Across Africa, oil, gas and minerals are being discoveredmore often than ever before. Nowhere is the global commodities boom being felt moreacutely. Over the next decade, billions of dollars will flow into countriespreviously starved of financial capital. Used wisely, these natural resourcerevenues could lead to sustainable economic growth, new jobs and investments inhealth, education and infrastructure. But sadly, history teaches us that a moredestructive path is likely – conflict, spiraling inequality, corruption andenvironmental disasters are far more common consequences of resource bonanzas.The cliche remains true: Striking oil is as much a curse as a blessing.
There are no easy answers to this problem. It can only betackled with global cooperation among private sector leaders in the extractiveindustries, African leaders in government and civil society. The ultimate goalis a transparent and accountable sector-generating financial firepower thatwill enable countries that have previously lagged behind to accelerate rapidlytoward the Millennium Development Goals.
The good news is that momentum is building behind thisobjective, and from an unlikely source. Financial regulators in the United Statesruled on Aug. 22 that all US-listed oil, gas and mining companies will have topublish all the payments they make to governments, broken down to the level ofindividual projects.
This historic implementation of the Cardin-Lugar amendmentof the Dodd-Frank Act passed by Congress two years ago will open some of theworld’s most opaque financial dealings to public scrutiny. The challenge now isto bring similar legislation to other jurisdictions, starting in the EuropeanUnion, where policymakers will vote on new transparency laws next week. Fromthere, African governments must pass their own reforms. The benefits will behuge.
First, citizens will be empowered with the information theyneed to hold government and companies to account for the money made fromnatural resources. This is not an abstract concept, as some have suggested. Aformer World Bank vice president for Africa, Dr. Oby Ezekwesili, estimates thatNigeria has had at least $400 billion of its oil revenue stolen or misspentsince independence in 1960. It is vital that countries with newly discoveredoil reserves, like Ghana, Kenya and Uganda, do not suffer the same fate.
Putting more information into the public domain makes it harderfor those with bad intentions to profit from secrecy. Those with nothing tohide are not afraid of greater scrutiny – which is why many resource-richcountries and companies have adopted the complementary voluntary standards ofthe Extractive Industries Transparency Initiative.
Greater transparency will also improve the business climate.The politics around natural resources tends to be fractious and debilitating.The recent violence at the Marikana mine in South Africa show what happens whentrust is in short supply at the local level. The east of the DemocraticRepublic of the Congo is an example of a whole region affected bymineral-fueled insecurity. Concerned communities in northern Kenya send asignal of caution to the developers of newly found oil and gas.
Of course, transparency alone cannot solve complexconflicts, but without it the hope of resolution is dramatically diminished. Itis in the interests of companies to support an atmosphere in which politicalrisk is minimized, rumors and innuendo around revenues are replaced with fact,and the most responsible companies are rewarded with the contracts theydeserve.
U.S. leadership on this issue should be the start, not theend, of efforts to break the resource curse. Europe’s proposed new transparencylegislation would require another swath of companies to publish what they pay –but if it is to be effective, a number of loopholes and exemptions should betightened up before it makes the statute book.
Most seriously, the proposed European law includes anexemption for autocrats who pass laws to prevent financial disclosure. Thislogic was explicitly rejected by the U.S. regulator and should be removed inEurope. It is also essential to require disclosure at the level of individualprojects, rather than the national level, which some European countries havesuggested. Local communities have the right to know what the mines and oilwells in their neighborhoods are contributing to the economy.
Beyond Europe, the G-20 should step up negotiations to ensurethat companies from emerging economies are also required to disclose theirpayments. Given their rapidly growing presence in Africa, this is important tosecure a truly global standard.
In the meantime, African governments should legislate at thenational level so that all companies competing for their contracts have similarexpectations – a requirement that is a central part of the Africa Mining Visionendorsed by the African Union in 2009. It is also necessary to step up supportto civil society groups that aim to hold governments accountable, so they canuse and interpret the data this transparency boom will release.
Some African countries have successfully usednatural-resource revenue for the public good. Botswana now has middle-incomestatus, and among countries with newly discovered oil, Ghana has madeencouraging moves toward publishing all present and future oil contracts. Butthe resource curse remains hard to shake off. The new global transparencymomentum gives African countries a genuine chance to escape it once and forall.
Kofi Annan is chairman of the Africa ProgressPanel, former secretary general of the United Nations and Nobel Laureate
