Controlling Africa’s natural resources needs knowledge and good governance

Addis Ababa, 05 May 2015 (ECA) – “Growth derived from natural resources has not delivered goods in terms of addressing poverty because is it linked to exploitation,” said Mr. Abdalla Hamdok, the Deputy Executive Secretary of the Economic Commission for Africa during the opening of the Policy Dialogue on Challenges faced by African states in mining and petroleum contract negotiations currently taking place in Addis Ababa.

Africa sits on 30% of the world’s natural resources, and with 70% of coltan deposits (from which electronic microchips are made), the continent should be rich but too often those countries who own the resources are typically low income or underdeveloped countries with shortage of skills in negotiating for ‘win-win’ contracts. To rectify this, “we have to address issues of governance and leadership,” said Mr.Hamdok.

“There have been discoveries of oil and gas in many countries in Africa during the last 10 years but the way we exploit natural resources is important. We can use the benefits from these resources to address long-term development,” said Mr.Hamdok.

These petroleum and mining contract negotiations can no longer be limited to technical experts but must be broadened to include a number of other specialists. The delegates at the Policy Dialogue agree that skills and knowledge limitation often result in skewed contracts that favour the investor and not the owner of the resources. Education must be improved to ensure that citizens acquire the necessary skills to be able to negotiate complex mining and petroleum contracts.

Mr. Martin Ndende, the Senior Regional Advisor at ECA asserted that African states sometimes take fatalistic action when it comes to natural resources. “They act as if they were not holders of their resources,” Mr Ndende said. He, however, also stressed that the global economic and political context at the time of the negotiations also determines the type of contract produced. When commodity prices are high, states might be tempted to offer very generous tax rebates to attract investment, but when the inevitable price drop comes, states are disadvantaged by the deal.

Regime type also determines how contracts are negotiated and the outcome. The nature of the state is crucial because “negotiating mining contracts is also about negotiation the future of development,” said Professor Mohamed Salih, a consultant at the ECA. States must take issues of equity, rights and justice into account when negotiating for their citizens, Professor Salih believes.

States also compete with each other to attract investors; a process which sometimes results in lack of co-operation between states thus allowing the extractive-industry global companies to exploit that competition to their advantage.

Contracts are often concluded without the representation of the local communities who sit on the resources and whose land and society will be affected either through environmental degradation, or a higher care burden for women whose husbands have health complications from their work and loss of land, delegates pointed out.

If Africa’s natural resources are to benefit its people, knowledge; representative and transparent governments; good governance and leadership; gender equity; and skills development are necessary.  

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