Exploitation of Africa's Natural Resources

[robocop187]

Far too many times have I listen to folks assert that the international community wastes resources by throwing money at the “problem” of famine and violent conflict in Africa. This is a huge misconception. In fact, the money that the international community spends is at best miniscule in comparison with the amount of profit the international community gains from the exportation of Africa’s natural resources.

Take oil in Sudan for instance- South Sudan is an impoverished and violence stricken country rich in oil that is exported throughout the global community for profit. The travesty in this is that the world does not recognize that the Sudanese only represent 5 percent of corporations that profit from oil exportation while 95 percent are represented by foreign countries. Herein is the real problem- gross exploitation.

What we see here is yet another case foreign power taking advantage of Africa’s instability to facilitate the build-up its own wealth. This is the real cause of famine and violent conflict in Africa.The pouring of money into Africa is not only a farce, but it threaten to perpetuate annihilation the continent’s people as it lures the global community’s attention away from true origin of Africa’s problems.

I would argue if rewarded with a more equitable share of profits from its natural sources, Africa would not need the international community’s money for humanitarian aid, building infrastructure, or anything else. It would be far better equipped to manage it problems itself. What do YOU think???

MAJ Robert L Perry, Student, Command and General Staff College, US Army Combined Arms Center, FT Leavenworth, KS
The views expressed in this blog are those of the author and do not reflect the official policy or position of the Department of the Army, Department of defense, or the US Government.

[Stan]

Hi Major !

It's not that we are constantly throwing money at the problem, and it's not always what we want to gain. It is however our political system more concerned than most of us are willing to even participate.

Nearly all of the 11 countries I worked in for more than a decade all suffered the same fate (in spite of the fact there was tremendous wealth). Buying one's diamonds or oil legally is one thing, what that dictator does with the funds is another.

I advocate turning off the facet and letting them go at it all alone. If, and a big if at that, the remainder of the world sat back and just watched, and oil and diamonds no longer were bought nor traded, the entire continent would be forced to return to an honest day's work and the dictators would be long gone.

I do like your last para though - with my pesky twist :D

All that oil and diamond money must first fund all that Humanitarian aid, and, with whatever is left, let the dictator have at it.

The NGOs are going to hate that idea ;)

[Dayuhan]

Take oil in Sudan for instance- South Sudan is an impoverished and violence stricken country rich in oil that is exported throughout the global community for profit. The travesty in this is that the world does not recognize that the Sudanese only represent 5 percent of corporations that profit from oil exportation while 95 percent are represented by foreign countries. Herein is the real problem- gross exploitation.

Of course oil is exported "for profit". What other reason is there for selling anything?

The ratio of local to foreign companies is not necessarily an indicator of exploitation. n many cases there aren't any local companies with the capacity, so the government cuts a deal with foreign companies, which typically pay substantial amounts to the government, which sits back and collects the money with no investment or effort. That could be called a win-win for the government and the company. Generally a lose for the people, since the government's share typically goes straight to an offshore account, but the companies can't do much about that.

Much of what's spent on aid is in fact tantamount to throwing money away, because the money is gone and the objectives are not achieved. I don't see the relationship between that and resource exploitation.

Also worth noting that "the international community is a pretty diverse place, and that it's not in any way under American control. Most of the companies exploiting African resources are not American, and they will do what they do regardless of our policies.

Of course if African officials wanted to stop exploitation, they could: they could make deal with the companies that brought more to the country and less to their own bank accounts... but why would they do that?

[robocop187]

All that oil and diamond money must first fund all that Humanitarian aid, and, with whatever is left, let the dictator have at it.

The NGOs are going to hate that idea ;)

Hey Stan!!!
Thanks for your response! You are right...The NGOs will hate this idea but who cares;)!!!!

Please keep with this string if you have time!!!

[Stan]

Hey Stan!!!
Thanks for your response! You are right...The NGOs will hate this idea but who cares;)!!!!

Please keep with this string if you have time!!!

OK, (Major) Robert , here's another twist for academic research, which I ended up with in both Zaire and Rwanda:

We're all there trying to do something. Some of us capable yet underfunded (by DOD), some funded (by everybody else on the planet) and yet incapable. Being part of the capable category and a member of a 3-man team faced with over a million refugees, I had some strange (and often inhospitable) bed fellows known as NGOs.

Stereotypes aside, our daily interaction included avoidance and antagonism. Gun-wielding military and the humble NGO would set the stage for 6 months of a disaster watching people get raped, shot, die of cholera, and starve to death.

I can't even fathom how much cash went into that scenario, but, I have wondered what would have happened if we just left that situation to fester without getting involved.

So, in the grand scheme of things, waste of money and resources aside, what would you have recommended we (the 3-man team) do ?

Keep in mind you were sent there without guidance, barely any money, and a very skeptical SNCO on the verge of crying "retired !".

I'm of the opinion we should be cleaning up our own backyard and should we have reserves, they should be put back in the pot. There are very few politicians at this point that agree with me :D

Regards, Stan

[Uboat509]

Here (http://www.economist.com/node/21547246) is a great piece on this subject from the Economist last week. As Dayuhan pointed out, most of these states lack the capacity to exploit these resources on their own. They must, therefore, find a balance wherein they can extract the maximum possible returns from the foreign companies without squeezing them to the point where they do not invest in the their facilities or pull out altogether. This is not an easy balance to find and the volatility of the commodities markets only complicates the issue.

The bottom line is that it is not up to these foreign companies to fix the internal problems of these states. They are businesses which exist for the sole purpose of creating wealth for the stockholders. It is also in no way the prerogative the home states of these companies to interfere with them in their dealings with these African states so long as the deals they are making are legal.

[J Wolfsberger]

The bottom line is that it is not up to these foreign companies to fix the internal problems of these states. They are businesses which exist for the sole purpose of creating wealth for the stockholders. It is also in no way the prerogative the home states of these companies to interfere with them in their dealings with these African states so long as the deals they are making are legal.

To which I'll add, if anyone wants to make it their business to clean up these states, start by talking about how many brigades they want to commit to the colonial venture.

[M-A Lagrange]

As Stan said, the main problem in Subsaharian Africa is not natural resources management but rather governance.
Katumba Mwanke in DRC is not fully cold yet that his former protégé is selling the shares of the national mining company (GECAMINE) to China for multibillions contract. Who could resist?

The problem goes even deeper. In many countries there was first a nationalization phase in the 70th. But, as Zimbabwe now, it was so badly managed that most of the one time wealthy companies went down to bankrupt, as for GECAMINE for instance. Then there was a phase of privatization supported by IMF. This allowed wealthy local people to invest in join venture with international companies. One of the best example is the Museweni family who took advantage of being at the head of Uganda to basically put an almost monopoly grip on the mining and oil business in Uganda.

Such attitude does trigger rebellion/insurgencies/contestation/civil wars…. Uganda is an interesting model cause after several decades of full dictatorship, Museweni managed to more or less pacify his country. (By pacify I hear having no fully operational armed groups on your land, not the end of those armed groups). Then he had to do something with his army, cause unhappy generals are a great threat. He then turned to PMC, saracem and others. Put his generals at the head of several companies, had some support from former PMC CEO (Barlow, Bukingham…) and made the junction: his family was running both the natural resources and security sectors.

Fortunately for the Ugandans, now political civil opposition and majority are questioning his position, especially in oil.
Uganda's Museveni is more concerned with oil than the anti-homosexuality bill
http://www.guardian.co.uk/commentisfree/2012/feb/10/uganda-yoweri-museveni-oil

There is a great ICG report on Chad oil: Chad: Escaping from the Oil Trap, Africa Briefing N°65, 26 August 2009
http://www.crisisgroup.org/en/regions/africa/central-africa/chad/B065-chad-escaping-from-the-oil-trap.aspx

Which is a good case study of how natural resources are managed in Sub-Sahara Africa.
Also, on Nigeria:
http://www.crisisgroup.org/en/regions/africa/west-africa/nigeria/B060-nigeria-seizing-the-moment-in-the-niger-delta.aspx
http://www.crisisgroup.org/en/regions/africa/west-africa/nigeria/B054-nigeria-ogoni-land-after-shell.aspx

[Dayuhan]

M-A makes a good point... nationalization and privatization have generally had little impact, because either way the resources end up in the hands of the same elite groups, who manage them for their own benefit instead of the nation's benefit. Any company that wants to be involved has to cut a deal with those same elites.

It's an ugly reality but anyone who wants to change it has to face the prospect of massive interference in another nation's internal affairs... and, as J Wolfsberger says, of bringing brigades to the table, with all the political and financial costs that always involves.

[robocop187]

M-A makes a good point... nationalization and privatization have generally had little impact, because either way the resources end up in the hands of the same elite groups, who manage them for their own benefit instead of the nation's benefit. Any company that wants to be involved has to cut a deal with those same elites.

It's an ugly reality but anyone who wants to change it has to face the prospect of massive interference in another nation's internal affairs... and, as J Wolfsberger says, of bringing brigades to the table, with all the political and financial costs that always involves.

Good morning all!!!! Great comments!! Appears that we all agree that a few greedy "haves" hoard profits from the "have nots". However I do not believe that we should give up on nationalization and privatization. Its current ineffectiveness is the result of a lack of middle-class presence- a solid body of productive citizens who realize their collective power to effect change in government and policy. This of course is a long term investment goal. At this point, the brigades Stan and J Wolfsberger call to bear reside in the international community. Key to successful employment of these brigades would be less focus on short term investment goals (business deals that only benifit a few African elites and foreign investors, band-aid fixes for wounds that really need turnicuits- these only perpetuate Africa's UNDERDEVELOPMENT) and more focus on fostering an environment where the middle-class will grow. As the Africa's people get stronger, the harvest of its natural resources will increase exponentially and drive costs down for the global community in the long run- a true win win situation!!!

[Dayuhan]

I do not believe that we should give up on nationalization and privatization.

Who is this "we" of whom you speak?

Investment policy and setting investment goals are the exclusive prerogative of the nation where the investments are taking place. Decisions on when and whether to invest are, in the West at least, up to private corporations. Neither are under control of the US or any Western government.

Any attempt to externally impose investment goals would have to include the elephant in the African foreign investment drawing room, China. What reason would they have to cooperate?

It would be lovely to see a middle class emerging across Africa, but if we're talking about building that into a foreign policy goal we have to first realistically assess our ability to make that happen.

When did it become our business to set investment goals for other countries... whoever "we" are meant to be in this case?

[bourbon]

Investment policy and setting investment goals are the exclusive prerogative of the nation where the investments are taking place.
This is true if the nation is not trying to receive or readjust a loan from the International Monetary Fund or World Bank. If they are trying to receive or readjust a loan, that prerogative can become a condition for structural adjustment.

[Dayuhan]

This is true if the nation is not trying to receive or readjust a loan from the International Monetary Fund or World Bank. If they are trying to receive or readjust a loan, that prerogative can become a condition for structural adjustment.

The ability of the IMF to enforce such conditions has always been questionable. Since the Chinese came on the scene offering loans and grants untied to domestic reforms that ability has been eroded even further. Chinese financing is of course directly tied to Chinese perceptions of their own interests, but that hasn't generally been a problem in coming to what might politely be called mutually satisfactory agreements with African elites.

The days when the IMF/WB clique could dictate policy to African nations are long gone. That may not be any great loss, as the attempts to impose policy were generally cheerfully distorted by African elites for their own benefit and the consequences for the populaces involved were less than wonderful, but it remains to be seen whether the new evolution will improve anything. I am not optimistic.

[M-A Lagrange]

The ability of the IMF to enforce such conditions has always been questionable. Since the Chinese came on the scene offering loans and grants untied to domestic reforms that ability has been eroded even further. Chinese financing is of course directly tied to Chinese perceptions of their own interests, but that hasn't generally been a problem in coming to what might politely be called mutually satisfactory agreements with African elites.

The days when the IMF/WB clique could dictate policy to African nations are long gone. That may not be any great loss, as the attempts to impose policy were generally cheerfully distorted by African elites for their own benefit and the consequences for the populaces involved were less than wonderful, but it remains to be seen whether the new evolution will improve anything. I am not optimistic.

This would be true if Hally Burton or Areva were not strategic industries and companies. If there was a complete cut between politic and economy. This is not the case...

Middle classes in Africa are facing a huge difficulty to rise, not because of external investors but because of domestic breaks. what economist call the Hyppo and Sheeta clash (Sheeta as the guepard, not the tarzan monkey). Old click, the Hyppo, do not want a middle class, the Sheeta, to emerge. Why?
Simply because youth in africa want stability, ROL, protective legal environment, fair taxes and is not willing to pay backshich. So,and I personnaly know some, as they cannot get this at home, and they try, they leave for a place where grass is for real greener: Europ, US, Asia...

[Stan]

M-A, Good points !
And just how do we even begin to turn around four decades of corruption at the middle-class level ? For years they have survived by innovating and cheating, making every cent count. I honestly can't imagine the DRC being able to turn off the last 40 years.

The huge military machines will not go down without a fight.

[Dayuhan]

youth in africa want stability, ROL, protective legal environment, fair taxes and is not willing to pay backshich

Ironically that's also what the western multinationals want... ironic because so few people would expect African youth and western corporations to have overlapping interests.

[J Wolfsberger]

M-A, Good points !
And just how do we even begin to turn around four decades of corruption at the middle-class level ? For years they have survived by innovating and cheating, making every cent count. I honestly can't imagine the DRC being able to turn off the last 40 years.

The huge military machines will not go down without a fight.

The obvious initial goal should be shutting down those military machines.

And as I started writing about the requirements for making that happen, and begin providing the kind of political environment M-A identifies as necessary, it became obvious what a gold plated bitch that effort would be.

Based on what I've read, especially from people who post here, at this time it seems as though "Heart of Darkness" was an optimistic view of sub Saharan Africa.

[M-A Lagrange]

M-A, Good points !
And just how do we even begin to turn around four decades of corruption at the middle-class level ? For years they have survived by innovating and cheating, making every cent count. I honestly can't imagine the DRC being able to turn off the last 40 years.

The huge military machines will not go down without a fight.

Well, if you first take all exCNDP to ICC then all the Mayi-mayi that are dummer than my @$s out... (May need some accidents having to happen...:D) You may have a pretty thine army that DRC gov can afford.

The trick in Rwanda and Uganda has been to convert all the idiots that lurk in the army into PMC watchmen. That would not work in DRC, that we both know. But there are solutions, many soldiers want a job, a real one with a pay at the end of the month that give them enough to eat, get drunk and send children to school. They actually do not want to stay in the army.

Same with South Sudan. people enter in the SPLA cause it's the only way to do business. But if you actually take out all the SPLA who are alcoolic then you end up with less than a handfull of good guys.

The problem of regime with huge armies in Africa is that they have it because they cannot afford either to have a good army or to buy peace spoilers. So they give them a title and the right to conduct illegal activities under the protection of a uniform.

[davidbfpo]

I am not an Africa "hand" and my comments are based on watching the continent from my "armchair". Plus a couple of encounters whilst visiting South Africa.

The theme of exploitation of Africa's natural resources is not a 'silo' and certainly from a UK perspective has been in parallel with arguments over multinational corporations (MNC), international aid, government aid, non-government aid (often via NGO's, who get a large % of state funding), international finance, world debt campaigns and the list goes on.

A few years ago now there was a loud debate between economists over the value of aid full stop; alas names now lost. Read Paul Collier's books.

Only last week I read this point of view (not solely on Africa):http://www.spectator.co.uk/essays/all/7652098/big-charity.thtml

Thirty years ago I met a South African journalist, who had travelled throughout the continent and she stated firmly "The West has written off this continent, except for exploiting it's natural resources. It has no strategic interests here and the West never did understand Africans".

To this "brew" add AIDS. On my last trip to South Africa the devastating impact on Botswana, the African "showcase" for 'good' exploitation of natural resources (diamonds by a MNC), good governance and peace was widely described as imploding under the pressure of the epidemic.

Just a question. Can an argument be made for sub-Saharan state(s) being 'better off' without known natural resources being exploited? The linked article refers to Somaliland and on a quick reflection I'd refer to former Spanish Sahara.

[Stan]

The obvious initial goal should be shutting down those military machines.

And as I started writing about the requirements for making that happen, and begin providing the kind of political environment M-A identifies as necessary, it became obvious what a gold plated bitch that effort would be.

Based on what I've read, especially from people who post here, at this time it seems as though "Heart of Darkness" was an optimistic view of sub Saharan Africa.

John,
I'm intrigued and had no idea you were working on that. What does the Reduction In Forces look like ? Which brigade do you start with and how many ? Does the RIF include employment ? One of the things the DRC is probably still trying to figure out is where all their firearms and ammo are (not as if they ever knew). As you may already know, when Tom and I were there together, the RIF notion came up several times. While we certainly got a good laugh at the prospect, DOS was in fact serious. Who, exactly would have the honor of presenting this along with the democracy package was another matter. Civil war and the refugee crisis saved many the chance of explaining the plan to Uncle Mo.



The trick in Rwanda and Uganda has been to convert all the idiots that lurk in the army into PMC watchmen. That would not work in DRC, that we both know. But there are solutions, many soldiers want a job, a real one with a pay at the end of the month that give them enough to eat, get drunk and send children to school. They actually do not want to stay in the army.

M-A,
We tossed that notion around with UN deminers in the East. They certainly had far better wages and their daily duties were actually contributing to the country. But, as soon as the team members left, the demining mission came to a halt (even though they were still getting paid). So after nearly 6 months of training, free equipment and a good salary, there is little to show for. Someone actually thought we should have offered a pension or something to sweeten the pot. I almost died when I fell off my chair :rolleyes:

I do however agree, that when the foreign instructors were there in the 80s, there were far fewer problems with soldiers. But then, most of us (the military instructors) didn't really know nor notice what was really taking place.



Just a question. Can an argument be made for sub-Saharan state(s) being 'better off' without known natural resources being exploited?

Hey David,
I don't think it's that cut and dried. In the case of the DRC, natural resource revenues never made it to even the hospitals and schools. Strangely, all the while organizations like USAID were pouring money into those projects and the Peace Corps were busy teaching people how to make fish ponds.

I actually don't have a good example where natural resources benefited the entire population (unless we count digging for it as an occupation).

[J Wolfsberger]

John,
I'm intrigued and had no idea you were working on that. What does the Reduction In Forces look like ? ...

I'm NOT working on that, and I don't think anyone could offer me a salary to do so that would come close to tempting me. :D

"... writing about the requirements ..." meant writing for the post above. The issues you raised are just the start, which is why I said the problem would be a GPB. :D

[Stan]

I'm NOT working on that, and I don't think anyone could offer me a salary to do so that would come close to tempting me. :D

"... writing about the requirements ..." meant writing for the post above. The issues you raised are just the start, which is why I said the problem would be a GPB. :D

Jeez, talk about embarrassing :D
And here I thought you had gone and finished the product. I had visions of selling it to M-A ;)

[J Wolfsberger]

Jeez, talk about embarrassing :D
And here I thought you had gone and finished the product. I had visions of selling it to M-A ;)

OH! Selling it! Cool! Let's work on it together.

But I like M-A, so we'll have to sell that snake oil to someone else. :D

[carl]

For what it is worth, as Stan and others suggested, perhaps it is best to forget about natural resources. But if outsiders can really influence anything in Africa, perhaps they would be better off trying to influence conditions of business conducted inside a country by companies that are based outside the country. Try to the extent possible to influence African govs not to steal too much from companies trying to do business inside the country.

Cell phone companies may be an example. They were and I suspect are big business. They make money, actually help the people and perhaps help increase the numbers of middle class people. They make all their money inside the country but most all the start up capital had to have come from outside countries like the DRC. Those companies must have some arrangement whereby the big vegetables don't steal so much that they can't get a return on their capital.

That is the only thing I can think of.

[M-A Lagrange]

Stan, John,

I'm affraid we are late... Someone already spent time working on it:
USAWC STRATEGY RESEARCH PROJECT
WHAT ARE THE CHALLENGES FACING THE FUTURE OF AFRICAN STANDBY
FORCE?

http://www.dtic.mil/cgi-bin/GetTRDoc?AD=ADA469644

Well, it's a little bit light but it's a good resume of all the failure of having conflict resolution mechanisms in Africa. Just because the business side is absolutely not integrated into the analyses of each players (direct and indirect) strategic objectives...

Carl,
Cell phones are a great business... And you could not imagine how creative the guys here are to make sure they get their share in the business. Last cell phone network sell in DRC ended up in a direct Paris/Benging negociation in order to avoid DRC gov selling first the Chinese network to an unknown congolese company that wanted to cell it to an Indian company that would have sell it to the French with a + 1000% benef and at least 50 time it is worst for. ;)
Who said africans do not understand business and globalisation?