Chad-Cameroon: oil and poverty reduction don’t mix

28 May 2003 | Guest comment

The Chad-Cameroon petroleum project was approved by the World Bank in June 2000 after more than three years of intense discussions between oil multinationals, the Bank, Bank member governments and NGOs from the South and the North. In response to the grievances received, the World Bank proposed a framework to impose social and environmental rules on the multinationals, and build the capacity of Cameroonian and Chadian governments to enable them to manage project-related opportunities and risks.

It may be too early to take stock of the overall petroleum project now that the construction phase has ended. Yet, a few weeks before the first oil flows, it seems possible to draw preliminary lessons of this unique experience in Sub-Saharan Africa.

Many observers had questioned the Bank’s involvement in the project, arguing that the institution’s poverty alleviation objectives seemed incompatible with an investment of this nature. The NGOs cited past experiences of oil exploitation in Africa, namely in Angola, Congo, Gabon, Cameroon, Nigeria and Equatorial Guinea, none of which ushered in development.

It is therefore not surprising to note that almost nothing occurred according to World Bank predictions. This failure can be illustrated by the following four points:

  1. The Bank is unable to really influence the behaviour of multinationals. The World Bank failed to make the consortium respect its environmental and social policies. The International Advisory Group set up to monitor the project on behalf of the Bank’s Board of Governors quickly expressed concern about it being a “two-speed” project. Construction works were far ahead of schedule, but social mitigation measures were yet to take off. At the end of the construction phase, the capacity building project aimed at enabling the government to ensure the respect of health, compensation and environmental management plans has not been realised. Furthermore, the plan for indigenous peoples whose territory was crossed by the pipeline is still faltering. During the past two years the Bank’s involvement achieved only damage control, not the positive objectives of its operational policies and directives.
  2. The World Bank’s presence did not improve the terms of the agreement between the consortium, Cameroon and Chad. Land provided by Cameroon and Chad for the project was not valued in calculating their financial contribution to the project. The governments also have many responsibilities in environmental management and social safeguard measures. Lastly, the project’s direct and indirect economic benefits are all the more reduced in Cameroon as the construction phase was tax free, carried out by foreign sub-contractors (some located in a tax haven). Royalties from oil transport will bring Cameroon about US$16 million per year, i.e. about 1 dollar per head per year. Oil is expected to generate a total revenue of $13.7 billion. Out of estimated profits of $8 billion Cameroon will receive 7 per cent, Chad 22 per cent, and the consortium 71 per cent. It is doubtful if the money in Chad will be devoted to poverty alleviation.
  3. Control mechanisms are not functional. The project provides for seven levels of monitoring, but they are either ineffective (only Exxon is capable of monitoring the project on a daily basis), or have no power to make their recommendations binding on the World Bank or Exxon. This is the case of the International Advisory Group, whose reports have not always resulted in action being taken.
  4. Construction work led to serious social and ecological problems along the pipeline route. Serious disputes were recorded on the amounts of compensation which sometimes led to a substantial impoverishment of victims. Furthermore, in several villages, springs were destroyed, thereby depriving people of access to drinking water and exposing them to waterborne diseases. The village of Mpango has been waiting since 1998 for its drinking water spring to be restored. Lastly, inflation rose in both countries, and the rural peoples have had to grapple with severe food insecurity and an outbreak of health problems, especially HIV.

The failure to respect promises in the construction phase is a cause for concern for the project’s future. There are already talks of expanding the oil exploitation zone to the east of Chad, north of the Central African Republic and north of Cameroon. As the World Bank will have no means to exert pressure on the consortium it is hard to think that the operations will respect people and nature more than in the past three years. The major merit of the project is to have confirmed that under authoritarian regimes there is a fundamental incompatibility between poverty alleviation objectives and oil exploitation activities.

Comment by Samuel Nguiffo, Centre for Environment and Development, Cameroon