Taxing Resources, funding development

Africa is a rich continent. In 2010, the value of natural resources extracted on the African continent was $788 per capita. In comparison, development aid only contributed $30 to the income of the average African.

At the same time, the median income of an African is only $945, suggesting that a large part of the continent’s resource wealth isn’t benefiting the majority of the population. A good example is Equatorial Guinea, a country that has a GDP of $17.7 billion at a population of just 760,000 people, almost exclusively fuelled by oil windfalls. Despite this, 77 percent of the population lives below the national poverty line.

In fact, Africa is estimated to lose between 40 and 80 billion dollars per year to illicit financial flows, e.g. tax evasion, alone. Much of this money probably originates in the resource sector.

For resource rich African countries, answering the question of how to profit more from their natural resources is probably the political challenge with the highest stakes of our time.

The importance of the resource sector for the economic development of Africa will continue to grow in the coming years, thanks to rising prices and new discoveries. “We had a series of major oil and natural gas finds in Africa,” Todd Moss, a senior fellow at the Center for Global Development tells Contributoria. “Basically everybody with a coast has had a discovery.”

The OECD, the African Development Bank and the United Nations Development Programme agree. “With a comparatively high price level remaining for some time and significant expansion of production over the next years,” the organizations write in the 2013 edition of the African Economic Outlook, “Africa faces a window of opportunity to create economic structures that can provide employment and income for all on the back of its resource wealth.”

Read the rest on Contributoria!

Rich Links: Fishing in Namibia and GMOs across Africa

As always, the most interesting links from around the ‘net:

Fishing over drilling in Namibia

Namibia is planning to halt oil and gas companies from carrying out off-shore exploration for part of the year to protect the fishing industry.

This comes on the heels of an earlier memorandum on off-shore mineral exploration. Namibia makes an interesting contrast to other African countries, where the promise of oil often trumps all other concerns.

Why Namibia’s off-shore is under threat | African Mining Brief

GMOs in Africa

IRIN details a new report on the adoption of genetically modified organisms in African agriculture. The report is very positive, as is the article, and gives little consideration to the drawbacks of a GMO-reliant agribusiness:

A recent study published in the journal Food Policy, titled Status of development, regulation and adoption of GM agriculture in Africa, shows that heated debates over safety concerns continue to plague efforts to use GM crop technology to tackle food security problems and poverty.

Is Africa ready for GM? | IRIN

The need for good governance

Since African extractive industries are often shrouded in secrecy and lack clear revenue management and accountability mechanisms, good governance is essential for African countries to properly harness their natural resources for development.

UNCTAD African Oil and Gas Conference Focus on Governance is Spot On | Africa in Focus

Drilling in Western Sahara

Plans by Kosmos Energy and partner Cairn Energy to drill a well next year in a Moroccan-licensed block in the Western Sahara continue to provoke intense interest among oil companies excited by the disputed territory’s offshore potential, as well as political debate among the traditional protagonists.

Oil drilling plan stirs hornets’ nest in Western Sahara | African Arguments

Other stuff:

Rich Links: Oil and Uranium across Africa

Quite a long list of noteworthy reading material this time around:

Falling gold prices lead to job cuts

Mining company AngloGold Ashanti Limited will lay off 400 miners in Ghana, reacting to falling prices for gold on the world market. Gold has fallen by $500 over the last months, coming down from a historic heigh point. The lay-offs in Ghana are the first signs of wider repercussions for gold miners around Africa. Mining Review

Oil – a blessing or a curse?

A series of articles from different media look at the benefits and drawbacks of petroleum exploitation for African societies. AllAfrica/This is Africa | AllAfrica/NewVision | AllAfrica/Deutsche Welle

Uncertain times for Somalia’s oil and gas business

Recent finds bring hope for new revenues for Somalia’s embattled government, but the recent attacks on a Kenyan shopping centre also put the remaining challenges for foreign investment under the spotlight. AllAfrica/Sabahi | Africa Confidential (subscription required)

Uranium mining around Africa

There is a rising interest in uranium mining across Africa. Recent articles look at projects in Tanzania and Botswana. Mining Review | African Mining Brief | AllAfrica/Tanzania Daily News

Petroleum exploitation in central Africa

The Jeune Afrique takes a look at the fortunes of the petroleum industry in central Africa. Jeune Afrique

East African states take stake in Ugandan refinery

The planned refinery project in Uganda, which will be provided with oil from the country’s nascent oil fields, has been given another boost with neighbouring states Kenya, Rwanda, Tanzania and Burundi agreeing to take a 40 per cent stake in the project together with the host country. The remaining 60 per cent will be financed by private companies involved in the exploitation of oil reserves. Engineering News | Africa Energy Intelligence

Benefication laws in Zambia lead to growing backlog for copper stocks

After the Zambian government has enacted laws forcing copper mining companies to process a larger part of their production in the country itself, those companies complain over limited smelting capacities. Stockpiles have been growing, according to the industry and threaten to block operations at the mines. Some observers allege that the bottleneck has been created intentionally by investors, to force the government to loosen the new regulations. Mining Review

Oil theft in Nigeria

A look at the origins and consequences of oil theft in Nigeria. Baobab | the guardian

African Arguments: Converting resource wealth to economic development: what role for ‘local content’?

This article is based on research and interviews conducted at the International Economic Forum on Africa in Paris on 7th October and was published in full on the blog “African Arguments” of the Royal African Society.

Few topics were debated as intensively at the recent International Economic Forum on Africa in Paris as the question of local content in the oil and mining industry. Local content is commonly understood as the share of materials, parts, etc. for the production of a given product that has been produced locally (instead of imported.)

For many African governments, it is the holy grail of economic policy: by finding ways to make investors procure more services, labour and materials from local businesses, the reasoning goes, their countries will benefit from resource endowments multiple times. The investors in turn seem to have accepted the concept of local content as important, but are mainly interested in limiting its potentially negative effects on their line of business.

Mozambican vice-minister of mineral resources Abdul Razak Noormahomed set the tone for the debate when he declared: “We want to increase the local content, because we want as much as possible small and medium level companies to be part of the business, providing goods and services to the big companies. And we are asking the support not only of the international organisations, but also from the companies in order to support our small and medium level enterprises.” Noormahomed went on to underline the need for technical and financial capacity building as areas where international investors are expected to support Mozambican businesses.

Read the rest on African Arguments!

Rich Links: Natural Gas in Tanzania, Nuclear Power in South Africa and More

As always, the best links from around the internet:

New policy on natural gas coming soon in Tanzania

The government of Tanzania is on the verge of passing a new national policy on natural gas exploitation. So far the country has no specific official policy in that sector and the new legislation wants to address specifically the issue of local content. AllAfrica/Tanzania Daily News (2)

South Africa aims for new nuclear power plants

The South African government pushes for the construction of new nuclear power plants to increase the generation of nuclear energy from 1,800 MW to 9,600 MW per year by 2030. Key financial decisions are planned to be taken this financial year. South Africa currently runs the only active nuclear power plant on the African continent and pursues a large nuclear capacity under the label of “clean” and indigenous energy. AllAfrica/SouthAfrica.info

Resources in the DR Congo

A detailed look at the trends and challenges of the natural resources sector in the Democratic Republic of the Congo. Ventures Africa

The dangers of the use mercury in gold mining

Mercury is used by the great majority of artisanal gold miners in Africa, numbering millions, but its use results in dramatic health problems. A new international treaty aims to reduce the amount of mercury used, but changing entrenched practices in local communities will be hard. The Economist

Search for oil kills whales off Madagascar

A sonar system, operated by Exxon Mobile to explore oil fields off the Madagascan coast, is the reason for the death of dozens of melon-headed whales. This is the finding of an independent scientific commission. Global Post

Three alternatives for South Sudanese oil

The governments of South Sudan and Kenya are currently planning the establishment of a new pipeline corridor to transfer Sudanese oil to the Indian Sea at Lamu. This article argues that the better alternatives would be to transfer the oil by either rail or road. AllAfrica/Pambazuka News

High hopes for Rwandan mining sector

The Rwandan government wants the country’s mining exports to triple by 2017. AllAfrica/Rwanda Focus

Rich Links: No Gas in Ghana, No Phosphate in Nambia, But More Oil in Libya

Some worthwhile reading from around the web:

Namibia bans phosphate mining

The Namibian government has declared a moratorium on phosphate mining in coastal waters. This is a reaction to ongoing protests from the fishing industry. The government and mining companies had plans to start exploiting the underwater reserves of phosphate, but mining phosphate at sea has never been done before. Fishermen and their employers — fish is one of Namibia’s most important exports — are afraid of possible negative environmental consequences of the mining endeavour. Mining Review

No gas for Ghana

The gas pipeline delivering natural liquified gas from the Jubilee oil field to several gas power stations in Ghana won’t be ready until 2014. The pipeline was due to go online at the beginning of this year, but the sinking of a ship with supplies and financing problems delayed are delaying completion. Ghana experiences severe power outages since a shipping accident made gas supply from Nigeria unreliable and solving the energy crisis has been a main campaign issue in the recent elections. AllAfrica/The Cronicle

Oil flows again in Libya

About thirty per cent of Libya’s oil production capacity has come back online, after militias opened the valves on an important pipeline in the west of the country. Several militias and regional groups are using oil flows to put the Libyan government under pressure in negotiations over jobs, payment and decentralisation of political power. Libyan oil is mostly exported to southern Europe and the row has led to rising prices on world markets. New York Times