How to ensure Africa’s natural wealth stays in Africa
With mineral prices plummeting 60 % from peak highs in 2011, turning Africa’s extractive industries, which include renewable resources, into lasting profits is a primary concern for the continent’s 54 nations. According to Ministers of Trade and Mining as well as experts in the fields, transparency and diversification of economies are the best ways to make sure that happens.
“We are in the process of reviewing all mining contracts,” to ensure fiscal terms are not one-sided in favour of major corporations said Kerfalla Yansane, Senior Minister of Mining and Geology from Guinea. He said his country sought help with the move from the African Development Bank Group (AfDB), which brought in an international law firm to oversee the review and make recommendations. “Contracts are no longer done in secret,” Yansane said. “We cannot work as in the past.”
Panel organizer and Director of the AfDB’s African Natural Resource Center, Sheila Khama, said while transparency is key, it has to be the kind that adds value. “It is important to distinguish between transparency of decision-making and transparency of paper work,” she said.
The panel, “Commodities Boom or Bust: Where are we now?” was part of a series of high-level and strategic conversations taking place this week at the AfDB’s Annual Meetings. Joining Yansane and Khama were the Minister of Mining and Industry from Côte d’Ivoire, Jean Claude Brou; Tilak Doshi of the King Abdullah Petroleum Studies and Research Institute; Brian Sturgess the Managing Editor of World Economics, and others.
Côte d’Ivoire’s Brou brought up the idea of optimizing taxation mechanisms along with creating economic mobility for the people who need it most. “It is important for growth to be inclusive,” Brou said. “If it is not, it won’t last,” which is why officials in Côte d’Ivoire setting an example. “60 percent of the price of coco goes to producers in rural area,” he said.
When it comes to what to do with the government’s share of boom time profits, the discussion turned to investment in sovereign debt, which many agreed can be risky for a developing nation, versus investment in infrastructure, health and education, things that almost always guarantee a benefit over time.
While the panel seemed to agree that many African nations are moving forward with transparency and developing plans to manage the profits from years when prices are high, diversifying economies is not so simple. Despite a robust 5 percent growth in the GDP from 2000 to 2014, the manufacturing sector’s contribution to continental growth declined. A way out of that hole, Yansane said, is for nations to do a better job of processing the commodities not just pulling them from the ground. That would not only lead to another reliable source of revenue but also employment.
“There are one billion people in Africa today,” Brou said, “and it will be double in 2050 so we need to create jobs.”
Though change will not happen immediately, participants agreed that all the measures raised will help an emerging Africa bound back from any commodities crisis in the future.