Africa's Big Moment: Could a Conflux of Oil and Water Ignite the Economies of Botswana and Namibia?

By Roger Weber

Do oil and water mix? Kavango East is an unrivaled repository of oil and fresh water in Africa. Botswana and Namibia are positioned to benefit from it. Could it catalyze a future greater than even they yet realize? Capital Frontiers investigates.

The Lightning in a Bottle Equation

It is among the remarkable statistics of history that Chicago grew its population tenfold three times within thirty years in the 19th century, from a small encampment of 3,000 in 1840, to 30,000 by 1850, to 300,000 by 1870, and then tenfold once more to 3 million by the first part of the 20th century. Compared to the last few decades in which Chicago cannot even maintain its current population, its demographic trajectory of the late 19th century was a population nuclear bomb, an explosive trajectory that is unfathomable there today.

Chicago back then was in the right place at the right time. It was most likely good fortune more than anything that so many moving parts that would catalyze the nation’s growth at that time converged on Chicago at once. It just happened to on a critical juncture of the Great Lakes at a time when immigration from Europe was exploding the settlement of the western United States. It just so happened that Chicago’s nascent investment industry, railroads, exploded into the primary inland transportation mechanism of the day. And it just so happened that this intersection of railroads and waterways was the largest of its kind for a thousand miles in a country where transportation linkages between water and farmlands would drive its economy for half a century. And it was only happenstance that political leaders like Stephen Douglas and Abraham Lincoln would draw the country’s attention to this burgeoning metropolis at the same time that other innovators in Architecture and Public Health were also pioneering developments in the city that would prove revolutionary across the world.

There are many reasons that Chicago grew, but any of them individually are subservient to the bigger point that it was their compounding intersection at exactly the right time that helped the city strike lightning in a bottle. Chicago, by happenstance, convened all of the ingredients to satisfy the exact appetite to fuel a hungry nation in the prime of its growth in an otherwise vacant heartland cafeteria. No wonder so many people joined the feast. Seemingly in a moment, Chicago transformed from a small stinky slaughtering town into a gargantuan powerhouse for the Midwest and a thought capital of the world.

Kavango East and the Modern World

Today, there are many new Chicagos rising around the world. Many are following an updated narrative on a similar formula: new intersections of industrial brainpower assembling around the confluences of untapped resources at fortuitous transportation geography in places of great promise and need. Like the original, these new Chicagos are bastions of population growth, urbanization, and economic transformation.

The look, feel, and formula driving many modern Chicagos are well-known. Soaring Dubai, for instance, falls at the intersection of all of the world’s major business timezones in a country with nearly unlimited wealth for investment. And surging Shenzhen is an Artificial intelligence capital at a crucial port of the world’s largest rapidly growing economy. In Dubai and Shenzhen, leaping skyscrapers and blaring lights have seemingly materialized in an instant to etch their stories of promise across the sky, modern postcard images that are transfixing the world and transforming their surrounding hinterlands faster than the speed of technology.

But they aren’t alone. In fact, in the part of the world where circumstances and resources align to portend the greatest opportunity for eventual economic transformation, the landscape has looked the same for a thousand years. Here, Syringa trees take the place of soaring towers. The lightning from thunderous daily rainstorms are the only blinding lights. And the only sounds are those of small interest groups infighting over which critical resource should carry the day in unlocking the rights to the potential of this remarkable future nexus: oil or water.

The site we’re talking about is known as Kavango East. It’s a 13,000 square mile zone that straddles the northern borders of Namibia and Botswana near Angola, and it just might be the most opportunity-rich place on the planet, despite being nearly vacant today. Over the last two years a company called ReconAfrica has started trying to rig for oil there, and it’s ignited one of the most competitive firestorms of debate in all of the African continent.

Why is Kavango East so Significant?

The oil fields buried under Kavango East are massive, likely around 12 billion barrels. That’s nearly 1/20th of all the provable oil in the entirety of Saudi Arabia, and around 1/3rd as much oil as is buried under the entire United States, all housed within two countries whose joint populations are smaller than that of metropolitan Miami and whose economies offer GDPs per capita barely half of the global average.

But Kavango East isn’t just an oilfield in the middle of nowhere. For one thing, the oil is buried deep down, as much as 12,000 feet beneath the surface, and requires deep well hydraulics in order to access it. This area of Africa was once shallow inland sea, and the same properties that have made it a rich depository for rich organic minerals and oil also make it valuable in other ways too. For countries primarily made up of the inhospitable terrain of the Kalahari Desert, Kavango East is the one area of Botswana and Namibia that is actually rich with vegetation and water, the edge of tree savannahs that connect to tropical rainforests and house an ecosystem linking all the way to the Congo River Basin. The Kavango River terminates here, drawing fresh water from lusher Angola into an inland wetland, one of these countries’ primary sources of fresh water. Like the Rio Grande and Colorado Rivers for the western United States, access to Kavango’s fresh water is an invaluable commodity in ever-thirstier industrializing nations. The wetland is also one of these countries’ biggest destinations for tourism, for both one of their biggest industries.

Kavango East is a veritable gold mine for three of the most valuable commodities on the planet: oil, water, and tourism, in countries that desperately need all three. But unlike in the United States, where fracking activities that activists have claimed pose significant dangers to the water supply generally exist away from the country’s most sensitive water sources, at Kavango East they exist literally in the same spot. Thus the controversy pitting resource activists against the environmentalists.

The controversy, ultimately, is a mere footnote to the larger reality: Kavango East is the intersection containing both of the region’s crown jewels in one spot: the water supply on which the fortunes of these entire countries depend, and the oil supply on which their entire futures could be reimagined. Together, they comprise a bubbling cauldron of promise and potential, if they can leverage both without destroying the other.

Promise Unfulfilled in a Place of Opportunity and Need

The intersection of such a massive depository of oil and its primary source of water would offer explosive potential for any nation. But for Namibia and Botswana, the circumstances portend uniquely explosive potential. In fact, it would be hard to imagine two countries whose futures could be better served, and are more likely to grow rapidly, fueled by access to such opportunities.

In each country, there are uniquely large gaps in the economy that are primed to be filled by downstream activities fueled by oil and water. In Botswana, this gap comprises the uncertain future of the half of the country that has worked as subsistence farmers for generations. Despite comprising half of the nation’s economy, subsistence farming, primarily of cattle, comprises just 2.6 percent of the country’s GDP. In a country that has seen its per capita GDP surge by around 8,000 percent since it accrued independence from Great Britain in 1965 – from around $80 per person per year then to nearly $7,000 per person per year today – continued uplift of its poorest citizens seems inevitable. The same goes for Namibia, a country that has seen its per capita GDP double since it became independent from South Africa in 1990. And yet in Namibia upwards of 30 to 50 percent of the country is unemployed, two thirds are rural, and two thirds of the rural population survives on subsistence agriculture.

In both countries these underemployed populations represent a massive opportunity for growth. These are stable countries, and it seems only a matter of time before their rural residents find new industries and more lucrative lives. As their economies surge, it is inevitable that their citizenry will move from the farms into cities seeking more white-collar and globally connected jobs, just as has happened in the US, China, and nearly every other ascendant country of the world as they’ve grown. Time will tell whether Kavango East will be a physical destination for that movement – a literal “Chicago” moment – or merely a critical generator that will power the inevitable doubling or tripling in size of these countries’ cities.

The impending “lightning in a bottle” moment for these countries will be aided not only by the transformation of the halves of their economies that are currently under-employed, but also by the fact that both are seeking transformation in the portions of their economies that are already stable. In Botswana, for instance, mineral mining is one of the biggest economic drivers for the country, but leaders there are eager to diversify away from mining. That Kavango East is a potential metaphorical gold mine for sectors that could help do this – including being a potential hub for forestry as well as a prime location for attracting a larger share of south African tourism – only supplements the wealth of opportunity it offers.

So how will oil, water, forestry, and tourism work together from Kavango East to drive the transformations of these countries? That is yet to be determined, but it’s almost assured that direct foreign investment will be a piece of the puzzle. And thus beckons yet another piece of the “lightning in a bottle” equation here: these are two of the best climates in Africa to attract foreign investors. As compared to many of their northern neighbors, these two countries are both peaceful and politically safe. Neither has had a Civil War since gaining their respective independences, and their governments are mostly free from the corruption that has plagued many other African nations. Unlike some of their peer nations, both have grown far more since gaining independence than they grew prior, with decades of empirical proof that they are headed in the right direction under their own independent leadership. Botswana, in particular, enjoys a stable stock exchange – one of the best-preforming in Africa – and a rising credit market, a unique growth driver on the African continent. And both enjoy a physical border and strong relationship with South Africa, home to the greatest concentration of wealth and international commerce in Africa.

Why is This a “Lightning in a Bottle" Moment?

So why does Kavango East represent a potential “lightning in a bottle” moment? Well, as we’ve highlighted, the conditions for explosive growth come at the intersection of multiple fortuitous circumstances, and the coming together at the right place and the right time of both resources and opportunity. The opportunity here is gargantuan – national leadership primed for economic transformation in their countries with a population impending a meteoric economic rise. The resources are stacked – not only voluminous depositories of critical raw materials, but also layered geographic co-location that is perhaps unrivaled elsewhere in the world. And the circumstances are golden – a virtually untapped opportunity in one of the most stable locations in the world for investors to make something of it.

If ever a part of the world were sitting on a gold mine today of the same intersection of circumstances that has propelled massive concentrated growth in locations in the past, this is that part. The downside, of course, is that concentrated potential is easy to mess up. Here the environmentalists worry that drilling could destroy the water supply. The government worries that too much international pressure to focus on renewables will distract from a generational opportunity in fossil fuels. And too much activity of all kinds descending on this location could de-stabilize the country, particularly if international investors turn into resource pillagers rather than contributors to the story of these two countries. Already the government has had to negotiate sensitively with ReconAfrica regarding financial relationships between the two.

The other big challenge here is what exactly this intersection of potential will look like? In this article we haven’t defined that because we don’t know the answer. This isn’t exactly a “Chicago” moment because this isn’t just a case of a city that happens to be well-located. If it were, Chicago wouldn’t be the only good example. Rather, Kavango East is a unique moment, and what it in its totality offers to the uplift of these countries may not look anything like the formulas that have propelled catalytic urban moments of the past. The question here is how to design a multi-resource generator for the countries’ economies that is aligned with their national ambitions, and de-coupled from their cities. It’s a remarkable moment for imagination without obvious precedent.

What are the Lessons for Other Emergent Economies?

The success or failure of Kavango East to help propel the rise of two of south Africa’s most promising domestic transformations will offer tremendous lessons for other countries, no matter how the activities of ReconAfrica turn out. But it’s an exciting moment for other countries to step back from their traditional formulas for how they use cities to propel growth to examine how the emergence of new kinds of valuable resources can help them envision critical new intersections in places never thought of as such before. After all, Kavango East is largely untapped today because nobody thought much of it for centuries.

This is a diamond in the rough. Where might similar examples exist elsewhere? Every country of the world should put its landscape of critical resources under the microscope, but current and prospective. Each country should look introspectively at what it wants to be, what combination of parts might help it get there, and what kinds of local resources might be buried in its own backyard that could layer together to catalyze that potential. It just might be that just as at Kavango East, amid the afternoon storms, the clouds may part and open our eyes to new yet-unrealized intersections of resources, transportation, and infrastructural linkages that will yet become the Chicagos of the future.

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