Last week’s report from Kofi Annan’s Africa Progress Panel has brought to light the unfairness of recent resource extraction contracts in the Democratic Republic of Congo. In doing so, it has unveiled something of much broader significance both for Africa and the Group of Eight.
The commodity supercycle of high prices and bumper profits for the mining industry triggered a decade of discovery in Africa, a region which had been only lightly prospected. Many countries are now bringing discoveries on-stream: copper in DRC and Zambia, oil in Kenya and Uganda, gas in Mozambique and Tanzania, iron ore in Guinea and Sierra Leone. Unless commodity prices tank, Africa will now benefit from rising extraction. But while this process has the potential for Africa to self-finance transformative development, it can easily prove to be a missed opportunity of tragic proportions. Harnessing resource wealth requires a chain of decisions to go right, of which the most fundamental is to capture revenues for society. As reported in the Financial Times last week, the antics of Dan Gertler in DRC – as with Beny Steinmetz in Guinea – demonstrate that some things went drastically wrong during that decade of discovery. Africa has been parted from its resource wealth for a small fraction of its true value.
In trying to capture fair value, African governments labour under two crippling burdens. Asymmetric information between African authorities and companies severely disadvantages African negotiators. Worse, those negotiators cannot be effectively supervised, inviting opportunities for bribery. For responsible governments, and responsible companies, these burdens are intolerable. Asymmetries can be reduced by pre-negotiation training, and by flushing out information through structured competition such as well-conducted auctions. Opportunities for bribery can be curtailed by corporate transparency.