Corporate Social Investment and Hydrocarbons in Namibia [opinion]

Namibia’s independence day marked almost a quarter-century of tremendous progress: a stable government, a multiparty democracy, and a business-friendly environment for domestic and international firms.

But today Namibia stands on the threshold of an era that could bring even greater change. The extensive oil exploration currently underway has the potential to boost the country’s development in so many areas, from unemployment to infrastructure and to health. To achieve this, however, will require careful, proactive planning and coordination among corporations, Government, and local communities.

The two of us first began interacting with Namibia and its leaders in Government and the oil and gas sector through our work in neighbouring Angola. (Isely served as Africare Country Director for Angola from 2009-2012, and Mack was a World Bank Team Leader in Angola in the mid-1990s). After decades of development work and designing and implementing corporate social investment (CSI) projects for major oil companies, we began to see in Namibia an opportunity that had been missed in Angola: to plan the right CSI before the discovery of oil.

Still, to avoid some of the challenges faced by hydrocarbon discovery in Africa and beyond, CSI must begin at this very early stage to ensure that the Government and oil and gas companies coordinate effectively, so that the country’s economy remains diversified, job growth is real and sustainable, and the population as a whole benefits from equitable development of these assets.

Namibia is now preparing to undertake serious development of the Kudu gas field, which is expected to produce 800 megawatts of electricity, nearly twice as much as current national production. “Apart from the electricity generated from the offshore gas field, Namibia expects huge economic spin-offs,” explains Simson Haulofu, the Divisional Manager of power generation at NamPower, Namibia’s state-owned power company.

But if the potential rewards of hydrocarbon development are great, so are the potential risks. Among the most immediate hazards are disruptions to local communities, particularly those containing oil-and-gas-related infrastructure, where large numbers of migrants may be lured by employment prospects.

As Haulofu explains: “Oranjemund, the small town where the Kudu gas-fed power station will be located, is expected to grow rapidly. This will stress the current utility services and will result in demand for more water infrastructure, streets, accommodation, sewer systems, health facilities, and hospitality services, to mention a few.”

It will also naturally lead to tremendous expectations around employment – only some of which can be met.

Sudden resource wealth poses risks for the country at large, as many other nations have learned the hard way. If careful planning does not support diversified economic development, this influx of revenue can benefit local elites to the detriment of the population as a whole.

Namibia’s neighbour Angola provides a case in point. The second-largest oil producer in Africa, Angola has often struggled to invest this revenue in ways that enhance its overall development and self-sufficiency. As just one example, despite significant water resources and a history of g agricultural production, Angola must still import most of its food.

Many of these risks can be mitigated with effective coordination and planning between the Namibian government and its exploration and production partners, even before production begins.

“Discovery can only curtail development if the parties to the discovery do not agree at the very beginning on what will happen if the oil is found,” explains Penny Akwenye, the CEO for the Millennium Challenge Account of Namibia. She stresses the importance of extensive discussion and planning early on, particularly to address Namibia’s main development priorities in the areas of logistics, tourism, manufacturing and agriculture.

Fortunately, Namibia has some key aantages that will greatly aid the planning process, according to Kevin Lowther, a regional expert who had a long career as a director at Africare.

Lowther’s connection with Namibia started well before independence, with his first visit in 1965 to meet the then-nascent independence party Swapo. Since then, he spent considerable time establishing development and relief projects on behalf of Africare in Namibia beginning in the 1990s.

“Unlike many resource-rich African nations, Namibia has had more time for the Government, the private sector and other institutions to develop the stability and experience that would not have been there 20 or more years ago,” notes Lowther. “It’s fair to say that the ‘Namibian model’ differs substantially from that of other oil producers.

The Namibians have clearly learned many lessons about planning and management – seeing both the missed opportunities and sustainable successes from other neighbours like Botswana, which has one of the best records in Africa of managing its natural resources and its finances.”

Importantly for oil and gas companies, g, sustained CSI strategies are more than just another operating expense, but a key factor in improving the results of their in-country operations. A g CSI programme built with community involvement and reflecting the government’s development priorities, can help companies directly address potential production challenges, from security and insurance to local procurement and staff recruitment.

CSI can also be tailored to support job creation, skills development, education, tourism, agriculture, and a host of other areas that can provide long-term benefits to communities. Projects with immediate impact can be coupled with longer-term programmes, and co-financing from other stakeholders can be incorporated, maximising companies’ investments and the benefits to the community.

New technology also offers ever-expanding opportunities to solve local development challenges and connect consumers with a corporate brand. And with the right design at the outset, these CSI programmes can even be scaled up and replicated in many other countries where these companies operate.

With incredible new resources on the horizon, Namibia sits at the edge of real possibilities – and the prospect of growth and development for every Namibian. Still, history shows that without a plan involving sustained collaboration between governments, companies and communities, the promise of most nations and most companies fall short in achieving their goals.

Namibia has a g foundation on which to build. With the right coordination and CSI planning from all parties, the road ahead in Namibia should be promising indeed.

* Christian Isely is the founder of South-South Solutions, a Rio de Janeiro-based development consulting firm specialising in building community outreach programmes in Brazil and Africa.

* Andrew Mack is the founder of AMGlobal Consulting, a Washington, DC-based consulting firm specialising in CSI and public-private partnerships with wide experience working with the natural resources sector.

Source : The Namibian