Africa's Natural Resources in a Global Context
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Africa’s natural resources in a global context Raf Custers & Ken Matthysen 1 - Editorial Research & text: Raf Custers Additional research & text: Ken Matthysen Editing: Didier Verbruggen, Jeroen Cuvelier, Devin Cahill Photos: Raf Custers Layout: Anne Hullebroeck Antwerp, August 2009 Caption photo Front Page: : Katangese miners concentrating on their activities in a mineshaft (Photo IPIS). 11.11.11 CNCD UN COMBAT DE PLEINS DROITS With the support of Justice et Paix francophone de Belgique membre du Réseau Ressources Naturelles and CNCD-11.11.11. IPIS is member of the Fatal Transactions network. Through research, public awareness activities and advocacy work, the members of the network are dedicated to transform Fatal Transactions into Fair Transactions: Transac- tions that truly contribute to sustainable peace and reconstruction in Africa. The current European members of the network are IPIS (Belgium), Broederlijk Delen (Belgium), Niza/Action Aid (The Netherlands), IKV Pax Christi (The Nether- lands), Oxfam Novib (The Netherlands), Bonn International Centre for Conversion (Germany), Medico International (Germany) and Wroclaw University (Poland). For more information: www. fataltransactions.org 2 Executive summary While, on the one hand, it is widely acknowledged that Africa has great natural resource potential, on the other hand, one cannot but regret that the complex interplay between political and economic factors at the national and inter- national level appears to make it impossible to use a more substantial part of the revenues from the exploitation and trade of these resources for the promotion of the well-being of people at the grassroots level. This paper, which con- centrates on non-renewable natural resources, aims to disentangle some of the processes that explain the paradox between Africa’s natural wealth and its relatively limited level of economic development. It shows that the state of affairs in the resource sectors of most African countries is still to a large extent determined by external factors. Extrac- tive industries in Africa tend to be export-oriented and contribute disappointingly little to local development. The paper is divided into six chapters. The first chapter is dedicated to definitional issues and to the discussion of a number of applications of non-renewable natural resources. It is demonstrated that these resources are indeed of vital importance for the production of a wide variety of products, devices and instruments. The second chapter pays atten- tion to Africa’s position in the global economy. It is shown that, despite its natural wealth, the continent only plays a marginal role, not only in terms of production but also in terms of trade. An attempt is made to account for Africa’s marginality and vulnerability by looking at the most significant developments in the continent’s twentieth-century economic history. The third chapter zooms in on Africa’s energy, metallic and non-metallic minerals. It does not only discuss Africa’s production and consumption of these minerals, but it also makes a comparison with other producers and consumers across the globe. Chapter 4 contains a description of the outstanding expansion over the last years in the commodities sector and the mechanisms that explain this exceptional growth. The chapter provides a short assessment of how the financial crisis that arose in the US suddenly harmed the world economy. It also discusses how the global crisis affects the mining sector, specifically in Africa. Chapter 5 tries to answer the question whether we are witnessing a new scramble for Africa’s natural resources. An attempt will be made to portray the actions of some of the main players in Africa at the moment, including the EU, the US, and China. The chapter offers an analysis of some of the special interest groups, their involvement in shaping policy and the influence that the aforementioned countries hold in the mineral sector. Finally, chapter 6 looks at how African governments can develop resource policies that have a positive impact on their national economies. 3 Contents Executive summary 3 1. Definitions 7 1.1. Classification 7 1.2 Definitions 9 1.3 Applications 9 2. Africa in the world economy 11 2.1 Africa and global production 11 2.2 The Seventies: North against South 12 2.3 The Eighties and Nineties: Downturn 15 2.4 Recent evolution 17 2.5 Reaction to the economic crisis 18 3. Africa’s minerals 20 3.1 Energy minerals 21 3.2 Metallic minerals 26 3.3 Non-metallic/Industrial 32 4. Economic perspectives 33 4.1 Growth perspectives 33 4.2 Price boom because demand-supply relationship is under pressure 35 5. Political perspectives: The Race is On! 51 5.1 Western Europe 52 5.2 United States of America 57 5.3 East Asia 60 6. Natural Resources and Development 66 6.1 International Commodity Agreements 66 6.2 Mining Reviews 67 Annexes 70 Annex 1 - Applications 70 Annex 2 – Mineral Statistics 72 List of abbreviations 87 4 1. Introduction Africa’s development depends, to a large extent, on the rest of the world. Ample evidence of this can be found in news reports about economic evolutions on the continent. First, there was euphoria over the good prospects in the mining sector, then, there was concern about the impact of the global financial and economic crisis. Outside influences deter- mine the ups and downs of the African continent. It is also these influences that shape the initiatives of policy makers and other social actors. In today’s times of crisis, the complex web of international relationships imposes itself on Africa even stronger than before, defining the opportunities and limits for development. As a result of the increased and justified attention for issues of good governance and corruption on the African national level, there is a tendency to underplay the importance of processes on the international level. Yet, it should be empha- sized that Africa is a player in a global resource game. Due to its natural resources, it occupies a central position in the global political economy. This is what this paper is about. It describes the position of Africa’s natural resources in a global context. For reasons of clarity, it is important to emphasize that we will only discuss one particular type of natural resources, namely the non-renewable ones. As we will explain in chapter 1, non-renewable natural resources are mineral sub- stances that are won through mining and drilling, that is, through the activities of the so-called extractive industries. These minerals are of vital importance. They are used for the production of indispensable appliances as well as for the creation of new techniques. Africa occupies a marginal position in the global economy as a whole. When one compares the volume of Africa’s production and trade with that of other regions in the world - as we intend to do in chapter 2 - it becomes evident that the former is much smaller than the latter. This situation has come into existence during colonial times and has become worse ever since. The crisis of the 1970s was an important turning point in Africa’s economic history. From that moment on, the prices of raw materials remained at a low level. Developing crisis policies, rich countries in the North started focusing their attention on Asia, relegating Africa to the role of raw material supplier. Things appeared to change for the better around the end of the twentieth century. Suddenly, Africa’s figures of economic growth, trade and investment were showing an upward trend. However, during the last quarter of 2008, the global economic and financial crisis spread from the North to the South, forcing African governments to look for remedies and solutions, in consultation with their foreign partners. The global public opinion is convinced of the fact that Africa is lucky to have so many natural resources. Nevertheless, we will use chapter 3 to make a number of qualifying remarks about this wealth. Although oil, gas and metals are of strategic importance, they do not even account for 5% of the world production. The importance of Africa’s raw materi- als is also relative. While there may be substantial mineral reserves in Africa’s subsoil, in most cases, the heart of the extractive industries lies outside Africa. Though Africa is at the top as far as the production of diamonds, gold, cobalt and platinum is concerned, it is essential to bear in mind that most of these minerals are exported in their raw form to the Developed Economies and to the Emerging Economies. Africa is mainly a supplier of raw materials. African countries rich in raw materials try to generate revenues through exports. As a result of this, markets outside Africa determine the perspectives for Africa’s economic growth and devel- opment. Chapter 4 will show that these perspectives are not rosy. While, on the one hand, the economic evolution in the Emerging Economies in Asia (and especially in India and China) arouses one’s hopes that there will be a sustained and even an increased demand for raw materials in the near future, on the other hand, the mechanisms governing the global market in raw materials undermine the interests of countries producing them. In fact, the market in raw materials is characterized by cyclic movements and depends heavily on the law of offer and demand. In the past few years, the market witnessed a so-called ‘super-cycle’ with an unprecedented rise of raw material prices. However, to an increasing extent, economic power is concentrated in the hands of a limited number of mining and oil companies. The latter have used the profits of the recent resource boom to buy extractive companies on an unprecedented scale. This has given rise to the emergence of giant enterprises that impose their prices on their customers.