Addis Ababa, 06 May 2015 (ECA) – Participants at the Policy Dialogue on Challenges faced by African states in mining and petroleum contract negotiations hosted by the ECA in Addis Ababa concluded that for Africa’s natural resources to largely benefit its citizens, contract negotiators have to be trained to acquire excellent skill-sets. Poorly negotiated contracts rob Africans of the benefits they could accrue from the sale of gas, petroleum, and minerals.
“The state of the global economy affects the kind of contracts made” Mr. Adeyemi Dipelou, the Director of Capacity Development Division at ECA reminded participants. In times of commodity boom with high windfalls for both states and multinational companies, the custodians of the resources may be trading far too cheaply for their resources.
Experts agree that mineral and petroleum contracts disadvantage African states because of the fluctuations in the global financial market, international investment and tax laws and the lack of certain skills in negotiators. These types of contracts are often complex, requiring a range of experts from fields other than engineering such as law, taxation, economy and humanities. African states therefore must invest in training their negotiators in specialisation by sector and practice area.
Africa (sub-Sahara region) is experiencing a critical increase in foreign direct investment, with 52 billion dollars invested in 2014 alone. With 84 deals concluded in 2014 and individual project values increasing, African states “must get the contracts right because there is big money involved and the playing field is not level at all,” Ms. Anna Gardner of International Lawyers for Africa reminded those present.
“Capacity constraints limit what can be done but we are training institutions in areas of tax and environment management related to the extractive industry. ECA has collaboration with universities, hold meetings and dialogues and delivers targeted evidence-based, timely and effective technical assistance,” said Mr. Sylvain Boko, the Principal Regional Advisor at ECA’s Capacity Development Division (CDD).
Since the ECA already advises African states on natural resource management, it can also help with new initiatives and guidelines to assist member states in forming a network of experts in the extractive industry.
“It’s not our partners who will do our development. They are defending their own interests. We must set up contracts that correspond to our needs in Africa,” said Mr. Martin Ndende. As an illustration, delegates suggested that African states could reach out to the experts in the diaspora currently working in large multi-national companies to assist with contract negotiations.
Ms. Gardner suggested that states negotiate for waivers on for example code of conduct so that they can get the right expertise and encouraged them to embrace arbitration, a growing practice globally, and find a way that it can work for Africa.
According to ECA’s research, the extractive industry is responsible for 60% of illicit financial flows to regions outside of Africa. Various initiatives are underway for example between tax authorities in the continent on issues of double taxation, coordination and tracking of taxpayers across the continent.
Delegates reminded each other that states ultimately are the custodian of these resources and must therefore act in their citizen’s best interest. The African Mining Vision adopted in 2009 is yet to be implemented by all states and its fundamental principles are not always followed, delegates heard.
Exploitation of natural resources and the consequences thereof are contentious and divisive subjects hence participants encouraged African states to be transparent, respect land rights, factor gender issues in, and protect their natural environments from degradation.
For now, the participants at the Policy Dialogue agree: training negotiators is the best chance for Africa to get better deals from their mining and petroleum contracts.
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