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BOARD OF EXECUTIVE DIRECTORS OF THE WORLD BANK

INTRODUCTION Created following the ratification of the Bretton Woods Agreement, at the end of World War II, the World Bank is an association of five development institutions which seek to provide technical and financial assistance to member countries. The two main ones are the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA); the others are the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for the Settlement of Investment Disputes (ICSID). The World Bank is composed of 187 shareholders who take part in two main decision organs: the Board of Governors, which is the ultimate police maker and is composed by all members, and the Board of Executive Directors, which has specific duties delegated by the Board of Governors. As of November 2010, there are 25 representatives on the Board of Executive Directors. Each of the five largest shareholders—France, Germany, Japan, the United Kingdom, and the United States—, appoints one executive director. The remainder 20 executive directors are elected to represent each a determined group of countries. From post-war reconstruction, which was the objective of the International Bank for Reconstruction and Development, its focus has evolved into assisting middle-income and creditworthy poorer countries to diminish poverty levels and engage in sustainable development strategies. To that end, the IBRD promotes loans decided upon by the Board of Executive Directors. Beyond that, the Board is responsible for creating the Bank’s general policies, stimulating a positive investment climate, proposing country assistance strategies and financial decisions, as well as providing support during crisis periods. Within the World Bank structure, reconstruction is now seen as just a part of the institution’s framework. Currently, poverty reduction, sustainable growth and development stand out as the main issues being advanced by the Bank. As a consequence, the World Bank has become deeply sensitive to matters related to the aforementioned topics, particularly regarding the achievement of the Millennium Goals.

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Exploring new possibilities. Treasuring the past.

TOPIC: Extractive Industries in Africa Isadora da Silveira Steffens, Alexandre Piffero Spohr, Diogo Ives, and Othon Veloso Schenatto

1. HISTORICAL BACKGROUND 1.1. From Ancient times to the Industrial Revolution Metal exploration in Africa has been developed in accordance with the civilizational process in that continent. It is estimated that the African peoples abandoned the Stone Age and entered the Metal Age between the 5 th century BC, in Western and Northern Africa, and the 7 th century AD, in Sub-Saharan Africa. During Prehistoric, Ancient and Medieval Times, the metal exploration caused—and it was affected by—political, economic, and social changes within African societies. Because of it, productivity gains in agriculture and commercial contacts between different peoples were intensified. Several empires and city- states, as Egypt, Cartago, Axum, Meroe, Ghana, Gao, Sofala, and Mombasa gained power due to their knowledge of metalworking, which provided them with major wealth and military strength (VERCOUTTER, 2010). The African-European and the African-Asian trade have been occurring since Ancient Times. Ghana had already gained its fame as the gold land in distant regions such as Bagdad (WARMINGTON, 2010). During the Middle Ages, the kingdoms of Western and Northern Africa focused in the gold trade with Arab and European peoples, at the same time that the East African coast was being opened to international trade, especially concerning metal sales to India and China (MASAO; MUTOYO, 2010; DEVISSE, 2010). In the 13 th century, the gold coins coinage was spread in the West. However, the amounts of gold that reached Europe were not sufficient to fulfill the demands of a period of economic expansion. This thirst for gold became a powerful factor that led the European nations to explore the world in the 15 th century. When the Portuguese navigators landed on West Africa, they were amazed by the region’s richness and prosperity (DEVISSE, 2010). Portugal’s contact primarily with the Gold Coast and later with East Africa in the 16 th century caused many economic changes in Africa. The initial Portuguese expansion over the West African coast allowed Portugal to control one of the ending points of the Saharan trade routes and deviate part of the gold formerly sent to the Muslim world. However, Portugal’s lack of means made the direct domination of the discovered lands impossible. The Portuguese then inaugurated the trading post system both in the West and East coasts. Such model was soon imitated by the other European powers that fought against Portugal for the control of

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African cities. The trading post system, until the moment the Spanish discovered mineral mines in America, supplied the world with large amounts of gold and silver (DIAGNE, 2010). Portugal kept the maritime and commercial supremacy in the West African coast, from Arguin to Angola, until the second half of the 16 th century, when it started suffering the competition of its European rivals, namely France, England, and the Netherlands which had better material and financial conditions than Portugal for trading (MALOWIST, 2010) 1. The impacts of European presence in West Africa are broad. From the 15 th century on, economic production, once directed to the trans-Saharan trade and to the Arab Empires, gradually converged to serve European interests. The disarticulation of the old commercial interior routes and their transfer towards the Atlantic increased incessantly. Even more significant in that moment was the growing European disregard for the African metal trade— once metals abounded from America—and their rising interest in the slave traffic which led to a decrease in African gold production (BOAHEN, 2010; CHÉRIF, 2010; INIKORI, 2010). In East Africa, the Portuguese relations with the autochthonous evolved in a different way. Once reaching the Mutapa Empire region—currently the area of Zimbabwe and Mozambique—the Portuguese tried to dominate the territory, so that they could control the intense trade of gold, ivory, and other metals occurring among the interior lands, the East African Coast, and India. To protect itself, the Mutapa Empire forbade its subjects to indicate the location of mines in the region. Throughout the 16 th century, the region started to diminish its mineral production, leading the interest in that region to decrease considerably (BHILA, 2010).

1.2. Industrial Revolution and Neocolonialism In the late 18 th century, the economic and social changes that spread from an industrializing United Kingdom to the rest of Europe changed European interests in the rest of the world and especially in Africa. Indeed, the economic demands arising with the Industrial Revolution were based on the needs for raw material supplies – to enable the usage of multiple technological innovations in production – and new markets (INIKORI, 2002). 2 The introduction of steam engines revolutionized transports and producing patterns. Metals like

1 European-African trade of fire weapons, forbidden by the Portuguese crown to its nationals, granted at first to the French and later to the British and the Dutch great advantages in the trade of gold and ivory. The introduction of fire weapons in Africa is a fact of major importance, for it increased the conflicts between local kings, producing many war prisoners who were later sold through the increasing slave traffic (MALOWIST, 2010; DIFFIE, WINIUS, 1977). 2 In consequence, from the beginning of the 19th century on, the slave traffic started to collapse, greatly as the result of a British campaign against it. The United Kingdom, formerly the greatest beneficiary of the slave trade, started a fierce campaign to demobilize slave trade and even the slave mode of production. Such a move was deemed necessary as to broaden the potential consuming markets made unavailable for slaves.

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Exploring new possibilities. Treasuring the past. iron, steel and lead became highly demanded, as they were used to build railroads tracks, steam locomotives, steamships and other diverse steam engines (HILLSTROM; HILLSTROM, 2005). Coal was the main source of power to run steam engines, and it became a fundamental raw material for the industrializing nations (KERR, 1977). In agriculture, the use of local organic matter to fertilize the earth was being replaced by phosphorus material mined at distant regions (CORDELL, DRANGERT, WHITE, 2009). Therefore, the control over raw materials producing regions and mineral-rich areas became essential if European countries were to develop their full productive potential and rise economically (MOKYR, 1985). As such, if only the African coast was broadly explored at the end of the 18 th century, by the beginning of the 19 th century this situation would start to change deeply (MALOWIST, 2010; REED, 2001). During the 19 th century, European presence inside Africa increased. Several Christian missions and naturalist trips put the interior lands on the map showing an increased European interest over African territory. The Berlin Conference (1884-1885) institutionalized the African partition among the main European powers, especially between France and England. Only Liberia and Ethiopia remained as free states, as the rest of the continent had to deal with the implementation of the neocolonialist domination model (AKPAN, 2010). The arbitrarily divided territory now in the hands of European powers was subjected to the local production of agricultural and mineral products strictly to supply European demands. At the same time, each colony was conditioned to buy the industrialized products from its colonizer country, once African societies were not allowed to produce them locally. The colonial economy turned itself into an extension of the European economy (RODNEY, 2010). The changes in the political and economic systems that rose with the domination generated parallel changes in the social and ethnic social composition 3. In the majority of the cases, the immigrants were able to impose their institutions and values to the local population (ISAACMAN, 2010). The foreign companies installed in African land were the greatest beneficiaries from the new political-economic model. The majority of the resources from Tunisia, Morocco, and Algeria passed to the foreigners’ hands, especially French. The discoveries of great mines of lead, phosphate, cobalt, zinc, molybdenum, manganese, and coal, already explored before the First World War, were incentives to the rising production levels which would hit their full

3 The colonial productive relations destroyed African self-sufficient economies. The ties that kept them united before were cut off, as in the cases of the trans-Saharan and the Great Lakes regional trade. Concomitantly, many local manufacture and industrial techniques were lost, as the African societies were required to import European products and as the local population was displaced to insalubrious services that required a minimum technical qualification (RODNEY, 2010).

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UFRGSMUN 2012 potential in the 20 th century (COQUERY-VIDROVITCH, 2010). In West Africa, after the abolition of the slave traffic, the trade of European products for gold, ivory, palm oil, and rubber became the main economic activity. A new African commercial class emerged, operating on permissions granted by European companies, which it represented. The descendants of the great commercial families of the region, who were schooled in Europe since the beginning of the century, established themselves at the top of the local social hierarchy (ARHIN; KI-ZERBO, 2010). The colonization process in South Africa deserves special attention, for it led to the economic transformation that turned the country into the most developed one in the continent. Between 1850 and 1880, “South Africa” was still a geographic expression with no political meaning. The region encompassed British colonies, Boer republics, and African states. By the end of the 19 th century, when mineral resources—like gold and diamonds—were discovered in the interior of South Africa, the United Kingdom began to execute an active policy in the region, seeking to unify it and to explore exclusively its natural resources (BHEBE, 2010). The exploration of mines by the British colonizers originated a huge capital flow to South Africa (the biggest in Africa from 1880 to 1939), Western technicians moved to the region, and an intense urbanization process occurred. The unceasing demand for labor force in the mines caused huge waves of immigration from other African colonies, like Mozambique and the Rhodesias, as well as from outside the continent, mainly from China, where the British were also entering (CROWDER, 2010). Besides South Africa, the United Kingdom colonized several other African territories that helped it gain great economic power in the final period of the Pax Britannica , when other countries were becoming competitors in the industrial field. The British explored reserves of gold in South Rhodesia (Zimbabwe today), Tanganyika, Sierra Leone, and Ghana; coal in Nigeria and South Rhodesia; diamonds in Ghana and South Rhodesia; cooper in North Rhodesia (Zambia today); iron ore, chromium, and platinum in Sierra Leone. The mineral reserves in those regions were already known before the colonization and were indeed one of its main causes. The real boom of production occurred at the beginning of the 20 th century, when minerals quickly became the largest part of the British colonies’ exports (CROWDER, 2010). The local administrations within the British Empire had autonomy to set the characteristics of political and production systems in each colony. Economic growth was seen in all of them due to the increase in outputs and the injection of capital. However, the living conditions of the African populations did not improve; as they were neither allowed to have rights over mineral exploration nor to specialize in a job. In Sierra Leone and Ghana, for

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Exploring new possibilities. Treasuring the past. instance, the mining company Cast exercised a monopoly over the entire mineral production. Furthermore, Western workers who had the same job of an African worker received higher wages (KANIKI, 2010). Following the United Kingdom’s and France’s empires in terms of size, Portugal and Belgium also possessed large portions of African territories. Regarding their colonies, Angola, Mozambique and the Belgian Congo were the ones that attracted the largest investments in mining. In those areas, non-paid work was common, as well as the obligation of compulsory work during some days of the year (COQUERY-VIDROVITCH, 2010). Germany, Italy, and Spain completed the group of seven European countries that owned colonies in Africa, a sensitive difference from before 1884, when the United Kingdom, France and Portugal were the only powers with presence in that continent (SHIH-TSUNG, 1998). Notwithstanding, Ibrahim (2010) notes that imperialism in Africa was not an exclusive practice of European countries. The lack of iron ore and coal in Egypt halted its industrialization, making it one of the poorest provinces of the Ottoman Empire. In 1805, Muhammad Ali rose to power and sought to explore the mineral resources of Sudan, specially its gold (IBRAHIM, 2010).

1.3. Europe-Africa mineral trade in the first half of the 20 th century During the first half of the 20th century, the implementation of the combustion engine caused a revolution in transports. The widespread adoption of motorcars increased the demand of industrialized nations for raw materials such as copper, glass, iron, steel, lead, zinc, and oil (substituting coal as the main energy source). The airplane industry also increased demand for metals. Construction became one of the most dynamic activities in the central economies, as growing urbanization and technological advances such as the elevator made it possible to build great height buildings and skyscrapers, and the motorcar industry implied in the construction of major highways and bridges, increasing significantly the demand for cement, sand, gravel, stone and other construction materials. The great expansion of electric power grids also increased dependence on oil (MORSE & GLOVER, 2000). Nonetheless, African responses to such innovations varied according to European changes in demand until the end of World War II. The First World War caused a crisis in the colonial economy. An exodus of the Europeans who worked in administrative and commercial functions paralyzed many essential services. The war provoked a fall in the prices of basic exports and an increase in the prices of imports, motivated by the reduction of supply from Europe. There was also a shortage of labor force, since a large contingent of African people became soldiers, carriers, and farmers

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UFRGSMUN 2012 of subsistence agriculture. It is estimated that more than 2.5 million African natives participated in the war between 1914 and 1918 (CROWDER, 2010). As Europe’s industrial production diminished during the war, the demand for Africa’s minerals fell. As there were exclusive trade ties between colonial powers and their colonies, Africa could not avoid the negative economic impacts of the conflict. Unemployment and misery spread over the continent. The only mineral production that benefited from the war was the gold mining, since the gold standard was used to regulate the economy at that time. South Africa had the biggest gold reserves then and the gains from their intense exploration led to the industrialization of the country during that decade of crisis (CHENNTOUF, 2010). The deep bonds that were established between Europe and Africa made the Great Depression of the 30s spread itself aggressively from the former to the latter. In Tunisia, the exports of the main mineral products were reduced by 220 million Francs from 1930 to 1932. In Morocco, the sale of phosphate fell by half from 1930 to 1931, going from 1.7 to 0.9 million tons. In Algeria, the iron production decreased by 75% from 1929 to 1932 (CHENNTOUF, 2010). The Second World War put an end to the recession in Africa. The military and economic destabilization in Europe and the occupation of the European colonies in Asia by Japan caused a high demand for raw materials and minerals from the African continent. Jobs were created and an important social change took place, as the traditional rural elites were replaced by an industrial and urban bourgeoisie in many societies (CHANAIWA, 2010). As an example, during the war, the fate of the United Kingdom — and therefore that of the Allies — had intimately been connected to the African colonies, which provided troops, agricultural products, and mineral resources for the country. Moreover, the Belgian government exiled itself in London, making 85% of the exports from the Belgian Congo to be directed to the Allies since 1941. The production of tin ore in that colony rose by 630% from 1939 to 1945, as well as the output of zinc, cassiterite, coal and cooper increased by similar proportions. In a special case, the manufacture of the atomic bomb by the United States depended on the supply of uranium from the Belgian Congo’s mines (CROWDER, 2010). As the use of nuclear power started to spread over the world after the end of the Second World War, the world start to see a greater demand for uranium (NUCLEAR ENERGY AGENCY, 2006), which was available in Africa.

1.4. Africa’s extractive sector management after decolonization After the Second World War, African decolonization processes began and Western interests for minerals were intrinsically involved in the independence trajectories of many countries, as the cases of Algeria and Angola clearly demonstrate. With the discovery of oil

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Exploring new possibilities. Treasuring the past. and natural gas in Sahara in the 1950s, France had access to those resources inside its own territory for the first time. The idea of being able to practice an independent oil policy strongly influenced France’s decisions during the violent war of Algeria’s independence from 1954 to 1962 (CHOWDER, 2010). In Angola, a producer of diamonds in the prewar period, iron ore and oil were discovered after 1945. Portugal tried to remain the sole beneficiary of those findings as long as it could. The independence of Angola was only conceded in 1975, after a long and violent conflict (M’BOKOLO, 2010). Mining activities managed by foreigners continued to be a reality after the independence processes, with the consent of the local governments from then on. In 1951, Libya gained independence, but the economic difficulties of the new State made easier for several companies from the United States, United Kingdom, France, and Italy to obtain concessions for oil extraction. Big reserves were discovered in 1959, which rapidly transformed Libya into one of the richest countries in Africa. Nevertheless, the national economy, based on only one product, became dependent on external decisions and vulnerable to the fluctuations of the world market (CHOWDER, 2010). Liberia, which had not been colonized by the Europeans, began to attract foreign investors by governmental initiative in the 1940s. As a result, the inflow of external capital caused a diversification of its economic activities. Besides latex and rubber, the country started producing iron ore, extracted by foreign companies, which led to the country’s position as the largest producer of iron ore in Africa. In order to allow for the viable economic exploitation of the nation’s richness, a highway network was built to connect the parts of the territory. It represented a radical transformation in the local tribes’ way of life, until then related to subsistence activities (SURET-CANALE; BOAHEN, 2010). A similar policy was implemented by the government of Madagascar, where exclusive rights of mineral exploration were granted to foreigners so they could help the country move from a subsistence economy into a market one (MUTIBWA, 2010). By still dominating the economic systems, the Westerns also managed to keep themselves as the social elite in the new African States. In South Africa and South Rhodesia, the situation was extreme, as the European descendant inhabitants implemented segregation laws—the Apartheid regime—after the independence processes in order to maintain their privileges 4 (CHANAIWA, 2010). On the other hand, a few countries managed to attain higher levels of development after becoming independent. Botswana is the best example, since it experienced the highest rate of economic growth in the world from 1966 (year of its

4Such laws preserved the exclusive use of lands and mines for them, while a higher tax burden charged the African peoples (CHANAIWA, 2010).

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UFRGSMUN 2012 independence) until 1999. Since 1966, infrastructure has been continuously improved, telecommunication has proven to be efficient, literacy surpasses 80% of the population, girls were reintegrated in the educational system, and public institutions have great assessments regarding transparency (MARTIN, 2008). Nonetheless, Botswana’s growth was highly dependent on the mineral sector, especially diamonds. In the past decade, it still corresponded to over 30% of the country’s GDP, in spite of governmental efforts to diversify the economy (MARTIN, 2008).

1.5. Conflicts and disputes over Africa’s minerals after independences During the Cold War Era, the capitalist powers continued to try and maintain economic advantages over Africa’s raw material supplies and buying markets. On the other side, the Eastern Bloc gave technical and economic assistance to both colonized and independent African countries, as means to stir them away from the capitalist powers. The dispute over areas of political influence was intense. The Angolan War of Independence was a paradigmatic case of proxy war under that conjuncture. The People’s Movement for the Liberation of Angola (MPLA, in Portuguese), a Marxist-oriented party, accepted the help offered by the USSR and Cuba in the dispute to govern the country against the National Union for the Total Independence of Angola (UNITA) and the National Liberation Front of Angola (FNLA), both formed by pro-Western guerrillas and supported by the capitalist nations. In addition to ideological motivations, the foreign powers from both sides were especially interested in the control of the uranium fields and the oil reserves of Angola. After fourteen years of conflict, MPLA rose to power in 1975 (THIAM & MULIRA, 2010), but civil war would only end decades later. Several other African conflicts that happened during the Cold War had motivations related to mineral resources and they generally received external interference. In the Democratic Republic of the Congo, the Katanga province tried to constitute an independent State from 1960 to 1963, but it faced the resistance of the central government, which did not accept the loss of the oil-rich region. Loose Katanga received military support from Belgium, which wanted to continue mineral exploitation activities in the former colony (SCARNECCHIA, 2011). A similar event occurred in Nigeria, when the oil-rich Biafra province tried to be an independent Republic from 1967 to 1970, a movement that was not accepted by the rest of the country. The Igbo separatists received support from France, while the United Kingdom acted in defense of a unified Nigeria. Both Western powers were protecting the best interests for their oil companies, namely Elf Aquitaine and Shell (PFISTER, 2005; UCHE, 2008).

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Exploring new possibilities. Treasuring the past.

In the last three decades, Africa as a whole has rose as the second biggest oil producer in the world, only behind Saudi Arabia. With the new reserves that have been discovered since the 1980s, especially in Sub-Saharan Africa, countries like Angola and Nigeria experienced great economic growth based on the growing oil exploration and in the rising oil prices since the oil crises of the 1970s. The Guinea Gulf, principal producing region of the continent, is the one that receives the largest amount of investments in comparison to other regions of the world (OLIVEIRA, 2007). In the north of the continent, production is concentrated in Libya and Algeria, and its oil exports are historically directed to Europe. In the Sub-Saharan portion, competition between powers for the African oil, which is safer and cheaper than the Middle East oil, is increasing, as the great powers like USA and China, and even regional powers like India, have an increasing oil demand and a diminishing oil production (OLIVEIRA, 2007). Oil production in Africa is completely dominated by foreign companies, which explore and pollute without offering real benefits for the local people. Notwithstanding, as a way to put pressure in the oil market and to create an unified oil policy, the Organization of the Petroleum Exporting Countries (OPEC) was created in 1960, and ever since, Libya, Algeria, Nigeria, and Angola became members of the organization, in 1962, 1969, 1971, and 2007, respectively. Throughout the civil wars in Angola, Nigeria, Algeria, and recently in Sudan, oil was a fundamental question. In Nigeria, where the income is concentrated in the north of the country, and production regions are in the south, rebel groups constantly attack and boycott the production. Nigeria and Sao Tome and Principe, and Nigeria and Cameroon also have territorial disputes in their borders for oil rich regions (OLIVEIRA, 2007). Mineral-related territorial expansion has not been an unusual practice inside Africa as well. After Germany was defeated in the First World War, South Africa took control of Namibia, one of Africa’s richest countries in minerals. The Namibians only gained independence in 1990, after 24 years of war (KHON, 2007). In 1952, Eritrea was annexed by Ethiopia, which wanted an access to the Red Sea and also to exploit the natural resources of its neighbor. After decades of conflict, Eritrea became independent in 1993. In the meantime, the war between Ethiopia and Somalia in 1977-1978 for the possession of the Ogaden region was influenced by mutual interest in the region’s oil reserves. Conflicts between the two neighbors in Ogaden are recurrent until present day (DE ROUEN; HEO, 2007). In 1973, Libyan occupation of Chad’s Aouzou strip, a uranium-rich territory, initiated a long period of conflicts. The dispute ended in 1994, when the International Court of Justice (ICJ) decided in favor of Chad’s rights over the region (MARK, 2002). After the Cold War, conflicts over minerals have still been a part of the African

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UFRGSMUN 2012 reality. Diamonds mined and sold by rebel groups provided revenues for them that fueled civil wars in Liberia, Sierra Leone, and Angola (GOREUX, 2001). Similarly, there is a low-level separatism in the region of Casamance, in southern Senegal, led by the Movement of Democratic Forces in the Casamance (MDFC). Such region gives access to an offshore oil reserve, which is shared with Guinea-Bissau (EVANS, 2004). In Sudan, the Southern part of the country fought for autonomy in the First Sudanese Civil War (1955-1972) and in the Second Sudanese Civil War (1983-2005). South Sudan finally gained independence in 2011. Nonetheless, conflicts in the border with Sudan still persist in 2012, essentially because of a dispute over the oil reserves in the Abyei region (VARMA, 2011). Recent conflicts involving interests over minerals and the participation of non-African countries include the Second Civil War in Côte-D’Ivoire (2010-2011), the Arab Revolution in Libya (2011) and the ongoing war in Darfur 5.

2. STATEMENT OF THE ISSUE 2.1. Natural resource distribution in Africa The term Extractive Industries concerns those processes of removing raw materials from nature, namely fossil fuels and metals, that can be classified in three categories: (1) Fuels; (2) Lootable minerals; 6 and (3) Non-lootable minerals (HILSON; MACONACHIE, 2009). The challenges facing these industries are diverse, considering the different types of actors and resources in each one of them, but the main challenge is common to all: to ensure that a long- term sustainable economy and social development both arise from the usage of such materials. Since the extraction of non-renewable natural resources 7 is limited and can make countries highly dependent on external factors, governmental planning to use profits into promoting economic diversification is critical. That is the main objective of the World Bank in the extractive sector: “to ensure that natural resources contribute positively to economic development” (WORLD BANK, 2011a, viii). Africa has a growing importance in the extractive sector, and how these industries can promote development and help fight poverty has been a major challenge to the continent. Of the US$679 million that the World Bank provided to extractive sector projects, 32% were

5With the advent of new technologies of the digital era, the second half of the 20th century saw a huge increase in demand for the so called rare earth elements, which compose many components of new products such as computer memory, DVD's, rechargeable batteries, cell phones, car catalytic converters, magnets, fluorescent lighting and much more (GOONAN, 2011). This has spurred a race for minerals in Africa, prompting foreign companies to seek deals in mineral extraction. 6 “Resources such as diamonds and gemstones that have a high value-to-weight ratio and can be easily appropriated and transported by unskilled workers” (HILSON; MACONACHIE, 2009, p.60). 7 Metals may be considered renewable resources in the sense that they can be recycled, but they are not regenerative in nature, therefore they will not be considered renewable for the purpose of discussing countries’ development strategies.

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Exploring new possibilities. Treasuring the past. destined to Sub-Saharan Africa, making it the region with the highest volume of financing received (WORLD BANK, 2011a). The explanation for such actions comes from the fact that Africa has about 30% of the world’s mineral reserves (SHARAKY, 2011) and produces about 10.4% and 6.2% of world’s oil and gas, respectively (BP, 2012). The continent is especially important in the exploration of platinum, chromium, tantalum, gold, diamond, cobalt, manganese, and phosphate (SHARAKY, 2011). Also, the African oil industry becomes increasingly important due to the growing demand of emerging countries and the depletion of resources in other oil-producing regions, in addition to the discovery of major new oil reserves in East Africa. Accordingly, about 60% of the FDI that comes into the continent goes to resource-rich countries, the majority of it into the primary sector (AFRICAN BANK, 2007). The distribution of oil resources is uneven in the continent – 65% of the reserves are located in only two countries, Libya and Nigeria, followed by Angola and Algeria representing each one about 10% of the total 8 (BP, 2012). Natural gas is found in Algeria, Egypt, Libya, and Nigeria, with the main reserves located in the latter, while coal is found mostly in South Africa and Zimbabwe (BP, 2012). As for mineral resources, there is a clear concentration of reserves in South Africa, but they are relatively more evenly distributed in Sub-Saharan Africa, as can be seen in the map below.

8 Other significant oil reserves are located in Chad, Republic of Congo, Egypt, Equatorial Guinea, Gabon, Sudan, South Sudan, and Tunisia (BP, 2012).

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Figure 1 – Geographic distribution of strategic minerals in Africa. Source: SHARAKY, 2011.

2.2. The challenges facing Extractive Industries in Africa The resources that could be a blessing to boost Africa’s economy are frequently seeing as a curse. There is a strong relation between abundance of resources and poverty, one that many scholars have been trying to explain. Despite the fact that, in terms of gross internal product (GDP), resource-abundant countries in Africa are richer than the resource -scarce ones, other indexes are worrying. Jeffrey Sachs and Andrew Warner studied 97 countries between 1970 and 1989, and found that states highly dependent on natural resources exports had slower growth rates, even when controlling other variables (SACHS; ANDREW, 1997). More recently, a study conducted by the African Bank (2007), analyzing data from 1891 through 2006, found that the economic growth and the investment in human capital of resource -rich countries was considerably lower when compared to other African countries, and the inequality level was higher. The inequality is particularly worse in countries with fuels and non-lootable minerals, because the exploration is done by huge enterprises – mostly

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Exploring new possibilities. Treasuring the past. multinationals or state-owned companies – that are capital intensive and use few unqualified labor, frequently hiring foreign employers and sending profits abroad. According to the same African Bank study, the comparison shows that the degree of economic diversification is also lower in resource-rich countries. That shows that a great part of extraction profits is not invested on diversification or social projects, but goes into the hands of the country’s elite, is absorbed by government corruption, or goes to foreign countries through the process of repatriation of profits. Also, the lack of diversification can be partially explained by the “Dutch Disease”, that is, the rise in the export volume of natural resources leads to exchange rate valorization, which is prejudicial to other economic sectors both because it undermines export efforts and because it overstimulates imports in the internal market. The high dependence on imports can be especially problematic with the deterioration of the terms of trade – the value of the country’s exports, mainly natural resources, diminishes when compared to the country’s imports. The terms of trade in resource-rich countries have dropped since the 1980s, and some studies even show that the phenomenon has been happening since “at least the beginning of the twentieth century” (ROSS, 1999, p. 303). Dependence on extractive industries is particularly risky considering the volatility of some commodity markets, specially the oil one, making a country’s economy susceptible to price shocks. Governments may feel compelled to over-borrow in times of high prices, compromising themselves with debts they will not be able to pay when the prices go down again, many times stuck with “white elephant” projects 9. That is the case with the high government borrowing during the euphoria of the oil booms, caused mainly by the petroleum crises in 1973 and 1979, and the fiscal problems that came as consequence when the prices came down in the 1980s (AFRICAN BANK, 2007, p. 102). Therefore, volatility is not only an economic issue but also a political one, since the revenues of the high prices periods could be managed in order to protect the countries in times of price shocks, and the indiscriminate borrowing could be stopped both by the government or the credit banks. The governments in resource-rich countries may turn into “rentier-states”, meaning that their budgets are composed mainly by revenues instead of taxation, which can lead to further distancing from civil society and its demands. The revenues also give enough financial laxity for the ruling elite to continue in the government, either by rent distribution between allies and to coopt enemies, or by affording police and military maneuvers. That is the case mainly in countries with fuels or non-lootable minerals that are explored by huge companies, either

9 The “white elephants” are those projects that get a lot of attention but that do not address the real necessities of the population – such as stadiums or huge hospitals built in the main cities while the major necessities are in the countryside –, and are usually focused on political gains other than addressing correctly the country’s main development needs.

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UFRGSMUN 2012 government-owned or multinationals. In oil-producers such as Equatorial Guinea, Angola, and Chad, the high levels of corruption (TRANSPARENCY INTERNATIONAL, 2011) have not stopped the investment in the extractive industries. The multinational companies are willing to participate in the schemes of corrupt governments because they cannot choose the location of the resources, and the high costs of setting up the endeavor make companies unlikely to move once they are established in a country. In countries rich in lootable resources, corruption happens in a lower level. Because the resources are explored in a decentralized way, efficient regulation becomes harder, facilitating the illegal trade; when there is some kind of regulation, it is frequently done not by the central government but by small groups that control the resource-rich areas. Africa’s vulnerability to the problems mentioned above have limited the development of an internally conducted industrialization process, diminishing African capacity to explore its natural resources and increase their selling price abroad. The local techniques are still rudimentary, since developments were delayed by the colonial teaching system. All the while, Western colonial companies did not transfer science and technology, so countries are dependent on foreign machinery (MAZRUI, 2010). Political and economic conditions in Africa have also prevented the development of the type of modern logistical systems that have fostered trade and economic growth in the industrial world (GWILLIAM, 2011). Bad infrastructure conditions keep all African economic sectors away from modernization and competitiveness, including the one of extractive industries. Currently, roads dominate the transport sector in most of the countries today, but their quality remains poor. Railway lines are isolated, with little network interconnection. Most networks still operate at the standards to which they were constructed: small-scale, undercapitalized, and designed for relatively little load and low speeds. More recently, China’s investment in railways has been motivated by that country’s need to secure supplies of scarce minerals critical to its growth. Furthermore, Africa’s inland transport is poorly aligned with port development, causing stuffing of containers in port areas and creating congestions. African ports are usually small and badly equipped (GWILLIAM, 2011).

2.3. Civil Conflicts and Extractive Industries Civil wars have an extreme impact on poverty and development, leading to an increased number of external and internal refugees, rampant unemployment, environmental degradation, spreading of infectious diseases, and other major problems. Moreover, conflicts are stages to constant human rights violations. They also cause a long term destabilization of the country’s economic infrastructure, taking it decades to recover and be back on the path to

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Exploring new possibilities. Treasuring the past. development. Thus, the search for the causes and factors that inf luence civil conflict is an important matter in the progress of Africa, a continent that has suffered under many armed disputes. In this context, it has been pointed out by Ross (2003) that there is a relation between civil war and extractive resource depe ndence, implying that natural resources can influence the occurrence and development of conflicts in impoverished countries. The World Bank recognizes this link and the effect it has on poverty, and dedicates attention to exploring its possible solutions, especially since 2002, when it started the Governance of Natural Resources Research Project (BANNON; COLLIER, 2003). According to a book published by the World Bank, “close to 50 armed conflicts active in 2001 had a strong link to natural resource exploita tion” (BANNON; COLLIER, 2003, p.7). Also, since the 1990s the United Nations identified on several occasions the exploitation of natural resources as one of the main economic factors financing conflict in Africa (OSAA, 2006, p.7). There is an estimate, rep resented in the graphic below, that the risk of civil conflict rises proportionally to the percentage of natural resources in the GDP.

Source: BANNON; COLLIER, 2003, p.3.

Although that statement has been validated, it is not deterministic. As Ross (2004b) points out, both civil war and resource dependence can be caused by a third factor, such as a weak rule of law or poverty. Likewise, the relation can be considered one of mutual causality. The distribution of resources can generate conflicts or influence and sustain an existing one. Moreover, an internal conflict can harm the economy, raising the reliance on one of the few sectors that cannot flee – Extractive Industries –, while the manufacturing and service sectors are disrupted. Also, when it comes to Africa, it is important to consider that the dependence on the extractive sector is partly a heritage of the colonization pattern: the colonial powers in

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UFRGSMUN 2012 resource-rich countries have established weak institutions and empowered a small elite in order to set the conditions to maximize their profits (BASEDAU, 2005), creating an economic environment focused on exports of natural resources, with little space for diversification and to attend the population’s needs. This means that the relation between natural resource dependence and civil conflict is influenced by the countries’ history, and the singularities of each conflict have to be analyzed. With these considerations in mind, there are some similarities that can be considered as trends in civil wars involving natural resources. Since the end of the Cold War and the consequent decline in foreign assistance, the importance of Extractive Industry revenues in financing conflicts has grown (LE BILLON, 2000). In Angola’s civil war, the National Union for the Total Independence of Angola (UNITA) rebels started to depend entirely on natural resources since assistance from post- Apartheid South Africa and the United States faded. Also, according to Ross (2004b), the war in Sudan became more serious in the 1990s for the same reason. Given that the rebels are usually the weakest side, the availability of natural resources as sources of financing means that the conflict may last longer than it would if they were deprived of means to continue their activities. That is also true if the government is considered the weakest part: in 1997 and 1998, during the First Congo War, the government was the weaker side in the DRC and was being financed by the control of the oil – the same happened in 1993-1994 in Angola (ROSS, 2003). If the resource is lootable, rebels can directly explore it, or charge workers a fee to explore the regions they control. Lootable resources like diamonds, that present a high value per weight, can be easily smuggled and sold illegally as experience has shown. If the resource is unlootable and demands high infrastructure to be explored and transported, especially in the case of oil, it is almost impossible for the rebels to control its production. However, if the petroleum is on shore, rebels can obstruct pipelines and destroy equipment, harming government profit. Rebels can also make profits through the kidnapping of workers and the charging of an “insurance” from companies to prevent the destruction of their facilities. That happened in South Sudan, where rebels frequently obstructed the pipeline that links the southern oil fields to the northern refinery and harbor (ROSS, 2004a). These kinds of maneuvers also happen currently in Nigeria, practiced by armed groups whose alleged goal is to fight the socio-economic damage the oil exploitation is causing in the Niger Delta region. Other important factors with regards to resource availability to rebels are the distance from the country’s capital and if the resource is concentrated or spread in a large area. When the resources are placed in areas far from the central power, it is easier for the rebels to control it – that is the case of Sierra Leone and the DRC, where diamonds are in remote areas.

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In Angola, the main diamond mines are in the Luanda Norte region, but the alluvial diamonds are scattered and were controlled mainly by the UNITA rebels. In Botswana and in Namibia, where the diamonds are respectively concentrated in kimberlite pipes and along the shore, it is easier for the central power to control them (LE BILLON, 2000). Both in Angola and in the Democratic Republic of the Congo (DRC) the same pattern was followed: the rebels controlled much of the lootable resources, while the unlootable ones were under the government’s power (ROSS, 2003). When the natural resource at stake is unlootable and concentrated in a certain region, particularly in the case of oil, historical events have shown that the region in which the resource is located can start a separatist rebellion in order to better profit from the revenues of the resource. That can be caused either by greed - that is, will to dominate the exploration without sharing it with the rest of the country - or grievance - in order to protest against the mismanagement of the central government, the lack of benefits felt by the population, and the negative consequences of the extractive activities in the region (COLLIER, 1999). Separatist conflicts are more likely when they are supported by an ethnic rhetoric, which helps the mobilization of rebels – especially if a group feels that it is being harmed by another in power, as was the case of the civil wars in Sudan and Nigeria. Although the two cases have many distinct characteristics, both the oil-rich regions of Biafra, in Nigeria, and South Sudan sought separatism through ethnic rhetoric, with only the latter achieving success 10 . Civil conflicts commonly have regional interests involved, and in the case of resource- rich countries, economic interests may also have global implications – resources needed by distant countries, and multinationals exploring far from home. The rebel group UNITA, in Angola, besides being helped by the United States in the Cold War context, received assistance from Burkina Faso and from Togo partly because of economic interests (LE BILLON, 2000). Immediate economic gains are not the only way countries can receive foreign assistance – even if a group does not have the control over the resources, it can sell “booty futures”, that is, future rights over resources they are currently fighting for. That has been done in the First Congo War, when multinational mining companies – namely the American Mineral Fields (AMFI) and the Canadian Tenke Mining – closed exploration deals with Laurent Kabila even before the war was over (SILVA, 2011). In fact, the Democratic Republic of the Congo is a great example of foreign intervention seeking the exploitation of resources. Considered to be the world’s richest

10 The ethnic component can also explain why even when separatist rebellions run out of financing they are prone to last longer – the support of the population to the rebel forces undermines the government efforts to contain it.

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UFRGSMUN 2012 country in mineral resources, the DRC had its politics, since independence, closely controlled by the United States through Mobutu Sese Seko’s government, both to secure American companies economic interests and to maintain a strategically important anti-communist regime. With the end of the Cold War, Mobutu lost its main supporter, and was deposed by Laurent Kabila, who was helped by neighbor countries and by multinational companies, in the First Congo War in 1997 (SILVA, 2011). In the following year, Uganda, Rwanda, and Burundi turned against Kabila, starting the Second Congo War. Ugandan and Rwandan troops, in both wars, allegedly benefited from plundering DRC’s resources (SILVA, 2011). Kabila’s allies - namely Angola, Namibia, Sudan, Chad, and mainly Zimbabwe – also had economic motives to get involved in the war and benefited from the exploitation of the country’s resources as well (SILVA, 2011). Hence, Congo’s importance as a strategically located and resource-rich country engaged the continent in its internal affairs, to an extent that the Second Congo War became known as “Africa’s World War”. Recently, the North of the continent has witnessed a massive wave of civil uprises – named “The Arab Spring” – which protested against poverty, unemployment, human rights abuse, and sought to remove governments considered corrupt and autocratic. The movement started in December 2010, in Tunisia, and spread to other countries of the Arab world, including the African countries of Egypt and Libya. Egypt and Lybia are significant oil exporters, a feature that renders their internal political changes a subject of interest for the international community. In Libya, since Muammar al-Gaddafi refused to step back from power while the war escalated, a United Nations resolution decided for military intervention in March 2011, with abstentions from China and Russia. NATO’s intervention was decisive to give victory to the rebels, and it is clear that interest for oil was a major motivation for foreign countries, especially France and England, to intervene. The abundance of natural resources in Africa has made it a space of imperialist dispute since colonization, passing through the Cold War, and arriving at the competition that involves the emerging players. However, after the independence of the African countries, the external influence on the political affairs of the continent did not occur in a direct form, but mainly trough proxy wars and financial and military support to allies. Therefore, the major security threat to African countries was not of an external attack, but from its internal disputes for political and economic power, always considering that these disputes frequently involve also foreign interests. The World Bank’s scope does not allow it to interfere in the political dynamics of civil conflicts, but, as analyzed, the conflicts involving extractive industries frequently have common logics of inequality due to unfair distribution of revenues, poor governance, and

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Exploring new possibilities. Treasuring the past. economic underdevelopment. A study published by the World Bank asserts that “successful development is the best protection against civil war” (BANNON; COLLIER, 2003, p. 7). Therefore, poverty alleviation and economic growth are two major areas where the Bank seeks to work in order to diminish the probabilities of civil conflict. Along with that, the Bank’s transparency measures ideally lead to accountability and consequently to a government that meets the needs of the population, also contributing to political stability.

2.4. Socioeconomic impacts One of the World Bank Group’s main goals is to help the eradication or, at least, the alleviation of poverty through sustainable development. To better understand this goal, it is important to bear in mind the definitions of poverty and sustainable development that guide the Group’s work. Therefore, poverty can be defined as a multidimensional phenomenon, encompassing inability to satisfy basic needs, lack of control over resources, lack of education and skills, poor health, malnutrition, lack of shelter, access to water and sanitation, vulnerability to shocks, violence and crime, lack of political freedom and voice (WORLD BANK GROUP, 2003).

Meanwhile, sustainable development is the “development that meets the needs of the present without compromising the ability of future generations to meet their needs” (WORLD COMMISSION ON ENVIRONMENT AND DEVELOPMENT, 1987, p. 43). Bearing these concepts in mind, it is not hard to believe that extractive industries can bring some help to the cause of poverty eradication. The expansion of the extractive sector can bring a variety of benefits to a country: greater flow of capitals towards the country and a positive balance of payments; increase in the governmental capacity to collect taxes without taking money from the people, investing the revenues in infra-structure and other common goods; and positive externalities, such as the creation of new businesses to better serve all the newcomers (UNCTAD, 2012). However, all these possible benefits must be thoroughly planned by the State so as to avoid the other side of these opportunities, for example the rise of the capital flow can, as described through the Dutch Disease concept, raise the prices of African products through exchange rate, reducing exports. Besides, corruption and lack of transparency are two great obstacles to a more comprehensive form of development that the extractive industries might have made possible. Despite the general belief that the employment rate will rise with the introduction of this new economic sector, the new enterprises develop capital intensive activities, needing, therefore, almost exclusively high-skilled professionals that are hardly found in the regions of exploration. To promote the sustainable development of the African economies through the extractive sector it would be necessary that the resources obtained through rents be used to

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UFRGSMUN 2012 improve the educational system and to build infra-structure. However, this is usually not the case in African countries (UNCTAD, 2012), as the rents are generally used for other purposes. The most important economic consequence of extractive activities is the great dependence of the country's economy on foreign markets (BRYAN, HOFMAN, 2007). This represents an incredible danger: even though the benefits from an increase on these products’ prices are huge, so are the losses provoked by crisis situations or any decrease in international prices. Besides, the exploration of such resources will necessarily extinguish them sometime in the future, since the reserves are not eternal and the only way to increase the national reserves is by finding new exploration sites. Furthermore, even though the extractive industries are responsible for a certain increase of the GDP, the social consequences from this exploration can be harmful to the common Africans. Throughout time, this kind of economic activity has not fostered an equal development throughout the different social groups, intensifying asymmetries of power, keeping, for example, women socially marginalized in most cases. Firstly, populations can be affected by the very granting of licenses to companies which receive the right to explore certain territories for their natural resources. When the land is granted, the people living in that land become an issue to the company, as they have to be evacuated for the beginning of the extraction process. However, according to a UN report, the enforced or involuntary resettlement Is considered a practice that does grave and disastrous harm to the basic civil, political, economic, social and cultural rights of large numbers of people, both individual persons and collectivities (UN Doc. E/CN.4/Sub.2/1993/8, p.10).

However, resettlement continues to occur and is usually not conducted in a way that really compensates the population’s losses (ENTWICLUNGSPOLITIK INFORMATION NORD-SÜD, 2007). There is not enough land to reallocate all the evacuated people and, when available, the places these people are moved to do not always allow them access to their primary needs, such as sources of income, arable land, and drinkable water, creating very bad living conditions for the resettled people. This problem is even worse when we examine the cases of indigenous people. There are some opinions that consider this change of habit in local people, who inhabited these areas for many years, a form of ethnocide (WORLD BANK, 2003). Another important human consequence of extractive industries is the migration of many foreigners and people from other regions of the country interested in the opportunities the emergence of new activities creates. The increase in population numbers can originate

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Exploring new possibilities. Treasuring the past. tensions among the people, since the old and new inhabitants compete for scarce resources, and the infra-structure and social services are over-explored and prove no to be prepared for such a high demand, decreasing incredibly the quality of the service at the local citizens’ disposal (SOCIETY FOR INTERNATIONAL DEVELOPMENT, 2009). Even though GDP increases, it does not necessarily induce better wages, as much of the work is made by machines and specialized working force is brought from other countries. This not only implies a stagnation of wages, but it is also responsible for rising unemployment rates, as the local artisanal methods of extracting minerals are substituted by extractive industries’ large-scale methods (ENTWICLUNGSPOLITIK INFORMATION NORD-SÜD, 2007). Beyond that, these industries do not always follow the countries’ work legislation and sometimes produce slave-like conditions of work for local people. The stronger development of resource regions in the country also promotes inequality among the countries’ regions, creating asymmetrical, and sometimes conflicting, relations among them. The conditions of work in the extractive activities are often pretty bad for the workers' health and safety, being the mining sector the one that kills the most workers (WORLD BANK GROUP, 2003, pg. 35). Therefore, better worker rights’ regulations have to be passed in each country, so that these workers can receive their salaries without having to threaten or harm their own health. The government is, therefore, the main responsible for ensuring that the companies are complying with the new regulations. Meanwhile, many transnational companies develop health and safety programs so as to show their interest for such causes and try to reduce the general criticism towards extractive companies, reversing accusations that they generate most of the problems related to natural and social issues in the African countries (WORLD BANK GROUP, 2003). In many cases the problems caused might be said to surpass the economic growth and the opportunities created: Even with the increase in the number of mining companies in Tanzania, the rate of employment has not increased. There have been falling standards in labor rights and welfare as workers are denied freedom to participate in unions. […] Inequality in society is further exacerbated by large-scale corporate mining operations. In most cases, people from the local communities around the mining area remain unemployed (SOCIETY FOR INTERNATIONAL DEVELOPMENT, 2009, p. 55).

Countries that have recently experienced some kind of political turbulence are usually good examples of human problems caused or catalyzed by the extractive industry. In Sierra Leone, extremely low wages, disrespect for labor law, and conditions of work similar to slavery are some of the problems faced by the country, caused by or related to the exploration of the countries' natural resources, mainly diamonds. In some countries, local initiatives have

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UFRGSMUN 2012 been formed to try and solve the problems major transnational mining companies have caused to the local population, like the WACAM 11 . This association tries to disseminate information on poorly conducted cases of reimbursement to dislocated people, and to help these people search for their rights through the legal framework. However, most companies end up settling the cases outside the courtroom, avoiding public records of such irregularities. Similarly, in order to help attract more foreign investment, Ghana, following the recommendation of many experts – including World Bank ones –, has passed a law that, besides reducing taxes, weakens the ecological and social burdens to mining companies (ENTWICLUNGSPOLITIK INFORMATION NORD-SÜD, 2007).

2.5. Environmental consequences The damages inflicted by the presence of extractive industries upon the African nature are as great as the political and economic phenomena usually described as resource curse. The processes adopted to extract minerals, oil, and gas incur in terrible consequences to the local environment, and, therefore, the indigenous population. To better understand the impacts that this extraction has over the African environment, it is important to analyze the different resources that are explored and the different forms this extraction is conduced. An important element that has to be considered in the analysis of the mining sector is the presence of both small- and large-scale mining, because of the distinct ways they damage the nature that surrounds them. First of all, the exploration of mineral resources implies the modification of the local natural structures: forests are invaded and stone formations are destroyed in order to create better ways to access the mining sites and to facilitate the transportation of the minerals extracted to their destinations (WWF, 2011). So, roads are built, changing the soil characteristics and an increased flow of people towards the mining region can be observed, incurring in the natural consequences that fast urbanization provokes. The construction of roads, besides promoting noise and material pollution, reduces the area the wildlife has to inhabit and can make it easier for hunters to develop their activities by reducing the natural defenses of the animals. An example of that is the Western Congo Basin that is located in the territory of three different states, Cameroon, Congo, and Gabon. The exploration of iron in this region led to construction of roads and other structures that enter the rainforest, making it easier for hunters to have access to the elephant and apes that inhabit the area (WWF, 2011).

11 WACAM is the Wassa (Ghana’s Western region) association of communities affected by mining. It records the problems caused by the exploration of minerals in that region and organizes the activities developed in order to reduce the human rights violations perpetrated by the mining companies (ENTWICLUNGSPOLITIK INFORMATION NORD-SÜD, 2007).

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Another common feature in the exploration of mineral resources in Africa is the high demands for water and the following contamination of water and air. During the exploration of most mineral resources, dust and other emissions are produced which are usually not constrained by their producers, spreading throughout the regions. The exploration sites are usually “plagued by poor sanitation, lack of clear and safe drinking water, high congestion, and poor hygiene” (SOCIETY FOR INTERNATIONAL DEVELOPMENT, 2009, p. 53). Often water bodies have their flow changed in order to facilitate the extraction of alluvial deposit minerals. The mineral’s nature and location are very important to evaluate the impacts its extraction might have on the surrounding environment. One of the less damaging forms of extraction is the underground mining, which can be summarized as the use of tunnels to have access to explored resources. Even though it does not occupy a large surface area and does not interfere directly in the wildlife, it does have negative impacts, such as the great consumption of energy and water, and the creation of mine tailings. Meanwhile, open-pit sites create greater disturbances, since they require important structural changes to the occupied surface, like the removal of rocks and sediments from the mining sites. The deep impact this form of mineral extraction causes can also reach underground layers, contaminating the water table (BATS, 2008). The extraction of some mineral resources occurs in a simpler way, without the utilization of chemical products that can detach the desired mineral from other elements. The exploration of those resources, like sand, clay, and rock, is marked by the removal of great quantities, promoting changes in the natural relief and soil composition. Other minerals, like gold, after their extraction from nature, have to undergo chemical processes before being introduced into the market (BATS, 2008). These chemical processes include products that damage the nature intensely and are commonly conducted without the minimal care required to avoid environmental impacts; for example, the obtainment of gold requires the utilization of cyanide, which is highly toxic. After the gold is obtained, the cyanide is usually disposed with no care in water bodies, provoking serious damages to water resources. Even though small-scale mining, developed by locals, might promote a better level of life in the countries, by allowing its citizens to find work and increasing the national income, we cannot undermine the potential large-scale mining has to use methods of extraction that are less harmful to the nature, because of the high level of technology it has access to and to the level of accountability the big enterprises might be forced to have, forcing them sometimes to use less harmful products and methods. The small-scale mining produces sometimes very bad results because of the inferior level of information that are at the miners’

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UFRGSMUN 2012 disposal. These cases usually risk not only the miner’s lives, but also the lives of the people that inhabit the region and use the same hydro resources (SOCIETY FOR INTERNATIONAL DEVELOPMENT, 2009) or rely on the same forests. The impacts of oil and gas extraction are also harmful to the African environment. The process of drilling in the oil extraction can in many ways promote pollution. This can happen as the drills made might reach table water or other sensible underground layers, or by creating disturbance to the natural life surrounding the exploration sites. The construction of infra- structure that precedes the drilling promotes similar effects to the local biodiversity as the ones experienced in the mining processes. Another harmful consequence is deeply related to an inappropriate structure for the transportation of the oil and gas to their destinations. The great advantages of the African oil for external markets, such as the facility to refine it, the better location of the reserves in terms of subsequent transportation and the small involvement of the oil producing regions in conflicts, all in comparison to the Middle East (KELLERMAN; DOVE, 2010), produce a high demand for this resource and therefore higher pressure on the commonly old and outdated extractive infra-structure. The bad conservation of the oil pipelines in many African oil producing countries causes frequent spills of this resource on the environment crossed by such pipelines. Oil spills are responsible for great damages to the local fauna and flora, contaminating water and soil (BATS, 2008). The only solution to this problem is the constant upgrading of infra-structure and surveillance over the oil pipelines so that spills can be prevented; however, this requires an increased investment that is usually not available for such causes. A third problem that is often caused by oil and gas exploration is what specialists commonly refer to as produced water. This outcome of the extraction of these resources is created when the water present in the offshore oil and gas reserves is brought out of the sea mixed with oil and grease. This water is highly contaminating, because of the presence of toxic substances from petroleum. At first, the produced water would be reintroduced into the nature without any regard for the implications of such a decision, provoking incredible environmental damages. Nowadays, this byproduct of the oil exploration ought to be extracted from the toxic mixture it is involved in through very long procedures. The obtainment of produced water is deeply related to the time the extraction unit has been used: as the time passes, more and more produced water is obtained as a byproduct of the oil exploration (BATS, 2008).

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2.6. Actors involved in the Extractive Industry 2.6.1. Traditional Actors As mentioned before, the beginning of the extraction of African natural resources was primarily conducted by the continent’s indigenous people and trade routes were established with the Arabs and the Ottomans. However, these processes started to take new dimensions with the arrival of European countries, which started to dominate various African regions since the 16 th century, and reached a higher level after the Industrial Revolution and the colonial period. In the 20 th century the forms of domination were gradually changed as movements for independence got stronger, finally resulting in the decolonization of the continent (CROWDER, 2010). However, the European powers, mainly France and the UK, maintained their influence over their former colonies in the post-colonial period, spreading it to the former territories of other European countries. Nevertheless, European interests in Africa and their capabilities to sustain their intensive intervention grew weaker and they were gradually substituted in many sectors by the US and the new actors, which started to act with more strength in the continent by the end of the 20th century. The United States and its companies were very successful in taking over much of the strong trade relations once conducted by Europeans. The largest colonialist empire in Africa was owned by the United Kingdom 12 . Initially, English interests towards the region were not of territorial domination, but the increase in trade; such goal was gradually enlarged because of the traders’ lobby and the fear towards the French empire (SHIH-TSUNG, 1998). The British obtained a lot from extracting natural resources from their colonies, even after the end of the British formal rule over its African territories. During the post-colonial period, the UK used the Commonwealth of Nations to maintain its influence over the continent. However, British interest in Africa gradually faded, as its power declined and it had to concentrate on other elements to keep its status as a world power. The main British company in Africa, which was an important element in UK’s foreign policy formulation, was the mining sector Lonrho 13 . Additionally, two of the world’s “supermajor” oil exploration companies are British: the BP plc (formerly British Petroleum) and the Royal Dutch Shell plc (also Dutch). These companies profited a lot from the British possessions in Africa, as some of these colonies detained and still detain some of the largest

12 Its African possessions went from South Africa to Egypt and from Somaliland to Sierra Leone. The British imperialism towards the African continent started around the end of the 18th century, with the occupation of the formerly Dutch Cape colony. 13 London and Rhodesian Mining and Land Corporation Limited, nowadays Lonmin plc, producer platinum group metals.

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UFRGSMUN 2012 oil reserves in the continent, such as Nigeria and Sudan (and recently South Sudan). Nowadays, the United Kingdom imports around 25.9% of its precious stones from African mines (or 17.8% of African exports of these products), and 8.7% of its oil from African reserves (INTERNATIONAL TRADE CENTRE). Its main African trade partners are, besides Algeria, the former colonies of South Africa, Botswana, Nigeria, and Egypt. The French imperialism was also really strong in Africa, having conquered a huge part of Western Africa and islands in the Indic Ocean. The African French colonies were the main colonial system for France, as its territories in Indochina were gradually lost 14 . Therefore, the French deployed a very intense strategy for the continent, so as to ensure control over the territory and the exploration of natural resources by French companies, competing intensively with the United Kingdom. The last African country to obtain independence from French rule was Comoros in 1975 – the French still control the Mayotte Island. The Francophonie was the French post-colonial way of maintaining its ties to the African continent, this being the most comprehensive Western initiative in that direction (CLAPHAM, 1996). Through the Francophonie, France managed to include former Belgian colony DR Congo into its area of influence. The French oil company Elf, which later merged into the French oil “supermajor” Total, got very good conditions for the exploration of oil in African territory. Currently, France imports around 18.2% of its oil imports from Africa, having as main commercial partners Algeria, Nigeria, Tunisia, and Morocco (INTERNATIONAL TRADE CENTRE). Portugal was the first Western European national State to establish a stronger contact with the African continent during the Age of Great Navigations, as aforementioned. The decline of the Portuguese power, however, did not allow it to conquer a greater portion of the African continent. Despite that, Portuguese colonies in Africa cannot be disregard, as two of them, Angola and Mozambique, were the stage of some of the most violent conflicts in the post-colonial period. Almost all Portuguese colonies became independent from the metropole in 1975. However, this independence came only through armed conflict, as Portugal did not detain the tools to deploy a neocolonialist strategy towards its former colonies (CLAPHAM, 1996). Even after the armed fight with the former metropole, the Portuguese colonies still have some level of contact with Portugal. Portugal kept the intense trade with Angola, which, together with Algeria and Nigeria, is one of the main Portuguese commercial partners in Africa. This trade is intensively based on the import of oil, which represents approximately 35.5% of all Portuguese oil imports (INTERNATIONAL TRADE CENTRE).

14 France first started spreading its influence and creating trade relations with Africa in 1624, establishing trading posts in Senegal.

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The German participation in the dispute for African colonies was delayed by the formation of its national State. Together with the French, the Germans summoned the Berlin Conference in order to consolidate some of its conquests and try to expand its colonies (SHIH-TSUNG, 1998). The first German colonies were conquered by the Prussians in the Ghana, Benin region in the end of the 17 th century. Later, the current territories of Namibia, Tanzania, Burundi, Rwanda, Cameroon, and Togo came under German rule. Nonetheless, all colonies were lost after the German defeat in the First World War. However, Germany still trades with Africa, mainly South Africa and Nigeria, with greater importance for the import of oil, accounting for 8.2% of German oil imports, and precious stones, representing 9.2% of the country’s import from the sector (INTERNATIONAL TRADE CENTRE). Other European countries also conquered African regions and developed some extractive activities, and still contribute to this sector, either through the national extractive companies they installed during the colonial period or by buying the products originated from these activities. Through French encouragement, the European Commission signed agreements – like the Lomé Convention – with former African colonies in order to create special conditions for the import of natural resources and other products from one continent to the other (CLAPHAM, 1996). The Dutch had some possessions in West Africa, in what is now Ghana and Mauritania, but ended losing or selling them to either the British or the French. Besides, they were the first to occupy the territory of current South Africa, but were also expelled from there by the British. The bi-national “supermajor” oil company Royal Dutch Shell plc has its headquarters in The Hague. The Netherlands still imports a great deal of oil from Africa, approximately 8.9% of its total oil imports, mainly from Nigeria and Algeria (INTERNATIONAL TRADE CENTRE). Belgium, for its part, colonized the Democratic Republic of the Congo in the 19 th century, later taking Burundi and Rwanda from Germany during the First World War. The colonization process was based on the exploration of ivory and rubber (VISENTINI, 2012). The Congolese independence came in 1960, while Rwanda and Burundi became independent in 1962. Since then, Belgium lost a lot of its influence over these countries and was gradually replaced by France and the United States. The Belgian trade with Africa was sensitively reduced; still, 7.7% of Belgium’s precious stones imports come from Africa (INTERNATIONAL TRADE CENTRE). Spain and Italy also had some colonies in the African continent: Spain dominated the territories of Equatorial Guinea and Western Sahara, keeping them until the independence of the first in 1968 and the conquest of the second by Morocco in 1975; Italy conquered Libya, Eritrea, and part of Somalia, losing all of them after its defeat in World War II. Both countries

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UFRGSMUN 2012 still maintain a great deal of trade relations with the continent, mainly of oil. Their oil purchases from Africa represent a great deal from their total oil purchases, Spain – 29.7% –, and Italy – 24.7% –, and from the African total oil sales, Spain – 7.2% –, and, Italy – 8.5%. Italy maintains strong trade relations with former colony Libya and Algeria; while Spain trades mostly with Morocco, Algeria, and Nigeria (INTERNATIONAL TRADE CENTRE). Additionally, during the 19 th century, the Ottoman Empire conquered the Northern part of Africa, but gradually lost it to European powers. The pattern of domination, however, was different from the European, as the extractive sector was not the main goal of the Ottomans. The dynamics through which the world superpowers started their intervention in the African continent were not based in the extractive sector. Being concerned with the global dynamics, they did not pay much attention to this continent, as its location was not strategic to any of them. The United States used to see Africa as secured by the maintenance of European influence and intervention through the post-colonialist practices. In that sense, the fast increase in American intervention is closely related to the Soviet challenge to the status of the continent, helping movements that wanted to undermine some regimes supported by European powers (CLAPHAM, 1996). The United States had almost unrestrained access to Africa – facing only some resistance from the French –, but few US companies maintained strong interests in the African extractive sector in the mid 20 th century, not pushing the American government towards a stronger economic policy for the continent. However, the oil sector already showed some level of American initiative, as the Gulf Oil – later merged into Chevron Corporation – was already involved in the Angolan civil war. Gradually, many other US companies started getting involved with the extractive sector in Africa. In the oil industry, the other two US oil and gas “supermajors”, ExxonMobil Corporation and ConocoPhillips Company, also started exploring petroleum in the continent. The increasing private interest led to a greater US insertion in Africa in order to ensure the accomplishment of the companies’ goals (GARY; KARL, 2003). The portion of US oil imports sold by African countries has been growing recently; in 2011 it represented 16.6% of the total, while representing 23.9% of the total oil exports from the continent to the world. Meanwhile, the African precious stones sector exported 6.5% of US total imports of these products, accounting for 12.2% of the African total precious stones’ exports (INTERNATIONAL TRADE CENTRE). US main African trade partners are Nigeria, Algeria, Angola, and South Africa.

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2.6.2. Emerging actors The African continent has been experimenting a new period of international competition. Especially after the turn of the millennium, the high growth rates of a group of developing countries has propelled them to seek new markets and sources of natural resources to fuel that growth. Africa is rich in natural resources, has a growing middle class, and many investment opportunities, all incentives to greater cooperation. Emerging countries also seek a place in world politics compatible with their growing economic strength, pushing for changes towards a multilateral world, such as the implementation of a new economic order and the reform of the United Nations Security Council. As Visentini (2010) points out, it is desirable for emerging countries that their allies in Africa be strong, since status is more important than quantity in the strategy of establishing a strong bloc of developing countries to push for changes in the international order. Although emerging countries frequently deal with limited resources and internal development problems of their own, they have been seeking to provide African states with aid within their capacities. The amount of aid donated by emerging economies is hard to measure, since it is decentralized and much of it does not fit in the traditional description of developmental assistance, being associated with economic agreements – such as export credits, natural-resource backed lines of credit, and hybrid credits (HUGON, 2010; AfDB, OECD, UNDP, UNECA, 2011). In the extractive industries, it is important to point out that the resources for infrastructure deals are very beneficial to African countries, especially if one considers the high levels of corruption frequently found in this sector. The resource revenues paid from the foreign investor to the government go directly into improving the country’s infrastructure, avoiding embezzlement – as it is clear in a popular saying in Congo: “you can't put a highway in your Swiss bank account” (LEE, 2010). China is leading these mixed forms of aid and investments, and the other Asian emerging countries also adopted similar models, while Brazil presents a more conventional method (AfDB, OECD, UNDP, UNECA, 2011). Despite the difficulties in measurement, it is clear that the bulk of emerging countries’ assistance to Africa is rising fast and is directed mainly to infrastructure construction, agriculture, and human resources. According to the African Economic Outlook, developed countries focus in institution building and governance, while emerging economies concentrate their aid in human resources, infrastructure and “other structural bottlenecks” (AfDB, OECD, UNDP, UNECA, 2011, p.108). The economic results of this phenomenon are seen when trade and investment figures over the last years are analyzed. According to 2009 data, the traditional partners still have the largest share of African trade, 63.5%, while the emerging countries have a 6.5% participation.

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However, the difference is rapidly diminishing: in 2000, the percentage of African trade corresponding to each group of countries was 77% and 23%, respectively. As seen in the figure below, China is Africa’s main trade partner among the emerging countri es, followed by India, Korea, Brazil, and Turkey. Regarding foreign direct investment (FDI), traditional partners were the source of 83.3% of the total received by Africa in the period between 2005 and 2010, while emerging partners invested 10.2%. But agai n, if compared with data from five years before, it is clear the presence of developing countries is growing (AfDB, OECD, UNDP, UNECA, 2011). The African Economic Outlook (AfDB, OECD, UNDP, UNECA, 2011) also stresses that focusing only on FDI can be mislea ding, since investment from emerging countries has generally other forms. In terms of destination of the investments, in the first ten years of this century about three quarters of incoming FDI in Africa were directed to oil exporting countries. It is impo rtant to observe that if only OECD countries are considered the number rises to 85%, showing that, despite also focusing on resource -rich countries, developing countries have a more diversified investment pattern.

Source: AfDB, OECD, UNDP, UNECA, 2011, p.103

With regards to extractive industries, the progress of these developing economies has affected the global commodities market in a way beneficial to Africa. The sharp increase in the demand of minerals, oil and gas - mainly due to China’s and Indi a’s growth - has risen world prices, increasing natural resources revenues and enabling the exploration of more technically difficult locations (WB, 2011a). World Bank’s predictions point out that the global metals demand will grow faster than global GDP through 2015, and energy demand is likely to rise by 55 percent until 2030. 80 percent of this increase will be in fast -growing developing countries l ike China and India (WB, 2011a, p.14).

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According to the World Bank (2011a), the extractive industries have gone from a buyers market to a sellers market, leading to the review of contracts in several countries, including the DRC, Tanzania, Guinea, Zimbabwe, Sierra Leone, Madagascar, and Guinea. It also raises African economic stability, since the 2008 global crisis could have affected more harshly the resource-exporting countries if it were not for the growing demand of emerging markets. In the oil sector, the Organization for Economic Cooperation and Development (OECD) member countries have reduced their demand growth rate, while the total demand raised mostly due Asia Pacific imports (BP, 2012). The emerging markets kept with the high medium growth of 6%, while developed countries’ growth is around 2%; without better conjectures in the future, the high prices in commodity markets will continue to be maintained due to developing economies’ growing demand (WB, 2011a). Oil demand from emerging countries used to represent 25% of the global demand back in 1970, while in the last years it represented about 50% (WB, 2011a). The presence of the emerging countries also undermines Western efforts to exclude countries named “pariah states” from the global economy. Having to face well established Western competition in the continent, it is clear to understand why Africa’s new partners see in those countries left aside by the traditional powers a great opportunity to engage in business negotiations (AfDB, OECD, UNDP, UNECA, 2011). It is the case of Sudan and Zimbabwe: both turned to the East when faced with Western sanctions, and these relations – especially with China – were essential to maintain the governments of Omar al-Bashir and Robert Mugabe in power. This has led to much criticism that the developing countries were undermining Western efforts to oblige these African regimes to comply with human rights, a position which can be considered hypocritical due to the traditional powers past of supporting undemocratic governments in the continent and elsewhere. China is by far the most prominent emerging partner in Africa. In 2009, China became Africa’s biggest trade partner, a position previously occupied by the United States (KERMELIOTIS, 2009). China-Africa relations date back to the 1950s and, with the end of the Cold War, China’s growth accelerated and economic relations with Africa had a sharp rise. China is still a developing country, but with deep pockets, willing to take even projects that the West refused to. Its emergence as a global political power is strongly supported by cooperation among developing countries, and its close links to Africa are a main part of that strategy. The strategic reasoning of China’s presence in Africa affects its economic dynamic since the majority of the Chinese companies are state-owned or closely assisted by the government, allowing them to operate with very low profit rates and increasing competitiveness.

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Oil is the second most important energy source to the country, and the high dependence on imports leads China to seek diversification from the Middle East to new petroleum producing countries, especially in Africa – in 2009, 76% of the country’s direct investment in Africa were directed to the 19 countries rich in oil or mineral resources (AfDB, OECD, UNDP, UNECA, 2011). The continent provides 24% of Chinese oil imports, mainly from Angola (EIA, 2012). Regarding mineral exploration, China’s main base metals consumption climbed 16% each year since 2000 (WB, 2011a). Over the years, it also became the largest consumer of bauxite, iron ore, coal, cooper, nickel, and others. The fast rise in demand has boosted China presence into Africa to assure the necessary resources to sustain its growth are provided. African-Indian relations have historical roots; however, a special Indian policy towards the African continent was only established after the subcontinent’s independence in 1947. This policy was based on the fight against colonialism and racism through the UN and other international bodies. It was through the cooperation of India’s first Prime Minister, Jawaharlal Nehru, and two African chiefs of state, Egypt’s and Ghana’s presidents, Gamal Abdel Nasser and Kwame Nkrumah, together with Tito (Yugoslavia) and Sukarno (Indonesia), that the Non-Alignment Movement was created. However, as India faced some regional and internal problems in the beginning of its independent period, creating a stronger policy towards Africa was not an option. It is only during Indira Gandhi’s mandate 15 that India reinitiated stronger relations with Africa, creating development projects in the continent and looking for natural resources, mainly oil, to fuel its economic growth (VIEIRA, SPOHR, 2011). In 2010, 70.5% of India’s imports from Africa were composed by oil, which accounted for 20% of its total oil imports from the world. The second most imported goods from Africa were precious stones, representing 6.4% of India’s total precious stones imports. India’s main African trade partners are Nigeria, South Africa, Angola, and Algeria (INTERNATIONAL TRADE CENTRE). The connections between Brazil and Africa date back to when the slave trade created permanent bonds between the two regions. Nevertheless, throughout time, this relationship has seen phases of proximity and distancing according to government projects and changes on the international scene. A phase of greater proximity started during the government of President Luiz Inácio Lula da Silva (2003-2010), when the number of Brazilian embassies in the continent more than doubled. According to an article written by the then Minister of Foreign Affairs, Celso Amorim, this strengthening of relations is a “political, moral and historical obligation”, being Brazil the second largest black nation in the world (AMORIM, 2003). The Brazilian interest in Africa is focused on Angola and other Portuguese-speaking

15 Indira Gandhi was India’s Prime-Minister between 1966-1977 and 1980-1984.

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Exploring new possibilities. Treasuring the past. countries, where the language facilitates doing business, and in South Africa. Also, Brazilian companies have important investments in Northern Africa countries (IGLESIAS; COSTA, 2011) and Nigeria. Brazilian investments are mostly directed to extractive industries and the construction sector, besides several diversified small and medium enterprises established in the country. Even as an oil producer and having recently discovered major petroleum reserves, Brazilian refining capacity is focused on light oils when it produces heavy ones, meaning there is always the need to import the first type (IGLESIAS; COSTA, 2011). The state-owned oil company Petrobras has been increasing its presence in Africa – in Angola, although it was present in the country even during the civil war, Petrobras increased substantially its participation since 2006, when it started to participate in oil exploration and production (VILAS-BÔAS, 2011). Moreover, the mining company Vale S.A. has also been investing heavily in Africa, especially in South Africa and Angola, and with prospects of new projects coming soon in Guinea, Zambia, and RDC. Vale’s most important investment in the continent, the Moatize coal mine in Mozambique, has started full production last year (IGLESIAS; COSTA, 2011). The joint venture of construction companies Odebrecht and Camargo Corrêa formed a partnership with Vale to the construction of Moatize, not only limited to the mine and processing plant but also including road infrastructure and building of a village to the expropriated families (VILAS-BÔAS, 2011). Turkey has traditionally been a partner to North African States, due to cultural and religious ties that date back to the Ottoman Empire, while keeping distant relations with Sub- Saharan Africa. Since 1998, though, with the Opening up to Africa Plan, this scenario has changed and Turkey has been seeking to improve relations with the whole continent (ÖZKAN, 2011). The “Year of Africa” (2005) was a mark in this new phase of Turkish- African relations due to the visit of Prime Minister Recep Tayyip Erdo ğan to Africa, “the first visit of a Turkish Prime Minister below the equatorial line in the country’s history” (ÖZKAN, 2011, p. 121). Last Year, Turkey’s Prime Minister and a businessmen delegation visited Egypt, Tunisia, and Lybia to reaffirm cooperation and to close new investment deals that can be highly beneficial to help the economic reconstruction of these countries after the “Arab Spring” (THE NATIONAL, 2011). Turkey targets Africa as a market for its products – between 2003 and 2011, the imports from Africa grew 163%, while Turkish exports were increased by 390%. The main trade partners in the continent are still northern countries, added to South Africa and Nigeria. Extractive sector products are among the most imported ones (TURKEY’S MINISTRY OF ECONOMY, 2012). During the Cold War, the Soviet Union occupied a primary role in the continent’s foreign relations. These close ties were severely damaged with the fall of the Soviet Union in

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1991, and in the following years there were cuts in diplomatic personnel and closing of nine embassies and three consulates in the continent (FIDAN; ARAS, 2010). After a period of introspection, Russia is recovering both economic and politically, a move which is expressed through greater involvement in global affairs and a revival of interest in Africa. There is a need for the country to relocate within the new power system and to face new problems, such as the competition with a rising China (HUGON, 2010). Despite having important mineral reserves, Russia has the need to import some minerals to supply its internal demand, and even some products that do exist in Russian territory – aluminum, cooper, nickel, uranium, and others – are shrinking and will not be enough to fulfill the country’s processing capacity (FIDAN; ARAS, 2010). Also, beyond internal needs, Russian companies seek to enjoy the investment opportunities in African extractive industries. To name examples, the companies Gazprom, Abrosa, and Rusoil are, respectively, involved in gas exploration in Nigeria, diamond extraction in Angola, and aluminium exploration in Nigeria and Guinea (HUGON, 2010). Other significant economic partners to Africa are intra-continental investors and the Asian countries of Thailand, Indonesia, and especially South Korea. South Korea has been an important aid donor to Africa, and it has a great interest in the continent’s extractive industries - the majority of Korean investment is directed to the sector, and natural resources compose most of African exports to the Asian country (KANG, 2011). Given intra-continental investment, South Africa is by far the biggest player, and companies take the expertise acquired in internal extractive industries to explore resources in other countries in Africa and in the world. Following South Africa, the biggest African investors are located in the North – Libya, Egypt, Tunisia, and Morocco – but the recent political turbulences in the first three countries have caused a shrinking in investment that will be felt in the rest of the continent (AfDB, OECD, UNDP, UNECA, 2011). Even though there are clear imbalances of capabilities between developing countries and besides the inevitable competition for natural resources, Africa is a place of numerous opportunities and there is space for all of these emerging countries to engage with the continent.

3. PREVIOUS INTERNATIONAL ACTION 3.1. African Development Bank (AfDB) The African Development Bank (AfDB) was created in 1963 with the main task of supporting the social and economic development of African countries through financing and policy advice. Its resources come currently from 53 regional member countries and 24 non- African countries. Among several areas of action, the AfDB finances mineral exploration

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Exploring new possibilities. Treasuring the past. operations. Lately, the Bank has become highly active in mainstreaming extractive industry governance by supporting institutional reforms in the sector. While the AfDB shares the idea that revenues from the extractive industries are an important source of economic growth and social development, it recognizes that the lack of transparency in the management of these resources has often led to conflict, corruption and poverty in Africa (AfDB, 2012). According to the African Development Report 2007, elaborated by the AfDB, few countries in Africa have managed their natural resources in ways that have benefited the majority of their populations, with the exception of mainly Botswana, Namibia and South Africa. In most of the other countries, natural resource wealth ended up in the hands of a few, causing state fragility—Sierra Leone, Democratic Republic of Congo (DRC) and Angola are examples (AfDB, 2007). As a way to alter this unequal scenario and improve the extractive sector governance, the funding decisions of the AfDB, among other criteria, are based on expectations that the supported projects are development oriented. The fairness (mainly regarding the distribution of resource rents) of the concession signed between the private investors and governments is one of the criteria used in deciding in favor of a loan (AfDB, 2012b). In 2006, the AfDB became an endorser of the Extractive Industries Transparency Initiative (EITI). Since then, the Bank has encouraged resource rich countries to adhere to the initiative. To those that lack the human, financial and institutional capacities for its implementation, the Bank provides technical and financial assistance. To date, the Bank has contributed to the achievement of EITI candidacy status of three countries—namely the Central African Republic, Liberia and Madagascar—and it is assisting others in implementing the initiative. These include Liberia, Sierra Leone, Chad, Togo, Guinea Conakry and Madagascar. With the Bank’s support, Liberia became the first African country and the second country in the world to be classified as EITI compliant (AfDB, 2012). In 2009, the AfDB launched the Africa Legal Support Facility, a technical advisory agency that assists member countries to negotiate complex extractive resource contracts. By providing legal assistance services, the Bank aims to create an environment with modern regulatory frameworks for the extractive resource sector (AfDB, 2012c). Nevertheless, countries still have a long way to go. According to a 2012 AfDB’s report, governments have provided overly generous concessions to foreign mining companies, mainly through taxes exemptions, and they have also failed to ensure transparency and accountability in the management of resource rents, violating their own mineral codes (AfDB, 2012b).

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3.2. World Bank (WB) The World Bank recognizes the existence of the “resource curse” patterns in most resource rich African countries, and believes that the main challenge is to guarantee that the extractive industry revenues generate economic growth leading to diversification, and ultimately to poverty alleviation. Since the resources are finite, it is necessary to transform the natural capital into human capital and infrastructure. The key is to achieve sustainable development, not only in an environmental sense but in also to maximize extractive industries’ profits by creating a chain effect that boosts the growth of other economic sectors. That is, “[i]n terms of extractive industries, the point is not ‘sustainable mining’ or a ‘sustainable oil industry’: the objective is sustainable development of human societies, communities, and environments” (SALIM, 2003, p.4). In order to achieve that, the WB works with governments, private enterprises, and civil society. In the 1990’s, the WB started to base its policies on stimulating private investment by providing a secure environment to mitigate the high risks involved in most developing countries’ extractive sectors. The Bank assisted governments to implement investment- friendly reforms, including privatizing state enterprises (SALIM, 2003). But, as the first Extractive Industries Review Report (SALIM, 2003) pointed out, these policies alone were not guaranteeing significant results on poverty alleviation and environmental preservation. Since then, the Bank has enhanced its social and environmental projects. Another significant change since the 2003’s report is the regional focus. Between 1994 and 2001, World Bank’s lending on the extractive industries sector was mainly directed to the Former Soviet Union countries and to Eastern Europe, while Africa only received 16% of the investments (SALIM, 2003). Nowadays, this pattern has changed, and Sub-Saharan Africa is the main benefited area, receiving 32% of extractive industry financing, while the Middle East (including North Africa) is the third region in volume of lending, with 23% of the total (WORLD BANK 2011a). The WB has provided lending to extractive industry projects of more than 20 African countries. The extractive industry sector of the WB is managed by the Oil, Gas, and Mining Policy and Operations Unit (SEGOM). SEGOM provides loans, technical assistance, policy expertise, and other mechanisms to more than 70 countries, most of them from Sub-Saharan Africa. In 2009, SEGOM created the Extractive Industries Technical Advisory Facility (EI- TAF), to provide urgent assistance to transactions in the extractive industries sector (WORLD BANK, 2011a). A government can ask for EI-TAF assistance when negotiating an exploration contract, for example. Another interesting field of work of SEGOM is on the relation between Extractive Industries and Gender, since impacts provoked by natural

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Exploring new possibilities. Treasuring the past. resource exploration affect men and women differently. The WB believes that one of the main causes of the resource curse is poor governance, and consequently it became the largest donor to projects that address this problem in the extractive industries. Accordingly to an African Development Bank’s survey, the WB’s donations to the sector represent 70% of the total (AFDB, 2009). The Governance for Extractive Industries (GEI), a program of the World Bank Institute, was formed to address that issue, by connecting stakeholders to monitor agreements in oil, gas and mining, resulting in more transparent and responsible contracts – in Ghana, thanks to the efforts of GEI, oil contracts have already been made public (WB, 2012). To improve governance in resource- rich countries, the WB also engages in international partnerships, such as the Petroleum Governance Initiative (PGI), created in collaboration with the Norwegian government (WORLD BANK, 2011a); the “GOXI” platform, a space in which those involved in extractive industries can exchange experience; and the Extractive Industries Transparency Initiative, that will be discussed on another topic. The WB also works with small and medium size enterprises engaged directly in the extractive sector or that may be included on the supplier chain to these industries. The main goal is to maximize the positive effects of resource exploration for the regional communities. The Communities and Artisanal & Small-Scale Mining (CASM) initiative is an important part of this strategy. Another of the WB’s concerns is the social and the environmental damages that the exploration can cause. The Bank provides advising and assistance both to private companies and to governments to assess previously the possible impacts of the enterprise and develop plans to mitigate them (SALIM, 2003). Also, the World Bank is part of the international program Global Gas Flaring Reduction Partnership (GGFR), which seeks to reduce this highly polluting practice. Recently, the WB launched the Extractives for Development initiative (E4D), that aims to be a platform between government, civil society and non-governmental organizations to share knowledge regarding the four “D’s” of the extractive industry process: discovery, development, depletion and distribution (WB, 2012b). The sharing of expertise aims to make resource management more effective and directed towards the main goal of the WB, poverty reduction.

3.3. Publish What You Pay Campaign (PWYP) “A Crude Awakening”, Global Witness’ report about the plundering of oil in Angola published in 1999, called on companies to “publish what you pay”. Three years later, the Publish What You Pay Campaign was launched internationally by joint efforts of Global

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Witness and other five non-governmental organizations. Today, over 650 organizations in more than 30 countries have joined the initiative (PWYP, 2011). These organizations pressure governments and companies to participate on the initiative, besides promoting discussions within the society about turning extractive industries’ revenues into development. To companies, the disclosure of what they pay is a way to escape liability from complicity of governments’ bad revenue management. The PWYP’s goal is to increase transparency in the extractive sector, in order to empower civil society and improve its participation in a country’s decision making, by holding governments accountable on how natural resources revenues are spent. That is, PWYP initiative is made by and to civil society, based on the idea that a country’s natural wealth belongs to the population, and not to a small elite. Initially, the campaign started to call for companies to publish what they pay and for governments to publish what they earn in revenues. These goals were later expanded to the disclosure of contracts. Also, the PWYP highlights the importance on international financial institutions – such as the World Bank – to demand transparency when lending to extractive industries projects. PWYP’s main office is established in London, but the bulk of its activities are focused in Africa, where countries’ development seems to have suffered the most due to lack of governments’ accountability in the extractive sector. The initiative is present in 27 African countries, and the continent has its only full-time regional coordinator located in Accra, Ghana. As for the publication of extractive industries’ contracts, already six African governments – Democratic Republic of Congo, Ghana, Guinea, Liberia, Niger and Sierra Leone – have accomplished it so far (PWYP, 2011).

3.4 Extractive Industries Transparency Initiative (EITI) In 2002, British Prime Minister Tony Blair announced the creation of the Extractive Industries Transparency Initiative (EITI), at the World Summit for Sustainable Development, and in the next year the project was launched. Having as its ultimate goal the fight against corruption, seen as a main obstacle to development, the EITI has been created to promote transparency and to stimulate the debate between governments, companies, and civil society. The Publish What You Pay Campaign (PWYP) has strongly supported the EITI initiative – PWYP has representatives on the EITI International Board, where it helps shaping the global standards of EITI’s rules and policies (PWYP, 2011). The World Bank formally supports the EITI since December 2003, mainly by administering a multi-donor trust fund (MDTF), which assists those countries in the process of implementing the EITI trough grants and technical assistance (WORLD BANK, 2011b).

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The World Bank has provided technical assistance to the implementation of the EITI in several countries. It also contributes to the enhancement of civil society participation and to the improvement of the International EITI Secretariat, where the Bank is an observer on the Board. There are seven African countries already compliant with the initiative, with the most advance program being in Nigeria, and other 14 candidate African countries in the process of compliance. However, there are many obstacles that the program still has to overcome, especially those of compliance by both governments and companies and the participation of civil society. Being the EITI a voluntary initiative, there are no mechanisms to punish non- compliant governments, and there is a strong necessity of legislation to enforce the collaboration of companies in releasing information. Also, the EITI website is the primary mean for the disclosure of the information, which is not efficient in many African countries where the majority of the population does not have access to the Internet. Most of all, transparency does not necessarily mean accountability, since there were no measures to search for missing oil and funds in Nigeria (OCHEJE, 2006), and since it does not guarantee a true participation of the society in countries where there are restrictions to the freedom of expression. These are the challenges the World Bank must address to improve the effectiveness of the EITI.

3.5. Kimberley Process (KP) The Kimberley Process (KP) is a 2002 initiative to fight the trade of illegal diamonds that finances conflict. It was a result of years of negotiation following the United Nations General Assembly resolution of 2000 that endorsed the creation of such a program (KP, 2012a) as a response to the critical African problem of “blood diamonds” - an issue that has mainly harmed Angola, the Democratic Republic of Congo, Liberia and Sierra Leone. The KP works by a Certification Scheme: after the completion of several requirements, including commitment to transparency, the rough diamonds receive the certification needed to enter the legal international diamond trade (KP, 2012a). That assures buyers that they are not helping to finance rebels groups. Currently, there are 51 members (77 countries) of the KP - 19 of which are African countries - representing 99.8% of world’s rough diamonds production (KP, 2012a). Furthermore, the initiative also includes the participation of the diamond industry, trough the World Diamond Council, and of civil society organizations. Accordingly to KP’s website, there are estimates that conflict diamonds currently represent 1% of total world trade, a large advance from the 15% of the 1990’s (KP, 2012a). But, although it exempted diamond companies from liability on civil conflicts – saving their

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UFRGSMUN 2012 reputation - and cleared buyers’ consciences, the KP as it is now is not enough to solve the many problems caused by decades of conflict over diamonds. Bad work conditions, environmental problems, and violence still are present in diamond mines in countries like Sierra Leone and Zimbabwe. Besides the illegal trade still existing, these persistent problems are partially caused by what’s pointed by many as the main flaw of KP: it only recognizes as conflict diamonds the gemstones that finance rebel groups, excluding from the definition those that finance corrupt and authoritarian governments involved in civil conflict (BIERI & WADDELL, 2012). The KP is generally recognized as a very successful program, but in order to address the still existing problems and improve the initiative’s effectiveness, it will be necessary to monitor social and environmental problems and to approach human rights in a broader sense, considering not only violations made by rebels but also those practiced by some governments.

3.6. United Nations (UN) The United Nations is a multilateral cooperation organization founded in 1945 after World War II by 51 states, and currently has 193 members. The organization has within its scope a wide range of subjects to be addressed and coordinated on a global basis as a way to promote friendly relations among nations, comprising areas such as peace and security, human rights, sustainable development, to name a few. The United Nations acts more in a global basis than in regional ones, and yet one can see initiatives from regional organs and groups of nations within the UN structure to coordinate policies and strategies toward issues of their interest. Related to extractive industries in the African regional sphere, in 2002 the World Summit on Sustainable Development (WSSD), held in Johannesburg (South Africa), debated about benefits that can derive from mining activities to sustainable development. The Summit introduced a paragraph in the Johannesburg Political Declaration and Plan of Implementation (JPOI) about extractive industries, ensuring the importance that the mineral exploitation has on modern living patterns, as for the economic and social developments of many countries. The paragraph states the importance of analyzing the mutual impact of decisions taken in each part of the cycle from mining to mineral processing and obtaining of pure metals, and the importance of enhancing the benefits that derive from mining to the workers’ health and safety, of diminishing environmental impacts, of promoting the participation of indigenous people and women in mining activities, and integrating a wide range of different actors (both public and private ones) in the sector. The document states that providing financial, technical

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Exploring new possibilities. Treasuring the past. and capacity-building support to developing countries is essential to foster sustainable mining practices (UNITED NATIONS, 2004). Deriving from the discussions initiated in the World Summit for Sustainable Development, a “Big Table”, composed of ministers and senior officials from 11 mineral-rich African countries and representatives of the African Union, under the auspices of the United Nations Economic Commission for Africa (UNECA) and the African Mining Partnership, along with representatives of the African Development Bank, the United Nations Commission for Trade and Development (UNCTAD), and the United Nations Industrial Development Organization (UNIDO), met in February 2007 to address the theme “Managing Africa’s Natural Resources for Growth and Poverty Reduction”. In 2008, as a result of the 2007 meeting, the African Union Conference of Ministers Responsible for Mineral Resources Development was held in Addis Ababa, where the Addis Ababa Declaration on the Development and Management of Africa’s Mineral Resources was adopted. This declaration reaffirmed the countries’ “commitment to prudent, transparent and efficient development and management of Africa’s mineral resources to meet the Millennium Development Goals, eradicate poverty and achieve rapid and broad-based sustainable socio- economic development”. To provide for these goals, the African Mining Vision was created in August 2008, as a coordinated program between UNECA and the African Development Bank (AFRICAN UNION, 2009). It aims to integrate the initiatives and efforts made at local, regional, continental and global levels to coordinate and foster the development of policy and regulatory frameworks related to mineral exploitation, willing to maximize its outcomes, and to increase its transparency. The Vision’s main objective is to provide information that promotes measures to spread the benefits and incomes from extractive industries to other spheres of the African economies, developing sustainable, modern and efficient mineral management systems and institutions, and providing for partnerships to come up (ECONOMIC COMISSION FOR AFRICA, 2011).

3.7. African Union (AU) The African Union is a continental organization launched in 2002 with the main purpose of promoting cooperation among the African countries. In 2008, ministers responsible for mineral resources gathered for the first time in Ethiopia. Their conference resulted in the African Mining Vision (AMV), which was later adopted by the AU during the 2009 summit of Heads of State. The AMV’s aim is to stimulate a “transparent, equitable and optimal exploitation of mineral resources”, in order “to underpin sustainable growth and socio-economic development” (AFRICAN UNION, 2009). It is considered that transforming

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UFRGSMUN 2012 the degrading situation of African resources exploration into a well-governed mining sector will improve the lives of workers and communities. Strengthened governance would enable nations to negotiate contracts with mining multinationals in better terms, foster a transparent and accountable extractive sector, and facilitate the integration of mining to industrial and trade policies. A better management of African resources would ultimately address the continent’s poverty (AFRICAN UNION, 2009). The African Mining Vision tries to stand out from previous initiatives. The idea that mineral resources could be used to catapult Africa towards modernization has been articulated in many strategies at national and regional levels, as in the Lagos Plan of Action, the SADC Mineral Sector Programme, the Mining Chapter of NEPAD, the Africa Mining Partnership, the ECOWAS Directive on the Mining Sector and the WAEMU Common Mining Policy. However, most of those plans were centered in building ambitious and grandiose projects, which were very capital intensive and dependent on foreign inputs (AFRICAN UNION, 2009). What the AMV proposes is a broad rethinking of the mining industry, one that includes educational skills, infrastructure needs, business environment conditions, local enterprises and regional integration. On December 2011, the second AU conference of ministers responsible for mineral resources took place in Ethiopia. At the time, the ministers established an action plan to implement the African Mining Vision. More than one hundred measures were proposed to be put in practice at national and regional levels, in a way to establish common standards on extractive industries. Following the idea of tackling several areas together, the action plan includes: renegotiating contracts to optimize revenues; developing systems to evaluate tax avoidance and evasion; developing the capacity of local communities to negotiate partnership agreements; enhancing the capacity of national geological institutions; strengthening continuing professional development; regularizing and upgrading artisanal and small-scale mining; facilitating technology transfer at sub regional level; resorting to the legislature to provide effective oversight over the mineral sector; ratifying and domesticating human rights conventions relevant to the mineral sector; developing mineral (and tax) law and policies that will encourage R&D; developing value addition strategies; and facilitating cross-border infrastructure investments. Indicators were also established to monitor the implementation of every suggested measure. The ambitious plan is supported by many partners, including the European Investment Bank, the World Bank, the African Development Bank, the United Nations, ONGs, national governments and private companies (AFRICAN UNION, 2011).

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4. BLOC POSITIONS The People's Democratic Republic of Algeria has the 3rd largest oil reserves (around 2% of the world’s reserves) and crude oil production in Africa and the 2nd largest natural gas reserves in the continent. The country is the largest natural gas producer in the continent (OPEC, 2012). In 2008, the oil industry made up more than 30% of its gross domestic product. The government and international companies dominate the oil sector. Aside from hydrocarbons, Algeria produces iron, steel, gold, silver, and other industrial minerals. Metal and mineral industries are growing at a large pace (in 2008 they grew 9,8%). Recently, the government is negotiating joint ventures with international mining companies to explore its metals, in an attempt to diversify the economy (TAIB, 2009). Brazil has a more diversified extractive industry, with both fossil fuels production and an important mining sector. That has allowed Brazilian companies to use their expertise abroad. As such, Petrobras and Vale have expanded their business in Africa recently and both companies are stakeholders to the Extractive Industries Transparency Initiative. Although, the country also has abundant natural resources to fulfill a great part of its needs, differences in refining capacity and oil quality still require Brazil to import such product. Canada is one of the world’s most active countries in the extractive field. It is among the top five countries in the production of uranium, aluminum, sulfur, cobalt ore, nickel ore, gem-quality diamond and platinum-group metals (PGM) ore. Canadian companies that explore in other countries account for a significant percentage of the world’s solid mineral exploration budgets (USGS, 2011). In the area of fossil fuels, Canada is a large producer and exporter of oil and natural gas. In 2011, the government created the Canadian International Institute for Extractive Industries and Development, with the main purpose of giving assistance to the extractive sectors of developing countries (CANADA, 2012). Chile also has one of the most notable extractive industries of the world, especially on the mining sector. All copper mines and companies were nationalized in the decade of 1970, but a growing private sector has been allowed in the last decades. Frequent tensions between labor unions and companies (including the state-owned CODELCO) have led to massive strikes due to alleged bad working conditions (SINGH, 2010). Nevertheless, Chile is considered a good investment opportunity by the Fraser Institute and could be pointed out as an example to African countries. According to the Fraser Institute, transparency and governmental policy are majors factors contributing to this evaluation (FRASER INSTITUTE, 2011). Furthermore, there are efforts to implement social responsibility on the mining sector (CONSEJO MINERO DE CHILE, 2004). The high growth of Asian economies has motivated their search for natural resources.

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This growth is being led by China , currently the largest energy consumer in the world (EIA, 2012b), which seeks to diversify its oil sources and to guarantee it has the minerals necessary for its industrial development, mainly by mining investments in Africa. But, despite being indeed a net importer of resources, China is also rich in many of them, and has an important internal extractive industry. The country is the largest coal producer and consumer and it also has oil and natural gas fields that supply part of the domestic demand – the intense exploration of these goods makes the production/reserves relation very high in comparison to other countries (EIA, 2012b). China is also rich in metallic and non-metallic minerals – the country has 171 varieties of mineral resources, of which 154 are explored (CHINA MINING, 2006). Even with an abundance of total resources, China has relatively scarce resources if compared to the size of the population, and is facing rising demand due to sharp economic growth – these issues demand a cautious mineral sector development strategy and a search for sources of supply in other parts of the world. The Democratic Republic of Congo has large reserves of gold, diamonds and major non-ferrous metals. The mining sector responds for about 12,1% of the gross domestic product, and is entirely directed for foreign markets (AFRICAN ECONOMIC OUTLOOK, 2012a). In ten years, the mining sector is expected to respond for about 20%-25% of the gross domestic product. About 90% of the mineral production in DRC is made with artisanal and small scale processes, a segment that employs more than 10 million people in the country, and presents many problems, such as the lack of health, safety, and environment protection, the exploitation of vulnerable populations, and conflicting relations between artisans and large- scale mines. Previously, the mineral production was dominated by state-owned companies, which are now bankrupt. Besides the attempt of restructuring these companies, the government faces many challenges. Over the past ten years, after a war that involved many States and groups in the region, the government has tried to rebuild political and administrative systems, and has to fight the many dysfunctions it presents, basically related to a culture of corruption and impunity involving officials and politics (WORLD BANK, 2008). France has a historical participation in the extractive sector in Africa. With a very low oil and gas production, the French depend on foreign markets to supply their energetic needs (EIA, 2012e). One of the world’s oil “supermajors” is French, Total SA, exploring some important African oil reserves. French oil imports from Africa account for 18.3% of its total imports from the world (INTERNATIONAL TRADE CENTRE). The French government recognizes the problem the lack of transparency and good governance might create when natural resources extraction reaches higher levels. Civil conflicts and reduced living conditions for local citizens are just some of these problems. The French Republic defends the

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Exploring new possibilities. Treasuring the past. urgent need of construction of infrastructure and of transparency policies for the African continent (FRANCE DIPLOMATIE, 2012). The very limited oil production in Germany does not meet the national oil demand, making it necessary for the country to find energetic resources elsewhere. The trade of extractive industry products between Germany and African countries is intense, both of oil and precious stones (INTERNATIONAL TRADE CENTRE). Germany is concerned about the social and political impacts the extraction of mineral resources from African countries has been promoting. The Germans are seized on the matter of promoting transparency and ending illegal extraction and trade in order to help to bring peace to conflictive regions, such as Sierra Leone and Liberia (FEDERAL FOREIGN OFFICE, 2011). India has experienced an accelerated growth recently. The extraction of natural resources from its own soil does not suffice this growth’s needs. Therefore, it requires that India import them from other regions in the world. The historical cooperation between the African continent and India has, thus, recently been broadened so as to include an increase in the trade between the two. India’s oil imports from Africa represent 20% of its total (INTERNATIONAL TRADE CENTRE). India has always been a strong defender of African social and economic development and of the use of its natural resources to achieve such goals. In that sense, the Indian government has already promoted important programs, exporting its development model and its technology to Africa in order to improve the conditions in the continent for their development (VIEIRA; SPOHR, 2011). Although Israel is significantly dependent on foreign oil and coal as sources of energy, most of its energetic imports come from ex-Soviet republics. Its most significant relations with extractive industries in Africa are related to its large diamond industry, as Israel is one of the major global hubs for the cutting and polishing of diamonds, done in the so called “Diamond District” in Tel Aviv. Israel is a member of the Kimberley Process, having been its vice-chair in 2009, and its chair in 2010 (AMI, 2010). Japan ’s extractive industry is characterized by small-scale mining operations and high- value-added mineral and metal processing activities (USGS, 2012). The country depends on trade to fulfill most of its needs for fossil fuels and minerals. It is the world's largest importer of LNG, second largest importer of coal and the third largest net importer of oil (EIA, 2012f). Japan Oil, Gas and Metals National Corporation, a state-owned company responsible for ensuring stable supplies of mineral resources, finances overseas activities performed by national companies, gives technical assistance and seeks technology development with foreign partnerships (JOGMEC, 2012). The Republic of Korea has sought to expand its presence in Africa, seeking new

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UFRGSMUN 2012 markets to which to export, based on the Korean export oriented development model, but also increasing its imports of African natural resources. However, the ROK has also stimulated development based on natural resources to promote sustainable and stable development, for instance, being a member of the Kimberley Process. Furthermore, the ROK has developed the Korea-Africa Economic Cooperation (KOAFEC) Action Plan. Of particular note was the 2009-2010 Action Plan, which established as its goals the development of infrastructure and the usage of natural resources to achieve sustainable and environmentally responsible economic development, with extensive consultations with African countries in order to provide financing to projects in an effective manner (LAGERKVIST; JONSSON, 2011). Libya ’s civil war in 2011, which took the dictatorial government of Muammar Gaddafi out of power and replaced it with a National Transitional Council, mainly disrupted the economy, and represented a great opportunity for social and economic reforms. Libya’s gross domestic product contracted 41.8% in 2011 with the cuts in oil and gas production and the freezing of the country’s assets by the international community. Nevertheless, it is expected to grow 20.1% in 2012 and 9.3% in 2013, as the country resumes its oil and gas production. In 2010 the mining sector (essentially composed of gas and oil production) represented 64% of real gross domestic product (AFRICAN ECONOMIC OUTLOOK, 2012b). In 2009 Libya had the 4th biggest oil production in Africa and the largest oil reserves in the continent (OPEC, 2012). The oil sector has been crucial for Norway ’s economy for more than forty years. In 2010, it represented 21% of the national GDP. The country is also among the top producers and exporters of natural gas (EITI, 2011). Norwegian environmental regulation on oil and gas activities could serve as an example to African countries. In order to diminish environmental damages, the Climate and Pollution Agency has limited the amount of pollutants the sector is allowed to produce, at the same time stimulating technological development. During the 1990s, the country established the zero-discharge-goal to new installations to avoid the discharge of oil on the sea – the same measure was adopted a few years later for older exploration sites (OIL, 2012). Norway is a leading country in the Extractive Industries Transparency Initiative (EITI). It was involved in the formulation of the program and it was the first Western nation to fully implement its principles, releasing its first EITI report in 2010. The EITI International Secretariat is based in Oslo. Poland has relatively little contact with African extractive industries. It is noteworthy, however, that it has a growing extractive sector, and focuses on sustainable practices and modernization of its mining, besides having recently approved legislation focusing on increasing health and safety conditions for miners, in addition to enhancing management and

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Exploring new possibilities. Treasuring the past. focusing on greater environmental protection (NORTON ROSE, 2011). Therefore, Poland can propose itself as a model for sustainable growth of extractive sectors, taking into consideration that Poland has maintained fairly elevated growth rates despite the economic crisis (PALARSKI, 2007). Poland is also represented in the Kimberley Process through the European Union representative. Because of its lack of oil reserves, Portugal must import a lot of oil from other countries, since it consumes around 259,760 barrels/day (EIA, 2012g). 35.6% of this imported oil comes from African countries (INTERNATIONAL TRADE CENTRE). The Portuguese have historical ties with oil producing Angola, among other former colonies. Being part of the European Union, Portugal also defends measures to eradicate poverty and giving the resource- rich countries the tools to turn these natural resources into sources of sustainable development, promoting social justice (EUROPEAN UNION, 2012). Russia ’s economic comeback has propelled the country to look for extractive resources abroad. Despite being rich in oil, gas, and minerals, Russia still has the need to import natural resources to fuel its refining and industrial capacity. Africa is an important element in that strategy. As such, African gas could be used by Russia to supply Europe, an alternative to internally produced gas (HUGON, 2010). Commercial relations between the Kingdom of Saudi Arabia and Africa have never been very intense, with the proportion Saudi imports from Africa among overall Saudi imports usually not being over 2% (SABB, 2001). Saudi Arabia’s connection to African extractive industries is mostly related to its links with OPEC’s African members (Nigeria, Libya, Algeria and Angola). Saudi Arabia also tends to increase its influence in Africa through its connection to Muslim African States, both financing religious institutions and promoting development through institutions such as the Islamic Development Bank (HUGON, 2010). South Africa is one of the leading countries in the world in terms of extractive industries. The country has the largest reserves of manganese and platinum group metals in the world, and large reserves of gold, diamonds, chromite ore, coal, vanadium and rare earths (BAARTJES, 2011). In 2010, the mineral industry accounted for 8,6% of the gross domestic product, and mineral products accounted for 48% of the country’s exports. Historically, the gold and diamond mines - South Africa’s most important mineral products - are dominated by large-scale producers. Therefore, the government is creating programs so that historically disadvantaged South Africans can join in mining ventures, an initiative inserted in its Broad- Based Black Economic Empowerment Plan (KEARNEY, 2012).

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The Republic of the Sudan was one of the biggest states in Africa, but in 2011 its southern region became independent, after decades of civil war. Suddenly, with the secession, oil revenues, which responded for half of the government revenues, decreased abruptly, as around 75% of the productive fields became part of the new state. Although most of the productive fields are now part of South Sudan, the entire pipeline, refining, and export infrastructure is in Sudan, so even if both countries are politically independent, economically they remain greatly interdependent. With contentions over the fees for the use of the pipelines and for export transit, South Sudan is now trying to make agreements with Kenya and Ethiopia to build pipelines through both countries, and therefore reduce its dependence on the Sudanese infrastructure. Sudan and South Sudan still dispute over the Abyei area, an oil rich region which still belongs to Sudan. Chinese, Indian and Malaysian companies dominate Sudan’s oil sector (EIA, 2012c). Recently, to fight some of the fiscal problems caused by the secession, Sudan began trying to diversify the economy, investing in new sources of revenues such as gold mining, and implementing an austerity program (CIA, 2012). Aside from oil and gold, Sudan has large and unexploited reserves of silver, zinc, chromium, uranium, gypsum, mica, and other metals (MINERAL AND MINING SECTOR INVESTMENT AND BUSINESS GUIDE, 2011). Turkey is a country that links Asia with Europe and is very rich in minerals, mainly industrial. Nevertheless, the country is poor on oil and gas reserves, making imports a necessity. As such, Turkey’s main imports from Africa are related to the extractive industries sector. After initial approaches in 2005, the Turkey-Africa Cooperation Summit (2008) opened way to further developments on relations between the country and the African continent (MINISTRY OF FOREIGN AFFAIRS OF TURKEY, 2012). The production of oil in the United Kingdom is not enough to meet its needs, making it, therefore, necessary to obtain additional supplies of oil elsewhere. Historically the UK has been present in the African continent, having interest in the extractive industry both for minerals and oil. In 2011, its imports from African precious stones accounted for 25.9% of its total imports from these products from the whole world (INTERNATIONAL TRADE CENTRE). The UK Foreign and Commonwealth Office is extremely concerned with social and political consequences that the illegal extraction and non-transparent use of the resource revenues create in African countries. Illegal extraction and commercialization finance armed groups, bringing social instability and civil conflict. It bids British companies to follow many acts in order to ensure the compliance to international norms of respect to human rights and sustainable development principles (UK FOREIGN AND COMMONWEALTH OFFICE, 2012).

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The highly diversified economy of the United States has made minerals a fundamental part of its industrial system. The country is a top producer and importer of core metals and fossil fuels. It has one of the largest outputs of oil, natural gas, coal, gold and copper of the world. It also has a significant production of iron ore, zinc, lead, molybdenum and silver (U.S. DEPARTMENT OF COMMERCE, 2012). American companies of the extractive sector are among the richest in the world. Recent governmental actions aim to enhance transparency in the industry, in order to hold companies and governments more accountable for their actions. In 2011, the United States committed to implement the Extractive Industries Transparency Initiative. Moreover, the Dodd-Frank Act, signed into law in 2010, includes sections relating to “Conflict Minerals”, “Mine Safety Disclosures” and “Payments to Governments by Resource Extraction Issuers”. Every company directly involved in exploration, extraction, processing and exporting activities must comply with the new legislation (KPMG, 2012). Venezuela has a prominent extractive industry, focused in the area of fossil fuels which accounted for 30% of its GDP in 2010. Back in 2006, the Venezuelan government announced its will to enhance its relations with Africa, being the oil sector a major point to be explored (MORSBACH, 2006). Through the state-owned Petróleos de Venezuela S.A. (PDVSA), the government managed to establish a joint venture with PetroSA, a state-owned oil company from South Africa, which included the development of refineries in South Africa. Vietnam is fairly self reliant in several minerals, reducing its interests in the extraction of African resources. However, despite having significant oil reserves, Vietnam is dependent on the import of oil products, being incapable of refining all the oil it needs. In all, Africa corresponds to about 1.2% of Vietnamese imports, with the most important products of extractive industries imported being liquefied natural gas (mostly from Nigeria), copper, precious stones and metals, and wood (VIETNAM TRADE PROMOTION AGENCY, 2012). Vietnam is also a member of the Kimberley Process.

5. QUESTIONS TO PONDER 1) Which actions can the World Bank take to help resource rich countries to diversify their economies, avoiding the resource course? How can the profits of these industries be translated in promotion of development and poverty mitigation? 2) Considering the relations between conflict and natural resources, and considering that “successful development is the best protection against civil war” (BANNON; COLLIER, 2003, p. 7), what can we learn from previous civil wars to prevent new conflicts and to mitigate their negative effects trough improvements in the extractive industries?

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3) In which way can the World Bank help to improve the efficiency of EITI and other transparency initiatives in order to fight corruption in the extractive industries? Can the issue of governance be addressed by voluntary means, without interference in internal politics? 4) What measures can be taken to mitigate the social and environmental impacts of the extractive industries? What are the gender issues related to the extractive industries in Africa and how can they be addressed? 5) How can the World Bank help countries to plan environmental-friendly infrastructure building to boost extractive industries growth and improve the population’s life quality? 6) What are the international interests, both of companies and governments, in the extractive industries in Africa? Should these actors take responsibility in the consequences of their involvement in the sector?

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