The politics of natural resources trade and industrial policy in Africa - BY FREDERICK PARRY ILO - ROAF DAR ES SALAAM, TANZANIA
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The politics of natural resources
trade and industrial policy in Africa.
BY FREDERICK PARRY
ILO – ROAF
DAR ES SALAAM, TANZANIA
1• “The African continent shall never be
developed by the generosity and goodwill of
the developed powers. It can become
developed only through a relentless struggle
against the forces that have vested interest in
keeping it underdeveloped”
Kwame Nkrumah.
2• Africa’s political economy has a history of the
exploitation and mis-management of its
mineral and natural resources.
• More than 500 years after commercial
exploitation of Africa’s natural resources
began, Africa continues to host many of the
large and unexploited deposits of minerals
globally.
3• Africa has 12 percent of the world’s oil reserves, 40
percent of its golf and 80 to 90 percent its chromium
and platinum. Africa is also home to 60 percent of the
world’s under utilized arable land and has vast timber
resources.
• With minor exceptions, Africa does not consume or add
value to its mineral products. Africa is a net exporter of
raw materials that fuel prosperity and development in
other regions of the world. Africa continues to struggle
with limited economic transformation, low or no
resource rents and scarce employment opportunities
4• Commodity prices in the past 10 years, have
been impressive, yet Africa’s share of the
windfall earnings has been minimal compared
with what the mining companies for example
have realized.
• The profits for the top 40 mining companies in
Africa was $110 billion in 2010, which was
equivalent to the merchandise exports of all
African LDCs in the same year.
5• It is fair to say that the resources for
development model that puts raw materials
suppliers at a significant disadvantage is not
working to bring about equity or bring
development to Africa.
• The African mining vision (AMV), jointly
developed by AU, ECA, ADB and UN
agencies was adopted by the African Union
Heads of State in 2009
6• The vision advocates for “transparent, equitable
and optimal exploitation of mineral resources to
underpin broad-based sustainable growth and
socio-economic development.
• In this regard, Africa governments needs to get
the best deals for their countries during contract
negotiations with the Trans National Corporations
(TNCs). For example in the DRC, a government
committee reviewed 61 mining deals over a
decade up to 2006, and found none acceptable. It
recommended renegotiating 39 and cancelling 22.
7• Another area of critical concern is that African
government do not have the capacity to take
stock of their minerals resources, relying on
transnational corporations to assess
commercial capacities of newly found
discoveries especially oil and gas.
This lack of capacity to verify data severely
compromises negotiation capacity and the
continent’s bargaining power.
8• An important structural measure is a better
integration of Africa’s development policies.
Africa needs to have long term development
objectives in the processes for extracting natural
resources.
• For mining , for example to benefit Africa’s
people, strong backward and forward linkages in
the local economy should allow local
entrepreneurs to take advantage of service
provision and technology transfer opportunities as
a result of proximity to the mining industry.
9• This should be done through investment in
infrastructure, research and human capital
development through conditionality for local
content.
• The potential of small scale mining should be
harnessed and improved to better rural
livelihoods and further integration into the
rural and national economies.
10• Other factors, such as the building of human
and institutional capacities towards a
knowledge economy that support innovation,
research and development and the promotion
of good governance of the mineral sector, in
which communities and citizens participate in
the decision-making process in which there is
equity in the distribution of benefits are also
necessary prerequisites.
11• Africa’s natural resources should be a blessing
and not a curse, that is if they are managed
well to provide solutions to the continent’s
socio-economic problems.
To make this possible, frameworks such as the
Africa Mining Vision (AMV) must be
implemented and used as a template at country
and regional levels.
12Industrialization – Africa’s hope for
economic development
• Six years after the global financial crisis of
2008 the economic performance of African
countries have been remarkable with an
average growth rate of over five percent per
annum. It is the world’s appetite for Africa’s
rich natural resources which has been the
driver of this economic growth.
13• The idea that the abundant natural resources
can be the driver for an industrial revolution
across the continent is growing. The Economic
Report on Africa (ERA-2013) sets out how the
continent's future will be determined by how
policies that prom commodity-based
industrialization are designed and
implemented.
14• A structural transformation from agriculture to
an industrialized Africa is possible, but it will
require courage, vision and a new mindset
from the continent’s business and political
leaders to overcome the challenges which
continue to hold back the building of a
successful and dynamic industrial base in
Africa.
15• The Economic Report on Africa (2013) published
by the ECA and African Union Commission
(AUC) states that “up to 90% of income from
coffee goes to rich consuming countries”
The story is similar with other primary products
such as cocoa, groundnuts, cotton, crude oil etc.
• Given this situation, value addition to the primary
commodities in Africa is the surest way for the
continent to realize its fair share of income from
international trade.
16• Advocates of commodity – driven industrialization, are
of the view that it will boost local manufacturing and
create millions of jobs in Africa. More jobs will reduce
poverty and expand the middle class, which will in turn
demand more goods and services.
• There is no one-size-fits-all solution to accelerating
resource-based industrialization, but important lessons
can be learnt from the success of countries such as
Malaysia, Chile, Indonesia and Thailand in promoting
value-addition, new services and technological
capabilities
17• Malaysia, in particular is a perfect example of
how a commodity based economy was
transformed, through focused state
interventions and allocation of resources
towards the industrial sector to a high income
and diverse manufacturer in only a few
decades.
18• It is clear that for Africa to shape its own
economic future through commodity-based
industrialization, African governments must
collaborate effectively with Africa’s private
sector to address barriers to Africa’s
industrialization such as the lack of technical
capacity of the workforce, poor and obsolete
infrastructure and lack of reliable energy to
boost local manufacturing capacity.
19• The current over reliance on commodities by
African countries is not sustainable because
commodities are exhaustible, and Africa has
little control over disruptions in world demand
and prices.
20AFRICA’S ROLE IN INTERNATIONAL
TRADE
• African countries are yet to realize the full
potential of trade as a pillar of development
due to their export composition. Most of their
traded goods are in the lower end of the value
chain and they are exported as raw materials or
with very limited value-addition whilst
consumer goods are imported on a large scale.
21• Africa is largely seen as a price-taker rather
than price-maker, with a marginal role in
international trade.
Africa countries also suffer from unfair trade
treaties and rules set out by international
bodies that penalize Africa’s value addition to
its primary commodities.
22• The way forward is for Africa to act as one in the
area of international trade especially in
negotiations at the World Trade Organization
(WTO) and the Economic Partnership
Agreements (EPAs) with European Union. The
objective in both negotiations should be to seek
development outcomes that favour Africa. In this
regard African countries must put great effort in
regional integration processes and address
problem areas such as weak political commitment
and lack of policy harmonization.
23• Adding value to natural resources could boost
intra – African trade as well. Intra – Africa
trade is currently low at 12 percent. Africa
with a growing population must create a
market for consumption of value added
natural resources within the continent.
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