This House believes Africans are worse off due to natural resources

Corruption in African governance is a common feature of African governance[1], with resources being a major source of exploitation by the political class. Natural resources are often controlled by the government. As resources fund the government’s actions rather than tax, there is a decrease in accountability to the citizenry which enables the government to abuse its ownership of this land to make profit[2].   To benefit from resource wealth, money from the exploitation of mineral wealth and other sources needs to be reinvested in to the country’s economy and human capital[3].  Investing in infrastructure and education can encourage long term growth. However a large amount of funds are pocketed by politicians and bureaucrats instead, hindering growth[4]. Africa Progress Panel (APP) conducted a survey on five mining deals between 2010 and 2012 in the Democratic Republic of Congo (DRC). They found that the DRC was selling off state-owned mining companies at low prices. The new offshore owner would then resell the companies for much more, with much of the profit finding its way to DRC government officials[5]. The profits were twice as high as the combined budget for education and health, demonstrating that corruption caused by resource exploitation detracts from any long term growth.

[1] Straziuso,J. ‘No African Leader wins $45m Good Governance Award’ Yahoo News 14 October 2013   http://news.yahoo.com/no-african-leader-wins-5m-good-governance-award-105638193.html

[2] Hollingshead,A. ‘Why are extractive industries prone to corruption?’ Financial Transparency Coalition 19 September 2013  http://www.financialtransparency.org/2013/09/19/why-are-extractive-industries-prone-to-corruption-part-ii/

[3]  Pendergast,S.M., Kooten,G.C., & Clarke,J.A. ‘Corruption and the Curse of Natural Resources’  Department of Economics University of Victoria, 2008 pg.5 http://economics.ca/2008/papers/0633.pdf

[4] Ibid

[5]  Africa Progress Panel ‘Report: DRC mining deals highlight resource corruption’ 14 May 2013, http://www.africaprogresspanel.org/wp-content/uploads/2013/09/20130514_Report_DRC_mining_deals_highlight_resource_corruption_ENG1.pdf

Resources don’t have to mean poor governance. In 2013, attempts were made to counter corruption, the G8 and EU have both began work on initiatives to increase the transparency of foreign firms extracting resources in Africa[1].  The Extractive Industries Transparency Initiative has been established in an attempt to improve governance on the continent by funding attempts to stem corruption in member countries. The results of this latter initiative has resulted in the recovery of ‘billions of US$’ in Nigeria[2]. Other projects are continuing in other African countries with great hope of success.

[1] Oxfam ‘Moves to tackle Africa’s ‘resource curse’ reach turning point’ 23 October 2013 http://www.oxfam.org/en/pressroom/pressrelease/2013-10-24/moves-tackle-africas-resource-curse-reach-turning-point

[2] EITI ‘Impact of EITI in Africa: Stories from the ground’ 2010 http://eiti.org/files/EITI%20Impact%20in%20Africa.pdf

Both licit and illicit resource extraction have caused ecological and environmental damage in Africa. The procurement of many natural resources requires processes such as mining and deforestation, which are harmful to the environment. Deforestation for access purposes, timber and cattle has led to around 3.4 million hectares of woodland being destroyed between 2000 and 2010 and, in turn, soil degradation[1]. As Africa’s rainforest are necessary for global ecological systems, this is a significant loss. Mining and transportation also create damage through pollution and the scarring of the landscape. Mining produces various harmful chemicals which contaminate water and soil, a process which is worsened by illicit groups who cut corners to ensure higher profits[2].

[1] Food and Agriculture Organization of the United States ‘World deforestation decreases, but remains in many countries’  http://www.fao.org/news/story/en/item/40893/

[2] Kolver,L. ‘Illegal mining threat to lawful operations, safety and the environment’ Mining Weekly 16 August 2013 http://www.miningweekly.com/article/illegal-mining-in-south-africa-a-growing-problem-that-has-to-be-stopped-2013-08-16

Other countries are hypocritical in expecting Africa to develop in a sustainable way. Both the West and China substantially damaged their environments whilst developing. During Britain’s industrial revolution pollution led to poor air quality, resulting in the deaths of 700 people in one week of 1873[1]. That said, sustainable resource management has become prominent in some African countries. Most countries in the South African Development Community (SADC) have laws which regulate the impact that mining has on the environment, ensuring accountability for extractive processes. In South Africa, there must be an assessment of possible environmental impacts before mining begins, then the company involved must announce how it plans to mitigate environmental damage[2]. In Namibia, there are conservation zones and communal forests where deforestation is restricted in order to prevent negative environmental consequences[3].

[1] Environmental History Resources ‘The Industrial Age’ date accessed 17/12/13 http://www.eh-resources.org/timeline/timeline_industrial.html

[2] Southern Africa Research Watch ‘Land, biodiversity and extractive industries in Southern Africa’ 17 September 2013 http://www.osisa.org/book/export/html/5134

[3] Hashange,H.’Namibia: Managing Natural Resources for Sustainable Development’ Namibia Economist 5 July 2013 http://allafrica.com/stories/201307051192.html

The majority of investment in Africa by Trans National Companies (TNCs) goes towards resource extraction[1]. Many companies use transfer pricing, tax avoidance and anonymous company ownership to increase profits at the expense of resource abundant nations[2]. Production sharing agreements, where companies and states share in the profit of a venture, can often benefit the former over the latter. In 2012 Ugandan activists sued the government for one such deal where the country was to likely to receive only half the profits rather than three quarters[3].

Kofi Annan, former United Nations Security General, has claimed that Africa’s outflow of funds by TNCs in the extractive industries is twice as high as inflows to the continent. Businesses such as Barclays have been criticised for their promotion of tax havens in Africa[4]. These allow TNCs to avoid government taxation for projects such as resource extraction, a symptom of the attitude of foreign companies to investment in Africa.  The unfavourable inflow/outflow balance prevents reinvestment in Africa’s infrastructure, education and health services.

[1]   African Development Bank ‘African Development Report 2007’  pg.110  http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Maximizing%20the%20Benefits%20from%20-%20Oil%20and%20Gas%20in%20Africa.pdf

[2] Stewart,H. ‘Annan calls for end to ‘unconscionable’ exploitation of Africa’s resources’ The Guardian 10 May 2013  http://www.theguardian.com/business/2013/may/10/kofi-annan-exploit-africa-natural-resources

[3] Akankwasa,S. ‘Uganda activists sue government over oil Production Sharing Agreements.’ International Bar Association 01/05/2012  http://www.ibanet.org/Article/Detail.aspx?ArticleUid=1f9c0159-6595-4449-9c3f-536572e4df70

[4] Provost,C. ‘Row as Barclays promotes tax havens as ‘gateway for investment in Africa’ The Guardian 20 November 2013 http://www.theguardian.com/global-development/2013/nov/20/barclays-bank-tax-havens-africa-mauritius-offshore

Resources are not the problem, bad management and agreements are the problem here. The presence of Foreign Direct Investment (FDI) in resource extraction can have a more positive impact than if it was absent.  The presence of FDI is often associated with increased bureaucracy efficiency and rule of law[1]. There have been attempts by Western governments to curtail illicit transactions as well. In 2013, the British government spearheaded the Extractive Industries Transparency Initiative aimed at encouraging accountability from TNCs[2]. Governments control the resources; they simply need to be more willing to fight, and prevent corruption, to get a better deal.

[1] Bannerman,E. ‘Foreign Direct Investment and the Natural Resource Curse’ Munich Personal RePEc Archive 13 December 2007 http://mpra.ub.uni-muenchen.de/18254/1/FDINRCECONDEV.pdf

[2] Duffield,A. ‘Botswana or Zimbabwe? Exploiting Africa’s Resources Responsibly; Africa Portal 12 December 2012 http://www.africaportal.org/blogs/community-practice/botswana-or-zimbabwe-exploiting-africa%E2%80%99s-resources-responsibly

There is a strong connection between the presence of natural resources and conflict within Africa. Natural resources, especially those with a high commodity price such as diamonds, are a useful means of funding rebellions and governments[1].  The 1991 civil war in Sierra Leone became infamous for the blood diamonds which came from mines with forced slavery. These diamonds were used to fund the Revolutionary United Front (RUF) for eleven years, extending the blood-shed. Continued conflict in the Congo is also attributed to the control of mineral wealth[2] and exemplifies how resources have negatively impacted Africa.   

[1]  Pandergast, 2008, http://economics.ca/2008/papers/0633.pdf

[2] Kharlamov,I. ‘Africa’s “Resource Wars” Assume Epidemic Proportions’ Global Research 24 November 2014  http://www.globalresearch.ca/africas-resource-wars-assume-epidemic-proportions/5312791

Kleptocrats wish to increase their personal wealth and power, and will find a means to do so. To contribute power over resources as the main motive is inaccurate, as noted by Charles Kenny in Foreign Policy; ‘For every Gen. Sani Abacha skimming billions off Nigeria's oil wealth, there is a Field Marshal Idi Amin massacring Ugandans by the thousands without the aid or incentive of significant mineral resources’[1]. There are many ways to increase power, if mineral wealth isn’t available then they’ll find another way.  

[1] Kenny,C.  ‘Is it really true that underground riches lead to aboveground woes? No, not really.’ Foreign Policy 6 December 2010 http://www.foreignpolicy.com/articles/2010/12/06/what_resource_curse#sthash.oZVe6bJW.mQFB5WaO.dpbs

Corruption in African governance is a common feature of African governance[1], with resources being a major source of exploitation by the political class. Natural resources are often controlled by the government. As resources fund the government’s actions rather than tax, there is a decrease in accountability to the citizenry which enables the government to abuse its ownership of this land to make profit[2].   To benefit from resource wealth, money from the exploitation of mineral wealth and other sources needs to be reinvested in to the country’s economy and human capital[3].  Investing in infrastructure and education can encourage long term growth. However a large amount of funds are pocketed by politicians and bureaucrats instead, hindering growth[4]. Africa Progress Panel (APP) conducted a survey on five mining deals between 2010 and 2012 in the Democratic Republic of Congo (DRC). They found that the DRC was selling off state-owned mining companies at low prices. The new offshore owner would then resell the companies for much more, with much of the profit finding its way to DRC government officials[5]. The profits were twice as high as the combined budget for education and health, demonstrating that corruption caused by resource exploitation detracts from any long term growth.

[1] Straziuso,J. ‘No African Leader wins $45m Good Governance Award’ Yahoo News 14 October 2013   http://news.yahoo.com/no-african-leader-wins-5m-good-governance-award-105638193.html

[2] Hollingshead,A. ‘Why are extractive industries prone to corruption?’ Financial Transparency Coalition 19 September 2013  http://www.financialtransparency.org/2013/09/19/why-are-extractive-industries-prone-to-corruption-part-ii/

[3]  Pendergast,S.M., Kooten,G.C., & Clarke,J.A. ‘Corruption and the Curse of Natural Resources’  Department of Economics University of Victoria, 2008 pg.5 http://economics.ca/2008/papers/0633.pdf

[4] Ibid

[5]  Africa Progress Panel ‘Report: DRC mining deals highlight resource corruption’ 14 May 2013, http://www.africaprogresspanel.org/wp-content/uploads/2013/09/20130514_Report_DRC_mining_deals_highlight_resource_corruption_ENG1.pdf

Resources don’t have to mean poor governance. In 2013, attempts were made to counter corruption, the G8 and EU have both began work on initiatives to increase the transparency of foreign firms extracting resources in Africa[1].  The Extractive Industries Transparency Initiative has been established in an attempt to improve governance on the continent by funding attempts to stem corruption in member countries. The results of this latter initiative has resulted in the recovery of ‘billions of US$’ in Nigeria[2]. Other projects are continuing in other African countries with great hope of success.

[1] Oxfam ‘Moves to tackle Africa’s ‘resource curse’ reach turning point’ 23 October 2013 http://www.oxfam.org/en/pressroom/pressrelease/2013-10-24/moves-tackle-africas-resource-curse-reach-turning-point

[2] EITI ‘Impact of EITI in Africa: Stories from the ground’ 2010 http://eiti.org/files/EITI%20Impact%20in%20Africa.pdf

Both licit and illicit resource extraction have caused ecological and environmental damage in Africa. The procurement of many natural resources requires processes such as mining and deforestation, which are harmful to the environment. Deforestation for access purposes, timber and cattle has led to around 3.4 million hectares of woodland being destroyed between 2000 and 2010 and, in turn, soil degradation[1]. As Africa’s rainforest are necessary for global ecological systems, this is a significant loss. Mining and transportation also create damage through pollution and the scarring of the landscape. Mining produces various harmful chemicals which contaminate water and soil, a process which is worsened by illicit groups who cut corners to ensure higher profits[2].

[1] Food and Agriculture Organization of the United States ‘World deforestation decreases, but remains in many countries’  http://www.fao.org/news/story/en/item/40893/

[2] Kolver,L. ‘Illegal mining threat to lawful operations, safety and the environment’ Mining Weekly 16 August 2013 http://www.miningweekly.com/article/illegal-mining-in-south-africa-a-growing-problem-that-has-to-be-stopped-2013-08-16

Other countries are hypocritical in expecting Africa to develop in a sustainable way. Both the West and China substantially damaged their environments whilst developing. During Britain’s industrial revolution pollution led to poor air quality, resulting in the deaths of 700 people in one week of 1873[1]. That said, sustainable resource management has become prominent in some African countries. Most countries in the South African Development Community (SADC) have laws which regulate the impact that mining has on the environment, ensuring accountability for extractive processes. In South Africa, there must be an assessment of possible environmental impacts before mining begins, then the company involved must announce how it plans to mitigate environmental damage[2]. In Namibia, there are conservation zones and communal forests where deforestation is restricted in order to prevent negative environmental consequences[3].

[1] Environmental History Resources ‘The Industrial Age’ date accessed 17/12/13 http://www.eh-resources.org/timeline/timeline_industrial.html

[2] Southern Africa Research Watch ‘Land, biodiversity and extractive industries in Southern Africa’ 17 September 2013 http://www.osisa.org/book/export/html/5134

[3] Hashange,H.’Namibia: Managing Natural Resources for Sustainable Development’ Namibia Economist 5 July 2013 http://allafrica.com/stories/201307051192.html

The majority of investment in Africa by Trans National Companies (TNCs) goes towards resource extraction[1]. Many companies use transfer pricing, tax avoidance and anonymous company ownership to increase profits at the expense of resource abundant nations[2]. Production sharing agreements, where companies and states share in the profit of a venture, can often benefit the former over the latter. In 2012 Ugandan activists sued the government for one such deal where the country was to likely to receive only half the profits rather than three quarters[3].

Kofi Annan, former United Nations Security General, has claimed that Africa’s outflow of funds by TNCs in the extractive industries is twice as high as inflows to the continent. Businesses such as Barclays have been criticised for their promotion of tax havens in Africa[4]. These allow TNCs to avoid government taxation for projects such as resource extraction, a symptom of the attitude of foreign companies to investment in Africa.  The unfavourable inflow/outflow balance prevents reinvestment in Africa’s infrastructure, education and health services.

[1]   African Development Bank ‘African Development Report 2007’  pg.110  http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Maximizing%20the%20Benefits%20from%20-%20Oil%20and%20Gas%20in%20Africa.pdf

[2] Stewart,H. ‘Annan calls for end to ‘unconscionable’ exploitation of Africa’s resources’ The Guardian 10 May 2013  http://www.theguardian.com/business/2013/may/10/kofi-annan-exploit-africa-natural-resources

[3] Akankwasa,S. ‘Uganda activists sue government over oil Production Sharing Agreements.’ International Bar Association 01/05/2012  http://www.ibanet.org/Article/Detail.aspx?ArticleUid=1f9c0159-6595-4449-9c3f-536572e4df70

[4] Provost,C. ‘Row as Barclays promotes tax havens as ‘gateway for investment in Africa’ The Guardian 20 November 2013 http://www.theguardian.com/global-development/2013/nov/20/barclays-bank-tax-havens-africa-mauritius-offshore

Resources are not the problem, bad management and agreements are the problem here. The presence of Foreign Direct Investment (FDI) in resource extraction can have a more positive impact than if it was absent.  The presence of FDI is often associated with increased bureaucracy efficiency and rule of law[1]. There have been attempts by Western governments to curtail illicit transactions as well. In 2013, the British government spearheaded the Extractive Industries Transparency Initiative aimed at encouraging accountability from TNCs[2]. Governments control the resources; they simply need to be more willing to fight, and prevent corruption, to get a better deal.

[1] Bannerman,E. ‘Foreign Direct Investment and the Natural Resource Curse’ Munich Personal RePEc Archive 13 December 2007 http://mpra.ub.uni-muenchen.de/18254/1/FDINRCECONDEV.pdf

[2] Duffield,A. ‘Botswana or Zimbabwe? Exploiting Africa’s Resources Responsibly; Africa Portal 12 December 2012 http://www.africaportal.org/blogs/community-practice/botswana-or-zimbabwe-exploiting-africa%E2%80%99s-resources-responsibly

There is a strong connection between the presence of natural resources and conflict within Africa. Natural resources, especially those with a high commodity price such as diamonds, are a useful means of funding rebellions and governments[1].  The 1991 civil war in Sierra Leone became infamous for the blood diamonds which came from mines with forced slavery. These diamonds were used to fund the Revolutionary United Front (RUF) for eleven years, extending the blood-shed. Continued conflict in the Congo is also attributed to the control of mineral wealth[2] and exemplifies how resources have negatively impacted Africa.   

[1]  Pandergast, 2008, http://economics.ca/2008/papers/0633.pdf

[2] Kharlamov,I. ‘Africa’s “Resource Wars” Assume Epidemic Proportions’ Global Research 24 November 2014  http://www.globalresearch.ca/africas-resource-wars-assume-epidemic-proportions/5312791

Kleptocrats wish to increase their personal wealth and power, and will find a means to do so. To contribute power over resources as the main motive is inaccurate, as noted by Charles Kenny in Foreign Policy; ‘For every Gen. Sani Abacha skimming billions off Nigeria's oil wealth, there is a Field Marshal Idi Amin massacring Ugandans by the thousands without the aid or incentive of significant mineral resources’[1]. There are many ways to increase power, if mineral wealth isn’t available then they’ll find another way.  

[1] Kenny,C.  ‘Is it really true that underground riches lead to aboveground woes? No, not really.’ Foreign Policy 6 December 2010 http://www.foreignpolicy.com/articles/2010/12/06/what_resource_curse#sthash.oZVe6bJW.mQFB5WaO.dpbs

Natural resources are a source of economic revenue for Africa. If managed well then this can become a genuine source of prosperity. Africa does not currently have developed secondary and tertiary sectors yet[1], most of the continent’s economics surrounds primary sector activity such as resource extraction and farming. The high commodity price of items such as gold, diamonds and uranium is therefore valuable for Africa’s trade. Profits from this trade have allowed countries to strengthen their economic position by reducing debt and accumulating external reserves, a prime example of this being Nigeria.

[1] Maritz,J. ‘Manufacturing: Can Africa become the next China?’ How We Made Africa 24 May 2011 http://www.howwemadeitinafrica.com/manufacturing-can-africa-become-the-next-china/9959/

The trade of natural resources can be unreliable for African nations. Exports on the international market are subject to changes in price, which can harm export orientated countries should there be a decrease in value. The boom/bust cycle of oil has been particularly damaging. The drop of oil prices in the 1980s had a significant impact on African countries which were exporting the commodity[1]. The boom/bust cycle of resource value has impaired, rather than inhibited, some states’ debts. The price slump of copper in 2008 severely damaged Zambia’s mineral orientated economy, as FDI stopped and unemployment rose[2]. This debt crisis had been created by another slump in prices in the 1980s that forced the government to borrow to keep spending.[3]  This demonstrates how international markets are unreliable as a sole source of income.

[1] African Development Bank ‘African Development Report 2007’  pg.110  http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Maximizing%20the%20Benefits%20from%20-%20Oil%20and%20Gas%20in%20Africa.pdf

[2] Bova,E. ‘Copper Boom and Bust in Zambia: The Commodity-Currency Link’ The Journal of Development Studies, 48:6, Pg.770 http://www.tandfonline.com/doi/pdf/10.1080/00220388.2011.649258

[3] Liu, L. Larry, ‘The Zambian Economy and the IMF’, Academia.edu, December 2012, http://www.academia.edu/2351950/The_Zambian_Economy_and_the_IMF

The African continent has the highest rate of poverty in the world, with 40% of sub-Saharan Africans living below the poverty line. Natural resources are a means of increasing the quality of life and the standard of living as long as revenues are reinvested into the poorest areas of society. There are 35 countries in Africa which already conduct direct transfers of resource dividends to the poor through technology or in person[1]. In Malawi, £650,192.22 was given out in dividends to the poorest in society ensuring that they were given $14 a month in 2013[2]. This ensures that there is a large base of citizens profiting from natural resources which increases their income and, in turn, their Human Development Index scores[3].

[1] Devarajan, S. ‘How Africa can extract big benefits for everyone from natural resources’ in The Guardian 29/06/13 http://www.theguardian.com/global-development/poverty-matters/2011/jun/29/africa-extracting-benefits-from-natural-resources

[2] Dzuwa,J.  ‘Malawi: Zomba Rolls out Scial Cash Transfer Programme’  Malawi News Agency 11 June 2013 http://allafrica.com/stories/201306120531.html

[3] Ibid

Despite projects such as direct dividends, the gap between rich and poor is still worsened by natural resources. Investment from the profits of natural resources in human development is relatively low in Africa. In 2006, 29 of the 31 lowest scoring countries for HDI were in Africa, a symptom of low re-investment rates[1]. Generally it is only the economic elite who benefit from any resource extraction, and reinvestment rarely strays far from urban areas[2]. This increases regional and class inequality, ensuring poverty persists.

[1] African Development Bank ‘African Development Report 2007’  pg.110  http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Maximizing%20the%20Benefits%20from%20-%20Oil%20and%20Gas%20in%20Africa.pdf

[2] Ibid

The extraction of natural resources creates the possibility of job creation which can strengthen African economies. Both domestic and foreign firms require man power for their operations, and they will often draw from the local labour force. Employment ensures a better standard of living for the workers and injects money in to the home economy leading to greater regional economic stability. In Nigeria, for example, the company Shell hires 6000 employees and contractors, with 90% being Nigerian and at higher wages than the GDP per capita[1]. This would indicate that the presence of natural resources is economically strengthening Africa. 

[1] Shell Nigeria ‘Shell at a glance’ date accessed 16 December 2013  http://www.shell.com.ng/aboutshell/at-a-glance.html

Employment practices are usually discriminatory against locals in Africa.  Due to a lack of local technical expertise, firms often import professionals particularly for the highest paid jobs.

The presence of these extractive industries can also disrupt local economies, causing an overall decrease in employment by forcing the focus and funding away from other sectors[1]. Returning to the Nigerian example, the oil industry directly disrupted the agricultural industry, Nigeria’s biggest employment sector, causing increased job losses[2].

[1] Collins,C. ‘In the excitement of discovering oil, East Africa should not neglect agriculture’ The East African 9 March 2013 http://www.theeastafrican.co.ke/OpEd/comment/East-Africa-should-not-neglect-agriculture/-/434750/1715492/-/csn969/-/index.html

[2] Adaramola,Z. ‘Nigeria: Naccima says oil sector is killing economy’ 13 February 2013 http://allafrica.com/stories/201302130929.html