Enough lessons; time for Africa to benefit from its oil, gas and mining

East Africa’s mineral wealth offers tremendous opportunity to lift the lives of millions. Revenue from oil, gas, and mining is worth hundreds of billions of dollars each year, healthy amounts to spend on health and education.

Violence in Eastern Congo, pollution in Nigeria, and Angola’s growing inequality remind us that mineral wealth can also bring more harm than good.

But optimism is warranted. Examples from Botswana to Norway highlight the benefits of mineral wealth. Botswana used its diamonds to transform from a low-income, land-locked country to a middle-income democracy.

As East Africa gears up to pump, mine, and export its impressive reserves of oil, gas, and minerals, many are asking: How do we get this right?

First, all parties must recognise that mineral wealth belongs to the people. Government may end up managing the wealth, but these resources belong to the people.

Transparency is critical. If a country is serious about using mineral wealth for the benefit of its population, then it will also want to be fully transparent about how much money its mineral wealth is making.

The most effective and credible way of doing this is by signing up to the Extractive Industries Transparency Initiative (EITI).

“EITI compliant” means a country transparently explains the revenues from its extractive sector; so that everybody can see how much their country receives from the oil, gas, and mining companies.

In Tanzania, in 2009, for example, EITI reports showed a discrepancy of nearly $37 million between what companies said they had paid and what the government said it had earned. In 2010, that discrepancy had dropped to nearly $4 million. And in December 2012, the EITI declared Tanzania a compliant country.

So far, 18 countries are compliant. Some 70 of the world’s largest oil, gas and mining companies have chosen to become EITI supporting companies. Kenya and Uganda are yet to sign up.

Why should revenues from oil, gas, and mining companies be a state secret? Governments and companies don’t always behave the way we want them to, but more and more governments and big companies are signing up to the EITI, placing extra pressure on all actors to become more transparent.

We must all take responsibility for making this work. We all win if Africa is stable and prosperous. Civil society must stand up for the people, demand transparency from their governments.

The international community must demand tougher anti-corruption regulation from its oil, gas, and mining companies. Donors must support civil society with training and capacity-building for monitoring government revenues.

In addition to transparency, a country should consider several other issues to maximise the benefits from oil, gas, and mining.

First, a country should build in linkages with oil, gas, and mining projects on its territory. Does an oil company ship its food from London, or is it buying from local farmers? When a mine builds a railway to transport precious ore from mine to port, how can the nearby populations use that railway too?

Second, what about human development? The oil, gas, and mining sectors are generally recognised as providing few jobs compared with the wealth they create. But perhaps government, mines, and local communities can work better together. Perhaps the mine can train locals to provide a profitable service of benefit also to the mine.

Third, how will a mine or company manage its pollution and waste? How will it clean up after exhaustion of the mine? How will it take care of the local environment?

Fourth, how will a country benefit if oil, gas, and mineral prices are volatile? The legal arrangements for the mining operations must take this into account.

African oil, gas, and mining sectors are changing rapidly. Most African countries have little experience of the extractives sector and few had such industries until a decade or so ago. No wonder that it can be difficult to negotiate with companies that have decades of experience in dozens of countries behind them.

Capacity to negotiate with major extractive companies may be critical to a country’s success. This is not just about having the best lawyers, it’s also about having equal information. For instance, do both sides of the table have a joint understanding of the geological data available?

Finally, civil society organisations must be a critical partner in designing extractive industries development policies; in particular, they have to contribute to designing the legal enabling environment for big oil, gas, or mining.

Civil society knows what is good for the people and what is damaging. Civil society must be included.

Africa already has many excellent initiatives so that mineral wealth can benefit local populations and not a greedy few. The Africa Mining Vision and the Natural Resource Charter are good examples.

Africa has learnt so many lessons already from its oil, gas, and mining sectors. There is no reason why Africans should not benefit.

Published in: The East African

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Chaired by Kofi Annan, the former Secretary-General of the United Nations, the Africa Progress Panel (the Panel) includes distinguished individuals from the private and public sectors, who advocate on global issues of importance to Africa and the world.

For further information, please contact
Edward Harris – edward.harris@africaprogresspanel.org
(m) +41 79 87 38 322 and (w) +41 22 919 7536

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