7 February 2008

Africa: Developed Countries' Leverage On the Continent


Africa is a vast continent of about 900 million people in 54 independent countries. It has a total area of over 30 million square kilometers (11.6 million square miles), about three-and-a-half times the size of the United States and 10 times the size of India. It is the second largest continent in the world after Asia. It stretches from the shores of the Mediterranean in the north to the Cape of Good Hope in the south.

Africa is also rich in mineral and natural resources with large parts of its terrain teeming with wild life and magnificent plant life. It possesses 99 percent of the world's chrome resources, 85 percent of its platinum, 70 percent of its tantalite, 68 percent of its cobalt, and 54 percent of its gold, among other minerals.

In addition, the continent has significant oil and gas reserves. Nigeria and Libya are two of the leading oil producing countries in the world. Further, Africa is the home to timber, diamonds, and bauxite deposits. Revenues from their extraction should be providing funds for badly needed development, but instead have fuelled state corruption, environmental degradation, poverty, and violence. Rather than being a blessing, Africa's natural resources have largely been a curse.

Meanwhile, Africa's enormous agricultural potential is vastly untapped, even as its vast mineral wealth and strategic significance have encouraged foreign powers to intervene in the continent's affairs. During the Cold War era, 1945 to 1990, there was increasing superpower intervention in Africa. The United States and the Soviet Union were major players on the African scene.

The 19th-century scramble for Africa saw the great powers rush to control land so they could exploit natural resources. Today, the scramble continues - the continent still a vital arena of strategic and geopolitical competition among the US, France, Britain, China, and India. The key question for many is: will the exploitation of Africa's vast natural resources benefit anyone other than the continent's elites?

Oil is perhaps the most important lure, with competition between foreign states and companies to secure resources so intense it attracts more than 50 percent of all foreign direct investment. It is noteworthy that in the year 2006, annual foreign direct investment (FDI) rose to a historic high of $38.8 billion, exceeding record levels of 2005 - a growth of 78 percent from 2004. According to the UN World Investment Report, FDI cash was concentrated in a few industries, notably oil, gas, and mining. And six oil-producing countries - Algeria, Chad, Egypt, Equatorial Guinea, Nigeria, and Sudan - consumed about 48 percent of it.

European firms represent roughly two-thirds of the total FDI in Africa. More than half of European investment originates from the UK and France, going mainly to countries with which they have historic ties. French oil companies such as Total - locked out of the Middle East through France's opposition to the Iraq war - have made large investments in Francophone countries such as Cameroon, Chad, and Gabon.

The US is interested in the region as a cheap and reliable alternative to the increasingly volatile Persian Gulf. West Africa already supplies about 12 percent of US crude oil imports, and America's National Intelligence Council predicts this share will rise to 25 percent by 2015. As is often the case with oil, military involvement follows trade. In February 2007, the US set up an Africa command (Africom), which has established bases in, and signed access agreements with: Senegal, Mali, Ghana, Gabon, and Namibia. Africa is becoming strategically important to the US because of its oil production and China's increasing regional influence.

Despite its own considerable "backyard," China is generally resource-poor and Africa offers the natural resources vital to fuel its rapidly-growing economy. China looks to the Democratic Republic of Congo (DRC) and Zambia for copper and cobalt, to South Africa for iron ore and platinum, and to Gabon, Cameroon, and the Republic of the Congo (Congo-Brazzaville) for timber. For oil, it has been wooing Nigeria, Angola, Sudan, and Equatorial Guinea. China is now the second-largest consumer of crude oil after the US, and was responsible for 40 percent of the global increase in demand between 2001 and 2005. Indeed, it imports 25 percent of its crude oil from Africa.

China has charmed African rulers with a triple whammy of arms sales, cancelled debt, and soft loans. Last year, President Hu Jintao and Prime Minister Wen Jiabao recently visited 10 African countries, and this increasingly close relationship was cemented at the China-Africa summit in October 2006, when Beijing rolled out the red carpet to almost 50 African heads of state and Ministers.

But while the global demand for natural resources will bring benefits to Africa - increased FDI and, as exports grow, an improving balance of trade figures - there are concerns that such demand is simultaneously fuelling corruption, environmental degradation, and internal dissent. The windfall gains from resource extraction cause more problems in Africa. They reduce a state's incentive to impose a free and just taxation system, and encourage corruption and acquisition of weaponry, in this way, generating the internal conflicts or external wars for which Africa is known.

In the form of "neo-colonization," thus, Africa is being fragmented into many pieces at the will of super-power countries, which are concentrating more on the exploitation of the continent's rich resources than providing it with development aid. For example, the Organization for Economic Cooperation and Development's (OECD) most recent report indicates that the world's major donors - which make up the 22 member countries of the OECD Development Assistance Committee (DAC) - provided $103.9 billion in aid in 2006, down by 5.1 percent from 2005. This figure includes $19.2 billion of debt relief, notably exceptional relief to Iraq and Nigeria. Excluding debt relief, other forms of aid fell by 1.8 percent.

The fall was foreseeable. In 2005, Official Development Assistance (ODA) had been exceptionally high due to large Paris Club debt relief operations (particularly for Iraq and Nigeria), boosting ODA to its highest level ever at $106.8 billion. In 2006, net debt relief grants still represented a substantial share of net ODA, as members implemented further phases of the Paris Club agreements, providing a little over $3 billion for Iraq and nearly $11 billion for Nigeria. Excluding debt relief, ODA fell by 1.8 percent. Preliminary data shows that bilateral net ODA to sub-Saharan Africa rose by 23 percent in real terms, to about $28 billion. However, most of the increase was due to debt relief grants; excluding debt relief for Nigeria, aid to sub-Saharan Africa increased by only 2 percent.

Charities and NGOs working on the issue believe that even governments that are OECD members are reluctant to investigate allegations of corruption or complicity in human rights abuses against Western companies.

In Equatorial Guinea - where US companies such as ExxonMobil and Chevron are active - the regime of President Teodoro Obiang Nguema has been accused of torture, electoral fraud, and corruption. Despite this, President Nguema was welcomed at the US State Department by Secretary of State Condoleezza Rice in April 2006 and described as a "good friend."

The environmental impact on Africa of such Western development is also alarming. The clearing of forests for timber exports increases vulnerability to erosion, river silting, landslides, flooding, and loss of habitats for plant and animal species. In particular, gas flaring from oil production, where unusable waste emissions are burned off, pumps large amounts of carbon dioxide into the atmosphere. It is estimated that flaring in the Niger Delta emits 70 million tonnes (68.8 million tons) of CO2 a year, out of which, in 2004 Sweden emitted 69.9 million tonnes.

The environmental and social impact of extractive industries is already acknowledged as a key factor in conflicts in Sudan and Nigeria. Indeed, non-governmental organizations fear that access to natural resources will fuel the kind of violent conflict seen recently in Sierra Leone, the Democratic Republic of the Congo, and Liberia. A number of initiatives have recently been launched in an attempt to deal with Africa's resource curse before the continent is further fragmented and its precious natural wealth more exploited. The developed countries should take heed of the situation and provide development aid and relief to the millions of Africans who are suffering from diseases such as HIV/Aids, as well as wide-ranging poverty, instead of merely exploiting their resources.

* Ravinder Rena is an Associate Professor of Economics at the Eritrea Institute of Technology. His most recent books published by the New Africa Press in December 2006 are A Handbook on the Eritrean Economy: Problems and Prospects for Development and Financial Institutions in Eritrea.

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