The corporate scramble for Africa

5 Sep
    Editor’s Note

    In many respects, the idea of the Extractive Industries Transparency Initiative (EITI) is a very good measure to save the country from the scourge of corruption and capital flight. However, as an international body, the EITI needs to be strengthened and information on its activities disseminated as widely as possible.

    EITI was established in 2003 to help create transparent dealings between companies and governments in member countries. Membership has a lot of processes to go through, a means by which a society does its own policing to stamp out corruption.

    In other words, how it works is that extractive companies disclose payments they make to governments for their acquisition of natural resources – oil, gas and minerals. Governments disclose revenues they receive for the resources they sell or tax.

    Independent EITI administrator reconciles the two payments. Finally the EITI country report would be released to citizens and the EITI board. No money would be lost to corruption. The oversight body in the country is a multi-stakeholder group constituted of from representatives of government, extractive corporations and civil society.

    Ethiopia’s membership request in EITI was rejected twice – the last time in March 2012, when Ethiopia withdrew its application for being rejected, instead of correcting its mistakes.

    The EITI board refused Ethiopia’s request for membership because of government laws and practices that are repressive to civil society organizations and journalists. Without these freedoms enjoyed by these bodies, i.e., to demand information and report on company and government activities, it would be difficult for the requisite reporting activities. The media in Ethiopia cannot expose corruption, since it has been muzzled and journalists persecuted. Civil society organizations cannot ask what happens to the moneys government receive in payments, since they could be targeted and prosecuted as terrorists.

    Several times, the EITI board gave Ethiopia the opportunity to work on this problem to make the necessary adjustments in 2009 and 2010. The process continued through 2011, with EITI delegations visiting the country three times. The Ministry of Mines was authorized to institute an EITI body. The work went well and the progress was appreciated in the hope that corrective measures would implemented. Finally, the Meles regime refused to make changes to its repressive. Therefore, that became the real obstacle for forward movement on Ethiopia’s application.

    There is every reason now for government in Ethiopia to close this shameful chapter and enable Ethiopia to join the EITI, by removing the repressive measures it has set in place, especially regarding civil society organizations and freedom of the press.

    In fact, it is so embarrassing that for several countries the Ethiopian mishap was used as lesson. Even the United States used it to prepare Iraq for membership of EITI, as a country with huge oil resources.

    The US wanted to help the new Iraq government to fight corruption arising from oil trade by becoming member of EITI. The advice the US embassy in Bagdad was dealing with was how to avoid the pitfalls of being rejected by EITI as happened to Ethiopia.

    In a cable released by WikiLeaks the following is reported:

    “BAGHDAD 00000082 002.2 OF 002

    also told ACCO staff that the problems with NGO legislation in Ethiopia had derailed the EITI process there, as it was judged the NGO’s could not be sufficiently independent of the government. (Comment: Those concerns bear watching as the process unfolds in Iraq, where there is few independent sources of income for civil society or media. MOO IG told us he was not concerned that “interested parties” would try to intervene with the CSO participants; this will be the key to judging EITI progress here. End Comment.)”

 

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The corporate scramble for Africa

By Johnny West, Al Jazeera

The Marikana mine massacre last week may be the ANC’s Sharpeville moment, but the struggle we are witnessing – workers and local communities against corporate giants and in some cases their own governments – is not just unfolding in South Africa. There is a new corporate scramble for Africa’s natural resources. You’d think it should play differently this time. After all, it’s a half century since political independence and decades since the first waves of resource nationalism resulted in the nationalisation of extractive industries across the continent. Since then, both sides have come to realise they need the other, and there’s this new buzzword of sustainable development.

In fact, the stage is set for Resource Conflict 2.0. The World Bank and others continue to flag the mining industry in particular as the engine of Africa’s future economic growth – the auditor Ernst & Young issued a report last year entitled “Africa: A Golden Opportunity”. Pundits predict that foreign investment in mining across the continent is set to increase by an astonishing 40 per cent this year and the top 40 mining companies in the world achieved record profits last year of $133 billion between them.

Some 17 African countries already register high dependence on extractives for hard currency and export earnings and meanwhile up to a dozen countries – Uganda, Kenya, Mozambique, Liberia, Mauritania, perhaps even Somalia – are about to start producing oil or gas.

Conflict exists at two levels. Across the continent governments are stirring, feeling that now is the time to increase their take. Ghana has said it will renegotiate mining contracts, as has Nigeria with its offshore oil contracts. Zambia just doubled its royalty take from copper, and other countries are beginning to insert state-owned companies as sleeping partners in ventures. Despite Eurogloom, the global economy stepped back from the precipice of 2009 – for the moment – and Africa’s leaders and functionaries are getting assertive. So far so classic.

But it’s the community level where the conflict is more explosive. Two decades of unchallenged neo-liberal consensus have morphed old nationalisms into Animal Farm-like hierarchies where some are more equal than others. Cyril Ramaphosa built South Africa’s National Union of Mineworkers under apartheid and became secretary-general of the ANC during the vital transition period. Then he turned into a businessman with a string of companies and took a seat on the board of Lonmin, the company running the Marikana mine. The workers’ demands for higher wages thus bring them into conflict with their own elites. The Chinese too – in Zambia, where China Inc has invested over a billion dollars in the copper mining industry, workers killed a Chinese mine manager earlier in the month while protesting for the right to the minimum wage the government just announced nationwide.

Something has changed in the equation. Local communities are more assertive and more connected – mobile phone penetration is expected to top 70 per cent across the continent by the end of the year, and even casual visitors cannot but be struck by their ubiquity. The companies have noticed this too. Surveys consistently show resource nationalism is their biggest concern, and their literature now makes much of obtaining a “social license to operate” and the need to get the message of all their community activities out there. But the typical big extractive company’s view of corporate citizenship is about as evolved as a Victorian gentlewoman’s programme of good works. For many, corporate social responsibility departments are window dressing and, deeper in the bowels of the company, closer to its real power centres, the view persists that a little knowledge can be a dangerous thing, and the more they can fly under the radar the better.

But that just won’t work any more, any more than the photo-op at the whitewashed health care clinic that closes a few months later because nobody thought to figure out how it was going to be staffed.

Three things are needed: levelling up the playing field when African governments negotiate with Big Oil or Big Mining so that agreements are fairer; commitment by the companies to radical growth of the local skills base; and by governments to radical transparency, of a kind not seen before.

All over Africa the negotiation process is still largely random. I know a bloke who ended up writing the entire regulatory regime for Somalia’s oil sector pretty much by accident – he’d originally gone there for a week to do something else. Companies employ legions of world class lawyers and know every trick in the trade. Governments are often reduced to asking for pro bono advice, sometimes even from their adversary across the table. If you’re in this game, the more stories you hear the more frightening it is. Contracts which determine billions of dollars and millions of jobs determined by things as trivial as a phone call never returned, or one key term left unexplained by advisors.

Lack of negotiating capacity is part of the reason for the next problem – the failure of all these capital-rich industries to reach into the rest of the economy and create inclusive growth and jobs. Half a million South Africans work in the mining industry but there are massive skills shortages. In theory contracts should address this issue through “local content” clauses which oblige companies to train, hire and procure locally. In practice, companies succeed in watering down these clauses until they are meaningless. Without positive discrimination to build local skills and participation, extractives will remain a largely neo-colonial activity in Africa. Brazil has built its own skills base, some of the Middle Eastern states have done it. Why not Africa?

Finally, transparency. It’s a nice buzzword and companies now have well groomed representatives ready to tell all kind of “multistakeholder initiatives” and TV channels how committed they are to sustainability. But there’s precious little for anyone to get hold of, a few impenetrable 80-page reports publishing figures so selective they always make you wonder where the rest are. How about radical transparency? Massive screens in every Nigerian city clocking in real-time how much oil is leaving the export terminals for Europe and the United States? And how many petrodollars the Central Bank has received so far this year. Why doesn’t the South African government publish the terms of the contract it signed with Lonmin?

If it is business as usual, there will be more Marikanas.

In fact, with the blogosphere, expectations raised by the Arab Spring, and the promise of mobile phone ubiquity, business as usual no longer exists.
 

Updated.

Transforming Ethiopia TE

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