Charting a New Path for Sharing Africa’s Natural Resources More Equitably

It appears the days of plundering Africa’s natural mineral for the benefit of foreign multinationals and enrichment of a few local powerful elites, while the vast majority of the continent’s people wallow in poverty, are numbered.

A lot has been said in recent times about how Africa is pregnant with possibility, a view influenced largely by the rapid growth the continent has enjoyed over the past decade, fuelled by exploitation of its abundant natural – including gold, platinum, oil and natural gas.

Kofi Annan, former secretary-general of the United Nations, sees the growth trajectory continuing into the next decade. He, however, warns of the need to do things differently henceforth.

“African policymakers have critical choices to make. They can either invest their natural resource revenue in the people to generate jobs and opportunities for future generations; or they can squander the opportunity, allowing jobless growth and inequality to take root,” said Annan.

Speaking at the launch of the Africa Progress Panel’s Africa Progress Report for 2013, at the World Economic Forum on Africa, in Cape Town, today, Annan said the natural resource wealth of many African countries has not improved the lives of their people; but has further widened the gap between the rich and the poor.

He called for bold steps to better manage the continent’s natural resource wealth for the betterment of the lives of its people. These steps required strengthening transparency and accountability in the handling of African nations’ mineral resources.

Annan said although the move towards greater transparency, the rule of law and accountability should be globally driven, pressure to do so should come from Africans themselves – their governments, business and civil society.

It was essential that there be trust: “Wherever there is trust, people (will) believe agreements are fair, that they protect everybody, including investors and country. Only mutually beneficial and fair agreements will stand the test of time.”

He welcomed the growing move by African governments to review existing agreements, to test their fairness.

Similarly bold steps were also needed to improve criminal accountability and tackle the practices of international tax avoidance and evasion, corruption, and weak governance. “The report therefore welcomes the commitment from the G8 presidency, the United Kingdom, and other governments to put tax and transparency at the heart of this year’s dialogue.”

The cost of inaction is too high: “Africa loses twice as much in illicit financial outflows as it receives in international aid. The Africa Progress Panel finds it unconscionable that some companies, often supported by dishonest officials, are using unethical tax avoidance, transfer pricing and anonymous company ownership to maximise their profits, while millions of Africans go without adequate nutrition, health and education,” said Annan.

The report cites the example of the DRC, where between 2010 and 2012, five deals cost the country $1, 3 billion in revenue through the undervaluation of assets and sale to foreign investors.

Another member of the panel, Strive Masiyiwa, chairman and founder of Econet Wireless, said: “While some major companies show outstanding leadership transparency, others show disregard for ethics and human lives. By cheating the system, they make work harder for honest business.”

Linah Mohohlo, fellow Africa Progress Panel member and governor of Botswana’s Central Bank, called for greater transparency on mineral extraction contracts and more equity, with host countries insisting on at least 50 of ownership. Where tax concessions are made, these should be clearly detailed, as should the tenure of contracts as well as their expiration.

Mohohlo emphatically denied that insisting on minimum a 50 percent ownership by host countries amounted to nationalisation. “Botswana’s key lesson has been that Africa’s natural resources belong to the people. In this way, diamonds became the country’s relative economic success.”

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Thabo Leshilo is a Director at FH SA.