Updated: Jan 21
On Wednesday, 22 March 2017, the President of Malawi, Peter Mutharika, made the assertion in Mangochi District that will likely let the country see an earth drill make a hole into Lake Malawi, suck some crude oil out of the earth buried under it onto its shores, and start making some easy money. The trade benefits from the fossil fuel make both critics and fans jubilate with premature excitement at the prospect of earning what has been normally elusive cash, in foreign currency, in amounts that currently only reside in the imaginaries. It would turn the fortunes of the country overnight, many are curious to think. But the current dynamics of oil profitability have changed since the North American market grew its independence from OPEC in recent years.
A cautious pro-crude perspective.
In December 2016, this website concluded the year with an article that noted the potential significance the contractionary policy by OPEC members would have on international prices of the commodity. By the end of the year, and thanks to an accident to a pipeline on continental US, the price of the commodity was responding upwards. The honeymoon was to last a short time for OPEC, as more discoveries of oil fields announced by the United States shuttered the hopes of a lucrative business environment that is the backbone of livelihoods to approximately half a billion title holders of this colluding oil real estate. As we advance into 2017, the picture looks different from the one we had in December 2016, and it is not the type OPEC leaders are happy seeing.
So, the drilling of oil in Malawi comes at a time when increasing global demand of oil is challenged by excess supply. Based on this simple economic spectacle, investors in new oil fields may not be looking for new costly ventures, whose benefit may simply be outrun by lagged and falling incomes. It may take a while for Mr. Mutharika’s anticipated tenants at the lake to settle down with their straws. If they do, it will have to be understood that we will relive the ordeal that the late President Bingu wa Mutharika dragged the whole country through on the defunct and still reminiscent Kayerekera uranium mine deal. An alternative is to look at the possibility of embracing a punitive business strategy where Malawi will have to undercut the going international price of OPEC crude if it is to compete, a tough decision to make for a new entrant. If it does, it will have to consider taking its prices low enough to supersede the low costs incurred by OPEC countries as Nigeria and Iran that enjoy long and appealing coastlines that cut their transportation costs like it were fairytale land.
Once revenues start trickling in, oil trade can be truly transformative. For Malawi’s current economic woes, the transformation would be quickly visible, if we can trust in our leaders' ability to get to real work. However, it is worthwhile thinking about the systems that need to be installed to run an enterprise as complex as oil trade without creating a resource curse situation, which is highly probable in a land where political leaders are looking to reap most of the benefit at the expense of everyone else. It is anecdotal as much as it is globally acknowledged that many oil-producing countries we know are riddled with corruption of phenomenal degrees. The installation of systems that will shield the country from unnecessary perforation by corrupt leadership will take long to build, internalize and benefit from the security intelligence they demand. We would want to establish those systems ourselves, otherwise the price tag of obtaining such services from a foreign entity might as well nibble away much of the anticipated benefits intended for overturning the fortunes of the poor.
A call for a green lake economy.
The environmental concerns about disturbing one of the rarest freshwater lakes in the world are also sensible. It should be obvious to Malawians that we have not applied our economics of scarce resources very well when it comes to managing Lake Malawi. In the 50 years of our independence, we have had the opportunity to build world-class tourism enterprises along the lake’s 580 kilometers that could, alone, have reaped the billions Tom Chiumia claimed in his recent post on Nyasatimes that Malawi could enjoy from oil drilling. Mr. Chiumia even offers a rare praise for Mr. Mutharika for his seemingly macho stance on oil drilling, a worrying characteristic of our journalism, which quickly relishes a dearth of knowledge before sharing an opinion of a professional nature. If it were not for Malawi's propensity and love for substandard lake shore resorts, with the exception of a strictly handful few, the environmental conservation of Lake Malawi would have carried a whole new meaning.
The environmental arguments for the preservation of Lake Malawi, in the presence of the fossils it harbours underneath, transcend the protection of the thousand-plus species of freshwater fish and other marine life to consideration of other things that the lake could offer. To share some persepctive, Bakili Muluzi, while President, could have explored wind and wave patterns (yes, wave power, which a lake that flows in one direction as ours is vantaged to drive) along the rift valley on which the Lake Malawi rests, that would have brought a boost to electricity generation for home consumption and for exportation of the excess. He turned away DANIDA, who were eager, in the mid-1990s, to draw Malawi's wind map.
This alternative to oil would probably have been a more lucrative deal in the longer run, and one with more stable predictability of inflows from energy production. The icing on the cake with this kind of energy generation is the sustainability component that adds value to the environment than fossil fuels would.
So, to zoom into the future…
Satisfaction with simple fantasies as prettily put in Mr. Chiumia’s Loose Canon piece is the departure point of our mentality as Malawians. Our article of 21 October 2016 articulates just how easy our egos are soothed. And it must be lucid in the eyes of all of us who heeded to the President’s call for water preservation (which we could all be guilty of awarding him some praise for), yet establishes itself as a controversy when the very water we need to preserve risks contamination if and when an oil spill is a major risk. As a matter of fact, an oil spill will send the nation in disarray when costly preparedness systems for such disasters strike are not in place. And so, Mr. President, the challenge does not stop at the environmental damage such a manmade disaster brings, but the stamina to put out the fire when it guts the lake, and when the spill suffocates the rare marine life we are so proud of – currently a livelihood source for millions of Malawians.
The time on the podium at Nkopola Lakeshore Conference Centre was quite valuable for the President and we, his audience, to outline a strong vision for the lake. The address should have used our taxes a little more wisely and based on hard evidence regarding the global dynamics guiding production of crude oil, its refinement and the parameters that support profitable international trading in changing global dynamics.
There must be an advisor for this among the many disciples Mr. Mutharika surrounds himself with. They should be put to work.