Recalibrating Extractive Governance to support Africa’s Structural Economic Transformation
By Ola Bello
Over the past seven years, the African Union (AU) has emerged as a central actor in regional level efforts to improve natural resource governance. As African economies grapple with the negative impact of the commodity price fall – including dimmer growth and job creation prospects over the medium term - the AU has an opportunity to reinvent itself as both thought-leader and harmonizer in resource governance initiatives. This is key for a coherent structural economic transformation across the continent.
For several decades, Africa’s pan-continental body largely issued symbolic proclamations with little concrete implementation and follow-up actions. Examples include the 1979 Lagos Plan of Action (on African self-sufficiency), and the 2008 decision of the AU Conference of Ministers (on working towards the integration of minerals development policies in regional economic planning).
With the advent of the African Mining Vision (AMV) in 2011, a significant milestone was reached as AMV implementation efforts sought to leverage Africa’s mineral wealth practically for accelerated broad-based development and the building of resilient, diversified economies. Through its advocacy of social and economic linkages between the extractive industry and other sectors of the economy, the AMV framework moved African economies beyond the erstwhile focus on revenue capture. AMV precepts have further inspired a number of bespoke Country Mining Visions (CMV), crafted to inform the development of inclusive, well-governed and internationally competitive extractive sectors in more than a dozen implementing African countries.
Still, AMV implementation faces some challenges. Its devolved implementation arrangement – involving the AU and technical implementing partners such as the African Development Bank (AfDB), the UN Development Programme (UNDP), and the UN Economic Commission for Africa (UNECA) – has sometimes been beset with uncertainties. For example, disagreement emerged among some of the implementing partners at the early stages on the timing and modalities of institutionalizing the AMDC as a specialized AU agency. Other challenges include financial and capacity constraint, politics of inter-agency rivalries, and perceived donor interference in AMV efforts.
The AU, whilst not lacking in ambition, has struggled to marshal the technical capability required to drive a bold, transformational reset of Africa’s extractive governance landscape. The AU also displays a blind spot in complimentary policy spaces which are germane to leverage mineral governance as a catalyst for far-reaching structural economic transformation in Africa.
First, if the AU is to successfully lead the push towards changing the structure of Africa’s commodity-based economies, the pan-continental body must better position itself to enable regional economic communities (RECs), helping to harmonize and support them as the primary building blocks of economic integration. In the extractive sector for example, it could lead African standard-setting efforts, and help further to institute disciplined policy implementation and evaluation, as well as enforcement actions across the board. This hands-on approach is needed to achieve coherence across diverse policy portfolios, such as in development financing, economic greening and social and sustainability policies, which will help to drive effective economic diversification with greater inclusion.
In the face of the commodity price collapse that is severely impacting African economies, stronger AU thought-leadership in strategic sectors such as minerals, oil and gas can become pivotal to erecting buffers against future commodity price falls. The current one has seen an average price fall of between 50 and 66 per cent for most minerals and energy resources. The effects are visible in lower growth figures in most African economies. Average economic growth across the continent declined from 4.5 per cent in 2014 to 3 per cent in 2015—far short of the 6.8 per cent average growth recorded between 2003 and 2008. The commodity rout is also impacting the continent more widely, affecting even diversified, non-extractives dependent economies such as Kenya, where in 2016 the stock index was down about 41 per cent from its March 2015 peak.
Fundamentally, the “Africa Rising” epoch, though wildly celebrated, did not see any significant reduction in the regional unemployment rate, which persist at around the 50 per cent mark and threaten inclusion and social cohesion. The nature of Africa’s extractives-fueled boom provides some of the explanations. With its bias towards raw material export, especially minerals and hydrocarbons, Africa’s boom decade only saw about 13 per cent of African exports trade taking place among countries in the region.
More positively, the commodity rout is now encouraging national and regional-level efforts to implementing long-overdue macro-economic reforms, including fiscal readjustment, improved tax collection and updating of regulations to close loopholes. Fewer mining licenses are also being issued, creating opportunities for improved Civil Society Organization (CSO) oversight of existing rights, and monitoring of compliance with environmental regulations, social standards and community rights. With the strengthening focus on extractive sector transparency, a new reformist mindset could presage an era of greater AU economic thought-leadership and harmonizing role at the African continental level.
To this end, the AU should, in consultation with RECs, work towards framing ambitious economic targets aimed at driving up regional competitiveness, exploiting creatively economies of scale, and diversifying Africa’s sustainable energy mixes further. Moves towards accelerated diversification, value-added manufacturing and product upgrading on the back of the commodity downturn will also help improve intra-regional complementarities and opportunities for trade. Priority attention should be paid to projects that will leverage Africa’s competitive advantage in natural resource inputs as well as skills-based and job creating sectors like development minerals.
The AU itself increasingly recognizes the need to link its work on extractive governance to tangible and measurable progress in broader social and economic sectors. This is evident in the AU Agenda 2063, unveiled in 2013 as a pan-continental development strategy, which reaffirms Africa’s development ambition and, in parts, echoes the AMV. It reasserts the importance of responsible extractive governance as a potential driver for “[a]n integrated, prosperous and peaceful Africa [that also represents] a dynamic force in the global arena”.
Paradoxically, Africa’s ambitions for economic transformation requires better attention to extractive sector governance — especially as regards greater revenue capture and investments to support diversification and expansion of know-across the continent. The AU will need to leverage its current extractive-induced crisis to push for a reset of African economies using extractive governance more broadly as a springboard. This is essential if Africa’s hoped-for economic synergies and industrial revolution are to materialize. The AU will need to lead, more consistently, efforts to drive forward extractive development as a change catalyst, including through better integrated hydrocarbon governance. The African continental body remains marginal in the governance of the sector, though it is highly crucial to Africa’s economic transformation. By 2012, Africa’s proven oil reserves, estimated at 53.4 billion barrels in 1980, had grown almost 150 per cent to nearly 130.3 billion barrels. Five of the 30 biggest oil-producing countries in the world are African, and the region will record close to $2 trillion of hydrocarbon investments by 2036. Yet, in terms of low human development, most of the worst-performing oil and gas rich countries are African. To address this, the AU must devote more of its human and financial resources to envisioning a greening revolution which more closely links mineral governance policies to investments for a clean energy transition across Africa.
The AMV remains a viable, ambitious framework for the AU to optimize the development contributions of Africa’s minerals through greater accountability, equity and linkage focus in the sector. However, to improve the AMV’s relevance in the emergent low commodity price environment, the AU needs to focus on harmonizing efforts at the African RECs level. In complement, it needs an expanded outreach to regional CSOs and repositories of knowledge, such as think tanks, to underpin policy domestication and coordination efforts. The AU should also enlist these regional networks for ongoing peer learning and analysis to guide evidence-based policy formulation for accelerated continental integration. In areas such as extractive contracting and taxation, greater AU visibility in the development of model contracts and shared standards could be crucial for driving up the qualitative development contribution of extractive investments across the continent.
In sum, the AU requires a broader conception of sustainable extractive governance, moving to occupy a more central role in thought-leadership on sustainability in Africa. This will require framing its extractive policies more comprehensively. It should do so by explicitly linking its work on mining to sustainable energy, by stimulating infrastructure planning on the basis of sound mineral value chains analyses, and catalyzing skills development through linkages with manufacturing, processing and similar activities. Within this expanded sustainability focus, what will be most crucial is for the AU to exercise a stronger political coordinating role alongside the RECs, helping to harmonize disparate African efforts, including those of technical implementing partners such as the AfDB, which already leads strongly on energy and climate finance. Finally, the AU must better influence, leverage and domesticate rival—often externally inspired—initiatives, including those of the global extractive industries transparency initiative and the natural resource charter. This will open up a viable niche for the AU to use its AMV work to drive an expanded sustainability agenda that can help shift Africa more meaningfully onto a path of structural economic transformation.
Ola obtained both his MPhil and PhD degrees in International Relations from the University of Cambridge and also holds a First-Class BSc degree from the Obafemi Awolowo University, Ile-Ife. He has worked for organisations including the United Nations (New York) and Management Systems International (Washington DC), Merchant International Group (London) and Arthur Andersen (later KPMG). Dr Ola Bello has more than 12 years of experience in policy advisory and research roles, including on governance and extractive sector reform; sustainable development and international development cooperation/EU-Africa relations. He spent three years with FRIDE (Spain) managing a donor funded programme on state fragility and resource governance. In 2012-2015, he was Head, Governance of Africa’s Resource Programme (GARP) at the South African Institute of International Affairs (SAIIA) In November 2015, he was appointed the Executive Director for Good Governance Africa’s (GGA), from where he has continued to lead multidisciplinary country teams and government/multilateral advisory work, especially on extractive sector reform and broader economic governance. Ola currently provides formal technical and advisory support to official frameworks such as the Joint Africa EU Strategy and the Kimberley Process (KP); serves as a member of the African Union’s Technical Working Group on the African Mineral Geoscience Initiative (AMGI); and advises the AU Commission and the UNDP on implementation of the Africa Mining Vision (AMV).