Blog: The Resource Curse – the plunder of Africa’s natural resources

 

Tom Burgis, an investigative journalist for the Financial Times, spent six years researching his new book ‘The Looting Machine’. The book, published at the end of February, lifts the lid on the prolific and systematic pillaging of Africa’s resource wealth by kelptocratic governments and their dodgy deals with Western and Chinese companies. These deals, Burgis says, amount to the ‘systematic rape of Africa’s resource wealth’ enabling the wallets of those in government to get fatter, as they cling on to power by any means possible, while the majority of the people they govern live below the poverty line [defined by the World Bank as living on or below $1.25 a day].

Take Angola, for example. Angola has abundant oil riches which account for 98% of the country’s exports and three quarters of its income. Much of this is produced through Western oil giants – BP, Chevron, ExxonMobil – in partnership with state-owned oil company, Sonangol.

Nothing unusual there you might think. Except, as Burgis details, a 2011 investigation by the International Monetary Fund found that between 2007 and 2010 $32bn went missing from the company’s accounts – a sum, Burgis points out, greater than the gross domestic product of each of the forty-three African countries. Burgis explains how oil wealth was further robbed from Angolans when US-based Cobalt International Resources unwittingly – or so it maintains – went into a contract with two companies later revealed to be secretly owned by the three most powerful men in Angola – one being the boss of Sonangol. According to US law it is a crime for a company with operations in the US to pay foreign officials to win business.

The Democratic Republic of Congo (DRC) provides another example of the resource curse in full-throttle. The DRC’s problems with rebel groups and blood diamonds have been well documented. What Burgis unveils, however, is an extremely complex systematic looting of the country’s resources – some of the most abundant and rich in the world – by key figures in the government and their ‘friends’. This included giving Israeli businessman Dan Gertler a monopoly of diamond mining in the DRC. The president’s relationship with Gertler and the dodgy deals this has resulted in have been widely investigated by Global Witness, which you can read more of here.

Burgis relays how a source close to former President Laurent Kabila – current President Joseph Kabila’s father – told him that the president used to receive $4m in cash every week from state and foreign owned mining companies – can you imagine? This makes the following statistic all the more believable: from 2007 – 2012 just 2.5% of the $41bn that the mining industry generated in the DRC ended up in the country’s budget. I could go on, or rather Burgis does in his book, about the systematic corruption of Africa’s resource wealth. I’m only half way through the book and it’s equally staggering as it is maddening how many shadow governments in Africa continue to get rich while millions of people live on the breadline, many without access to electricity or basic healthcare and education.

What can be done to stop this?

Although a complex problem with no simple solution, some suggestions to curbing Western companies involvement in corruption overseas, and therefore reducing corruptions by head of states, have been: banning anonymous companies or banning Western based companies entering into contracts with companies of which the owners cannot be identified; making corporate social responsibility guidelines as mandatory; more stringent oversight of resource companies’ work abroad; forcing companies to be transparent about every payment they make to governments and companies overseas – NGOs are currently making headway in achieving this.

But as I said, it’s a very complex situation. Burgis explains how a country, such as Angola or Nigeria, which is almost entirely dependent on revenues from natural resources – be it oil or minerals – has a distorted economy. For example, if three quarters of a government’s income comes from oil revenues, as opposed to tax, as in Angola, the government is no longer answerable to the people it serves. It doesn’t need them. This breeds greed, corruption and kelptocracy. As Burgis states: “Not being funded by the people, the rulers of resource states are not beholden to them.”

Instead of having a broad industrial economy, like in Western countries, which provides jobs and opportunity, resource states create mass unemployment as the resources are lifted from the ground and exported in raw form to industrial nations like us in the UK and, most notably, China. Beyond the government and those in their pocket, the wealth and opportunity created from these valuable natural resources is rarely seen.

Tom Burgis’s book is out now.

*You can read my interview with Tom Burgis about his book here.*