The Royal United Services Institute Whitehall Report 4-06
African Security, Commodities and Development
Contributors
Robert Bates, Paul Collier, David Hale, Jeffrey Herbst, Iqbal Jhazbhay, Patrick Mazimhaka, Greg Mills, Erik Solheim and Steve Stead
Edited by
Terence McNamee
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Cover captions (L to R): Congolese miners dig at a gold mine in Montgbawalu, Ituri district, eastern Democratic Republic of Congo. REUTERS. Orapa diamond mine, Botswana. Discovered in 1967, it provided the initial mineral base for Botswana’s development. Control room operations at Orapa mine. Botswana’s Jwaneng diamond mine. This single mine is reputed to be the richest in the world. A Nigerian soldier serving with the African Union forces in Sudan. REUTERS. Oil rig awaiting servicing in Cape Town’s harbour. Photo by Mike Hutchings/REUTERS. The views expressed in this report are those of the authors and do not necessarily reflect the views of RUSI or any other institution to which the authors are associated.
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iii iv Contents
Foreword vii Robert Bates
Preface ix Patrick Mazimhaka
Chapter 1 1 Security, Governance and Development: The Braided Strands of Future Prosperity in Africa Patrick Mazimhaka and Iqbal Jhazbhay
Chapter 2 6 African Security: What the Statistics Suggest Paul Collier
Chapter 3 13 The Rise of China and India: Implications for African Growth and Security David Hale
Chapter 4 22 The Petroleum Sector in Africa: Between global security, national interest and local governance? Erik Solheim
Chapter 5 28 Diamonds and Development Jeffrey Herbst and Greg Mills
Chapter 6 36 The Role of External Tools to Manage African Conflict Steve Stead
v vi Foreword Robert H Bates*
RUSI, in collaboration with the by Sierra Leone, Sudan, Congo and other Johannesburg-based Brenthurst Foundation, nations, conflicts over mineral rights and oil- have taken the important step of assembling fields mar the histories of countries blessed and publishing these excellent papers on the with natural resources. Erik Solheim high- relationship between Africa’s production of lights a second: the loss of political account- primary commodities, its security and its ability. If a group uses political power to seize development. the earnings from precious exports, then its In recent years, Africa has experienced fortunes no longer depend upon the will of an export boom. The sustained growth of those it governs. The elite can use its wealth the advanced industrial economies helps to to purchase the support of those inclined to explain the high level of demand for Africa’s oppose them or the weapons with which to imports. The rapid rise of that demand can repress them. Resource wealth does not better be accounted for by the rapid growth guarantee good governance. Indeed, history of Asian economies, and in particular the suggests that it can undermine it. massive economies of India and China. Not only does the past record caution The export boom has certainly been that resource wealth can endanger political good for economic growth in Africa. order and political liberty; ironically, the Whereas in the late twentieth century, record suggests that it can endanger econom- Africa’s economies exhibited low and some- ic welfare as well. Resource booms pose an times negative rates of economic growth, obvious threat to economic equality; those they recently have averaged 4.5 per cent or who benefit might not care to share their more. While not sufficient to ensure the wel- earnings with those poorly positioned to fare of Africa’s people, economic growth benefit from the bonanza. And even when may well be necessary. The change is certain- governments seek to spread the wealth, they ly welcome. may simply sew the seeds of further eco- Several factors will determine whether nomic challenges. Governments throughout the export booms will generate higher levels Africa treated the booms of the 1970s as if of welfare. To discern them we need only they were permanent rather than transitory. join the authors of these papers in observing Many invested in projects that could only pay how commodity exports have affected Africa off if economic conditions remained in the past. favourable; and at the end of the boom they As Patrick Mazimhaka and Iqbal were then left with a legacy of inefficient Jhazbhay note, too often ‘political power projects and loss-making firms. In addition, equals economic domination’ in Africa. From the expenditures triggered by the boom often this observation flow several points of cau- triggered the appreciation of the local cur- tion. As stressed by Paul Collier, one is that rency. The result then is the collapse of other people will fight for power in order to con- sources of exports. Thus the decline of cocoa trol the riches that now flow in. As evidenced and cotton exports from Nigeria, and maize
* Robert H Bates is Eaton Professor of the Science of Government at Harvard University.
vii Robert H Bates
exports from Zambia. mistake to base policy-making simply on a The question posed by these papers, desire to avoid the mistakes of the past! then, is whether these mistakes will be made Another difference marks this episode again. As pointed out by Mazimhaka and from previous ones: the emergence of China. Jhazbhay, not if governments can learn. China’s development will affect the history of Botswana, South Africa and Tanzania, they the twenty-first century, and nowhere more contend, demonstrate that governments can importantly than in Africa. Its economy avoid the mistakes that tend to bedevil exhibits a voracious appetite for energy resource-rich economies. At one point David and raw materials and the terms on which Hale seems to suggest that this resource it is prepared to secure them will shape boom may be unlike those of the last centu- Africa’s economic and political development. ry. The growth in demand does not merely China’s primary competitor for these reflect the impact of short-term fluctuations resources is the United States. Once again, in the economies of the West; it results as Africa’s resource wealth has placed it amidst well from the entrance of two massive new rivalries among the great powers. The economies into the ranks of the industrial manner in which they address each other world. As their incomes and population elsewhere in the world will affect the manner grow, then, so too will the demand for in which each comports itself in Africa. Africa’s projects. If this is valid, then the big The emergence of China introduces new mistake may be to treat this boom as transi- opportunities for Africa, new challenges and tory rather than permanent; it would be a new imponderables as well.
viii Preface
Diamonds and Africa’s Development: A Positive Correlation Patrick Mazimhaka*
Africa’s commodities, especially diamonds, unique regulatory public-private partnership: have a bad development reputation. But they the Kimberley Process. This diamond certifi- have also been given a bad rap. cation scheme cuts out all but a small frac- They are all too often judged as reasons tion of blood diamonds, just 0.2 per cent of behind and a fuel for conflict – articulated in overall African diamond trade – or $20 mil- the academic literature as the ‘greed versus lion – at last count. Now industry is again grievance’ argument. But this is a false leading the way in finding means to regulate dichotomy, misrepresenting their real value. the one million African artisanal diamond With the right ingredients of good gover- miners and ensuring a better price for their nance and careful leadership, commodities hard work through the Diamond have been a tremendous force for continental Development Initiative with the first pilot good. scheme due to be rolled out in Tanzania. Africa’s diamonds have had a positive And why should the Kimberley model impact on the economic development of key not be extended to other commodities producer countries, notably Botswana, including gold and rare metals, and particu- Namibia, South Africa and Tanzania. Yet, larly to Africa’s $200 billion yearly oil produc- anxious to find an explanation for conflicts in tion? This is not the only positive change in Liberia, Sierra Leone and, to some extent, the African diamond industry in the past the Congo, writers, film-makers and non- decade. Previously viewed as a monopoly, De governmental organizations continue to Beers is recognized today as being in compli- blame diamonds. As a result, the term ‘blood ance with the strict competition laws of the diamonds’ is now enshrined in the literature European Union and the US. The historical of such organizations and in our collective view of the diamond business operating on psyche. the fringes of legality benefiting a few at the Yet the negative association that gives expense of Africa’s citizens is a parody not in rise to this term could be applied to any com- line with the contemporary reality of modity that supports governments and non- increasingly widespread, mutually beneficial state actors involved in repression and vio- public-private partnerships. lence. Liberia and Sierra Leone may have The fortieth anniversary, this used diamond revenue to decimate their pop- September, of its independence reminds ulations but Rwanda did not use diamonds to Botswana of its exemplary record in this carry out its genocide. It relied on foreign aid regard. GDP per capita has increased from and loans. $70 in 1966 to $9,000 today. This increase Contrary to the widespread perception owes everything to the productive combina- of a business operating outside on the fringes tion of diamonds, governance and sound of the law, diamond producers have instead leadership. Botswana’s government has worked together with governments and non- moved positively in taking charge of dia- governmental organizations to establish a mond production by becoming an important
* Patrick Mazimhaka is the Deputy Chair of the African Union Commission. He writes in his personal capacity.
ix Patrick Mazimhaka
shareholder in De Beers, the world’s leading luminous resources for the benefit of their diamond producer. More than a commercial people. At the same time, regulatory mea- relationship, this is a symbol of what is possi- sures should be enforced to ensure that the ble when government and business co-oper- exploitation of one of Africa’s most precious ate in Africa over commodities. and valuable commodities is no longer per- A positive attitude towards the harvest- ceived as synonymous with the exploitation – ing of resources in Africa – especially or worse – of African people. diamonds – by the international community Recent G8 summits including those at is needed. Today’s African governments are Gleneagles and St Petersburg have focused more responsible and responsive towards on the emerging partnership between Africa their citizens; so NGOs and other advocacy and the international community, of a conti- groups should themselves adjust their view nent increasingly recognized for its reform of Africa lest they damage the very people efforts. The past of blood diamonds is behind they are trying to assist. Mineral-rich coun- us. We are instead looking forward to the tries including Angola, Botswana, Liberia, future, focusing on enhancing domestic cer- Namibia, Sierra Leone, South Africa and tification schemes, increasing the number of Tanzania should be encouraged to work with Africans employed in trading, polishing and the mining industry and other development cutting, and extending private-public regula- partners, including NGOs which are general- tory practices to other sectors. We would ly working for the development and the well- prefer it if all our friends in the international being of the people, in order to exploit such community looked in the same direction.
x Chapter 1
Security, Governance and Development: The Braided Strands of Future Prosperity in Africa Patrick Mazimhaka and Iqbal Jhazbhay
Patrick Mazimhaka is the Deputy Chair of the foothold in the global economy, the continent African Union Commission and formerly is a key target destination for Asian giants like Senior Presidential Advisor to the President of China and India in their quest for energy and Rwanda. He writes in his personal capacity. natural resources. Meanwhile, several factors Iqbal Jhazbhay teaches at the University of – weak states; proximity to the Middle East, South Africa, serves on the board of the South Asia and Europe; vast oil deposits; and Institute for Global Dialogue and is a member politically frustrated Muslim communities – of the African National Congress (ANC) are attracting Western military and intelli- Commission for Religious Affairs. gence activity as Africa becomes a point of increasing concern in the post-9/11 trans- national terrorism and global security Africa is at a pivotal juncture. In the past fif- environment. teen years, since the end of the Cold War, the If managed well, these new forms of continent has experienced rapid democrati- zation and steady integration. More and engagement could accelerate growth and more countries are forming governments on deepen stability across Africa. Handled poor- the basis of national elections, and peaceful, ly, however, Africa may once again find its constitutionally mandated succession is resource wealth exploited by distant foreign becoming the norm. Africa’s eight regional powers with little lasting benefit to its own economic communities, meanwhile, are economies and its security priorities overrun striving to create harmonized customs regu- by potentially destabilizing international latory regimes and effective, nimble peace- interests. In short, after an all-too-brief inter- keeping structures. Though imperfect, these val, Africa is once again the focus of compet- efforts reflect a shared vision among African ing international economic and security leaders to build a more prosperous future interests that do not necessarily reflect its based on collective security, political inclu- own priorities but nonetheless provide both sion and open, market-based economies. opportunities and risks. The immediate opportunities suggested Several questions thus arise: What is the by the end of the Cold War for greater stabil- relationship between security and develop- ity and self-determination in Africa, however, ment in Africa? How can African states man- were short-lived. As East/West proxy wars age their natural resources better in this new ebbed, they gave way to bitter ethnic strife and globalized context to improve its develop- new inter-state African conflicts, making the ment and security prospects? What can 1990s the continent’s bloodiest decade on Africa do on its own to improve growth and record. More ominously, the new century has security, and what forms of external engage- brought new forms of foreign economic and ment would best promote the interests of security intervention in Africa that will likely African reformers? Put differently, how can have long-term consequences. At a time when Africans maximize the opportunities and most African countries are struggling to get a minimize the risks of globalization and
1 Patrick Mazimhaka and Iqbal Jhazbhay
global security measures to strengthen states consistent exports (i.e., diamonds). and national economies? Mozambique remains a poor country but it has improved its economic growth through the effective use of foreign aid, which A Portrait of African Development accounts for roughly 60 per cent of gross There is an abiding tendency in the West to national income. In both cases, however, gov- lump all of Africa into a single classification, ernance is key: in the case of Botswana, to to speak of the continent as a single entity managing natural resources; in the case of rather than a collection of fifty-plus individ- Mozambique, to create the capacity to ual states with varying degrees of gover- absorb large aid infusions effectively. Natural nance, stability and economic performance. resources are not, as is sometimes cited, a While a few generalities are broadly true – problem to African development; on the con- Africa has the greatest number of weak trary, it is the absence of governance which is states; all of Africa is unlikely to reach the the problem. poverty-reduction targets of the UN With the right conditions of gover- Millennium Development Goals by 2015 – nance, natural resources are a tremendous these provide little credible guidance either development asset, as Tanzania has also for assessing levels of governance and devel- shown in the development of its own dia- opment or for identifying opportunities for mond businesses, or South Africa in its own engagement. Nor, strictly speaking, do dis- mineral industry, which has formed the back- creet economic indicators reliably indicate a bone of its modern industrialized economy. specific country’s overall condition or trajec- We should thus not look at natural resources tory. as a curse; far from it. The same nuanced At the start of this new century, Africa approach has to be taken with African states remains the least developed continent on the per se. globe. The average African, meanwhile, is poorer today than in 1970. Overall, the conti- nent attracts less than 1 per cent of global The Need for Differentiation foreign direct investment, and accounts for Indeed, far from the common impression, just 2 per cent of global trade, one-third of the evidence of the usefulness of natural the figure at independence. resources to development is mixed and not However, misery and decline are not uniformly negative. In the same way, we the universal standard in Africa. While sever- must caution against the overall external al African states persistently rank at the bot- view of Africa as one thing or another. It is tom of annual development indices, several not, just as not all European states are the other African states consistently chart the same. Governance, geography, political world’s highest economic growth rates. record and economic performance illustrate Botswana, for example, has maintained the degrees of difference between African – roughly 7 per cent economic growth for and European and Asian – states, and should three decades, while Mozambique, once shape external engagement and assistance perennially at the bottom of global rankings, strategies. now enjoys annual economic growth exceed- Based on annual World Bank indicators, ing 8 per cent. Behind these figures, however, Jeffrey Herbst has identified six categories of lie strikingly different economic profiles – African states according to their readiness to and, consequently, lessons both for local pol- engage in the global economy, ranging from icy and external engagement. Botswana is a high performers (characterized by high middle-income country and has maintained growth, foreign investment, strong exports its economic growth largely on the basis of and a thriving private sector) to countries in
2 Security, Governance and Development: The Braided Strands of Future Prosperity in Africa
collapse (characterized by poor governance, pute between Ethiopia and Eritrea, mean- low growth and failing institutions). Herbst while, reflects isolated historical causes concludes that ‘[c]ountries in the different rather than economic expansion. categories face very different growth Côte d’Ivoire, however, points to the prospects. It is only the countries in the first first of two primary security threats that we two categories (high performers or those in have to be on the watch for in Africa lest they an upward trajectory) that have the domestic recur in the coming decades: the battle for prerequisites to potentially take advantage of control of resources. Certainly, Côte d’Ivoire, the opportunities offered by the global econ- like the DRC, and further afield, the former omy.’1 Yugoslavia, reflects a post-authoritarian col- In other words, Africa in the twenty- lapse. But at its core, the enduring conflict in first century must be differentiated. African that West African state reflects a dynamic states are at widely varying degrees of gover- that is too prevalent in Africa: namely that nance and development. Importantly, several political power equals economic domination. have experienced significant changes of for- Despite the patient efforts of the UN- and tune. Some formerly stable and relatively AU-mandated work of President Thabo prosperous states, such as Zimbabwe and Mbeki to broker a peace settlement between Côte d’Ivoire, are now in economic and polit- the warring factions of Côte d’Ivoire, there is ical crisis. Others, such as Uganda and little incentive towards peace in a country Ghana, while among the stronger perform- where a clique controls the country’s prima- ers today, were failing states two decades ago. ry economic assets – cocoa and timber – and the revenues they generate. This underscores a fundamental chal- Twenty-First Century Security lenge to lasting security in Africa, particular- Challenges ly in the highly volatile oil-producing states in This century opened with four major African an age of increasing competition for access conflicts: the continent’s first multi-state war to Africa’s hydrocarbon reserves. As oil pro- in the Democratic Republic of the Congo ducers, oil-addicted Western states and rapid- (DRC), which involved at its peak six neigh- ly growing China and India shift more atten- bouring states and some twenty-one militia tion to the African west coast in an attempt groups; a cross-border territorial war to secure future energy supplies and cut their between Ethiopia and Eritrea; the reliance on the Middle East, political control civil/regional war of Sierra Leone and of those reserves – a recurrent driver of war, Liberia; and a civil war in Côte d’Ivoire. The corruption, factionalism and select misman- first three were probably anomalies. While agement in such countries as Angola, Nigeria spill-over conflicts remain an active risk in and Equatorial Guinea – will become ever both West Africa and the Horn, multi-state more contested. This indicates a long-term wars like the one in DRC – a predictable cause for potential destabilization in Africa as result of fragmentation, state collapse and well as an urgent need for transparency, good opportunism – are not a likely trend in governance and strong institutions at both Africa. Gradually, the regional economic the national and international levels. communities (particularly ECOWAS in West The second security threat in Africa Africa) and the African Union are building relates to the role of what the West calls strategic responses to these. The border dis- ‘ungoverned spaces’ in an age of transnation-
1 Jeffrey Herbst, ‘Africa and the Challenge of Globalization’, presented at the Conference of Globalization and Economic Success: Policy Option for Africa, 7–8 November 2005, and posted by the Brenthurst Foundation on www.brenthurstfoundation.org, p. 13.
3 Patrick Mazimhaka and Iqbal Jhazbhay
al terrorism. One of Washington’s initial con- routes. The second, and less understood, clusions after the 11 September 2001 terrorist problem is radicalization. Particularly in the attacks against the United States was to iden- Sahelian states – Mali, Niger, Mauritania and tify weak and failing states as a threat to Chad – remote Muslim populations are international security. Taliban-ruled potentially vulnerable to external influence, Afghanistan, after all, harboured Osama bin particularly if they feel either estranged from Laden and Al-Qa’ida. It was thus assumed or abandoned by their national governments. that once Kabul fell, Al-Qa’ida would seek to When hearts and minds are lost, recruits are relocate to another failed state – namely found – and these pose a threat not only to Somalia. That assumption has not held over distant Western governments or localized time, but there is growing evidence that fac- Western targets, but also to national govern- tors of state weakness are rendering Africa ments themselves. Tanzania knows only too vulnerable to exploitation by transnational well the cost of such trends, given the 1998 terrorists. Hence the emphasis on Al-Qa’ida bombings in Dar-es-Salaam and ‘ungoverned spaces’ in the Bush Nairobi, at that time the most devastating Administration’s 2006 National Security attacks by that organization. Strategy. The term applies to those remote areas within national boundaries that are beyond The Importance of Governance the reach and control of the government. The relationship between development and There may be several reasons for this: poor security in Africa should be evident from the infrastructure, insufficient financial above discussion.2 What both indicate, above resources, geography, legal deficiencies and all else, is the importance of strong, effective cultural or ethnic fragmentation. Whichever governance. Political stability is the vital req- of these, the inability of states to exercise uisite of economic growth and social coher- effective political, security and economic ence. The critical question, then, is this: control over remote regions – or, in some What specific institutions, policies and sys- cases, de facto decisions not to exercise con- tems are required to build more effective and trol – renders these zones open to exploita- sustained development and security from tion by a range of non-state actors: foreign within, and what forms of external engage- terrorists, foreign Islamic charities and orga- ment will do the most to support better gov- nized crime syndicates who smuggle every- ernance to ensure long-term economic sta- thing from pasta and cigarettes to drugs and bility and security in Africa? guns. Economic activity between these Starting on the basis of differentiating actors and local communities becomes the African states, foreign governments must pri- local articulation of the state’s inability or oritize states of regional institutions and decision not to provide for the basic needs of bodies, and develop engagement strategies its citizens. based on the particular circumstances and There are two probable consequences needs of specific states. Importantly, they to such interplay between these non-state must do so on the basis of shared priorities actors and local communities. The first is rather than Western-oriented agendas. States increasing criminality and destabilization of must be encouraged and supported to devel- marginal communities, particularly along op economic diversification strategies that borders and long-established smuggling reflect both their deficiencies as well as their
2 See also the article by Chris Landsberg on the link between development and security for a developmental state. ‘Toward a Developmental Foreign Policy? Challenges for South Africa’s Diplomacy in the Second Decade of Liberation’ in Social Research (Vol. 72, No. 3), available at
4 Security, Governance and Development: The Braided Strands of Future Prosperity in Africa
comparative advantages. Regulatory regimes wrest national economic assets and must be reformed to streamline the passage resources from party political control. of goods within states and across borders, ∑ Creating market conditions, removing minimize the time required to start-up or barriers to investment, improving the shut-down companies and harmonize labour skills base and branding the country. relations. Legal mechanisms must be put in What are the legal and political con- place to entrench property rights. straints to economic reform? How can Infrastructure – financial, physical and they be redressed? telecommunications – must be extended, ∑ Subordinating security strategies to modernized and integrated across borders. economic development plans. Secure While secure borders, effective, com- borders, effective police forces and munity-led police structures and national strong national armies are vital to sta- militaries are vital, the greater extension of bility, but extending the state’s reach the state must be in the provision of basic through the provision of key human human needs – health care, education, hous- needs – health care, housing, utilities, ing, food security and employment. This lat- food security, education and employ- ter point remains the Achilles’ heel even for ment – will provide a more certain Africa’s best economic performers. Both buffer against interference from lawless Botswana and South Africa, for instance, non-state actors. Eradicating political have jobless rates that persistently hover exclusion is vital to countering and pre- above 30 per cent. The most effective means venting radicalization. for coping with ‘ungoverned spaces’ – or, ∑ Identifying and protecting downstream rather, undergoverned and less-observed economic benefits. China’s demand for spaces – lies in removing the incentive for African resources is a particularly alliances of convenience between sometimes tempting form of quick cash. But at lawless non-state actors and local communi- what cost? Squandering long-term pro- ties. tection of natural resources for short- Other strategies for enhancing gover- term gain will undermine future com- nance, development and security in the cur- petitiveness and efforts to diversify. rent context in which Africa finds itself include: Africa has enjoyed few historical intervals ∑ Tying external engagement to effective when it has been free to pursue its own and transparent governance, and devel- course and develop at its own pace without oping strategies that address the speci- foreign exploitation and interference. The fic context and conditions of individual end of the Cold War should have provided states. Aid can only be truly effective if one such period, but the rise of China and the state has the capacity to absorb it. India, combined with the advent of transna- What are the political, legal and sys- tional terrorism, has once again made Africa temic obstacles to better governance the playground of competing interests. The and how can these be redressed rapidity of globalization, meanwhile, means through a combination of inputs and that Africa does not have the luxury of devel- incentives? oping at its own pace. ∑ Developing specific sector-by-sector Is an African renaissance possible? economic reform strategies that encour- Absolutely. Governance is key, not least to age diversification and, imperatively, make full use of natural resources.
5 Paul Collier
Chapter 2
African Security: What the Statistics Suggest Paul Collier
Professor Paul Collier is Director of the also studied the causes of coups, and the Centre for the Study of African Economies, determinants and effects of military spend- Department of Economics, Oxford University. ing. A full list of our recent research is pro- vided at the end of the paper. In combination this analysis has yielded new results that look Introduction to be important for policy towards enhancing Although Africa is currently largely at peace, African security. This short paper cannot violent challenges to regimes have been com- report these results in detail. Rather, it sum- mon. Civil wars and coups have been too fre- marizes our findings and draws out the likely quent to regard the present tranquillity as implications. likely to persist. Côte d’Ivoire, Sudan, Chad and Somalia all have active conflicts and the most recent successful coup was September Causes Revisited 2005 in Mauritania. Civil wars and coups are Civil wars and coups have multiple causes. costly. I estimate the cost of the typical civil However, an important distinction is war at around three times the country’s between the political events that ‘trigger’ vio- annual GDP, so that in a typical low-income lent conflict and the underlying factors that African country with a GDP of around $10- make the same event liable to trigger conflict 20 billion, the avoidance of war is worth in in one society but not in another. My work the range $30-60 billion. Coups inflict lower focuses exclusively on these underlying fac- costs. I find that the typical coup costs tors. This does not mean that I consider trig- around 7 per cent of annual GDP, or of the gering events to be unimportant. Clearly, a order of $1 billion. However, coups can society with a high degree of underlying become very costly since they increase the proneness to violent conflict would be wise risk of civil war: the current war and parti- to organize itself in such a way as to avoid tion in Côte d’Ivoire was the result of a coup. triggering events. I focus on underlying fac- What causes these civil wars and coups tors partly because these are in general more and what can be done to reduce their inci- amenable to being changed by external dence? Together with Anke Hoeffler, I have actors, albeit only slowly, and partly because studied this question statistically. In our the statistical techniques that I use are better published work1 we studied the period equipped to address this question. 1965–1999 and tried to establish which fac- The key distinguishing feature of a civil tors appeared to be systematically important war is that a large, non-government military in increasing risks. Recently, we have updated force – ‘the rebel army’ – challenges the army our study to include the period through to of the government. It is this phenomenon the end of 2004, and have taken the opportu- that must be understood if civil war is to be nity to improve the underlying data. We have explained. When I say this it is sometimes
1 Paul Collier and Anke Hoeffler, ‘Greed and Grievance in Civil War’, Oxford Economic Papers (Vol. 56, No. 4, October 2004).
6 African Security: What the Statistics Suggest
misunderstood: I am accused of ‘blaming the power. rebels’. This is a misunderstanding because Our key results from our previous work my point is not normative. Rather, all gov- on the causes of civil war continue to hold ernments possess armies on a continuous with the expanded data: the greater the basis, and even if this force is turned against country’s dependence upon the export of the civilian population it constitutes a primary commodities, the higher the risk of pogrom not a civil war. The defining feature conflict. The risk from primary commodities of a civil war is the formation of a rebel could arise through three distinct mecha- army. In understanding why a rebel army nisms, reflecting respectively greed, griev- forms in some situations but not in others, a ance and opportunity. The greed route from central distinction is between motive and primary commodity exports onto the risk of opportunity. For a rebel army to form there conflict is evident: this trade makes the cap- must be both. The phrase ‘greed and griev- ture of the state more valuable. In a brilliant ance’, with which I am associated, is a further paper Jeremy Weinstein2 has recently distinction between two broad groups of demonstrated that in countries in which such motivation. My own sense from having ana- exports are important, even if a rebellion lyzed the data is that motives have been starts off as idealistic, the process of rebel overemphasized relative to opportunities. recruitment will gradually shift it towards This is natural in that civil wars generate greed. Essentially, volunteers will be dispro- advocacy groups on each side concerned to portionately drawn from the ill-motivated justify behaviour, and justification is and the rebel leadership will not be able to inevitably based on motive. I would certainly keep them out. The gradual erosion of the not wish to claim that most rebel groups are Colombian rebel group FARC from a rural motivated predominantly by greed. Indeed, I protest movement into a drug barony is an suspect that coherent motivation is one of example of such a process. The grievance the first casualties of violent conflict. I tend route from primary commodity exports onto to think that in the rather rare circumstances risk is due to the greater detachment of gov- in which rebellion is feasible, it will occur, ernments from citizens: resource rents although the motivation of the rebellion, to reduce the need for governments to tax the extent that it can be established at all, citizens and it is taxation that has generally could be almost anything. For example, the provoked citizens into making government Lord’s Resistance Army in Uganda has a accountable. Globally, resource riches signifi- clearly expressed agenda of wishing to cantly reduce the extent to which govern- establish rule according to the Ten ments are subject to checks and balances.3 Commandments. Such organizations may be The opportunity route from primary com- better understood by analogy with the psy- modity exports onto risk is due to the chology of groups such as Jonestown and finances that rebel groups can get during Waco, with the violence turned outwards conflict. Rebellion is expensive and predation rather than inwards, than by reference to of the trade in primary commodities can conventional political movements. Coups help sustain it. There is some evidence for obviously differ from rebellions in not requir- each of these routes and since they are not ing material sustenance: a coup uses the gov- incompatible the safest inference is that they ernment’s own military spending to usurp are all of some importance. Increasing the
2 Jeremy Weinstein, ‘Resources and the Information Problem in Rebel Recruitment’, Journal of Conflict Resolution, (Vol. 49, No. 4, August 2005) 3 Paul Collier and Anke Hoeffler, ‘The Political Economy of Secession’, in Hurst Hannum and Eileen Babbitt (eds.) Negotiating Self-Determination, (Lanham, Lexington Books, 2005).
7 Paul Collier
accountability of governments for their Coups have a common core of risk fac- revenues from primary commodities, as tors with civil wars: low income and slow attempted by the Extractive Industries growth are both important risk factors. Transparency Initiative, would not only reduce There is also a powerful ‘coup trap’: one legitimate grievances but also reduce the coup increases the risk of further coups. incentive for the ill-motivated to capture the Unfortunately, aid seems to increase the risk state. Tracking the trade in commodities, as of a coup, possibly because taking over the attempted in the Kimberley Process, makes it state becomes more valuable. more difficult for rebel groups to sustain themselves. Recently some terrible African civil Military Spending wars have been settled. This is a product of In response to the high risk of civil war, careful diplomacy rather than a change in the African governments increase their military underlying risks. Indeed, the underlying risks spending. Spending is particularly high in are, if anything, getting more adverse. The post-conflict situations, partly because risks importance of primary commodity exports of further conflict are very high, but also to the region is evidently increasing. The rise because of inertia from the inherited high in the world prices of commodities directly spending during war. African military spend- increases the value of such exports, and this ing is also increased by emulation and rivalry in turn has induced new exploration: most among neighbours, and by aid: around 11 per notably, several African countries are in the cent of development aid inadvertently leaks process of becoming oil exporters. into military spending so that in Africa Africa is not only at risk due to its pri- around 40 per cent of spending is financed by mary commodity exports. We continue to aid.4 African governments respond to a high find that low income and slow growth are risk of coups in the same way as to a high risk both important risk factors: Africa is now the of rebellion: military spending is increased. poorest region in the world and despite Evidently, however, the motivation is likely improvement it still has low growth. We also to be different. Governments expand their find that Africa is exposed to civil war military in response to a risk of civil war in an because of the small population size of its attempt to deter, or at least to survive assault. typical countries. Although a small country is They increase military spending in response a little less prone to civil war than a large to high coup risk in order to buy off the mil- country, the effect is less than proportionate: itary lobby. These different motivations are a region divided into many countries has in turn likely to lead to different patterns of more civil war than if it were a single coun- military spending. For example, by the end of try. Ethnic diversity increases risk and Africa the coup-prone military rule in Nigeria, the is the most diverse region. Finally, we contin- navy had more admirals than ships. ue to find a powerful ‘conflict trap’. That is, What does this military spending do for once a country has had a civil war, the risk of security? The question is complicated further conflict increases sharply, fading because of the evident interdependence of gradually if the peace is maintained. Hence, military spending and the risk of a civil war. post-conflict situations are particularly risky, High risks cause high spending, and if this is and Africa’s very success in recently settling not taken into account causality can easily be many wars has elevated these post-conflict misinterpreted: high spending will appear to problems to the key issue in African security. cause high risk. Once this interdependence is
4 Paul Collier and Anke Hoeffler, ‘Unintended Consequences: Does Aid Promote Arms Races?’ Oxford Bulletin of Economics and Statistics (forthcoming).
8 African Security: What the Statistics Suggest
controlled for, we find that outside the con- conflict government inadvertently signal to text of post-conflict military spending by the the rest of society its likely intentions. High government does not have any discernable military spending unavoidably signals the effect on the risk of rebellion. That is, we intention to repress dissent if necessary. In cannot find a significant deterrence effect. turn, this strengthens those voices that This does not mean that there is no relation- oppose peace. The adverse effect of military ship, but it is consistent with the argument of spending suggests that it should normally be Fearon and Laitin5 that counter-insurgency is reduced very sharply in post-conflict situa- so difficult that most low-income countries tions. An example where this worked very lack the capacity to do it properly. As a result, well in Africa is Mozambique. Nevertheless, it provokes and this offsets any deterrence precisely because post-conflict risks are high, effect, so that it might create as many prob- it is difficult for governments to take this lems as it solves. Military spending buys off step. Are there alternative ways of bringing coup risk more effectively than it deters risks down? Together with Anke Hoeffler rebellion. For example, the successful coup in and Mans Soderbom I am currently trying to Côte d’Ivoire occurred after the president answer this question, looking at all post-con- had fobbed off a demand by a group of offi- flict periods globally. We find that one reli- cers for better conditions for the army. Coup able way of bringing risks down is economic risk is sufficiently high in Africa that the mil- growth. Aid and economic policy reform are itary is a two-edged sword, providing defence both atypically effective in augmenting from rebels but itself constituting a signifi- growth during the post-conflict decade, so cant threat. Military establishments appear to accelerated growth is certainly attainable. be running extortion rackets against their However, economic recovery evidently takes governments on a grand scale. This phenom- time; it is a matter of a decade not a couple enon is largely confined to Africa; elsewhere of years. coup risk is generally much lower and gov- Unfortunately, we do not find that par- ernments appear not to respond to these low ticular designs of political institutions signifi- risks by raising spending. cantly lower risks during this decade. It is not clear whether the appropriate Elections in post-conflict situations seem not conclusion from this is that the effectiveness to have very strong systematic effects, but to of the military needs to be increased, or the extent that they do have systematic whether military spending should simply be effects they are not notably helpful: risks fall reduced. Perhaps governments should rely in the year before an election but rise by an less on soldiers and more on police. equivalent amount after it. This suggests that pulling peacekeeping troops out just after an election, as is currently being debated for the Post-Conflict Risks DRC, is understandable but mistaken: the fall However, in the context of post-conflict we in risks in the approach to the election can find distinctively different results: military easily encourage peacekeepers that their spending by the government is significantly work is done, when actually it is merely a lull. counter-productive, increasing the risk of If risks are high, domestic military further conflict. Why should military spend- spending makes them worse, political design ing be so distinctively adverse in precisely the is ineffective and economic development is context in which civil war is most likely? One slow, this only leaves external peacekeeping. possibility is that the choices made by a post- We find clear statistical evidence that
5 James Fearon and David Laitin, ‘Ethnicity, Insurgency, and Civil War’, American Political Science Review, (Vol. 97, No. 1, March 2003).
9 Paul Collier
such peacekeeping is effective in containing financed by aid, the military guarantee there- risks. Given the very high costs of conflict,6 it fore indirectly enhances aid effectiveness. looks to be cost-effective, and there seems to Military and development assistance are be little choice but to try to make external complementary. peacekeeping work as well as possible. Potentially, external security guarantees Effective peacekeeping, as in Sierra Leone, is could be conditional upon governments a very cost-effective form of development maintaining military spending at a modest assistance. level. In most circumstances, such condition- ality is likely to be counter-productive, partly because it would be seen as illegitimate inter- Security Guarantees ference. Further, in normal circumstances The recent British experiment in a ten-year the conditionality is likely to be unnecessary: ‘over-the-horizon’ guarantee of military the government can recognize that the risk is intervention to maintain peace is potentially reduced and therefore will realize that it has a very important new policy instrument for less need of military spending. The circum- development and security. Although it is new stance in which conditionality seems to be and so cannot be directly evaluated, it revives advisable is post-conflict. Governments start a former policy of the government of with high spending, and forces of inertia will France. Until the mid-1990s, when French tend to make this persistent, especially since military intervention in Africa was rethought aid is generally scaled up very rapidly in these following Rwanda, France tended to provide situations. The government is unlikely to rec- implicit security guarantees to most of the ognize that its spending is counter-produc- governments of its former colonies. The tive. Hence, there is a strong case for making guarantees were made credible by the main- post-conflict peacekeeping missions and sub- tenance of large French military forces in sequent guarantees conditional upon deep several of these countries. Were these implic- cuts in military spending by the government. it undertakings effective in bringing risks The problem with such an approach – down? In our new work we find a dramatic and indeed with military guarantees more answer: the former French colonies had a risk generally – is the perceived illegitimacy of of civil war that was less than half what European military interventions in Africa. would have been expected given their other The growing perception of illegitimacy was characteristics. This massive reduction can- indeed probably the main reason why the not necessarily be attributed to the French government of France changed its stance, military guarantees; it might, for example, despite the resulting catastrophe in Côte reflect some deep aspect of French cultural d’Ivoire. France intervened to separate the influence. Nevertheless, the military inter- warring forces but not to put down the coup pretation is surely the most plausible. If so, which gradually spiralled into the civil war. the guarantee strategy looks to have been a How can external military intervention com- highly cost-effective development instru- bined with conditions on military spending ment. French military spending avoided be given sufficient legitimacy to make them much higher costs of civil war. credible? The strategy of military guarantees not I think that in post-conflict situations only reduces the risks of rebellion and coups, there may now be scope to use the new but as a result, it curtails government mili- Peace-Building Commission of the UN to set tary spending. Since much of this spending is standards. Because the Commission is new it
6 Paul Collier and Anke Hoeffler, ‘Conflict’, in Bjorn Lomborg (ed.), Global Crises, Global Solutions, (Cambridge: Cambridge University Press, 2004).
10 African Security: What the Statistics Suggest
is unclear how it will develop. However, it is ing public investment with their own money well-suited to be a standards-setting body. because of the fear of insecurity. Conversely, What is needed is not yet another agency to external military provision of security intervene in implementing international unmatched by direct support for develop- security and development efforts in post-con- ment will face the brute fact that low-income flict situations, but rather an authority that countries with slow growth are structurally at co-ordinates all implementing agencies risk: the provision would need to be perma- around a common and appropriate agenda. nent. Interdependence implies that success- Implementation and co-ordination are alter- ful intervention requires two distinct instru- natives: if the Peace-Building Commission ments: one providing security, the other sets itself up as an implementing agency it development. During the 1990s international will inevitably be seen as a rival by the other efforts for Africa were seriously unbalanced: implementing agencies and its efforts to co- security interventions became more com- ordinate will be frustrated. Co-ordination is mon, but they were largely short-term far easier if done by means of a few agreed responses to crises detached from develop- prior rules around a decade-length strategy, ment strategy. There were even budget rival- rather than reactive micro-management. ries between the aid lobby and the military Outside situations of post-conflict there lobby. International provision of security is may be scope to forge a partnership between an important complement to the more con- the African Union and the EU. The African ventional forms of assistance. Undoubtedly, Union, unlike its predecessor, the OAU, rou- the most cost-effective security provision, as tinely condemns attempts to change regimes long as it is credible, is a security guarantee. by violence. However, it lacks the hard power It would be ironic if the last disservice of to enforce its decisions – only in the case of colonialism was to preclude such guarantees the coup attempt in tiny São Tomé and through fears of ‘neo-colonialism’. Príncipe was it able to force the coup leaders to step down. The EU has the troops and logistics for intervention. It even has the References and research on which this paper is political will, having established an Africa based: Rapid Reaction Force. What it lacks is an ade- quate authorizing environment. An alliance Collier, P. and A. Hoeffler, 2004, Greed and Grievance in between the AU and the EU – with the for- Civil War, Oxford Economic Papers. mer authorizing intervention and the latter ______, 2004a, Conflict, in Global supplying the bulk of the troops and logistics Crises, Global Solutions, Cambridge University Press. for a joint force – has some compelling advantages. ______, 2004b, Aid, Policy, and Growth in Post-Conflict Societies. European Economic Review. Conclusion ______, 2005, Democracy and Africa needs security in order to develop, and Resource Rents, mimeo, Department of Economics, it needs development in order to be secure. Oxford University. This interdependence is liable to frustrate single-instrument external interventions. Aid ______, 2005a, Resource Rents, on its own will usually be insufficient to Governance and Conflict, Journal of Conflict Resolution. achieve security. Governments will continue ______, 2005, The Political to divert it into military spending that they Economy of Secession, in Negotiating Self-Determination, regard as essential for their security, and pri- Hannum, H. and E.F. Babbitt (eds)., Lanham, Lexington vate investors may be wary of complement- Books.
11 Paul Collier
______, 2006, Unintended Con- Handbook of Defense Economics, K. Hartley and T. Sandler sequences: Does Aid Promote Arms Races? Oxford (eds.). North Holland. Bulletin of Economics and Statistics. Collier, P, A. Hoeffler and M. Söderbom, 2004, On the ______, 2006a, Military Expen- Duration of Civil War, Journal of Peace Research. diture in Post-Conflict Societies, Economics of Governance. ______, 2006, Post-Conflict Risks, mimeo, Department of Economics, Oxford University. ______, 2006b, Grand Extortion: Coup Risk and Military Spending, mimeo, Department Weinstein, J., 2005, Resources and the Information of Economics, Oxford University. Problem in Rebel Recruitment, Journal of Conflict ______, 2006c, Civil War, in Resolution.
12 Chapter 3
The Rise of China and India: Implications for African Growth and Security David D. Hale
David Hale is a Chicago-based economist. He China’s while manufacturing is 27 per cent of is the founding chairman of Hale Advisors and the economy. As a result, India accounts for China Online. He is also a member of the only 2 per cent of global demand for copper, Academic Advisory Board of the Federal aluminium and nickel, compared to 23 per Reserve Bank of Chicago and the Hong Kong cent, 22 per cent and 16 per cent, respective- Monetary Authority. ly, for China. But with India now poised for several years of 6-8 per cent output growth, her demand for raw materials will also There has been a major change in the charac- increase and make her a more important fac- ter of the global commodity market since tor in global commodity markets. 2003 which could have profound implications Africa is well positioned for the new for both Africa’s security and economic posi- global commodity demand because it has a tion. During the past three years, there has large endowment of natural resources. been sustained appreciation of most industri- Africa has a treasure chest of raw materials al commodity prices because of booming which will give it a large share of the global demand from China and steadily increasing commodity production far into the future. demand from India. By 2004, China displaced South Africa alone has 88 per cent of global the US as the world’s leading consumer of platinum reserves, 72 per cent of chromium, most industrial metals and had displaced 80 per cent of manganese, 30 per cent of tita- Japan as the world’s second-largest consumer nium, 40 per cent of gold, 44 per cent of of oil. vanadium and 19 per cent of zircon. It also China has also emerged as an important has 10 per cent of the world’s coal, 10 per new player providing capital for natural cent of its uranium, 8 per cent of its nickel resource projects in developing countries as and 17 per cent of its fluorspar. Guinea has a diverse as Nigeria, Ecuador, Angola, Zambia, third of the world’s bauxite. Botswana has a Kazakhstan and Indonesia. The need for quarter of the world’s diamonds. Zimbabwe commodities is having a major impact on has 12 per cent of the world’s chromium as China’s foreign policy as well. Beijing is well as large platinum deposits. Niger is the attempting to negotiate free-trade agree- world’s third-largest supplier of uranium. ments with important commodity producing The former Belgian Congo has large deposits countries, including Australia, South Africa of copper, cobalt, gold and other raw materi- and Chile. China is also providing military als which have not even been measured. assistance to potentially important oil-sup- Africa is emerging as an important fac- plying countries such as Sudan and Nigeria. tor in the global oil market. At present, it is India is not yet a major factor in the producing 3.4 million barrels per day from commodity market because her manufactur- fields in Nigeria, Angola, Equatorial Guinea ing sector is much smaller. India’s industrial and Gabon. There is a 90 per cent probability output is worth only about 10 per cent of that production could exceed 5.3 barrels by
13 David D. Hale
2010, a 50 per cent probability it could exceed high scores. The US state of Nevada had the 6.4 million barrels and a 10 per cent probabil- highest score in the survey with a grade of ity it could exceed 7.4 million barrels. The .90. Mali followed with a score of .86, Ghana dominant producers will continue to be ranked at .81, Botswana at .73 and Burkina Nigeria and Angola, but new production is Faso at .71. South Africa was in the middle coming from countries as diverse as Chad with a score of .57 followed by Tanzania at and Mauritania. The US has long depended .50. The low scores were Zimbabwe at .13, upon commodities from Africa. In 1950, the Democratic Republic of Congo at .25 and European colonies in Africa supplied the US Zambia at .27. with 82 per cent of its bauxite, 68 per cent of There was also a sharp divergence in its cobalt and 23 per cent of its manganese rankings for political stability. Among the ore. The US is now importing about 15 per respondents, 81 per cent said they would not cent of its oil from West Africa and this level invest in Zimbabwe because of political con- is expected to rise to 25 per cent during the ditions, compared to 71 per cent for the next few years. DRC, 17 per cent for Zambia, 13 per cent for In the past, Africa’s dependence upon Botswana and 7 per cent for South Africa. commodities was often regarded as a liability. Concerns about security reflected views The continent was vulnerable to large fluctu- about politics. Among the respondents, 73 ations in the price of copper, nickel, oil and per cent would not invest in Zimbabwe other raw materials. Some countries also suf- because of concerns about security, com- fered from declining output because their pared to 72 per cent in the DRC, 12 per cent governments nationalized the natural in Botswana and 7 per cent in South Africa. resource sector. In the former Belgian Infrastructure also ranked as a major con- Congo, copper output declined from a peak cern. One third of the respondents would of 500,000 tonnes in the mid-1980s to less not invest in Zimbabwe because of infra- than 50,000 tonnes by 1993 and has stayed at structure, compared to 45 per cent in the low levels until recently. General Mobuto DRC, 10 per cent in Tanzania, and only 4 per looted the mines for cash and did not provide cent in South Africa. capital for new investment. Zambian copper The Fraser survey makes it clear that production peaked at 700,000 tonnes in the global mining companies have distinct views mid-1970s and declined to less than 300,000 about Africa on the basis of national eco- tonnes by 2000. Output suffered from nomic policies. They are positive on newly Kenneth Kaunda’s decision to nationalize the emerging countries such as Mali because of mines and turn over management to political good policy while they have turned against appointees. Zimbabwe because of the collapse in the rule The Fraser Institute in Vancouver pub- of law there under President Mugabe. But lishes an annual survey of conditions in the the mining companies will gamble on even global mining industry. It examines, on a high-risk countries, such as the DRC, country basis, public policies that are impor- because the opportunities are now immense. tant to the mining industry. The survey is There are now projects getting underway in based on questionnaires to 1,435 exploration, the DRC which could boost copper output to developing and mining consulting companies 250,000-300,000 tonnes by 2009 unless some around the world. The companies participat- new political shock stops the investment. ing in the survey reported exploration spend- Zambia has also received an influx of new ing of $1.83 billion in 2005 compared to a capital from small mining companies and global total of $5.1 billion. could see copper output exceed the old highs In the survey of current mining poten- by 2010. tial, some African countries had relatively The rise of China as a major consumer
14 The Rise of China and India: Implications for African Growth and Security
of commodities has produced a significant new natural gas pipelines from Russia to price rally for many metal prices which could China. These projects could set the stage for endure for much longer than in previous Chinese companies to invest in the Russian global business cycles. In 2003, China dis- oil and gas sector. Chinese firms are also placed the US and Europe as the world’s actively looking for mining deposits. They largest consumer of most industrial raw took over a Zambian copper mine six years materials. China, for example, now con- ago and are now building a new smelter sumes 22 per cent of global copper output, there. Chinese companies are large investors compared to 16 per cent for the US. China in the Australian iron ore industry and have consumes 21 per cent of global aluminium plans to spend nearly $1 billion developing a output, compared to 20 per cent for the US. nickel mine in Papua New Guinea. China’s share of seaborne iron ore trade last China’s new role in the commodity year was over 30 per cent while China also market is going to have geopolitical conse- produced 40 per cent of the world’s cement. quences, not just economic ones. During the Despite China’s high level of metal demand, twentieth century, the need for commodities its per capita consumption of copper and alu- has often played a decisive role shaping minium is equal to only 20 per cent of US American and British foreign policy. When demand. These low per capita consumption the Royal Navy converted from coal to oil ratios suggest that as China develops further, during the first decade of the twentieth cen- her share of global raw metals consumption tury, Britain had a need for oil which encour- could rise to 30–35 per cent. aged her to obtain oil exploration leases in China displaced Japan last year as the Iran and the Mesopotamian provinces of world’s second-largest consumer of petrole- Turkey for the government-sponsored um. Chinese consumption will probably Anglo-Iranian Oil Company (now British exceed 7 million barrels per day this year and Petroleum). Britain also turned Kuwait into a nearly half of it will be imported, one quar- protectorate in order to guarantee her securi- ter from Africa. In 2015, China could be ty from Turkey. At the Versailles Peace importing over 10 million barrels per day of Conference in 1918, Britain then carved out oil. the protectorate of Iraq from the Ottoman As a result of China’s need for oil and Empire and dominated the country’s political other commodities, she is emerging as a system until the 1950s. The US formed an major investor in the natural resource sector alliance with Saudi Arabia in the 1940s to for the first time. Between 1990 and 2005, guarantee oil supplies. The US fought a war Chinese oil companies invested $7 billion in with Iraq twice in order to guarantee the foreign projects. In 2005, CNOOC launched safety of Middle Eastern oil. The US also an $18 billion takeover bid for Unocal in the maintained a good relationship with South US but Congress rejected the bid. Since the Africa during the apartheid era because of collapse of the Unocal bid, Chinese oil com- concern about the country’s raw materials. panies have made $12 billion of other invest- China is now also adjusting her foreign poli- ments in Kazakhstan, Syria, Ecuador and cy to reflect an increasing need for raw mate- Nigeria. In Syria, they announced a joint ven- rials. She is attempting to launch free-trade ture with the Indian national oil company. In agreements with South Africa, Chile, his recent visit to Nigeria, President Hu Australia, New Zealand and the Persian Gulf Jintao announced $4 billion of infrastructure countries to improve her access to raw mate- investment in return for China being given rials. President Hu Jintao recently toured attractive new offshore oil leases. During Africa to sign new deals for energy invest- April, President Putin of Russia visited ment. In early 2006, Angola displaced Saudi Beijing and announced plans to construct Arabia to become China’s leading oil
15 David D. Hale
supplier. China offered a large loan to Angola more bilateral co-operation, as well as meet- last year as an alternative to IMF borrowing. ings of foreign ministers, trade ministers and China is anxious to enhance its relationship experts on science and technology. In 2005, with Angola because of the country’s steadi- Sino-African trade reached US$37 billion, ly increasing oil output. compared to US$19 billion in 2003 and $10 An Angolan government minister billion in 2000. China now accounts for a recently told Reuters that as a result of China large share of the foreign trade of several winning many large construction contracts, African countries, including 68 per cent of he expects that 4 million Chinese could move Sudan’s exports, 36 per cent of Angola’s, 32 to the country during the next few years. It is per cent of Burkina Faso’s, 28 per cent of the difficult to imagine such a large-scale migra- Congo Republic, 20 per cent of Chad, 9 per tion to a country with only 16 million people. cent of South Africa and 6 per cent of DRC. But the fact is Chinatowns are sprouting up A senior economist at the Chinese Ministry in many African countries and the arrival of of Commerce predicts Sino-African trade only 100,000 Chinese in Angola would be a could rise to US$100 billion within five years. major geopolitical event. China has signed investment protection In 2000, Beijing created the Forum on agreements with twenty-eight African coun- China-Africa Co-operation (FOCAC) as a tries. Prior to China’s large new energy vehicle for expanding Sino-African econom- investments in Nigeria, Chinese firms had ic, trade and political links. The two triennial invested $1.25 billion in Africa. China is FOFAC conferences held so far (Beijing in focused primarily on obtaining commodities 2000, Addis Abba in 2003) enjoyed high-level but its firms are active in many sectors. They representation, including African presidents are players in the Ethiopian pharmaceutical and deputies, prime ministers and foreign sector, large construction projects in ministers. China’s president, vice-president Mozambique and Botswana, forestry in and premier were present at the Beijing Equatorial Guinea and retailing in Namibia. meeting. Premier Wen Jiabao attended the Sinopec recently announced plans to acquire Addis Abba conference in December 2003. a 30 per cent shareholding in Angola’s largest He also announced that China was cancelling oil refinery. In January, CNOOC announced a debt of $1.27 billion owed by thirty-one $2.3 billion investment in Nigeria’s offshore African countries. oil deposits. Other Chinese firms have China recently issued its first position announced plans to explore for oil in paper on relations with Africa. The paper Madagascar and Ethiopia. In April and June, was timed to coincide with the fiftieth 2006 both President Hu Jintao and Premier anniversary of China establishing diplomatic Wen Chen Biao visited several African coun- relations with Egypt, the first Arab and tries in order to promote better economic African country to recognize the Communist relations. In Nigeria, President Hu Jintao government in Beijing. China now has diplo- announced a $4.5 billion infrastructure pro- matic relations with forty-seven out of gram as a quid pro quo for Chinese firms Africa’s fifty-three countries, while Taiwan obtaining new oil leases. While China’s pri- has only six. This paper takes a very positive mary goals in Africa are economic, her view of China’s relationship with Africa, investments have had security implications. pledging more co-operation on many fronts, China has deployed 4,000 military police in including trade, investment and sharing Sudan to help protect the oil pipelines it built experience in governance and development. there. China recently provided arms to the The paper hails the FOCAC, saying it Nigerian government in order to help it con- has become an effective mechanism for col- tain an insurrection in its eastern oil-produc- lective dialogue. The paper also encourages ing province. Nigeria complained that the US
16 The Rise of China and India: Implications for African Growth and Security
had been slow in providing it with military links to India of any African country. assistance. As a result of China’s need for Bilateral trade is worth $2 billion per annum commodities, there will be further signifi- or more than 20 per cent of the total. South cant expansion of Sino-African trade. In the Africa has various co-operation agreements past, former European colonial powers such with India for technology, telecommunica- as France and Britain have dominated both tions and small business. It has also estab- foreign investment and trade with Africa. In lished an India-South Africa commercial the future, China will emerge as a rival to alliance and set up a joint ministerial com- their dominance by providing both an mittee to promote government consulta- immense new market and numerous oppor- tions. South Africa recently adopted the New tunities for investment in the natural Delhi agenda for Co-operation – a south- resources sector. south co-operation agreement with India India has enjoyed a rapid expansion of and Brazil. The aim of the government is to its trade with Africa during recent years, but expand trade flows between the three coun- it is only a fraction of China’s trade. India’s tries from $4.6 billion to $10 billion by 2010. exports to Africa grew to $5.25 billion during In April, 2005 the Indian foreign ministry 2005 from $1.91 billion during 2000 and only hosted a trade conference for Africa in New $327 million during 1990. Indian imports Delhi to promote commercial relations in from Africa grew to $4.12 billion in 2005 the power, energy, transport, education and from $3.05 billion during 2000 but are below mineral sectors. Indian officials also the peak of $5.5 billion during 1999. India’s expressed support for establishing a preferen- major exports to Africa are cotton products, tial trade agreement with the South Africa pharmaceuticals, machinery, cereals and customs union. mineral fuels. Indian companies have begun As a result of concern about develop- to make a variety of investments in Africa ment, India has long provided aid to Africa. but they are not yet as ubiquitous as the India claims to have given $2 billion of aid to Chinese. Between 1996 and 2004, India Africa since the mid-1960s under the Indian invested $70 million in Zambia. India is the Technical and Economic Co-operation fifth-largest foreign investor in Ethiopia. The Agreement. Indian companies are running largest Indian investors have been Mittal training programs to build up small compa- Steel and Tata Group. Mittal controls South nies in several commonwealth countries, Africa’s largest steel company (Iscor). Tata including Nigeria, Senegal, Zimbabwe, has investments in retailing, auto assembly, Tanzania, Uganda, Kenya and Ghana. In steel, hotels and coffee in Zambia, Tanzania, 2003, India set up the India Africa fund with Namibia, Ghana, Uganda, Mozambique and a goal of disbursing $200 million in credit to South Africa. It recently announced plans for various projects in Africa. a $120 million investment in a ferrochrome Indian firms will focus more attention project at Richards Bay in South Africa and is on Africa because of their perception that the considering a further investment in chromide continent has become more stable and mines there. The Indian state oil company, growth this year could rise to the highest OGNC, proposed a $6 billion deal for indus- level in over thirty years. But as India’s trial investment with Mittal Steel in Nigeria appetite for commodities is only a small frac- in return for access to oil leases. OGNC also tion of China’s, India will not be as aggres- wanted to make a bid for another major set sive in promoting trade and investment. The of oil leases but the government rejected the Indian Express recently editorialized that proposal, so the Chinese purchased it for $2.3 ‘India is sleep walking in Africa’ compared to billion. China’s numerous forays. South Africa has the strongest trade
17 David D. Hale
Can Africa Compete with China? Nations is projecting that the continent’s There is great concern in South Africa and population will rise from 793 million in 2000 other countries about competing with China, to 2 billion in 2030 while the population of especially in the textile industry. South China will rise from 1.275 billion in 2000 to African textile firms in urban areas have a 1.47 billion in 2025 and then begin declining. cost disadvantage with China. They pay These demographic trends suggest that workers about $2.17 per hour compared to Africa could become a magnet for labour an average of about $0.70 per hour in China. intensive industries during the twenty-first In the clothing industry, South African firms century against a backdrop of declining pop- pay about $1.38 per hour while Chinese ulation in Europe and Asia. The problem for firms offer $0.88 per hour. South African tex- Africa in the intermediate term is labour cost tile workers in rural areas earn about $1.30 differentials in some countries. per hour. South African labour is cheaper South Africa needs to introduce highly than in Mexico but it is more expensive than flexible labour market policies in order to in India, Egypt and Mauritius, not just China. compete with China during the next ten The South African government has years. After 2015, Africa’s immense supply of been protective of the textile and clothing excess labour should help to make her more industries. Despite the move to trade liberal- competitive with Asia. ization since 1994, the government has retained a 22 per cent tariff on textile imports and a 40 per cent tariff on clothing imports. Conclusion The goal of government policy has been to The rise of China as a great economic power give the industry time to restructure. But now looms as one of the great challenges of both the textile and the clothing industries the twenty-first century. China has the have been shedding jobs despite protection. fourth-largest economy in the world when The textile industry has reduced employ- measured in nominal dollars, and the second- ment from 75,200 jobs in 1995 to 55,000 jobs largest when adjusted for differences in pur- in 2000 and 48,000 jobs in 2005. The clothing chasing power parity. In 2040, it could have industry has lost about 37,000 jobs since an economy larger than America’s. It has 2000. It employs 95,000 people in the formal already become a larger consumer of most sector and about 40,000 in the informal sec- industrial raw materials than the US and its tor. share is likely to rise further, because its man- There is no simple solution to the com- ufacturing output could exceed America’s petitiveness problems of South Africa’s tex- within the next five years. It will therefore tile and clothing companies. As China is offer an immense new market for raw mate- experiencing labour shortages, there is rials and other products exported by Africa. upward pressure on wages. In Guangdong, Africa has traditionally had a much clos- wages have increased by 30 per cent during er relationship with Europe than Asia. The the past two years. But as Chinese wages are Europeans colonized South Africa during the still only about one third of South Africa’s, it seventeenth century and the rest of Africa will take at least six years of 20 per cent pay during the nineteenth century. Europe has growth to eliminate the pay gap. The growth been the dominant market for African rate of China’s labour force is poised to slow exports since the nineteenth century. In 2005, sharply in the next ten years. Such a slow- Europe exported $83.6 billion of goods to down could reduce the country’s supply of Africa and imported $97.3 billion, so Europe surplus labour and further boost real wages. is still Africa’s dominant trade partner. Africa, by contrast, is poised to experience a European foreign direct investment in Africa significant population expansion. The United during 2005 was also $13.5 billion, far larger
18 The Rise of China and India: Implications for African Growth and Security
than FDI from any other source. The leading to avoid countries that have more authoritar- European powers in Africa are France and ian political agendas, stressing that China’s Britain. France exports $27 billion of goods new status as a great power should compel to Africa and imports $22.5 billion, so its Beijing to adopt a larger vision of its African trade exceeds China’s. Britain imports $14.6 interests than simply extracting raw materi- billion of goods from Africa and exports $10 als. billion. Japan is also an important trading China is now pursuing an active politi- partner. It exports $7.3 billion of goods and cal agenda in South-East and Central Asia. It imports $11.8 billion. But whereas the is proposing the creation of an East Asian Japanese trade with Africa exceeded China’s free trade zone in order to reassure other during the 1990s, it is less than half today. Asian countries that it will not threaten their The rise of China now offers an opportunity economic interests. As China now has a trade for shifting the global balance of power east- deficit with most Asian countries, they are ward. There is great apprehension in supportive of Chinese proposals. China has Washington about the rise of China, but the also helped to create the Shanghai Co-opera- Chinese are stressing that they want to tion Council in order to promote better eco- become a great power through peaceful nomic and political relations with the coun- means: they do not want to imitate the mis- tries of Central Asia. It is now buying a great takes of Germany and Japan during the early deal more oil from those countries, and is twentieth century. During the 1960s, China also concerned about the increased intervened in Africa on behalf of liberation American military presence in the region. movements in Southern Africa, and it helped China’s agenda for Africa is still highly to construct the Tan-Zam railway in order to opportunistic. China has signed investment reduce Zambia’s dependence upon protection agreements with twenty-eight Rhodesia. In its new role as a global econom- countries and will probably negotiate new ic power, China has a very different agenda. It ones in the future. China is seeking commod- has turned to Africa for raw materials and is ity investment opportunities in many coun- seeking to promote trade. It has become an tries but its investments have so far been investor in Algeria, Egypt, Nigeria, the heavily concentrated in oil-producing coun- Sudan, Angola, Zambia, Sierra Leone, South tries. China’s trade with Africa will soon Africa and other countries. It plans to boost exceed $40 billion but China is pursuing a trade to $100 billion by 2010 from $10 billion free trade area only with South Africa. The in 2000 and $37 billion last year. US and Britain are concerned that China will It is clear that China is going to become support authoritarian and corrupt regimes in a rival to European power in Africa. Some return for access to raw materials. China African governments welcome China stresses that it has a policy of not interfering because Beijing is less critical of their human in other countries’ politics but it cannot over- rights policies than governments in Europe look the fact that its new great power status and North America. Others welcome China will require her to be more sensitive to the simply because they want new investment political implications of her economic rela- and trade opportunities. South Africa is cur- tionships. The decision to support Robert rently negotiating a free trade area with Mugabe is especially troublesome. He has China. President Mbeki should also attempt destroyed the Zimbabwean economy and to enlist China in his New Partnership for future generations of Zimbabweans could be Africa’s Development (NEPAD) programme critical of China for being the only important to improve political governance in Africa. He country to support him. China has to recog- should encourage China to favour political nize that it has the same self-interest in pro- regimes that share the goals of NEPAD and moting good governance as America and
19 David D. Hale
Britain. growth. Africa will be the youngest continent China is still coming to terms with the of the twenty-first century. Africa’s embrace consequences of her new status as a global of democracy and the rule of law remain economic power. The natural focus of fragile. Many presidents are still amending Chinese foreign policy is the US and East constitutions to prolong their term of office. Asia but Africa will loom increasingly large as Zimbabwe is an economic and humanitarian China’s need for raw materials expands. disaster which has not attracted enough crit- China will initially focus on the economic icism from surrounding countries. It is not aspects of its relationship with Africa but in yet clear who will succeed President Mbeki the long term it will not be able to avoid the of South Africa in 2009. political issues which concern the US and The risk of political accidents remains Europe. China cannot be a global power if it high and will continue to make many allows commodity needs to be the only fac- investors cautious. But the high growth rates tor driving its foreign policy. China will also of 2005 and 2006 are a reminder that Africa have to rise to the challenge of addressing has potential to improve its performance and issues such as governance. In fact, managing emerge from four decades of poor leader- such issues in Africa could emerge as one of ship. It is also interesting to note that public the great early tests of how China defines its opinion polls show far more support for new role as a global power. globalization in Africa than in countries such The countries of Africa will enjoy a as France. Africans recognize that they need growth rate of close to 6.0 per cent during engagement with the global economy to 2006 because of the recent improvements in escape their poverty and political failures. political stability and high commodity prices. The challenge will continue to be one of The 2006 growth rate could be the highest in improving governance and providing a stable thirty years and follows a year of 5.5 per cent framework for the private sector to exploit output growth during 2005. It is too soon to Africa’s young population, immense raw say whether the recent upturn will be cyclical materials and new appetite for globalization. or structural. The major cyclical factor dri- The challenge is a daunting one for a conti- ving growth is high commodity prices and a nent with Africa’s history. But the Africans surge of investment in raw material produc- themselves now know there is no alternative, ing sectors. The structural change is a trend so they will have to address the challenge of towards better governance in many countries governance or face another half century of and Africa’s still high rate of population increasing poverty.
India and China’s economies – a comparison
Figure 1. India has a much smaller economy than China India China Population 1.1bn 1.3bn Labour force 482.2m 760.8m GDP (PPP) US$3.319tn US$7.262tn GDP/capita US$3,100 US$5,600 Source: Citigroup Investment Research; World Bank, Groningen Growth & Development Centre
20 The Rise of China and India: Implications for African Growth and Security
Figure 2. Key Commodities Consumption (kg/capita) Commodity India China USA Germany Steel 33.4 197.9 349.3 451 Stainless 0.6 3.1 7.6 16.5 Copper 0.3 2.8 7.6 12.9 Aluminium 0.7 5.2 21.9 21.4 Zinc 0.3 2.1 3.8 6.2 Energy* 600 1,200 12,000 6,300
Note: * kWh/capita Source: Citigroup Investment Research
Figure 3. China & India’s commodity markets (% of world, 2005) Production China India Alumina 13% 5% Aluminium 23% 3% Steel 48% 5% Copper (refined) 14% 3% Nickel (refined) 8% 0% Zinc (refined) 26% 3% Gold 10% 0.1% Iron ore 19% 12% Demand Alumina 22% 2% Aluminium 23% 2% Copper (refined) 22% 2% Nickel (refined) 16% 2% Zinc (refined) 25% 3% Gold 11% 17% Source: IISI, CRU, WBMS, ILZSG, Citigroup Investment Research.
21 Paul Collier
Chapter 4
The Petroleum Sector in Africa: Between global security, national interest and local governance? Erik Solheim
His Excellency Erik Solheim is Norway’s the one hand, revenues available for poverty Minister of International Development reduction will be huge, but on the other hand, the dramatic failures that have charac- terized most oil-dependent countries show The African Oil Boom that petrodollars may not reduce poverty, but Africa is in the midst of an oil and gas boom rather exacerbate it. as foreign companies pour billions of dollars Africa’s oil revenues have for far too into the continent for the exploration and long been inserted into governments lacking production of petroleum. African govern- in transparency and accountability. Despite ments, in turn, are – and increasingly will be efforts to combat corruption in Angola, – receiving billions of dollars in revenues Nigeria, Cameroon and the Republic of from this boom. Well above $100 billion will Congo, oil wealth has failed to generate be spent on developing African oil and gas development and has instead generated fields between now and the end of the deep-seated corruption that has retarded decade.1 growth. These activities are not only centred on The natural resource curse2 has repre- the hydrocarbon-rich waters of the Gulf of sented an enormous impediment to develop- Guinea, but also on North Africa, where ment. Lifting the natural resource curse Libya is one of the hot-spots in the global oil could be like an economic oxygen for devel- sector since sanctions were lifted. oping countries where growing oil revenues Whilst many African countries will ben- are used to improve the lives of the poor efit from higher revenues from the oil sector, through increased investment in education, the majority of citizens on the continent are health, water, roads, agriculture and other not enjoying their share of it. Many govern- vital necessities. But for this to occur, these ments without oil and gas resources have to revenues must be well managed to con- pay a substantially higher bill for importing tribute to alleviating poverty. Without their energy as a result of the high oil prices. improvement in their democratic institutions That is a substantial concern, not only to the and administrative capacity, it is unlikely that countries’ leaders, but to the whole world. African oil exporters will be able to use However, the oil boom will provide an petrodollars to fuel poverty reduction; opportunity for many African countries beset instead, oil money could make matters by wide-scale poverty. But it is important to worse for the poor. It is possible to succeed, remember that it can also be a great peril. On as evidenced by Chile, Botswana, South
1 The Norwegian oil foundation’s (INTSOK) latest study shows total expenditure of $60 billion in oil and gas sector in Angola and $54 billion in Nigeria in the period 2007–2010. 2 The term was first used in the formal economic literature in 1993 by professor R M Auty.
22 The Petroleum Sector in Africa: Between global security, national interest and local governance?
Africa and Malaysia, who have managed to Bank. As donors we also need to point the build sound institutions and sustained finger at ourselves. The bribing party gets off growth while decreasing their dependency too easily. Those involved in corruption and on natural resource rents. crime operate across borders, and we need We now see a drive for change in many global tools and international co-operation African countries that are taking the first step to solve the problem. towards improving their performance by Good governance is critical to success- joining the Extractive Industry Transparency fully addressing the challenges linked to Initiative (EITI) launched by Prime Minister resource-dependency. Good governance Tony Blair in Johannesburg in 2002. Since should include clear and stable laws and reg- then some twenty countries have committed ulations, rule of law, high level of compe- themselves to EITI principles and criteria, tence in government, fiscal, budgetary and and to work with oil and mining companies monetary discipline, public-private sector and civil society in a multi-stakeholder dia- balance in the economy, an open dialogue logue. Fourteen of these countries are between government and civil society and a African. Nigeria has been a pilot country in high degree of transparency. Studies have implementing the principles and has made shown that when governance is good, large impressive steps towards more transparency revenues will be generated to foster econom- and accountability in the petroleum sector. ic growth and reduce poverty. However, EITI supports improved governance in when governance is weak, they may instead resource-rich countries through the full pub- cause poverty and corruption. Unfortunately, lication and verification of company pay- many oil-rich developing countries do not yet ments and government revenues from oil, score well against these governance indica- gas and mining.3 tors. The Norwegian government is hosting a third plenary conference in Oslo in October, aimed at promoting and consolidat- The Changing Petroleum Sector in Africa ing EITI. The main objective is to expand the Africa has a new strategic relevance for glob- number of countries participating in the al energy supply and the stability of the glob- process and improve EITI implementation, al economy as a result of the many large oil building on the experience gained so far from and gas discoveries in deep waters. Nigeria and Azerbaijan, where the EITI prin- Africa’s oil and gas resources are vital to ciples are being implemented. The confer- global energy supplies. Proven oil reserves ence will reflect the initiative’s multi-stake- have doubled in the last twenty years and holder character and assemble representa- now hold close to 10 per cent of the world’s tives from national governments, the extrac- oil reserves.4 The continent remains largely tive industries, intergovernmental institu- unexplored, and governments across the con- tions and civil society. Our aim is to promote tinent are hoping that they too can cash in on the development of the EITI standard from the oil and gas bonanza. being just an important initiative to becom- African production may double within ing a consolidated international norm. the next decade as a result of dramatic EITI is one of many initiatives. The improvements in exploration and production multilateral development banks need to take technologies in deep waters. Two-thousand the same firm public stance on good gover- metre water depth is no longer off limit. The nance and anti-corruption as the World result is that the vast acreage off the African
3 More on EITI can be found on http://www.eitransparency.org/. 4 According to IEA estimates.
23 Erik Solheim
coast has been opened for exploration. bonuses for the best acreage than interna- Angola’s oil production grew 26 per tional oil companies. They are willing to cent from 2004 to 2005, whilst Sudan’s oil invest in projects that host governments have production grew 15.5 per cent in the same defined as strategic projects: infrastructure, period.5 Both countries have potential for gas pipelines, refineries, railways, and they further growth. Nigeria, Africa’s largest oil may even provide soft loans. Angola has for producer, is looking to expand its oil produc- years tried unsuccessfully to get internation- tion from 2.5 million barrels per day to 4–4.5 al oil companies to invest in a refinery in the million barrels per day from 2010. The role of country. The Chinese oil company Sinopec is natural gas exports will also grow as new now committed to building the refinery. countries join Algeria, Egypt and Nigeria as Over the last decade, Chinese compa- exporters of liquefied natural gas (LNG). nies have also become the dominant players Governments now have a strong bar- in Sudan. The state oil company, CNPC, gaining position as international oil compa- entered Sudan in 1996 and has invested some nies and foreign governments scramble for $4 billion since. Sudan has become China’s access to their resources. African oil-produc- fourth largest overseas oil supplier after Saudi ing nations want more than just the revenues Arabia, Iran and Oman. Sudan is a long-term from the oil and gas sector. They want more plan for China, especially since the highly value creation from the development of the prospective southern region remains virtual- resource potential. They want more jobs. ly unexplored. They are looking for technology transfer and The international community is work- investments in the country’s infrastructure. ing hard to build a permanent peace in And they increasingly turn to the east for Sudan, and Norway has been able to assist financial and political support. the parties in their painful path towards The two largest oil-importing countries peace. We believe that we, as a third party in the world, the US and China, are both with no direct interest in the outcome of a looking to Africa to diversify their oil sup- given conflict, can play a role in peace-build- plies and both have an interest in maximizing ing, primarily as a facilitator, at times as a African oil production. China’s presence in mediator. I recently visited Sudan and saw Africa is longstanding, with more than fifty some of the oil operations as well as their years of diplomatic involvement. The coun- positive impacts. Progress on peace will bring try’s transformation from energy self-suffi- stability and increased potential for foreign ciency to import dependency has led to investments in Sudan. Norway is prepared to expanded engagement in Africa. In 1998, be engaged in assisting Sudan, and we will China imported a bit more than 100,000 bar- send experts to Sudan to advise the develop- rels per day from Africa. Last year that figure ment of a transparent oil regime, environ- was higher than 900,000 barrels per day. mental policies and how to manage the But China is not alone. The need to resources to the benefit of society. diversify has driven Asian states into Africa, once nearly the sole preserve of the Western oil companies. India, Malaysia and Korea are Managing the Oil Wealth investing heavily and rapidly in African explo- The primary responsibility for managing ration and production projects. Presidents Africa’s oil wealth in a transparent, fair and negotiate strategic deals. They bring with accountable way lies with Africa’s govern- them their national oil companies, in some ments. They have the authority to decide pri- cases willing to pay far more in signature orities, allocate resources and reward some
5 BP’s annual statistical review June 2006.
24 The Petroleum Sector in Africa: Between global security, national interest and local governance?
groups, regions or individuals more than oth- Managing oil wealth is not easy, not ers. But African governments are not the even for my own country, Norway. And it is only actors determining the outcome; for- far more challenging for African countries eign companies, international financial insti- like Angola and Mauritania, where institu- tutions like the World Bank and IMF, export tional capacity and competence is weak – or credit agencies and governments from other almost non-existent. parts of the world also have to contribute. The Angolans are about to become Many of these actors acknowledge that even richer with a massive oil windfall gain improving the distribution of benefits from derived not only from higher international oil production is an essential ingredient oil prices but also from rapidly growing towards a more stable and sustainable world. domestic oil and diamond production. Successful management of any miner- Government revenues from petroleum over al-based economy is difficult, but petroleum the next five to ten years are expected to be may be the hardest resource to utilize well. very large. Estimates show that they can Countries dependent on oil exports seem reach close to $266 billion in present value particularly susceptible to policy failure. The terms.6 The present value of that asset, dis- reason seems to lie in the interaction counting future revenue flows at a 10 per between economic and political power. Only cent rate, results in estimates ranging from those who control political power can grant $119 billion to $266 billion, depending on the the opportunity to make money from oil, production and price scenarios assumed. and only those who receive this opportunity These figures translate into per capita petro- can provide the revenues to keep regimes in leum wealth ranging from $8,500 to $19,000, power. Thus a partnership of mutual interest based on an estimated population of 14 mil- has been created. Contracts between govern- lion. ments and companies have been kept secret, The country’s petroleum wealth opens often based on commercial arguments. up opportunities to address the country’s We have, however, seen a new trend economic, social and developmental goals. emerging, breaking with the past. With the advent of peace since 2002, the Governments are announcing transparent country now faces the daunting challenge of bidding rounds where international oil com- channelling its huge resource endowment panies are told that the best blocks will be into reconstruction of its infrastructure and awarded to the highest bidders. Brazil, into poverty reduction activities. However, Angola, Nigeria, Libya, Algeria, Venezuela improvements in the competitiveness of the and East Timor have introduced more trans- local industry and efforts to diversify the parency in their bidding processes. Bids are economy away from the mineral sectors now open for all to see. In Nigeria, 800 peo- remain hampered by inadequate infrastruc- ple attended the bidding conference. In ture, poor governance indicators and a less- Libya, the bidding round was on live televi- than-adequate business environment. sion. Production sharing contracts are Provided the serious issues associated increasingly becoming standardized and with the ‘Paradox of Plenty’7 are adequately made public. The government’s terms are addressed, the fiscal gain could go a consider- publicly available on the Internet. It changes able way towards alleviating Angola’s wide- the relationship between government and spread poverty, contribute to growth and international oil companies. It builds trust economic diversification, and increase the and removes secrecy. general standard of living. To guarantee the
6 World Bank report 2005. 7 The term was developed by professor Terry Karl in her book, Paradox of Plenty.
25 Erik Solheim
well-being of future generations, part of port gained through the provision of patron- Angola’s oil revenues should be saved. age, and a politicized bureaucracy and judi- Angola will need to improve in the cial system. The transition authorities have areas of governance, transparency and insti- embarked on a path toward democracy, rule tutional capacity. The presence of weak insti- of law and good governance, and initiated a tutions may invite rent seeking and waste. wide range of reforms based on the priorities The level of institutional capacity in Angola that emerged from consultations with civil is still low, in part because of the effects of society and political parties. the war and in part because of problems The authorities have signed the UN associated with the ‘Paradox of Plenty’ Convention Against Corruption and support dilemma. The government in Angola is a World Bank initiative to undertake a com- aware of the need to develop institutional prehensive anti-corruption study. The capacity to manage the country’s oil wealth authorities acknowledge that it is fundamen- appropriately, and we clearly see its willing- tal to foster economic governance and have ness to become more open and engage in dia- expressed their commitment to the imple- logue with Angolan civil society and external mentation of EITI and the establishment of actors. The latest licensing round was a clear transparent mechanisms of managing natur- step in the right direction. al resource wealth. Mauritania is the latest African oil pro- Building national capacity is an urgent ducer. Its resource potential is limited, with need. It includes training local personnel an initial production of some 75,000 barrels who are able to put in place a clear legal, reg- per day. Mauritania starts from a situation of ulatory and contractual framework. Such a weak governance, low levels of foreign framework – the cornerstone for private sec- reserves, the presence of significant arrears tor involvement in the oil and gas sectors – and declining execution rates of investment should emphasize the government’s objec- spending, notably in the social sectors. The tive in maximizing the positive impact that country’s capacity to create wealth is con- the oil and gas sector could have on overall strained by the legacy of high volumes of economic development. Proper attention aid, possibly causing some ‘Dutch disease will need to be paid to environmental man- effects’,8 rural-urban migration and a depen- agement since fishing represents a sizeable dent form of social capital. export. It is, however, important to remem- In a high price scenario, Mauritania ber that developing oil fields and building may receive some $18 billion in oil revenues, pipelines happens faster than the construc- and the oil sector may represent some 80 per tion of efficient states and good governance. cent of the government’s revenues in 2015.9 The country faces considerable pressure to use the oil revenue to boost social expendi- The Norwegian Oil for Development tures rapidly, given the need to reduce the Strategy country’s poverty headcount. The oil boom comes at a time when foreign During the previous regime, the coun- aid to Africa from industrialized countries is try displayed the characteristics of a paternal- falling and being replaced by an emphasis istic and predatory autocracy – that is, a rela- from donor nations on trade as a means for tively stable government, with political sup- African countries to escape poverty. The
8 The term originated in Holland after the discovery of the giant Groningen field triggered an overvalued currency, excessive government spending, loss of Dutch competitiveness and eventually a sustained process of Dutch de-indus- trialization. 9 World Bank report May 2006.
26 The Petroleum Sector in Africa: Between global security, national interest and local governance?
dominance of oil and mining in Africa’s trade emphasize the importance of strengthening relationships means that it is especially the institutional and macroeconomic frame important that Africa makes the best use of conditions in our partner countries in the its oil, gas and mining resources. South. Our efforts will be channelled multi- In Asia, a broad economic development laterally via the UN system and the World process has lifted more people out of pover- Bank, and bilaterally through our co-opera- ty than ever before. In many African coun- tion with individual countries. tries, poverty increases from one day to the Our bilateral efforts will particularly next. There are still around one billion peo- focus on areas where Norway has a recog- ple who are living on less than a dollar a day nized and sought-after expertise, for example – most of them are in Africa. in the hydropower, petroleum, fishery, fish- Forty years ago, the situation was quite farming and maritime sectors. We also have a different. Ghana and South Korea were more high profile in environmental issues and have or less equally rich – or equally poor. Today, a strong focus on employees’ rights and the the per capita wealth of South Korea is more rights of women. than ten times that of Ghana, and the dispar- We have developed an initiative called ity continues to increase. Oil for Development. This establishes petro- The Asian countries that have experi- leum management and good governance as a enced rapid economic growth have under- high-priority focus area, and entails a signifi- gone a broad process over time, where rela- cant increase in the financial support to this tively sensible policies, a reasonably well- field over the development-assistance bud- functioning state, an open, market-based get. economy and focus on education and cultur- The intention behind the Oil for al factors have combined to pave the way for Development initiative is to enable petrole- progress and the eradication of poverty. um-producing developing countries to utilize China, Vietnam and South Korea are good the income from oil and gas resources to examples. reduce poverty and improve the living condi- What most of us regard as traditional tions of their populations. We want Norway development assistance will undoubtedly to play a clear and key role in the internation- continue to be important for many poor al debate on oil and development. On the developing countries for many years to basis of Norwegian expertise and experience, come. But unless we also pave the way for the globalization of the Norwegian oil indus- greater economic activity and value creation try and the country’s existing involvement in in these countries, it will not be possible to resource management, development, peace meet the overarching target of the UN and human rights, Norway is in a good posi- Millennium Development Goals: to halve the tion to play such a role. We have the impres- number of people living in extreme poverty sion that Norway’s participation in this field by 2015. will be welcomed by many. In its policy platform, the Norwegian The increase in direct investments from government emphasizes the fight against abroad in many African countries is primari- poverty and the right to economic develop- ly related to investments in natural resources, ment and participation in international trade. especially petroleum. Many of these cases This means that the development of the busi- have both positive and negative conse- ness sector will be a high priority focus area quences. We hope to increase the positive for the government in its international devel- consequences through our Oil for opment co-operation. Development initiative. In our development co-operation, we
27 Paul Collier
Chapter 5
Diamonds and Development Jeffrey Herbst and Greg Mills
Professor Jeffrey Herbst is Provost of Miami eventually lead to a boycott that would drive University. He has served as a consultant for down the price of jewellery with these pre- E Oppenheimer & Son (EOS). EOS is owned cious gems. by the Oppenheimer family, who also have a Yet, at the same time, diamonds are the controlling interest in De Beers. Dr Greg Mills driver for development for some of Africa’s is Director of the Brenthurst Foundation. greatest successes. Diamonds were critical, of The Foundation was established by the course, to the development of South Africa. Oppenheimer family in April 2005 to strength- Indeed, Brian Roberts concluded that ‘More en African economic performance. than any other city can Kimberley claim to be the womb of modern industrial South Africa.’3 In recent times, Botswana – long Introduction regarded as the development success in There is a fundamental paradox in the discus- Africa – and Namibia have built, by African sion regarding diamonds and development. standards, flourishing economies on the basis On the one hand, there has been consider- of revenue from diamonds. able criticism regarding the diamond trade A central policy debate is whether by NGOs such as Global Witness and jour- countries such as Sierra Leone and Liberia nalists who believe that diamonds foster war. can transform their diamonds into the dri- Fred Bridgland typified the debate of some vers of development that they were in years ago when he wrote: ‘across great Botswana and South Africa. In particular, will swathes of Africa, diamonds fuel wars. Many countries with alluvial deposits that are rela- a diamond ring slipped on to fingers of eager tively easy to mine, and therefore divert to brides-to-be has first been washed in African unsavoury purposes, be able to duplicate the blood.’1 The forthcoming movie Blood experiences of the Southern African coun- Diamonds, starring Leonardo DiCaprio as a tries whose diamonds are more concentrated South African mercenary jailed for gem in their distribution, much harder to mine smuggling during Sierra Leone’s bloody civil and therefore easier to ring-fence and con- war, which ended in 2002, may only further trol? The question is especially pertinent criticism of the diamond trade. The quan- because the so-called Kimberly Process – the tum of blood to licit diamonds is today international regime established to prevent gauged at just 0.2 per cent2 (down from an the use of diamonds to fund conflict – is estimated peak of 4 per cent) of a total gross based on national governments being able to value of African rough diamonds of around control their own diamonds. The Diamond $8.5 billion. Some retailers fear that criticism Development Initiative (DDI) – an interna- of this tiny aspect of the diamond trade may tional effort by corporations (including De
1 Fred Bridgland, ‘Blood Diamonds are Guerrillas Best Friend’, The Scotsman, 21 September 2000. 2 According to the Kimberley Process Working Group on Monitoring in its February 2006 submission. Go to http://www.kimberleyprocess.com 3 Brian Roberts, Kimberley: Turbulent City (Cape Town: David Philip, 1976), p. 391.
28 Diamonds and Development
Beers), international agencies and non-gov- networks at stake. More recent efforts to ernmental organizations – also seeks to change the incentives that miners and farm- change the dynamics of alluvial diamond ers face through direct purchasing from the production. If DDI can address the root caus- producers themselves, reducing the profits es of conflict – poverty and inequality made by intermediaries and paying fair amongst poor miners who live and work out- prices, may have more promise. Through a side the formal economies of these previous- top-down approach that addresses the legal ly war-torn countries – by creating the neces- framework and a bottom-up approach that sary incentives and structures for legal dia- addresses sustainable small-scale business mond markets, there will be a good chance models, it may be possible to change ‘blood of cutting the link between alluvial diamonds diamonds’ into ‘development diamonds’ for and conflict. Indeed, the central argument of those African economies home to artisanal this paper is that while alluvial diamonds def- mining. But the going will not be easy. initely present countries with significant challenges and can fuel conflict, the automat- ic assumption that easily-mined diamonds Diamonds for Better and Worse leads to war can be challenged. There has been a substantial evolution of the It is clear that diamonds were not the debate about diamonds. Non-government cause of the conflicts in the Democratic organizations such as Global Witness, which Republic of Congo (DRC), Liberia, Sierra have been central to the debate over dia- Leone, Angola and elsewhere in Africa. monds, recognize that in Botswana, dia- However, diamonds were a relatively easy monds have been an engine of growth, help- source of revenue for rebel leaders, and gov- ing it meet development goals.5 Indeed, that ernments, who self-financed their wars in the different countries have had varying levels of post-Cold War world when outside support successes in exploiting their diamonds for for small wars is limited to non-existent. development is indisputable. As Table 1 indi- Bringing these diamonds into the main- cates, there are only eight countries in the stream economy remains difficult. However, world, all in Africa, where diamond produc- in both Angola and Sierra Leone over the last tion is above 3 per cent of total economic few years, respective governments have suc- activity. South Africa and Russia are very sig- ceeded in introducing incremental improve- nificant producers of diamonds but their ments that are leading to the progressive reg- economies are also diversified enough that ularization of diamond flows.4 The question diamond production itself does not now is whether these will be fast enough and suf- account for a very large share of GDP. All of ficiently effective to enable the revenues to be the other countries (those on the right side of re-invested to meet development priorities in the table) are marginal producers, except for health and education. Indeed, international Australia and Canada. Those countries are experience suggests that simple legalization also rich enough so that their exposure to of small-scale mining is inadequate and sev- diamonds is limited. This paper will focus on eral previous attempts at mainstreaming arti- the role of diamond production in countries sanal mining, particularly in the gold sector, on the left side of the table, excluding South have failed because of poor design that failed Africa and Russia because of their diversified to understand the wider social impacts and economies.
4 Sierra Leone has introduced licence reform but not taxation change: http://www.diamondregistry.com/News/2006/Sierra.htm 5 See the excellent report, Global Witness, Rich Man, Poor Man: Development Diamonds and Poverty Diamonds, October 2004.
29 Jeffrey Herbst and Greg Mills
Table 1 Dependence on Diamonds, 2000 High dependence or major producers Low dependence Diamond Diamond Diamond Diamond Production Production Production Production ($000) as Percent ($000) as Percent Country of GDP Country of GDP Botswana 2,125,200 40.473 Lesotho 5,000 0.582 Sierra Leone 87,500 13.806 Tanzania 45,965 0.506 DRC 585,000 13.591 Ghana 13,500 0.271 Namibia 419,120 12.278 Guyana 1,700 0.239 Angola 739,662 8.102 Cote d’Ivoire 21,750 0.205 Central African Republic 72,000 7.556 Australia 360,600 0.093 Liberia 27,200 5.023 Canada 453,555 0.064 Guinea 103,500 3.325 Venezuela, RB 45,500 0.039 South Africa 1,109,513 0.835 Brazil 29,250 0.005 Russian Federation 1,595,000 0.614 China 16,480 0.002
Source: World Diamond Council and World Bank
Of the countries that are highly depen- that are buried deep in the ground and dent on diamonds, Botswana and Namibia require capital-intensive machinery to have managed their resources well. In Sierra exploit. As a result, companies and govern- Leone, DRC, Angola, CAR, Liberia and ments are able to retain control over the Guinea, governments have not been able to resources because access to and from the dia- exploit diamonds for public revenue, and in mond-rich grounds can be controlled at the many cases the gems have been used to fund mine entrance. The relatively low number of insurgencies. employees and their higher skill base facili- Botswana and, to a more limited extent, tates control of illegal diamond flows. Global Namibia do have good governance records Witness estimates that only 6,000 people are compared to the other countries. However, actually employed directly by the diamond the primary distinction between the coun- industry in Botswana.6 tries that have done well through diamonds In contrast, alluvial diamond deposits and those that have fared poorly is the way in are spread over hundreds of square miles, which they are mined. Botswana and within old and new river deposits. They do Namibia have kimberlite diamond resources not require capital equipment to exploit;
6 Ibid., p. 5. 7 Ibid., p. 4. 8 This information was sourced in correspondence with Alyson Warhurst and from her forthcoming paper: ‘Corporate Social Responsibility and African Development Diamonds’, Draft for discussion, Alyson Warhurst, 13 May 2006 (forthcoming). See also Maplecroft’s Map ‘Artisanal Mining in Africa and Development Status, 2006’, http://maps.maplecroft.com.
30 Diamonds and Development
rather, the deposits are close to the surface of Charles Taylor, currently awaiting and can be mined by artisanal miners with trial on war crimes in The Hague – has almost no equipment. Indeed, Global mainly been a conduit for international Witness estimates that there are approxi- smuggling operations from other coun- mately one million alluvial diamond miners tries, notably Sierra Leone. in Africa7 concentrated in the following countries:8 Alluvial diamond mines are notoriously diffi- • The Democratic Republic of Congo cult to police. Neither colonial nor post-inde- (DRC): Some 700,000 artisanal miners pendence African countries developed mech- produce around 85 per cent of dia- anisms to regulate this type of diamond min- monds exported by value, some U$620 ing. Extensive smuggling makes it difficult to million in 2004. ensure the accurate prediction of the num- • Angola: The diamond industry is the bers of miners involved in this sector and second most important nationally after their exact output. In Sierra Leone, the level oil, with 6.6 million carats (or $763 mil- of smuggling may have been as high as 50 per lion) in production in 2004. Some cent of production; and the Angolan govern- 150,000 artisanal miners produce ment estimates that $375 million in state rev- around 12 per cent of this amount. enue may be lost annually due to smuggling, • Sierra Leone: Artisanal mining, around mainly to the DRC.9 Instead, the diamond 90 per cent of all mining, is the coun- revenue tends to go to whoever exercises try’s main source of foreign exchange, local control over the deposits. As a result, accounting for 60 per cent of total there has been constant conflict over much of export revenues and offering employ- the diamond-rich territory in many of these ment to an estimated 120,000–200,000 countries. In particular, guerrillas have found miners. control over alluvial deposits to be one of the • Guinea: Artisanal and small-scale min- best ways of funding their insurgencies. In ers accounted for around 95 per cent of turn, the countries become poorer because national production of 740,000 carats in guerrillas can be self-financing and a key 2004. resource cannot be taxed by governments. • Central African Republic (CAR): 40 per Thus, Lujala, Gledtish and Gilmore, in the cent of total export earnings are first systematic survey of lootable and non- sourced from the activities of some lootable diamonds, find ‘evidence that sec- 50,000 artisanal miners. ondary [lootable] diamonds are positively • Ghana: 70,000 miners recover approxi- related to the incidence of civil war, especial- mately 60-70 per cent of Ghana’s dia- ly in countries divided along ethnic lines. mond production. Primary diamonds, on the other hand, make • Liberia: There were around 60,000 arti- ethnic war onset and incidence less likely.’10 sanal diamond miners in Liberia, many The fundamental question for dia- of whom shifted their activities into mond-fuelled development is if countries gold mining as a result of UN sanctions. with alluvial deposits can reap even a per- Like the Ivory Coast (which produces centage of the gains via mining that some 300,000 carats annually from its Botswana has shown possible for kimberlite mines mainly in the north-west), deposits. Kimberlite mining will always be Liberia – particularly under the regime more supportive of development, but if
9 Ibid. 10 Päivi Lujala, Nils Petter Gleditsch, and Elisabeth Gilmore, ‘A Diamond Curse? Civil War and a Lootable Resource’, Journal of Conflict Resolution (Vol. 49, 2005), p. 538.
31 Jeffrey Herbst and Greg Mills
countries with alluvial deposits could begin and small-scale mining. Many are driven into to exploit their diamond resources produc- these activities because of poverty.11 tively and distribute the gains more evenly, Indeed, evidence from Ghana – recog- they would face a much more optimistic nized as a leader in the promotion of small- future. Government revenue in what are des- scale mining12 – makes it clear how difficult it perately poor countries would be enhanced, is to control alluvial mining. Ghana legalized and those who sought to fight against public small-scale mining in 1989 and, in co-opera- institutions would not immediately find a tion with many donors, ‘has overseen the way to finance their wars. On the other construction of seven small-scale mining dis- hand, failure to develop alluvial deposits in a trict support centres; orchestrated the imple- formal way may condemn many of these mentation of a series of training programs countries to poverty as they will face contin- for miners; and has undertaken research uing conflict and violence over who can con- looking into possibilities for re-skilling min- trol the valuable land. Indeed, as noted ers with the aim of improving their poverty- above, failure in the alluvial countries may stricken lifestyles’.13 Yet, Hilson and Potter contaminate diamond production every- estimate that 85 per cent of the miners in where if campaigns against ‘conflict dia- Ghana still operate illegally.14 They attribute monds’ do begin to change consumer atti- most of the failure of legalization in Ghana tudes about a gem which has limited innate to unavailability of land, insufficient institu- value. The stakes in the alluvial countries are tional support and a licensing system that is therefore high for all concerned. still too complicated.15 Efforts in Sierra Leone to legalize diamond mining have not fully succeeded because, among other rea- The Quandaries of Regulating Alluvial sons, the cost of obtaining a mining license Mining are high, procedures to get a license are very Regulating decentralized mining activities is complicated and land is limited.16 Indeed, especially difficult. Hilson and Potter, in their many efforts worldwide at legalizing and reg- well-titled article (‘Why is Illegal Gold ularizing alluvial mining have faced substan- Mining Activity so Ubiquitous in Rural tial obstacles because of expensive and cum- Ghana?’), report that there are between bersome licensing practices.17 More general- eleven to thirteen million alluvial miners ly, a large percentage of miners work outside worldwide and that perhaps one hundred of the established laws because of land short- million rural inhabitants rely on income ages and because legislation is seen as inap- derived directly or indirectly from artisanal propriate for miners.18
11 Gavin Hilson and Clive Potter, ‘Why is Illegal Gold Mining Activity so Ubiquitous in Rural Ghana’, African Development Review (Vol. 15, 2003), p. 240. 12 Ibid., p. 243. 13 Ibid. 14 Ibid. 15 Ibid., p. 259. 16 It is estimated that half of the mining in Sierra Leone is still done illegally. See, ‘Management Systems International, Mining the “Chaos” in Sierra Leone’s Diamond Fields: Policy and Program Implications of the Structure of the Artisanal Mining Sector in Sierra Leone’, June 2005, pp. 40–1. Found at: http://www.resourcebenefi- ciation.org/data/2420313_Mining per cent20the per cent20Chaos per cent20Final per cent20June per cent2014.pdf 17 Gavin Hilson and Clive Potter, ‘Structural Adjustment and Subsistence Industry: Artisanal Gold Mining in Ghana’, Development and Change (Vol. 36, 2005), p. 115. 18 Edmund M Bugnosen, ‘Small-Scale Mining Legislation: A General Review and an Attempt to Apply Lessons Learned’ in Gavin M Hilson (ed.), The Socio-Economic Impacts of Artisanal and Small-Scale Mining in Developing Countries (Lisse: A.A. Balkema, 2003), p. 18.
32 Diamonds and Development
Similarly, international regulation of argues that ‘Government motivation to legis- diamond mining alone will not inevitably late small-scale mining does not necessarily prevent the re-emergence of ‘conflict dia- match the priorities of small-scale miners. It monds’. The Kimberley Process was an is therefore important to also consider the important development because it estab- aspirations and principal priorities of min- lished a way in which nations could certify ers.’21 The fundamental challenge for coun- that their diamonds were produced without tries with alluvial deposits is to provide contributing to conflict. However, the incentives to artisanal miners, which encour- Process itself recognizes that the certification age them to remain within the confines of of diamond production only has positive the state-regulated economy, yet not fall prey effects if governments have established inter- to government control without reaping basic nal schemes to eliminate conflict diamond financial rewards. production.19 The Process does not guaran- There are many obstacles to ‘getting tee the legality of diamonds per se. The prob- prices right’ for alluvial diamond miners. lem with artisanal mining activities is that the One fundamental to the problems of regulat- activities are largely illegal (not licensed), and ing mining is that much of the downstream the diamonds produced therefore have to be industry in diamond-mining companies is sold to intermediaries outside of formal controlled by a small number of middlemen. frameworks. They are therefore illicit. It is estimated that in Sierra Leone about Intermediaries then enter these diamonds three-quarters of exports were controlled by into formal flows in order to obtain their five companies in 2003. Even fewer actors Kimberley Certificate to demonstrate they are controlled even a larger percentage of the conflict free. Undervaluing often goes on at trade the next year.22 Given the market con- this stage, as well as at the point of production. trol that the middlemen have, they are able They are then exported. Some diamonds (up to pay miners very low prices and receive to 50 per cent in Sierra Leone) do not even massive mark-ups. However, there are also enter official flows prior to export but are many other obstacles to a transparent mar- smuggled across borders and enter formal ket. Smillie23 notes the most important: flows in other Process member countries.20 • Access to land is often problematic for small producers. This may be an espe- cially important issue because there is Miner Incentives and Alluvial Mining often tension between disorganized The legalization of alluvial mining is proba- small-scale producers and larger mining bly a necessary step in mainstreaming pro- companies. duction from small-scale miners but it seems • Small-scale miners require immediate clear that it is not sufficient. There are too payment given the desperation of their many other obstacles to the legal, transpar- situation. One of the advantages that ent trade of diamonds that will not disap- the middlemen have now is that they pear. Bugnosen is undoubtedly right when he are able to operate on a cash basis.
19 Corene Crossin, Gaving Hayman and Simon Taylor, ‘Where Did It Come From? Commodity Tracking Systems’ in Ian Bannon and Paul Collier (eds.), Natural Resources and Violent Conflict: Options and Actions (Washington, DC: The World Bank, 2003), p. 147. 20 Global Witness, ‘Making it Work: Why the Kimberley Process must do more to stop the flow of conflict dia- monds’, November 2005. 21 Bugnosen, op cit, p. 18. 22 Ian Smillie, ‘Why is the DDI Important at a Micro Level?’ August 2005, p. 3. Found at: http://www.pacweb.org/e/images/stories/documents/ddi-micro per cent20paper per cent202005-08.pdf 23 The following points are all from Ibid., p. 4.
33 Jeffrey Herbst and Greg Mills
• Regulations, especially getting a dig- ficulty of entry, access to land, information ging license, ‘can be enormously time and capital)’. When even small improve- consuming and expensive. In each ments are made in access to markets, the country there are a dozen or more cost- results can be significant for small countries. ly and time-consuming steps required For instance, in Sierra Leone the Integrated before any mining can officially com- Diamond Initiative has, among other things, mence. Bribes are required almost attempted to create a scheme whereby ‘dig- every step of the way.’ Such bureaucrat- gers… receive the best prices for production ic mazes obviously do not encourage from reputable buyers. Prices will be the very small-scale miners to become part of best because the buying mechanism will be regular markets. more competitive than are currently avail- able’. Dr T Alpha-Kpetewama, executive Smillie does a good job in cataloguing the director of the Peace Diamond Alliance, various attempts that have now been made noted that, due in part to the effort to cut out worldwide to address miner incentives. Some exploitative middlemen, export revenue from appear to be good ideas but fell apart due to legal diamonds increased from $41 million in very typical implementation problems. For 2002 to $130 million in 2004.26 instance, the government of Sierra Leone To be successful, any alternative that created a ‘Diamond Area Community seeks to curb abuses (they may never be elim- Development Fund’ whereby a portion of inated) in alluvial mining must do the follow- the diamond tax was given to local commu- ing: nities where the diamonds were found. This • Provide more income to miners than resulted in more than half a million dollars they currently receive trading through returned to those communities in 2003. the current supply chain. Unfortunately, in 2004, this initiative was sus- • Offer the miners a marketing system pended due to irregularities.24 Loan pro- that allows government to observe, reg- grammes to miners, training, improved mar- ulate and tax diamonds before they are ket and price knowledge, media campaigns exported, facilitating fair prices to be and many other initiatives have been paid directly to them for the diamonds attempted. Not surprisingly, when very weak that they find. governments attempt to mainstream extremely valuable commodities in outlying The Diamond Development Initiative (DDI) areas, there are policy, technical, financial, that was recently formed by De Beers, Global social and institutional obstacles to all of Witness and Partnership Africa Canada clear- these attempts.25 ly recognizes that the problems associated Smillie is undoubtedly right to put the with alluvial diamonds are complex and problem baldly: ‘Ultimately the most impor- must be addressed at the level of the miner if tant issue is the development of free and diamonds are to move from being a source of open access to markets, closing the distance insecurity to a driver of development. The between the digger and the market, and focus of the DDI must be to make the legal reducing the barriers to digger participation market for diamonds secure and attractive in the formal economy (e.g., the cost and dif- enough that artisanal miners are incentivized
24 Ibid., p. 5. 25 Ibid., p. 6. 26 T Alpha-Kpetewama, ‘Integrated Diamond Management Scheme in Sierra Leone’, October 13, 2004. Presentation at the 4th CASM Annual General Meaning and Learning Event. Found at http://www.casmsite.org/Documents/15- Colombo-Kpetuwama.pdf
34 Diamonds and Development
to sell their diamonds openly to legitimate conflicts, to confront, but they are tractable. marketers. Certainly, offering the miners a Indeed, it is important to finally end the better price is an important, and probably image of diamond smugglers who are imper- necessary, step if alluvial mining is to be reg- vious to government control. Diamond ularized. However, it is also clear that the smuggling emerges and endures because obstacles created by land shortages must be governments are too weak, or not interested addressed. Finally, governments should not enough, to create the basic infrastructure to confuse the legalization of mining with the allow legal trading to occur. The new inter- regulation of mining. Indeed, legalization national emphasis on helping countries legal- seems to have been stifled in some cases ize and regularize their diamond production because government regulation is so cumber- is an opportunity to finally break the tie some that miners revert to illegal markets. between diamonds and conflict in West and These are difficult problems for govern- Central Africa. ments, especially those emerging from civil
35 Paul Collier
Chapter 6
The Role of External Tools to Manage African Conflict Steve Stead
Rear Admiral (JG) S.K. Stead is the Director This is also applicable when neighbouring Capability Development at Joint Operations countries discover a resource that extends HQ, South African National Defence Force either side of the common border. There is a tendency to think of resources only in their primary form, but this is usually not the case. For the purpose of this paper, a resource also Introduction connotes political power which permits Africa remains a turbulent environment. It is access to some alternative objective. perceived as a continent in continuous con- Contributing to the subject of competition flict, although there are countries and regions for resources is the excess of demand over where destructive instability is absent. supply for arable land and increasingly scarce Democracy in Africa has not brought an end water and competing historical claims to the to conflict. Factors fuelling the continuation same territories.2 Due to their minimal polit- of violence are complex and not fully under- ical influence, local communities neither stood by the continent’s critics.1 As has been share in nor derive any benefit from resource stated in countless articles, most causes of exploitation, which leads to growing intoler- conflict are domestic; yet closer study reveals ance of authority and a culture of disobedi- that in a majority of cases, the impact extends ence based on opposing visions of society into adjacent areas. This complicates the sim- and the state. plistic approach of addressing the problem in The influence of external actors further terms of a ‘target’ or individual country, or complicates the situation. The presence of indeed a specific sector within a country. In external actors is driven primarily by finan- the process of determining whether to cial interest, and ethics and humanitarian become involved, and if so, what actions considerations invariably play a secondary should be considered, a comprehensive analy- role. The local direct beneficiaries of sis of the contributory factors will reveal the resource exploitation are those in a position most appropriate approach. to control or regulate access to the resources in question, thereby strengthening the level of co-operation between the two. This cre- Factors Contributing to Conflict in Africa ates an internal and external dimension to Conflict in Africa is fuelled primarily by com- conflict-resolution initiatives. petition for resources. In a ‘preferred sce- Statistics reveal that since 1960 there nario’ this would be restricted to two or have been over eighty undemocratic changes more groups within a country claiming the of government in Africa.3 Unfortunately, resources in question or at least part of them. undemocratic changes are usually accompa-
1 J.M. de Jager, African Defence Challenges in a Global Context, paper presented at the Land Warfare Conference, Brisbane, September 2005 2 Ibid. 3 Africa Institute, Africa at a Glance, 2002
36 The Role of External Tools to Manage African Conflict
nied by violence. This is due, in some mea- investors. Growth, in turn, will generate a sure, to the existence of a ‘winner takes all’ bigger market for the external actors’ attitude with respect to wealth, resources, exports. patronage, power and prestige, amongst oth- Africa’s extractive industry prices and ers. The underlying causes of, or reasons for, demand are on an upswing. Oil is emerging this attitude are not the subject of further as a viable alternative source to the more speculation here, save for accepting it is a fac- established producers (The Middle East, in tor that cannot be ignored – and one that has particular) and could ‘fuel’ the increasing created its own special set of circumstances, demands of the Chinese and Indian which in turn require a specific approach. economies. In addition to the growing What has been evident in the past is an demands of these two countries, there is also unwillingness to relinquish power after the ongoing search by Western states for securing it, and scant regard has been given alternative sources of oil. President Bush has to constitutional legitimacy. More recently, recently alluded to this when referring to the however, there have been more ‘democratic’ United States’ addiction to Middle Eastern approaches to retaining power, such as oil. However, there is a probability that the amending the constitution to allow further present competitive costs will increase, for a terms of office. number of reasons, presenting opportunities Additionally, there is insufficient and challenges that will have to be addressed accountability of leaders, lack of transparen- by the ‘client’ countries before the initiative is cy in regimes, minimal adherence to the rule lost. For example, with the increased income of law, good governance and the internation- derived from the extractive industries comes ally accepted meaning of democratic princi- an increased purchasing power, which trans- ples – for example, the transfer of leadership lates into a potentially important market as through the ballot box – as well as a general indicated earlier. lack of respect for human rights. Certain key factors need to be This rather depressing picture of the addressed to ensure any chance of success: continent has been painted in order to create • Firstly, there is need for the leaders of the environment in which external conflict- an affected country to recognize and management tools can be assessed. accept the benefits of change and implement the changes required. If leaders are faced with the prospect of Why the Interest in Managing Conflict in emerging from the exercise in a worse Africa? position than before, they have no The easy answer is that the international incentive to change. community cannot sit back and ignore the • Secondly, a recognition of who will human suffering that accompanies conflict. benefit from the change. This includes The associated problems of displaced people external and internal actors. These con- and refugees, and their effect on neighbour- stitute the focal point of the conflict- ing countries, generate further pressure for management effort. intervention and a solution to the causes of • Thirdly, a careful assessment of what the instability. What cannot be ignored are should and what can be changed. the economic interests of external players. Stability and security will provide the requi- There has been an increased focus on Africa site environment to stimulate a concentra- over the last eighteen months. The opportu- tion on productivity and growth, leading to a nities for African countries and, by implica- greater potential for return on investment tion, their leaders to benefit from interna- and subsequent financial benefit to the tional assistance have improved. More impor-
37 Steve Stead
tantly, there is a growing understanding meantime, it could result in wasted efforts among donor countries that Africa would and a forced return to negotiation. Given the like to be the architect and executor of any inability of a number of governments in programmes to utilize its resources better in Africa to exercise effective control beyond order to improve continental security, there- the capitals, any initiative would have to take by giving momentum to its development. this into consideration in favour of some form of multilateral discussions. Additionally, in a situation where more than one group or Factors Against External Influence movement is involved in the conflict, there is As indicated above, the beneficiaries will play a proven ability to form and break coalitions a role for or against change. On one side are at regular intervals – which should one the internal actors: the incumbent leadership approach? and those presently excluded from the deci- A final consideration is the impact of sion-making process and therefore not deriv- external actors on neighbouring states and ing any benefit. The latter could be in open their leadership. Inter-state relations can play revolt against the state (armed conflict) or a major role in Africa, and even though the suppressed by the state security apparatus. aim of the programme may be commend- If the leadership feels threatened or able, a reticence may emerge on the part of fears losing control of power, it will be less leaders in the region to support it – e.g., the inclined to consider any change. Additionally, iconic status of President Mugabe as a libera- if it enjoys accompanying benefits of power tion leader in Africa. – e.g., wealth – there is an added incentive to maintain the status quo. Finally, there is another reason for not entertaining the What Constitutes External Tools? prospects of change – the possibility that It is necessary to make a distinction between change could bring about punitive action various categories of conflict: against the previous leadership. • Where the nature of the conflict Any form of pressure will be affected by requires military intervention to sepa- the relative wealth of the country in ques- rate the parties in conflict prior to going tion. If it controls valuable resources – e.g., to the negotiating table. oil – it is less likely that it will be exposed to • Where there is a cessation of hostilities the same level of pressure as a resource-poor as a result of military intervention and country. This is due to the economic interests a process of reconciliation and stability of the countries initiating the changes. The is required. greater their economic interests in the coun- • Where the armed conflict has reached a try in question, the greater the consideration situation of stalemate and the parties given to their political initiatives – i.e., they involved are looking for a way out of will be deterred from applying too much the impasse. pressure. Should they be insistent in their • Where there is potential for resolution efforts, they could find themselves excluded through negotiation and compromise, from economically beneficial activities in the either because the parties in conflict country in question and lose out to their have not resorted to armed confronta- competitors. tion or appear unlikely to, for whatever The other actors to be considered are reason. the potential successors to the current leader- • To these I would like to add the situation ship. If one only deals with the current lead- where the actions of the state infringe ership during conflict-resolution negotiations on the human rights of its citizens, and a transfer of power takes place in the although this is technically not a conflict.
38 The Role of External Tools to Manage African Conflict
At the risk of being contentious, I suggest an international or regional institution, like that ‘influencing is to coercion as regime the UN or the AU. In all probability it will change is to coup d’état’. The legitimacy of include the use of military force. But it is the intervention is invariably subjective. The last category which generates increasing principle of non-intervention in the domestic interest. Because of resistance to direct inter- affairs of sovereign states is endorsed by the vention, formal embargoes or punitive sanc- United Nations.4 Furthermore, the UN tions, however, a more subtle approach specifically prohibits intervention by military appears to be favoured. force.5 In spite of this, a number of cases can be quoted where military intervention by external forces has occurred – e.g., Grenada A Potential Alternative Approach (1983), Gulf War (1990/1), Haiti (1993). There are emerging signs that the ‘subtle Traditionally, these have and can be justified approach’ is indeed having an effect. Granted in terms of Article 51 (response to an armed the examples are apparently unrelated, but attack) and/or Article 42 (authorization by there are three that can be used to support the Security Council to maintain or restore this statement. international peace and security) of the The first is the difficulty being experi- Charter. Additionally, it is accepted in inter- enced by Coalition forces in Iraq. The strate- national law that certain reasons constitute gic premise of removing one leader by mili- justification for states, regional and/or inter- tary intervention and simply installing a national organizations to intervene in the democracy (‘regime change vs. coup d’état’), affairs of another state. They are: a state’s appears more problematic today than it did right to protect its citizens abroad; to assist three years ago and has been compounded people in their right to self-determination; as by what US Secretary of State Condoleezza a result of a state formally consenting anoth- Rice referred to as ‘thousands of tactical er party to intervene; and humanitarian errors’. intervention.6 The last reason has been the The second is the reported feelers put subject of some controversy as its propo- out to the British Government by the nents argue that the interests of humanity Mugabe regime in an effort to find the means outweigh the prohibition on intervention.7 to end the politically-manufactured econom- Historically, it is perceived that non-mil- ic crisis that is crippling Zimbabwe. If noth- itary approaches to defusing conflicts and ing else, this initiative illustrates the extent to promoting investment have a very limited which the ‘smart sanctions’ implemented by likelihood of succeeding. A reticence to look the European Union and the United States past this mindset could jeopardize the use of against Harare have hurt both the pride and a potentially effective conflict-management the personal pockets of the ruling elite – and tool. perhaps how much even the most vagrant Much has been written on the first four and autistic regime desires to be accepted by categories, and much will still be written. In the international community. most of these cases there will be some form The third is the apparent effectiveness of direct intervention, supported by the of the sanctions regime against the North international community and sanctioned by Korean Government. It is assumed that
4 UN, The Charter of the United Nations, Article 2. 5 UN, The Charter of the United Nations, Article 2(4). 6 G. Barrie, ‘South Africa’s forcible intervention in Lesotho’, op cit. p 47. 7 R. Gueli, ‘Humanitarian Intervention in Africa: Towards a New Posture’, SA Journal of Military Studies (Vol. 32, No. 1).
39 Steve Stead
Washington, instead of following the path of where the emphasis is on diplomacy and regime change or military intervention policing rather than military action. I sug- against Pyongyang on account of its nuclear gest, however, that such pressure could weapons programme, decided to implement potentially be highly influential in the resolu- a range of financial measures with the objec- tion of conflict in Africa. tive of closing down the conduits through which Kim Jong-Il’s regime finances itself. The threat of blacklisting has influenced Factors Contributing to Success financial intermediaries, including a Macau- Among the many arguments for the suc- based bank, to cut off Kim’s accounts and cessful resolution of conflict in Africa, three access to his network of black-market activi- can be extracted to afford a high level of ties – including heroin trafficking, circulation confidence in making peace through of counterfeit hundred-dollar bills, sale of negotiation: missile technology, manufacture of fake ciga- • Firstly, recognition by the parties rettes and Viagra. Japan has reportedly fol- involved that more can be gained from lowed this example, affecting activities esti- finding a mutually beneficial settlement mated in excess of $500 million that have a than from continuing the conflict. This direct result on the regime’s inner circle. The normally happens when fighting has effectiveness of this campaign can be deter- reached a stalemate and neither side is mined by Pyongyang’s declaration that the able, in the foreseeable future and with- lifting of the measures was a precondition for out unacceptable cost, to achieve a mil- the resumption of the stalled Six-Party itary victory. Talks.8 • Secondly, recognition of this state of To these can be added international affairs must be shared by the interna- agreements that seek to achieve the same tional community, resulting in no other ends but through formalized co-operation. alternative but political negotiation. The Kimberley Process Certification Scheme This was in all probability the case in for Rough Diamonds is an example that Zimbabwe circa 1980 and in South binds participants to contribute to measures Africa a decade later. Additionally, taken by the UN Security Council under regional states have to be prepared to Chapter VII of the Charter to maintain inter- take decisive action against insurgents national peace and security. Having accepted and those who would seek to derail the that trade in rough diamonds is fuelling cer- peace process. tain conflicts – the so-called ‘conflict • Lastly, and perhaps crucially, it is up to diamonds’ – it is directed at the control of leaders with strategic insight to initiate trade and processing to ‘break the link the moves, backed by competent and between certain illicit transactions of rough capable supporters who can negotiate a diamonds and such conflicts.’9 future that is acceptable to all the par- The pressure exerted through the ties involved. The need for external threat and application of directed measures mediation remains a distinct possibility to target specific elements, and thereby bring – for example, in Burundi and the about change or resolve conflict, can be Democratic Republic of Congo – but viewed as a Clausewitzian tool towards a success is premised on the presence of wider political end, albeit a non-violent one, indigenous leadership to carry out the
8 ‘Pocketbook Policing’, Newsweek, 10–17 April 2006, p 32–34. 9 Kimberley Process Working Document, Essential Elements of an International Scheme of Certification for Rough Diamonds, July 2001
40 The Role of External Tools to Manage African Conflict
task of political salesmanship and rec- nerships.’10 What is remarkable is that a state- onciliation. ment of this kind was made by an African leader in the presence of heads of state and The need for such prerequisites may help to senior cabinet ministers. explain why the process of negotiated politi- The military option will remain for the cal settlement has been so problematic in foreseeable future because of the nature of many African countries and further afield – the problem. However, the role of militaries the Middle East, for example, where the exis- in getting the conflict to the point of negoti- tential questions surrounding the state of ation should not be overlooked. Do conflicts Israel remain both problematic and largely have to reach a tipping point for negotiations unanswered to much of the Arab popula- to be an effective or viable alternative, or are tions of the region. there key tools that can be employed to make success more likely? I suggest that, given the particular nature of the conflict, certain key Conclusion tools can be employed to achieve success. With the increasing will of African states to The problem of amnesty is likely to be succeed in ‘self-help peacekeeping’ – i.e. raised in most negotiations. This is a subject major power funding with African commit- that must be negotiated and agreed to by the ment/deployment, under the auspices of the parties involved. External guidance should be African Union – there is an opportunity to given with circumspection as no two con- encourage and support any initiative towards flicts are generated by the same causes. good governance and stability. The major An aspect for consideration is the powers are prepared to make a financial response given to the African journalist commitment in order to create a financial Diana Games when she asked a colleague in benefit. They are generally not prepared to Uganda what actions should be taken by the become physically and directly involved in Ugandan Government against the Lord’s the continent, which should not be seen as a Resistance Army. The Ugandan Army had drawback. This approach, combined with the been tasked to quell the bandits, giving the African will to help itself, can contribute to rebels a sense that their cause was one of African self-esteem. national political importance, carrying some A different view must be taken toward cachet. The response was that sending in the Africa. There has been a call for less aid to police, rather than the army, would psycho- Africa – the principle of not giving a man logically make it clear that they were com- food, but rather teaching him to fish – which mon criminals who needed to be arrested has been met with mixed responses. At the and removed from civilized society.11 2006 World Economic Forum on Africa, held Success is a long-term objective. It is in Cape Town, the Nigerian Governor of the difficult to judge in the short term, as indica- Central Bank, Charles Soludo, stated that tors of progress are minimal; patience, ‘Foreign aid is simply prolonging the understanding and appreciation of the situa- inevitable demise of some unviable African tion are required. But the elements that can states and the sooner they collapse the quick- contribute to success should be put in place er the continent’s leaders will get together to now and encouraged to grow. form sustainable political and economic part-
10 Tom Robbins, ‘Aid prolongs “death of unviable states”’, Sunday Independent, 4 June 2006. 11 Diana Games, Business Day, 26 May 2006
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