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Chad: the oil effect

Daniela Kroslak
18 September 2009

Oil prices have hit record highs in recent years. Yet the living standards of the majority of the population have not risen to match the vast profits being made by the government. Instead, most Chadians are still mired in poverty.

Daniela Kroslak is deputy Africa programme director of the International Crisis Group (ICG)

Chad: Escaping from the Oil Trap was published by the ICG on 26 August 2009The core of the problem lies in the flagrant misuse of oil revenues by the authorities. Since the oil began to flow in 2003, President Idriss Déby's government has squandered hundreds of millions of dollars as the precious resource has become a means for the regime to strengthen its armed forces, reward its cronies and co-opt members of the political class. Chad's oil wealth, far from relieving poverty, has both become an important element in Déby's strategy to hold on to power and contributed to the country's endemic instability. 

The idea that oil makes currently poor but resource-rich countries even poorer is nothing new. It was Venezuela's former oil minister (and co-founder of Opec) Juan Pablo Perez Alfonzo who coined the phrase "the devil's excrement" to describe oil. But Chad was supposed to be different - the exception to this rule. 

The turning-point

It started out so well. In 2000, Chadian government representatives met with World Bank officials and came up with a groundbreaking concept. The bank would finance the development of the oil sector in Chad - specifically the building of the 1,600-kilometre, $4.2-billion pipeline from Chad through Cameroon to the sea - while the Chadians would invest the majority of the oil revenue in poverty-relief projects. 10% of the profits were to be stashed in a rainy-day fund for future generations; a further 80% was earmarked for Chad's development. To make sure the government kept the agreement, oil firms had to pay royalties into an account monitored by an independent watchdog, the Committee of Control and Supervision of Oil Revenues (CCSRP). 

It didn't take long, however, for Ndjamena to chafe under these restrictions. In 2005, the president claimed that the government was broke and that he needed to double what he could use for general government spending. In January 2006, he decided he needed to buy more weapons to deal with an armed rebellion supported by Sudan; he subsequently changed the law to give him more freedom over how to use the oil revenue (which in 2007 amounted to $1.2bn).  

This proved to be the turning-point. The World Bank immediately suspended its loans to Chad for six months. This response, not surprisingly, failed to deter Déby's regime. Instead, since then, the government has repeatedly reduced the power of the CCSRP, thus greatly limiting its ability to control the use of the proceeds of oil. 

These developments have done nothing to improve the lives of Chad's people, who remain desperately poor. In 2008, the United Nations Development Programme (UNDP) ranked Chad 170 (out of 179) in its human-development index. This position is closely related to the pervasive corruption in Chad; in the same year, Transparency International placed the country 173 (out of 180) in its annual list of the most corrupt countries in the world. 

Oil wealth has only contributed to the inherent instability in the country. It has fuelled the civil war, especially in the east, and enabled Déby's government to avoid engaging with the opposition to engage in reform and develop long-term solutions to the internal political crisis. 

The oil revenues have also become a factor in the tension with neighbouring Sudan. Khartoum and Ndjamena have repeatedly accused the other of supporting rebels in the other's territory, and this dispute underlies President Déby's decision greatly to reinforce his armed forces. Chad's military spending over the period 2000-09 rose from $14 million to $315 million. Chad now has one of the best-equipped armies in sub-Saharan Africa, but it still cannot feed its own people. 

Even when the regime appears to be trying to do the right thing it ends up making a bad situation worse. In 2007, high oil prices encouraged the government to announce plans for large public-works projects aimed at modernising the country. But the opaque way in which contracts were awarded prompted widespread accusations of cronyism and corruption. The result is a deep budget deficit that will take years to clear and will add to the country's debt.

The way ahead 

What can be done to redress this serious condition? Here are three recommendations.  

Also on Chad and the region in openDemocracy:

Gérard Prunier, "Chad, the CAR and Darfur: dynamics of conflict" (18 April 2007)

Gérard Prunier, "Chad's tragedy" (7 September 2007)

Gérard Prunier, "Chad: between Sudan's blitzkrieg and Darfur's war" (19 February 2008)First, the Chadian government needs urgently to engage in a national dialogue about how to make Chad's oil wealth beneficial to its population. The agreement reached in August 2007 between the government and its opponents reached in can be the foundation. The government should build on it by convening a roundtable - at which traditional chiefs, representatives of communities, NGOs, rebels and opposition parties are represented - to discuss how best to use the oil revenues.

Second, the internal oversight mechanisms regarding use of the oil revenues should once again be strengthened. The simplest way would be to restore the status of the CCSRP so it can exercise effective management of the revenues. In addition, the government must be prepared to reform its own practices in order to end cronyism and corruption. A new body to replace the International Consultative Group (whose mandate expired in June 2009) could play a valuable role here. Its task would be to undertake studies, make recommendations and give technical support to the CCSRP. It should be independent and multidisciplinary, contain representatives of Chadian and international civil society, and receive financial support from the World Bank.  

Third, the international community has an important contribution to make. This is especially true of Chad's main overseas partners: France, the United States and China. Their interests in the country would be protected and those of Chad's people advanced if they were to exert increasing pressure on Déby to begin a process of national conciliation - in part by linking their support for his regime with these reforms. China in particular is in a position to encourage both Sudan and Chad to come to an agreement to stabilise relations between the two states and halt support for rebels in the other's country. 

The experience of Chad has so far confirmed all the arguments about the "oil curse". The country's oil has become just another weapon in the hands of the government and its allies; the revenue has evaporated, been wasted, or used to benefit a tiny elite. The changes recommended here would do much to ensure that the benefit goes to those who most need and deserve it: Chad's people.

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