Maximising returns from natural resources – A solution for Africa
AP Photo/Tsvangirayi Mukwazhi-File
Africa has long been touted as the next global economic frontier, largely because of its abundant natural resources and unprecedented growth during the past few years.
Many economic pundits say the economy of Africa will continue to grow faster than the economies of other continents with some countries identified among the fastest-growing economies in the world.
The continent is growing faster than the economies of every other continent and some African countries have a yearly gain in gross domestic product of more than 6 percent.
With the resources available for economic development, Africa has the ability to be the next global dominant economic engine and the development centre.
The continent remains the biggest source of minerals such as diamonds, lithium, uranium, gold, vanadium, manganese, platinum and cobalt despite.
Africa has about half of the world’s gold reserves, a third of its diamonds and has a larger share of oil reserves.
However, although Africa is endowed with vast natural resources that are key to economic development, some of the countries are rated amongst the poorest in the world.
With such potential in natural resources, one of the most interesting eye opening questions that Africans continue to ask is why the continent remains poor regardless of the vast resources that it holds.
For example, Nigeria is ranked amongst some of the poorest nations in the world which is paradox considering it is the tenth largest oil producing nation in the world.
Most of the ‘exploration’ of African resources has in most cases created problems for the continent instead of solutions which address the problems.
Several situations and answers have been used to explain the trend, ranging from alleged corruption to political conflicts but one area that the world continues to ignore is that African resources continue to be exploited by some of the multi-national corporations disguised as investment partnerships.
The exploitation by wealthy nations is so severe as they take the wealth from those resources back to their already wealthy countries and leave close to nothing for African states.
A documentary by Danish filmmaker Christoffer Guldbrandsen, Stealing Africa, reveals how multi-national companies are making a fortune out of African resources but contributing little to the development of the host country.
A case study presented in the documentary is that of one Swiss company, Glencore which is making billions from copper mining in Zambia while the country remains one of the poorest in the world.
The exploitation has gone for many years without the world questioning the neo-colonialism aspect of exploration of African sources of wealth by these multinational corporations.
Very few African countries process their own raw materials, with the bulk of the value-addition taking place elsewhere and benefiting others.
Due to the absence of processing industries in Africa, billions in dollars of potential revenue that can be used to positively change the continent continue to be lost to the ‘industrialised’ and developed nations.
The African Progress Report 2013 states that Africa is exporting predominantly unprocessed natural resources and using the revenues to import consumer and agricultural goods, many of which should be produced locally.
With hundreds of years of the mining in the continent, measures have not been put in place to ensure that all the production processes where value addition takes place is done on the source.
The mining sector best explains how Africans are failing to harness their resources for their own development.
For example Zimbabwe has been the largest producer of lithium in Africa over the last 60 years and is estimated that it has over 11 million tonnes of caesium – petalite resource, making it the largest known such deposit in the world.
Lithium and its compounds have a number of industrial applications, including glass and ceramics and, increasingly popular, lithium-ion batteries.
This therefore means that with the rising demand of lithium-ion batteries for cell phones and other appliance in the world, Zimbabwe has the potential to make billions of dollars if the processing of the mineral was done in the country to produce a much expensive battery that the ore.
Without the processing factors the result is that Zimbabwe is importing its value added products losing a millions of dollars.
South Africa and Zimbabwe are amongst the top producers of platinum and the two combined have more than 70 percent of world reserves.
Depending on the type of platinum mined, the mineral has many uses including producing catalytic converters in automobile exhaust systems, bushings for making glass fibres used in fibre-reinforced plastic, electrical contacts, capacitors, conductive, cancer drugs and jewellery.
Africa has also been playing a huge part in the supply of crude oil to the world. Nigeria, Angola, Algeria, Libya and DRC are amongst the top producers in the world but the price of oil and related fuels remains high in the continent.
Natural resources continue to be discovered in Africa every year. The discoveries of oil, gas and other natural resources in Malawi, Mozambique, Namibia and Tanzania is a sign that measures must be put in place for Africans to benefit from their resources.
In addition to possessing enviable quantities of platinum, gold and diamonds, as well as significant amounts of other commodities, the African continent has its fair share of uranium. Niger is the world’s fourth-ranking producer of uranium.
Among other uses, uranium has the potential to produce vast amounts of nuclear energy that is needed due to the rise in demand for energy across the continent.
If the future Africa is going to take its rightful place among the superpowers of the world and leave the realm of poverty then this is the time for policy makers to ensure that Africa regains its value from its resources.
The solution to channel natural resources for betterment of the continent lies in effective and equitable stewardship of Africa’s natural resource wealth which could transform the continent.
Former Secretary-General of the United Nations, Kofi Anna, in the Africa Progress Report 2013 said there is greater need for African governments to monitor their resources for the benefit of the people.
“African governments must rise to the challenges posed by fiscal policy, tax reform and the development of industrial policies. They must manage their countries’ oil, gas and mining resources efficiently and share revenues fairly,” he said.
There is also need to revisit the idea behind Africa Mining Vision (AMV) and ensure the operationalization of the African Minerals Development Centre (AMDC) which was formed to provide strategic operational support for the Vision and its Action Plan.
The Africa Mining Vision was adopted by Heads of State at AU summit in 2009 in which leaders agreed that Africa must responsible in tackling the paradox of great mineral wealth existing side by side with pervasive poverty.