Development in Africa: Resource optimism

LONG before Baobab became a lowly journalist he scraped a living as a lowly academic. “If you’re so clever why aren’t you rich?” was a favourite tease of his less bookish but better-paid peers. The Africa Progress Report, prepared by an expert panel led by Kofi Annan (pictured), a former UN secretary-general, was unveiled last week at the World Economic Forum conference in Cape Town, and deals with a more wounding provocation. If Africa is so resource-rich, it asks, why are its people not better educated, its children well nourished and its adults longer-lived?

The study notes a large gap in mineral-rich countries between incomes and broader gauges of living standards like the UN’s human-development index. Twenty countries in sub-Saharan Africa are classified as “resource-rich” by the IMF. Of these 14 are placed higher in the world rankings based on GDP per person than they are by their score on the UN index. Angola, for instance, is the 110th richest country measured by GDP per person but is ranked 148th on the development scale.

This in part is a familiar tale of the resource curse. The battle for the spoils from oil, gold or diamond wealth is a cause of political instability and a check on other forms of enterprise. Export earnings drive up the exchange rate, making it harder for jobs-rich local farming or manufacturing to compete with cheap imports. But there is more to the story, says the panel. The continent is not benefiting as much as it should be from its minerals partly because of the poor deals it cuts with foreign mining firms.

One problem is that mining assets are sold on the cheap. The panel looked at five deals struck between 2010 and 2012 in the Democratic Republic of the Congo, and compared the sums for which the mines were sold with independent assessments of their value. It found that the valuation gap was a staggering $1.36 billion, double the state’s annual budget for health and education. And these deals are just a small subset of all the bargains struck, says the report.

It also highlights some of their puzzling details. For instance ENRC, a London-listed Kazakh mining firm which is currently being investigated by the Serious Fraud Office in Britain, waived its rights to buy out Congo’s stake in a mining enterprise only to then acquire it for $75m from a company owned by Dan Gertler, an Israeli businessman, which had paid $15m for it just months earlier. Mr Gertler has long and close ties with Joseph Kabila, Congo’s president.

African countries also fail to adequately tax the profits from mining, says Mr Annan’s panel. Zambia’s copper exports were worth $10 billion in 2011 but its tax receipts from mining were a meagre $240m. The widespread use by mining firms of offshore investment vehicles as conduits for mining profits creates scope for tax avoidance. Their use is not restricted to rich-world companies. Much of the oil that Angola ships to China is via the China International Fund. Its trading prices are not made public.

Despite these many problems the panel is loth to succumb to what its report calls “resource pessimism”. Instead it calls on the G8 group of rich countries to work together to make tax avoidance harder. African countries should favour investors that create bigger spillovers for the local economy. They should publicise the details of asset sales so that outsiders can judge whether a good bargain was struck for their citizens.

Business also has a responsibility, says Strive Masiyiwa, founder of Econet Wireless and a panel member. Firms making deals in Africa are more experienced than the officials with whom they negotiate and often take full advantage. Mr Masiyiwa’s advice to them is not to cut deals in this way. “You’ll embarrass yourself down the line,” he says.  

FG Excited As Nigeria Is Set To Host 2014 World Economic Forum On Africa

Nigeria is to host the 24th edition of the World Economic Forum (WEF) on Africa in Abuja next year.

The Coordinating Minister of the Economy and Minister of Finance, Dr Ngozi Okonjo-Iweala, made the announcement at the close of the 23rd edition of the WEF in Cape Town, South Africa on Friday.

Okonjo-Iweala thanked the WEF for choosing Nigeria as the next host, expressing the readiness of the country to make the next edition as exciting as possible.

She said that the choice of Nigeria was appropriate given its position and huge economic potential.

“I think we epitomise a lot of things about Africa. We have the excitement, the passion, the entrepreneurship, the private sector drive and the glow for the future.

“But we also epitomise all of the difficult challenges of the continent such as infrastructure deficit, governance issues, corruption and transparency,” she said.

According to her, a combination of these opportunities and challenges in one country makes Nigeria the most exciting place to be on the continent.

Okonjo-Iweala said that the future of Africa was bright, judging by the commitment and passion demonstrated by participants in the forum, especially the Young Global Leaders, who represented the youths of the continent.

The Director General, Nigeria Economic Summit Group, Mr Frank Nweke Jnr, said that Nigeria was excited to be the host of the next WCF.

He said that President Goodluck Jonathan had already mandated the team to organise a successful forum.

africaisdonesuffering:

(Where I Stand) Week 2: Tension and Cultural Differences

There’s an elephant in the room and we pretty much can’t continue to ignore it. We can’t continue to pretend it’s all rosy. In different ways, we’re dealing with issues of colour, race, identity, culture, ethnicity, etc. And it all affects how we view and relate to each other.

“You can live in the hotel for all your life but at some point you’ll need a home, and Africa is home”.

I quote this from one of last week’s entries. As an African, I immediately came to agreement with it. Afterall, no matter how far away I go, Africa will always be home. But I didn’t realise it was not as straightforward until I was drawn to consider how I’d take the statement, had I been of indirect African descent. Even if I decided that Africa is home, it won’t make me any less foreign to the people living there. They have different ways of receiving people not directly from their countries. In Ghana for example, a foreign accent could easily land you the label “obroni”. The tag, which isn’t intended to be derogatory or negative in anyway suggests you’re foreign and that makes me wonder if it’s possible to be a foreigner in your own home. I’ll leave that to you to answer.

It’s not that easy to live in this imaginary utopia we’ve created for ourselves. This week, as part of the Rise Africa JelyPals Diaspora series, we’ll discuss the Tensions Between Africans and Blacks of Indirect African Descent. Indeed, Africa is home but having gone our separate ways so long ago, being raised up in different environments, going through experiences of the civil rights movements and other similar movements, the diaspora also becomes less of a hotel and more of a home.

This week, lets put aside the diplomatic skills we use to swerve issues relating to these tensions and face the awkwardness and find answers to these questions.

-Michael Annor