Committing to natural resource transparency in Africa pays
How can Chinese investments and aid for Africa be leveraged to help more kids can get vaccinated, make anti-malarial bed nets more available, achieve food security for families and ensure that more African youth gain employment?
There are two particularly important sectors to consider when asking this question – investments in natural resource extraction (i.e. hydrocarbons, minerals) and in agriculture.
On natural resources, the global momentum is towards improving the transparency and accountability of the sector. Last month American regulators released final rules that will mean US-listed oil, gas and mining companies will have to “publish what they pay” governments around the world for the rights to extract natural resources. The European Union is set to implement a similar law in the coming months, with the next hurdle being a key parliamentary vote on 18 September. This is historic and potentially a game-changer as over 70% of listed extractive companies will soon be far more transparent in their financial transactions with governments. Markets will function better and citizens will no longer be in the dark.
The next question is whether China will agree to similar measures. Conventional wisdom says this will be tough. But that is too simplistic. China’s relationship with Africa is evolving and China is quickly realizing the benefits that will accrue if Chinese investments are better communicated, especially to African citizens.
Openness and accountability do not need to be feared – they are essential components of a strong social contract to operate. Furthermore, Chinese companies don’t need opacity to win contracts. They can win tenders on the strength of their experience and expertise. Indeed, in the extractives sector, as many Chinese companies are listed on the New York or European stock exchanges they will shortly be disclosing information about payments to governments. Hong Kong already has a similar requirement for newly listing companies.
While the global playing field is being levelled, there will also be pressure nationally for African countries to demand that non-US or EU-listed companies operate at a similarly transparent level. It is essential that civil society partners within resource-rich but developing countries are supported in this endeavour, and in their work using the new data to hold their governments to account. Get all this right and the annual revenues from extractives often far exceed aid and could be fantastic financing for Africa’s fight against extreme poverty.
On agriculture, we’ve all read about the latest drought and food price concerns, part of a longer term structural food shortage faced by the world as the emerging nation’s middle classes demand Western standards of consumption. Africa can be the supplier of this food and more than feed its own population at the same time, with the right investment. The continent has the largest area of uncultivated arable land in the world.
The Chinese and others are investing in this potential. But like the extractives investments, these must be done transparently so local citizens are party to the investment and reaping its benefits. China has great experience in boosting agricultural productivity to fight hunger and poverty, and this could be shared as part of this responsible aid and investment programme.
This post first appeared on the World Economic Forum’s Forum: Blog
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