Africa's new model for spreading oil wealth

With Africa emerging as a major oil player, a groundbreaking experiment in Chad aims to thwart corruption and use revenues to build schools.

Whenever oil is discovered in an African country - which happens more and more these days - a certain pattern unfolds. Vast sums of money start flowing in. Government officials divert much of it into their private bank accounts. And the masses are left nearly as poor as before - and are increasingly angry.

But this month, the nation of Chad embarked in earnest on a groundbreaking - some say foolhardy - effort, policed by the World Bank, to ensure that the benefits of the country's new oil wealth reach its 9 million people.

The experiment is being watched closely by outsiders, including the US, which wants to develop sources of oil outside the volatile Middle East. If things go well in Chad - and across Africa - America could import 25 percent of its oil from this continent by 2015. Otherwise, Chad risks ending up like Nigeria, with its rampant corruption and armed insurrections from militants who covet oil revenues.

"If it works, it's going to be a great model for other countries in Africa," says a Western diplomat here of Chad's venture. Some even see potential lessons for Iraq.

The money flows

This month, Chad got its first $38 million in oil revenues. Over the next 20 years, it's expected to get at least $2 billion, boosting national revenues by 50 percent, according to the World Bank. But unlike other African nations, Chad is committed to spend 80 percent of oil revenues on schools, clinics, roads, and other basic needs. Five percent goes to a fund for future generations. Another 5 percent goes to develop the southern oil region, near the Cameroon border. And 10 percent is socked away in case oil prices fall.

Most of the cash is held by the World Bank in a London account to avoid "leakage." And a citizens committee, with four members from nonprofit groups and five from government, must approve all oil- revenue expenditures.

Already, villagers in the hamlet of Meurmeouel, here in southern Chad's scrub-brush desert, are reaping benefits. Pumps are sucking 200,000 barrels of oil a day from beneath Meurmeouel and nearby villages, and sending it via a 670-mile pipeline through Cameroon to world markets.

Last year, oil giant Esso (a local partnership between ExxonMobil, ChevronTexaco, and Malaysia's Petronas) gave some $3 million to individuals most affected by the project. That money has funded everything from new tin roofs to beer parties. It also spent about $3 million as part of a community compensation program that offered a new well, a water tower, or a primary school to some 80 villages, including Meurmeouel. The village's 760 residents overwhelmingly chose the school. Today the school's brick walls and bright-green shutters stand out amid the village's straw-roofed huts. [For a related look at "Judging a village by its huts," see notebook_africa/.]

"Schools make great men," says Ellie Souleingar, a tall farmer with a broad smile, explaining Meurmeouel's education focus. When the village's best and brightest go off to high school or university, and then return home, "Everyone will listen to them" for advice and new ideas, adds Marcel Kordodjin, the brother of the village's chief.

In theory, Chad's oil money will jump-start new ideas and new initiative all across the country. "People here are used to presenting their wishes to authorities," says Otto Honke, a German development specialist who runs the village compensation program here for Esso. "But instead of asking for something, we'll help them plan how to do it themselves."

Bricks made locally

That's what happened in Meurmeouel. Villagers were hired to help build the school. The construction firm also bought bricks from local brick makers. And after the building was finished, villagers realized they needed yet another classroom. So they pooled their profits and spent about $50 to build an addition to the school, a one-room building with a tin roof. Even the chief, who's a brick mason, pitched in.

In Meurmeouel and elsewhere, oil revenues have sparked a great sense of possibility. But even with its new bonanza, Chad won't be rich. Per capita income is $250 per year - or 73 cents a day - according to the World Bank. That's expected to rise to $550 per year by 2005. Chad ranks 167th out of 177 countries on the 2004 United Nations Human Development Index. Electricity, paved roads, and clean water are rare.

And skeptics say that despite the new revenue model, life won't change much for the masses - only the elites. They worry the citizens committee won't be independent of the authoritarian regime and point out, for instance, that President Idriss Deby's brother is on the panel. The authoritarian president is used to getting his way: He's changing the Constitution to let himself run for a third term. And in 2000 he reportedly spent $4 million of a $25 million oil-deal "signing bonus" on military supplies.

But the World Bank, in a calculated gamble, figures Chad's leaders would risk too much by trying to skim money for themselves. Even with oil revenues, Chad will still rely heavily on outside aid to fund even basic services. "If they are going to renege on their commitment, it would jeopardize relations with the World Bank and other donors," says Gregor Binkert, the World Bank country director here.

Meanwhile, other African nations are tilting toward the Chad model.

On Africa's West coast, for instance, the island nation of Sao Tome and Principe has been debating a new law intended to bring transparency to oil revenues. The country also struck a deal with Nigeria to release regular audited financial reports for an oil-rich coastal zone both countries are developing.

Driven by unrest

The driving force behind these moves is clear: Inequalities created by elites skimming oil profits can spark social strife, which interrupts the flow of oil.

Oil facilities in Nigeria, Africa's largest oil exporter, are regularly attacked by militants. This often forces their shutdown, causing 10 to 40 percent declines in Nigeria's production capacity of 2.5 million barrels per day.

In oil-rich Angola, watchdog groups warn that some $4 billion went missing because of corruption or mismanagement between 1997 and 2002, even as 3.7 million citizens are malnourished. Yawning rich-poor gaps like this set the stage for civil strife.

Given these pressures, even the multinational oil firms that have long been accused of abetting corruption may be changing. In Chad they've agreed to disclose what they're paying the government for oil contracts. It's something they've resisted elsewhere, saying it hinders their ability to compete with rivals that are willing to pay bribes.

Meanwhile, in a sign of Meurmeouel's entry into the modern era, residents are now dealing with two problems faced by countless US cities: school overcrowding and a teacher shortage.

Parents from nearby villages now covet a spot for their kids at Meurmeouel's school, forcing the village to continue using its old wood-and-straw classroom.

And many area teachers are getting oil-company jobs, so it's not clear Meurmeouel will have any adults standing at the chalkboard this fall. In fact, villagers are gearing up to raise teacher salaries above the current $36 a year. "It's the last solution to keep teachers in the village," says Mr. Souleingar, the farmer. But it must be done, he says, because "education is our first priority."

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