‘Good governance’ and resource plunder in Africa
Mining benefits international corporations and the economic elite at the expense of Africa’s people. Gyekye Tanoh looks past corruption to the structural defects at the heart of this mineral plunde…
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12 June 2019
The modern global economy upholds the continued mining of natural assets and profits from resource-rich African countries. The Tricontinental: Institute for Social Research spoke to Gyekye Tanoh, the head of the Political Economy Unit at research and advocacy group the Third World Network Africa in Accra, Ghana, about corporate plunder, resource nationalism and people-centred forms of resource management in Africa.
Tricontinental: One of the great scandals of the 21st century is the theft of resources from the African continent. Could you please put that theft in some context?
Gyekye Tanoh: Africa, from its colonial history to its postcolonial history, has specialised as a source and supplier of raw materials for the rest of the world. Much of the region’s political policy slates continue to be dominated by foreign powers as well as international financial institutions, such as the World Bank and the International Monetary Fund.
History, from slavery and colonialism to the present, has created a landscape where the dominance of foreign companies is immense, more pronounced than in any other part of the world. A defining feature of this dominance is the tremendous power imbalance in which there is an immense influence of corporations to exploit the continent’s labour and resources, to destroy the environment and to dictate policy to governments.
A recent report from the Bank of Ghana said that of the $5.2 billion (about R77 billion) worth of gold exported by foreign-owned mining firms from Ghana, the government received only $68.6 million in royalty payments and $18.7 million in corporate income taxes. In other words, the government received less than a 1.7% share of the global returns from its own gold. What’s even more shocking is that the share of the wealth that goes to the communities directly impacted by the mining is 0.11%.
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No doubt, the African continent has been exploited for a very long time, but this particularly aggravated structure of plunder has roots in the period of the debt crisis of the 1980s. Before this, in the era of national liberation, states tried to protect their raw materials and gain better trade agreements. But the debt crisis weakened their bargaining power. This lead to the export of unprocessed or barely processed raw materials to earn revenue, which was not ploughed into domestic investment but used to pay back their debt, leading to premature deindustrialisation.
In 2003, the United Nations Conference on Trade and Development put forward this concept of premature industrialisation to explain what was ongoing in the Global South. It refers to the collapse of the manufacturing sector before it has become integral to the economy. If manufacturing does not develop, then the political class drums up revenue by the export – in the African case – of raw materials.
Domestic economies retrogressed. People could not afford to save or invest in local production. Nor could the state raise enough resources to provide social goods and infrastructure. The structural marginalisation of the people weakened their ability to shape the state’s policy framework.
The growing dependence on raw material exports meant growing dependence on foreign corporations and markets. This was demanded by the World Bank and sanctified by a document it put out in 1992, which crisply states that governments should shift their policy “towards a primary objective of maximising tax revenues from mining over the long term, rather than pursuing other economic or political objectives such as control of resources and enhancement of employment” (World Bank, Strategy for African Mining, 1992).
In other words, governments should merely export raw materials and allow foreign mining companies to thieve resources. There should be no attempt to “control resources” or create jobs.
T: As the World Bank and other international finance institutions pushed governments on the continent to export raw materials and not bother with the wider goals of development, an interesting dichotomy opened up. There was a new suggestion that “resource-rich countries” were “governance poor”. In other words, that the problem of corruption was not in the system as such, but in the political class and in the state. Is the discourse on “poor governance” another way to undermine social forces and institutions that might have pushed to democratise state policy?
GT: From the 1990s onwards, the term “governance” was installed at the heart of development discourse. Everything was about “good governance” and its importance. It ignores, even obscures, the deep structural dynamics that push a country to become merely the exporter of raw materials and that give transnational firms the power to set prices and determine the share of revenue to be handed over to the states.
It is not the “corruption” of government officials that brings only 1.7% of Ghana’s gold revenues to the state coffers. The entire system that was set in place in the 1980s to force countries to rely on raw material exports and become dependent on foreign buyers is what leaves countries such as Ghana with such a minuscule amount of the wealth taken from its land. “Good governance” is not going to solve this, unless “good governance” refers as well to the deep structural dynamics.
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The lack of resources available to accountable public institutions makes it impossible to create or sustain meaningful domestic anticorruption mechanisms. And the overwhelming power of the transnational corporation makes it virtually impossible to apply genuine democratic and developmental governance norms to these firms when they operate in Ghana or Zambia or Papua New Guinea.
Even in times of commodity booms, the revenues are minuscule. An antidote to the boom-and-bust cycle is for public resources to be substantively dedicated to enhancing the productive activities of working people and the productive capabilities within the economy.
This is possible in resource-rich states that have diversified economies, autonomy from imperial domination and social democratic institutions won by the struggles of working people. These states create sovereign wealth funds (SWF) from their natural resource export earnings. Norway is an oft cited example.
This should be a minimum requirement for all natural resource-dependent countries: save in times of surfeit and use the SWF in times of scarcity. But to expect Zambia or Ghana to build up that kind of sovereign fund from such paltry revenues and from such a narrow economic base that is so completely dependent on foreign markets and capital is unrealistic.
In the era of financialisation, most SWFs invest mainly in financial securities. This was the case with Angola’s SWF, a huge chunk of which went to buying up financial securities in particularly Portugal. It lost out heavily on these “investments” when Portugal got embroiled in the financial crisis of the eurozone after 2008.
Rather than invest in financial markets, states such as Angola and Nigeria could make direct investment in production through development banks. These banks would provide credit for agricultural and industrial cooperatives and other such initiatives that generate employment and goods and services. This requires states to control the financial sector and to have the public’s wellbeing at heart.
The language of “good governance” is used to delegitimise any aspiration for nationalisation and the creation of a state monopoly.
Zambia’s copper industry was better for Zambia during the time of state monopoly from 1970 to 1998. The returns to the treasury from the copper industry thereafter have been just 3% of what they were in the bad old days of state monopoly. This is an uncomfortable fact for the champions of privatisation.
The discourse of “good governance” suggests that the states in developing countries are deeply and congenitally corrupt. The only salvation, they say, is for the country to adopt free-market regimes. But “government deficits” or “bad governance” do not explain the deindustrialisation of Zambia, nor do they explain the rollback from economic diversification.
Because Zambia is now utterly reliant on copper exports, the international copper price movements have a preponderant and distorting effect on the exchange rate of the kwacha [Zambian currency]. This distortion and the limited revenue from copper exports impacts upon the competitiveness and viability of other, non-copper exports, as a result of the fluctuations of the kwacha. The fluctuations also impact on the social sector. Because of the collapse of the kwacha between 2015 and 2016, per capita health expenditure in Zambia fell from $44 (2015) to $23 (2016).
It is not the corruption that creates the situation. It is the structure that weakens domestic capacities and democratic, participatory economic planning that can best ensure state accountability and effectiveness; sets aside the project of diversification and industrialisation; and turns over the raw materials to foreign multinational corporations.
Once you have hidden the structure, then you can blame the pettier parasitic bribery as the author of the misery. That’s what this resource governance discourse does.
T: Could you give us your assessment of the Extractive Industries Transparency Initiative (EITI), the Natural Resource Charter (NRC) and the New Partnership for Africa’s Development (Nepad)?
GT: It seems that each of these, in different ways, is key to the proliferation of the discourse of “good governance” to discipline political movements and state institutions.
Of these three, Nepad comes first. It was adopted in 2001 by the African Union (AU) as a policy framework for the continent. Nepad promoted the idea that democracy and “good governance” are the preconditions for development. The structure of plunder was once more out of the discussion. The EITI came in 2003 out of the World Summit on Sustainable Development, which was held in Johannesburg. The NRC emerged out of these – particularly the AU’s steering committee for Nepad – in 2011.
These initiatives all follow the same logic. They do not aim for any real engagement over the distribution of rents and the ownership and control over production – the fundamental problems for the African continent. Nor do they interrogate the political economic relations that underlie the plunder.
On this last point, if they did open up the question of the relations of plunder, then they would have to pay attention to the inequitable distribution of benefits and the lack of compensation for the natural owners of the subsoil resources and the labour that actually creates useful or valuable products out of these endowments. They might also have to discuss the priorities for a country, and the maldevelopment that ensues when a government is reduced to merely the conduit for raw material export.
It is important to point out that the NRC, while adopted by the AU, was drafted by intellectuals from international finance institutions. These include Paul Collier, who was from the World Bank, and Anthony Venables, who is a professor of economics at Oxford University.
In 2013, the National Resource Charter and the Revenue Watch Institute were folded into each other to form the New York-based Natural Resource Governance Institute. It is headed by Daniel Kaufmann, who worked at the World Bank. This institute is devoted to promoting the NRC.
For these initiatives, the values of transparency and accountability are self-sufficient ends. “Transparency” in this context means that a government must align its policies to the basic principles of the international financial institutions. If a government accedes to these principles, then it is a transparent government.
The language of anticorruption was often mobilised by the World Bank and Transparency International against governments that were not prepared to surrender to these principles. Such governments that tried to maintain some measure of sovereignty were branded as “governance poor”. No “resource-rich” country in the core – such as Australia or Canada – was “governance poor”, even though there are scandals in these countries.
The Canadian government is in the midst of a scandal over bribes paid by Canadian engineering and construction firm SNC-Lavalin to Libyan officials. What makes Canada, whose company gives the bribe, less corrupt and Libya, whose official received the bribe, more corrupt is part of the way in which “transparency” operates in our time.
Nepad – rooted on the African continent – promotes the work of the EITI and NRC at the expense of autonomous African institutions and decision-making.
One example of an African-led development initiative is the African Mining Vision, which was adopted in February 2009 by the AU. Central to the African Mining Vision is the call to integrate the mining question into a broader development agenda.
The Western-driven frameworks – such as the NRC – set aside the African-driven initiatives. The policy frameworks and institutional credibility of the African-driven processes – however limited they might be – are undermined by the intellectual and political dominance of the Western-driven frameworks.
This so-called intellectual paucity provides more evidence that “resource-rich developing countries” are automatically “governance poor”, for after all they don’t even have a framework to deal with “corruption”. This so-called absence justifies the external help of the “international community”, namely the Western states and their institutions, to define the norms of governance.
The purpose of the EITI and NRC is to ensure that the fundamentals of the system – the plunder – remain undisturbed or rather that these fundamentals are perpetuated and extended.
T: Could you walk us through an alternative to the “good governance” paradigm and towards ideas such as “resource nationalism” and “resource sovereignty”?
GT: A large share of the raw materials in Africa are owned by a small group of powerful corporations, but this is made worse by the fact that most of them happen to be foreign companies. These companies act with the full weight of the power of their governments.
Barrick Lumwana, for instance, is one of four foreign companies that account for 80% of Zambia’s copper production. Barrick Lumwana is a subsidiary of Barrick Gold and is fully backed by the Canadian government in its Zambian operations.
During the global commodity boom, from 2000 to 2014, Latin America as well as Africa experienced the impact of the rise in prices for raw materials. But the two regions experienced them in radically different ways. In the case of Africa, the benefits of the natural economy were marginal for African governments and populations. The benefits were skewed in favour of foreign companies and their respective countries, and a tiny African elite.
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The first aspect for reform should be the economic asymmetries that have emerged as a result of the present resource-grab culture. There are three immediate problems:
First, the composition and structure of employment in the extractive industries is glaring. Higher skilled positions are typically held by expatriates, mostly from the West. The pay differences between the expatriates and the Africans are enormous; in mining firms, this is sometimes as high as 600 to 1. In the export sectors, we are witnessing the growth of the phenomenon of “super-exploitation”, which is payments to labour below the cost of survival and cost of living for the labourer.
Second is plunder through the tax system. In addition to the tax breaks that all foreign investors get – such as a 10-year tax holiday, as well as a faster rate to write off capital losses – we have something called the mining list. This list includes everything that the mining company imports from abroad, such as toilet paper, tissue paper, bottled water and even toothpaste. All these things are tax exempt. The forgone tax on these goods can be considerable for an economy that has weak foreign exchange reserves.
Third, the overwhelming majority of returns are either retained or returned offshore as profits, capital gains, interests on dubious intra-company loans, management fees or intellectual property rents.
We have to be precise about our sense of resource nationalism. In the example of mining, it could include the complete nationalisation of mines or it could be much milder reforms, such as the imposition of higher taxes on foreign companies. It could also include a higher basic wage for workers.
Countries could also insist on higher royalties and royalties based on the final market price of the resources rather than the prices that they set, which are often lower.
These interventions form the basis of resource nationalism. But some misconceptions might come into the discussion. Firstly, the entire form of mining is developed around the exploitation of labour power. Secondly, the implication of this is that one cannot assume that resource nationalism is merely a state-centred political project. Workers – miners in this case – are a key agent of change against capitalism. Their struggles enrich society, raising questions of ethnicity and gender and other forms of oppression into the debates around what kind of society one wants to produce and live in.
Resource nationalism does not merely refer to minerals, gas and oil. It includes water and land as well as the conditions of agrarian production. Popular struggles for compensation and access to crucial resources in various sectors are brought into the same framework, allowing the struggles to develop common strategies out of a systematic analysis of dispossession.
Resource nationalism can bring immediate material benefits for the working class and the peasantry in resource-rich countries. Whatever the limitations, and there are many, it is an important framework for the continent. But we do need to be aware of the limitations of resource nationalism, particularly if nationalism obscures the class interests at stake.
Take the Democratic Republic of the Congo (DRC). Moïse Tshombe was the leader of Katanga province, where most of the DRC’s resource wealth is located, before becoming prime minister, a position he won on an ethnic nationalist agenda. But his nationalism dissolved into total capitulation to imperialism. During the era of his successor, Mobuto, Le mal Zairois or the Zairean Sickness came to refer not only to Mobuto’s personal corruption but to the theft of the wealth of the DRC (then Zaire) by Western corporations.
At the same time as the DRC’s hopes dissolved into plunder, Bolivian tin miners and landless agricultural workers led a struggle – including a historical hunger march through La Paz, Bolivia’s capital – that overthrew the government. This was the Bolivian National Revolution of 1952.
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The new government put in place agrarian reforms and control over the mines, but economic pressure led to the collapse of all the new institutions a decade later. However, the memory of the revolution remained and was awakened in the new century – in 2000 – when the people of Cochabamba fought against the privatisation of water.
Workers from the fields and mines rose up to create genuine resistance from below based on a working-class resource nationalism. On their agenda was water rights, but also the rights of coca growers and oil workers, the rights to culture and representation, the right to be the Earth and of the Earth. One of Latin America’s weakest countries was able to enact the most far-reaching changes in the resource sector because of this class-based movement.
We must be bold and uncompromising about our commitment to a class-based movement that defends the natural world and that defends the common rights of the people to resources. We need to formulate an alternative resource governance agenda that is defined by a democratic, class-based development project that is not sectarian but internationalist.
This is an edited version of Tricontinental’s Dossier 16: Resource Sovereignty: The Agenda for Africa’s Exit from the State Plunder. The full dossier can be read here.
