Month: November 2008

Sharing of Wealth from Natural Resources: Experience of Developing Countries

This paper provides an overview of the sharing of wealth from natural resources in Africa. It explores the implications of this sharing of wealth especially for local communities who live next to or own these resources. It examines wealth sharing for both renewable and non-renewable natural resources. Due to the diversity of natural resources, it is not possible to cover all areas; rather this paper will explore selected examples (i.e. parks and conservation areas, forests and trees, fossil fuels and minerals). Suggestions on how African governments and local communities, as well as local and international civil society, can improve the sharing of natural resources for citizens are provided.

Africa is unarguably rich in natural resources. Natural resources are naturally occurring substances that are considered valuable in their relatively unmodified (natural) form. A natural resource’s value rests in the amount and extractability of the material available and the demand for it. Natural resources are mostly classified into renewable (e.g. trees and forests) and non-renewable resources (e.g. oil, coal, natural gas, diamonds). Some non-renewable resources can be renewable but take an extremely long time to renew. Fossil fuels and minerals, for example, take millions of years to form and so are not practically considered ‘renewable’ and for this paper are considered non-renewable.

Dozens of experts and interested parties, nearly all African, attended the sixth African Resource Bank meeting in November 2008 to focus on the important question of why Africa, blessed with rich natural resources, has failed in most of the continent to turn that advantage into wealth and increase living standards for its people. The tendency of African governments to tightly control natural resources for generating wealth serves to concentrate power and wealth in the hands of government and those who control and therefore facilitates corruption. It also fundamentally weakens the political process. Despite its vast natural resources (Refer to Figures 1 and 2 for some of Africa natural resources), people in Africa are characterised and battered by endemic hunger, genocides, wars, corruption, massive underdevelopment and all sorts of untold sufferings. For example, in Sub-Saharan Africa, the share of people living below US$1.25 remained static at around 50 percent between 1981 and 2005. Despite a 4.7 percentage point decline in the share of people in extreme poverty between 1999 and 2004, some 31 percent of Africans will still be living in extreme poverty by 2015. This is a far higher proportion than the Millennium Development Goal target of 23 percent. The number of people living under the US$1.25 line has almost doubled during the same period, from around 200 million to 380 million. Improving economic growth and access to basic services to enable the poor to participate in the growth process in Africa will be necessary if its rate of poverty reduction is to be brought in line with the rest of the world.

Other reasons for Africa’s underdevelopment despite natural resources are because African leaders have failed to tap their natural resources for the benefit of the general public. African governments have failed to come up with a constructive reform powerful enough to shape a better and prosperous future for Africans. The dormant international community cannot be left out of the responsibility for Africa’s underdevelopment and suffering due to historical and contemporary issues of natural resource extraction. Although Africa is rich in natural resources the overwhelming problem lies in the nature of exploitation of resources, especially by developing countries. Foreign corporations and investors make deals with repressive regimes in the country to share the wealth with an elite powerful few, thereby entrenching the dictatorships and autocratic government, or failed corrupt democracies. These rulers, their families’ friends and military supporters are enriched with guarantees of wealth in foreign accounts. However, the vast impoverished populations of these countries remain in a cycle of poverty with a lack of sharing of wealth with nationals.

Natural resources are important aspects of a nation’s power. Africa as a whole has a vast amount of resources compared with other continents and these can allow Africa to be a major force in the international arena if natural resources are properly utilised in a sustainable way. African governments are still unaware that the natural resources of each African state are a source of power for its international relations. If they even are aware of this, then their corruptive tendencies override their national interests. Rather than exploit their natural resources to solve their country problems, African leaders have opted for foreign aid that has plunged the continent in abhorrent debts. This has in most cases not resulted in the sharing of resources with the local communities who live next to and own these natural resources.

The African experience of sharing of wealth from natural resources
Renewable natural resources:

Parks and conservations areas
The history of renewable natural resource plundering by developed countries continues to exhibit impacts today on African nations by tourist operates and African governments who advertise parks and conservation areas for tourism. These have had no benefit for locals even today. For example, in 1905, the native African populations in Tanzania living in the Selous area were forced by colonial masters from their homes and villages were burnt down. About a third of the local population (300 000) died, and as a result, the groundwork was laid for the creation of the Selous Game Reserve. Images of nature in Africa have been crafted to appeal to European preconceptions of Africa as a virtual ‘Garden of Eden’, innocent of the ills of modern civilisation, rather than as a complex and changing environment in which people have actually had to live. To the present day, Africa is still presented in such Edenic terms of its parks. Parks such as the Selous, Serengeti and Arusha in Tanzania are marketed to western tourists as nature in its ‘true’ form. For example, the Selous Game Reserve is promoted by safari operators as being undamaged and unspoilt. Besides serving the interest of the safari operator and the revenue goals of the Tanzanian national government, it has nothing to do with the Selous history. If the Selous, like many other reserves and parks, appears to be ‘wild Africa’, it is the product of extermination and removal of its people by deliberate European strategy in the twentieth century. Unfortunately, the profits generated from these marketed game reserve’s are not shared with local populations who once lived on these lands, which belong to them. Even London-based travel to Tanzania tourism company, Tanzania Odyssey, market the country’s parks as Edenic and generate profit while the locals receive nothing in return. Wildlife authorities and conservationists also seldom consider the cultural significance of natural resources locked within Africa’s sprawling game parks and reserves prior to enforcing laws that exclude indigenous communities from them. Sacred forest shrines and animal totems of immense value to the Samburu, Maasai and Taveta peoples of Kenya are fenced off and access is limited to the hordes of insensitive tourists who frequent the country’s parks.

Forests and trees
Due to climate change in developed nations, this is leading to an increase in exploitation of renewable natural resources and abuse of the local populations which own them. The Democratic Republic of Congo (DRC) contains the world’s second largest tropical rainforest expanse. International economic forces have placed a growing demand for natural resources. Unfortunately, widespread regional poverty is still common. This lack of sharing of wealth from the rainforest is, in turn, putting poverty stricken communities to place further pressures on the forests, wildlife and freshwater areas of the Congo Basin. Current patterns of resource exploitation and infrastructure development across the region could result in as much as 70% of remaining forest being lost by 2040. Wealth extraction from renewable natural resources and a lack of sharing with locals are also on the increase as developed countries aim to secure carbon credits due to their pollution and contribution to climate change. Example, a new World Rainforest Movement report entitled ‘A funny place to store carbon’ documents human rights abuses at Mount Elgon National Park in east Uganda, where the Dutch Face Foundation has been planting carbon ‘offset’ trees since 1994. The report exposes how villagers living along the boundary of the park have been beaten and shot at, have been barred from their land and have seen their livestock confiscated by armed park rangers guarding the ‘carbon trees’ inside the National Park. Clearly, a lack of transparency, partnerships and accountability to locals will not result in equitable sharing of wealth, but exploitation of African environments and human rights abuses.

Non-renewable natural resources
Fossil fuels and minerals
The demand for non-renewable natural resources (i.e. fossil fuels and minerals) is high worldwide due to its scarcity. With the peak in the world’s oil resources fast approaching the risks of competing fossil fuel exploitation and depletion are set to exacerbate inequalities within Africa nation-states and between developed nations and Africa. Natural non-renewable resources exploitation has been a problem in African countries leading to human rights abuse of local populations and a lack of equitable resource wealth distribution. For example, Nigeria’s oil-rich southern delta region has witnessed repeated armed clashes amongst local residents, dissident groups, the military and police. Fighting over wealth from natural resources in the region has claimed many lives. Shell (i.e. Royal Dutch Shell Group) and the Nigerian military government are united in their continuing violent assault of indigenous peoples (i.e. the Ogoni people) and the environment. Considering that oil reserves have also been discovered in Uganda’s Lake Albert region, it is it is questionable whether benefits of this natural resource will be shared with locals, considering that recent reports indicate that the Ugandan government has asked Nigeria for assistance in developing the countries oil industry.

Other non-renewable natural resource discoveries such as diamonds in Côte d’Ivoire, West Africa have also not been shared with locals, with rebel faction groups controlling a large open-pit diamond mine in the town of Seguela. It is one of several producing diamonds estimated to be worth more than $20 million that have been smuggled into Mali and Ghana to help fund arms purchases, in violation of UN sanctions. Many central governments are unable to fully control the behaviour of their own officials and employees. With large sums of money involved, armed factions and smugglers can often pay off ministers, licensing authorities, customs officers and border guards. This leads to a lack of sharing the wealth with local populations living next to natural resources. Mbuji-Mayi in central DRC is sometimes called the “diamond capital of the world.” But the city itself is little more than a slum. Its province, Kasai Oriental, has high rates of illiteracy and infant mortality, it lacks electricity and 60 percent of its children under five suffer malnutrition. Meanwhile, a few Congolese and foreign diamond merchants display unimaginable wealth. Such inequities contribute greatly to social and political tensions across Africa, and make it easier for armed groups to mobilise local supporters. Alluvial diamonds are seen as an especially strong risk factor in predicting civil war. As documented by numerous journalistic reports and scholarly case studies, alluvial diamonds have indeed played a central role in some of the most high-profile civil wars in contemporary Africa (e.g. Sierra Leone, Angola, Congo, and Liberia). Moreover, a recent comparative study found that countries that produce alluvial diamonds had the highest civil war rate in the 1990s among resource-rich countries. Because of their strong association with civil war, alluvial diamonds have been vividly described as “blood diamonds” and the “ultimate loot.” Unfortunately, sharing of wealth from non-renewable fossil fuels extraction has been less successful than renewable natural resource wealth sharing.

Community-based natural resource management (CBNRM): The case of Namibia renewable resources
To ensure equitable distribution of natural resources, a CBNRM strategy is important for equal sharing of resources. CBNRM is based on the recognition that local people must have the power to decide over their natural resources in order to encourage sustainable development. Namibia’s National CBNRM Programme is a joint venture between Government and non-government institutions, communities, community-based organisations and development partners. The programme aims to provide incentives to communities to manage and use wildlife and other natural resources in sustainable and productive ways. It does this by promoting three closely related approaches which include a natural resource management and conservation program, a rural development program which creates opportunities for enterprise development and income generation for locals, and an empowerment and capacity building programme to assist communities and local institutions to develop skills and experience for sustainable develop and pro-actively pilot their own futures. The idea of a national CBNRM support structure emerged in the early 1990s, through the efforts of the Living in a Finite Environment (LIFE) Programme. Several partners, including the Ministry of Environment and Tourism as lead agent, NGOs, donors, local and traditional authorities and communities, agreed to initiate a CBNRM programme. According to the Ministry of Environment and Tourism on CBNRM, in 2000, $3.5 million was generated through CBNRM activities, with the largest amount earned from community owned tourism. However, CBNRM is not unique to Namibia. There are CBNRM programmes in most southern African countries, including CAMPFIRE in Zimbabwe and ADMADE in Zambia. Although each country has worked out its own model for CBNRM, all of them are based on the idea that a resource is likely to be used in a sustainable manner if it is seen as valuable, and if landholders have the exclusive rights to use, benefit from and manage the resource.

Ways forward to improve sharing of natural resources in Africa
Africans and their international partners are focusing increasingly on ways to break the links between conflict and natural wealth. Experts from representatives of African governments, the UN and other regional and international organisations, civil society groups, academics and the private sector met in Cairo, Egypt, in June 2006 to discuss natural resource conflicts. The group recommended measures to strengthen international and national controls to prevent natural resources from financing military factions. They suggested steps to reduce domestic conflicts over access to natural wealth, including “responsible, just and economically productive resource management” by African governments, with “equitable distribution of wealth to all stakeholders, in particular, local communities.” Even if governments are able to manage their natural resources more transparently and effectively, that will have only a limited impact if the benefits are not also shared more widely within African societies. Paradoxically, many areas that have plentiful oil, diamonds or other minerals are also extremely impoverished. The group strongly urged African governments and extraction industries to ensure that a greater share of natural resource wealth is used for social services and development programmes nationally, as well as to directly benefit local communities.

The United Nations Non-Governmental Liaison Service has made a number of recommendations for redressing the imbalances associated with natural resources exploitation that does not benefit locals. Some of these have included reparations for lost resources, with former imperial and colonial powers providing compensation for the natural resources that were mined, looted and forcibly wrested from Africa (i.e. minerals, tropical timber, ivory, game trophies and products of Africa’s once-rich soils). It is insensible to talk of sustainable development in a region whose resource base has been mined to unsustainable levels by insatiable external powers. African peoples, NGOs, governments and the international NGO community should institute legal proceedings in the International Court of Justice to seek redress and compensation for these stolen resources. There is also a need to control of resource exploitation, with African countries forming Natural Resource Cartels to control and manage the exploitation of Africa’s resources and to ensure the protection of Africa’s interests via resisting attempts to globalise Africa’s biological resources.

There is also a need to review policies and laws for governing the conservation, utilisation and management of natural resources in Africa. This must include discarding those that inhibit and prohibit the control and participation of local communities in the conservation, management and utilisation of natural resources, and protecting the cultural norms of Africa’s ethnic nationalities that pertain to the conservation and management of natural resources in the region. There also needs to be a strong need for the local management of resources. NGOs and development agencies working in Africa must identify and promote community-based strategies that integrate local indigenous knowledge into natural resources conservation and management. Local people, the ultimate owners and guardians of natural resources, must be the direct beneficiaries of the income that accrues from the exploitation of resources by, sharing collected revenues from wildlife reserves through tourism; integrating them into resource management and control committees at local and national levels; eliminating middlemen and processes that reduce income from the exploitation of natural resources.

Finally, it is important that African countries rich in natural resources introduce Natural Wealth Accounts and move away from Natural Resource Rents. Natural resources generate what economists term ‘rents’ meaning profits that are much higher than the minimum level needed to keep the activity going. Natural resource rents are a ‘honey pot’ where politics comes to be about the contest for control of these revenues. This produces a politics of corruption, aided and abetted by foreign corporate behaviour and sometimes directly a politics of violence. Natural resource rents increase the risk of war is through the detachment of government because resource-rich governments do not need significant other tax revenues they become detached from their electorates. In most societies, because electors have to pay high taxes, they scrutinise the government to see how it uses their money. Natural Wealth Accounts is a system in which the income from natural resources exploitation is given directly to citizens, and which is then only partially collected by the government in the form of individual taxes. While natural resource rents seem to have corrosive effects on government, tax revenues do not. The information effect is that the proposed system equips the public with a better understanding of the government’s revenue stream from natural resources. The potential benefits of this income effect are great, especially for the poor, who would immediately enjoy a much larger disposable income.

Leonard, L. (2008) Sharing of wealth from natural resources: Experience from developing countries, Ugandan Parliamentary briefing, Royal African Society, United Kingdom, 27 November.