Top 10 Blogs of 2013: 7. Resources in Africa

by Developed Africa 24. December 2013 09:00

As 2013 draws to a close, Developed Africa looks back over our 10 most popular posts of the year.

Africa's bountiful resources have often been a source of contention, we evaluate the current mining investment sector.

An article from the Huffington post, among many others recently, has posited that Africa's natural resources could be the development boost it needs if only the sector was structured for the country's benefit.

International companies typically provide the technology, skills, and finance required. This means that much of the income generated from these industries goes to foreigners. Whether Africans benefit depends largely on how effective governments are in raising revenues from taxes and royalties."

This does not mean to say that international companies do not deserve to be making money from the resources, they are putting in a lot of investment for their returns, the point here is that the countries are not taking enough advantage of their resources, and they are not using an effective system to properly benefit from their mineral wealth. Instead, the article promotes several measures that are important to ensure a fair system that allows African governments to gain more control. Transparency and accountability are highlighted here as being key to the development of the sector, and as more and more countries get on board with The Extractive Industries Transparency Inititative, they will be better informed as to how to properly negotiate contracts with large international companies. But what is evident is that it is extremely important how things are handled once the income is captured, that it should be properly handled. And this means that it is invested correctly rather than frittered, and that the focus is not solely on resources, because they will run out, and when they do, African countries need to have built up their other sectors to ensure they have diversified enough to keep their heads above water.

All Africa posted an article in late September discussing the existence of a new "vision" for African resources which:

seeks to retain most benefits from the rich minerals that have been exploited and taken out of Africa for decades without significant returns for Africans"

This is again on similar lines to the ideas postulated by the Huffington Post article, that African governments should start to make moves into gaining back some of the revenue from their natural capital. The article argues that the new vision is one that takes back ownership of resources for governments, so that the money made from oil, or diamonds, or gas, can have a serious and positive impact on the lives of African people. 

For a long time now, some scholars have branded Africa's immeasurable natural resource wealth as a curse because most States that have the most amount of minerals, are among the poorest, due to the way these minerals are managed and exploited."

The discussion highlighted the importance of countries controlling their own resources, so as not to be left poor whilst foreign investors and countries benefit greatly from their mineral wealth. This is linked to our posts last weeks regarding Botswana and their 50/50 split of the profits from diamond mining in the country. This occurred due to Botswana owning their wealth of diamonds found within its borders, and so was able to broker such a deal. It is possible to see more discussion recently around the idea that such a move would be better for other African nations. 

governments and communities are starting to stake claims for control over the resource located within their national boundaries"

So it is possible that governments may start changing the rules around their extractive industries in order to gain access to the riches produced and to help them develop further.

Aside from the debate about resource nationalism, it is evident that most reports at the moment show a strong amount of investment coming from China, but not only this, the investors are acting in a way which is beneficial to the African countries, as the Business Reporter writes: 

A new generation of African leaders has found it so much easier to strike deals with the Chinese because of their no strings attached approach, as well as the "in-return" infrastructure investments; the building of roads, airports, schools, hospitals and so on."

However, many would argue that this is still not enough, or at least not enough of what Africans really want. It would appear that they want Chinese investors (or any investors for that matter) to supply are more jobs. For example, an article from Reuters reported earlier this year noted that despite South Africa being the manufacturing hub of the continent, 40% of shoes come from China, in response to this:

South African President Jacob Zuma bluntly warned last year that such an unbalanced pattern of trade was "unsustainable""

Counter to this, many still believe that this is a far better option than investment which has 'strings' attached, like the investments from many Western institutions which add on democracy and governance requirements. Which is perhaps why the topic of African ownership of resources and control of how they are used has come to the fore. Investment is most definitely needed into developing Africa's resource supplies from foreign investors, but there is an argument that they should be investing into a sector that is weighted more equally, and is fairer to the host country.

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