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Africa must use new oil, mineral wealth for people’s benefit-experts

Source: Thomson Reuters Foundation - Thu, 24 Oct 2013 16:12 GMT
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Company representatives stand beside a Porsche at a new Porsche dealership in the heart of Lagos's wealthiest district, Victoria Island, which has one of the world's highest concentrations of millionaires. Picture taken March 14, 2012. REUTERS/Monica Mark
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NAIROBI (Thomson Reuters Foundation) – Multinationals and governments must work to ensure new oil and mineral discoveries across Africa benefit the people of the continent and do not trap them in a ‘resource curse’, academics, campaigners and executives meeting at Oxford University said on Thursday.

Major new oil and mineral discoveries across the continent, from Kenya and Mozambique to Ghana, are leading to increased pressure on both the extracting companies and the host governments to tackle the corruption and capital flight that often accompany the creation of such wealth.

“Ensuring that the proceeds from oil and gas work for the people of Africa requires a new approach both inside and outside of Africa,” said Nic Cheeseman, director of the African Studies Centre at Oxford University.

“How well African countries manage their natural resources over the next decade is the single most important factor that will determine whether or not the continent manages to sustain its fragile economic recovery.”

HUGE NEW FINDS

The ‘resource curse’ describes the fate of many countries which lack strong state institutions to manage lucrative oil and mineral discoveries and whose elites siphon off riches for themselves while the majority grow poorer.

Sub-Saharan Africa has lost $1 billion a week for the past 30 years in illicit financial flows, according to the African Development Bank. Fuel-exporting countries like Nigeria were the worst hit by such outflows of wealth.

“We are at a turning point in genuinely opening the global extractive industries to more scrutiny and cleaning up their tax affairs,” said Winnie Byanyima, executive director Oxfam International. “These huge new finds could mean tens of billions of dollars of taxes to pay for schools and hospitals – but only if this new wealth remains in Africa.”

The issue matters personally to Byanyima, who is Ugandan.

In 2006, some 3.5 billion barrels of oil deposits were discovered along Uganda’s border with the Democratic Republic of Congo. The government aims to start selling this oil by 2016.

On Monday, Human Rights Watch said that Uganda risked falling victim to the resource curse when it launches commercial oil production because its government lacks the political will to fight corruption.

Byanyima praised recent initiatives, such as Ghana’s new petroleum revenue management law and the Economic Community of West African States’ (ECOWAS) development of a regional mining code to protect the rights of local communities.

“At long last we see some solid blueprints being laid out,” she said. “Now we must push for all of these exciting initiatives to be put to work for African people.”

In June, the European Union passed a law compelling oil, gas, mining and logging firms to declare payments of more than 100,000 euros ($130,000) made to governments for natural resources, broken down by country and project, by 2015.

The United States has passed similar legislation, requiring extractives companies listed on the U.S. stock exchange to disclose such payments, but it has been challenged in court.

Oxfam’s chief executive, Mark Goldring, called on Canada to introduce similar legislation. “Foreign companies can’t be expected to fix weak governance – but they can exploit it, and many continue to do exactly that,” he said.

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