Africa, oil and the West-Show us the money
Africans need more transparency to benefit from their resource wealth
Sep 6th 2012 | from the print edition
BARELY a month goes by without a new oil discovery in Africa. Only five of
the continent's 55 countries are neither producing nor exploring for oil.
Most places are also extracting lots of lucrative minerals. A resource
bonanza is in train across the continent, generating big government revenues
and real benefits for Africans. Road networks are expanding, public services
are improving. But most of this happens behind a veil of secrecy. Money
sloshes out of public scrutiny at the insistence of officials and
politicians who prefer it that way.
Even if squeaky-clean Western multinationals are involved, transparency over
payments for resources is minimal. Ordinary people can rarely find out how
much goes into government kitties. That makes it easier for insiders to line
their pockets. Monitoring groups say corruption has been rising. Ministerial
car parks are filled with the fanciest limousines. A lot of money still
reaches public budgets, but without oversight it is often badly spent. Many
new roads go nowhere or are barely used; shiny new hospitals are often
understaffed.
The resulting frustration can trigger violence. In Angola, Africa's
second-biggest oil producer, activists have been demanding a fairer
distribution of revenues; the government has responded with a bloody
crackdown (see <
http://www.economist.com/node/21561939> article). South
Africa has just seen the worst disturbances since the apartheid era, with 34
platinum miners shot dead during a wildcat strike. Resources can also fuel
international conflicts. The two Sudans went to the brink of war earlier
this year over oil.
African governments have become more democratic and better at delivering
services. Yet the combination of rising mineral wealth and continuing
poverty is explosive. After decades of misrule, even the most competent
officials are often suspected of pinching funds. More transparency is what
is needed to ensure that resource wealth is used better and distributed more
fairly. Much of Angola's income is managed by a national oil company that is
shielded from oversight by commercial secrecy. The oil revenues of
Equatorial Guinea, where three-quarters of the population live below the
poverty line, are a state secret. This is both wrong and dangerous.
The challenge for Western firms and governments is how to help African
citizens wheedle data out of their governments so as to hold them more to
account. A decade ago Britain's Tony Blair had a go, promoting the
Extractive Industries Transparency Initiative. As many as three dozen
countries, in Africa and elsewhere, agreed to publish details of payments
from oil and mining companies. But the scheme was voluntary; the worst
offenders either refused to join or dragged their feet.
Follow America's lead
America's Securities and Exchange Commission has now come up with a set of
rules. The 1,100 resource companies listed on American stock exchanges,
which make up half the global industry by value, will be required to publish
all payments to foreign governments above $100,000. The European Union is
talking of introducing similar requirements. It should do so.
Some Western investors say such rules involve costly red tape. Without some
hidden payments to officials, business will be lost, they add. Divulging the
details of every deal will give secrets away to competitors. Moreover,
non-Western companies, especially Chinese ones, will gain an advantage
because they will escape such scrutiny.
The bureaucratic cost will not be large, since companies will merely have to
make public figures that are currently held privately. And some Chinese
firms will find themselves subject to similar requirements, because many
are, or plan to be, listed in America. Moreover, if the West changes its
behaviour, China may too. After years of claiming that, unlike Western
imperialists, it supports Africa's people, not its dictators, it may feel it
has to back the publication of data about payments.
But there is no guarantee that China will see the light; and, in the
meantime, Western companies are likely to find themselves at a disadvantage.
So be it. Western countries already spend money and political capital on
trying to promote democracy, encourage development and discourage corruption
in Africa. Helping Africa use its mineral wealth to achieve those ends is
worth paying a price for.
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Received on Thu Sep 06 2012 - 18:20:50 EDT
