Moves to tackle Africa’s ‘resource curse’ reach turning point

Conference discusses moves to end scandal of $1 billion lost every week to Africa

Sweeping measures to improve transparency and governance are urgently needed to end a scandal that has seen Africa lose an average of $1 billion every week for the past 30 years in illicit financial flows, says Oxfam.

Oxfam executive director Winnie Byanyima will also say today at a special public meeting of political, business and civil society leaders that this hemorrhage of Africa’s money – up to $1.4 trillion was lost from 1980-2009 according to recent Africa Development Bank figures^[source], or between $50-60 billion each year^[source] – requires a global solution, not solely an African one.

Fuel-exporting African countries were hit hardest, losing $732.8 billion in that period, according to the Bank. Nigeria, Egypt and South Africa were the worst affected countries across Africa’s regions.

A new surge of illicit flows?

With new mineral discoveries amounting to $11 billion in iron, oil, gas, gold and coal in Guinea, Ghana, Liberia, Tanzania and Mozambique alone, according to the Africa Progress Panel^[source], there is a worrying potential for a renewed surge in illicit flows from Africa.

Oxfam and the African Studies Centre of the University of Oxford are hosting the event with speakers including Ugandan Foreign Affairs Minister Sam Kutesa, Ghanaian High Commissioner Kwaku Danso-Boafo and Zimbabwe’s former Prime Minister Morgan Tsvangirai. The chief economist of the African Development Bank and representatives of Rio Tinto, the Ford Foundation and the Global Alliance for Tax Justice will also speak.

Blueprints for resource-rich countries

Byanyima said: “The resource curse has never been so stark and, with new mineral discoveries happening every day in Africa, has never been so vital to tackle. These huge new finds could mean tens of billions of dollars of taxes to pay for schools and hospitals – but only if this new wealth remains in Africa. Too often it has ended up in Zurich not Zambia, London not Liberia.”

“We are at a turning point in genuinely opening the global extractive industries to more scrutiny and cleaning up their tax affairs. Ghana has married its new mineral discoveries with an ambitious new petroleum revenue management law. Regionally, the Economic Community of West African States (ECOWAS) has begun work on a regional mining code intended to protect the rights of local communities and the Africa Union has adopted its ‘Africa Mining Vision’.

“At long last we see some solid blueprints being laid out. This puts us at square one. Now we must push for all of these exciting initiatives to be put to work for African people.”

A commitment to extractives transparency

The challenge, however, remains huge. The latest CIVICUS survey reveals that many newly-resource rich African countries remain rooted near the bottom of global governance rankings.

One study of the global extractive industry^[source] found that for each extra US dollar in oil exports, an additional 11 to 26 cents leaves the country in illicit capital flight. Globally, extractive industries are currently estimated to be worth around $3.5 trillion a year.

Oxfam believes the G8 made a good start earlier this year by committing to raise global standards for extractives transparency and by endorsing mandatory payment disclosure requirements and the Extractive Industries Transparency Initiative. The EU Transparency and Accounting Directives and US Dodd-Frank Act require oil, gas and mining companies to disclose payments to host governments down to the project level; Oxfam welcomes the UK government’s commitment to implement the EU directives in 2014. Canada’s commitment to implement mandatory payment disclosure within the next two years is also good news, and should match the standards set in the EU and US.

“Self-interested policies to the detriment of African people”

The Director of the African Studies Center at Oxford University, Dr Nic Cheeseman, will say that “The importance of natural resources to the African continent is growing by the year. Following recent finds of oil and gas across East and West Africa, an issue that was previously only relevant to a small number of countries is now at the top of the political agenda for many more.”

“We are no longer just talking about the classic “resource economies” – DRC, Nigeria and South Africa. In the future, the debate about the impact of oil and the resource curse will focus on Ghana, Kenya, Uganda and Tanzania,” Dr Cheeseman said.

“How well African countries manage their natural resources over the next decade is the single most important factor that will determine whether or not the continent manages to sustain its fragile economic recovery.

“We must redouble our efforts to understand how African countries can best manage their extractive industries. But these efforts should not just focus on what African governments can do. Multinational companies and international governments have often pursued self-interested policies to the detriment of African people,” he said.

“Ensuring that the proceeds from oil and gas work for the people of Africa requires a new approach both inside and outside of Africa”.

From transparency to accountability

Mark Goldring, Oxfam Chief Executive who will close the event, said: “We now need the US and EU to quickly implement their own extractive industries transparency laws, and for Canada to get its law in place. Mining giants Australia and South Africa have an important opportunity to lead G20 nations by example on this issue too.

“But transparency is only effective when twinned with accountability. Companies and governments equally need to be held to account for managing Africa’s mineral riches for the benefit of African people. Foreign companies can’t be expected to fix weak governance – but they can exploit it, and many continue to do exactly that,” Goldring said.