[R-G] Africa aid wiped out by rising cost of oil

[Richard Menec]

http://www.ft.com/cms/s/0/005d1f30-b5b0-11dc-896e-0000779fd2ac.html

Africa aid wiped out by rising cost of oil

By Ed Crooks and William Wallis in London

Published: December 29 2007 02:00 | Last updated: December 29 2007 02:00

The rising cost of oil has wiped out the benefits many African countries 
were expecting from western aid and debt relief over the past three years, 
new research from the International Energy Agency has shown.

The situation is raising fears that, in spite of the strong growth many 
African countries have seen in recent years, there could be a repeat of the 
1980s debt crisis in the developing world that was caused in part by the oil 
shocks of the 1970s.

Africa enjoyed a surge in western engagement during the UK's presidency of 
the Group of Eight leading industrialised countries, culminating in a 
commitment by world leaders to a broad package of debt relief and increased 
aid at the 2005 Gleneagles summit in Scotland. But since then oil prices 
have steadily risen towards $100 a barrel.

Surveying 13 non-oil-producing African countries, including South Africa, 
Ghana, Tanzania, Ethiopia and Senegal, the IEA found that the increase in 
the cost of oil bought by the countries since 2004 was equivalent to 3 per 
cent of combined GDP.

This was more than the sum of debt relief and aid received over the past 
three years by the countries, which have a combined population of 270m, of 
whom 104m live on less than $1 a day.

The IEA's warning comes as Senegal's President Abdoulaye Wade said 
"crippling" oil prices threatened to provoke "unrest and violence" in 
Africa.

Mr Wade, who has been among the most active African leaders on the issue, 
told the FT he was encouraging 15 non-oil-producing African countries to 
form a multinational energy corporation of their own to compete for oil 
concessions on the continent in order to hedge against further price spikes.

"There is a growing understanding that the most urgent need in Africa today 
is the challenge of providing affordable energy," he said.

Africa's economic growth has remained strong this year, but increased fuel 
costs have put upward pressure on inflation and slowed growth in some 
countries. They have also contributed to social problems including rising 
food prices, power cuts due to the use of diesel- powered generation in many 
areas - and an increasing burden of fuel subsidies.

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