In May 2011, the International Monetary Fund (IMF) published a Working Paper by Burcu Aydin called ‘Ghana: Will It Be Gifted Or Will It Be Cursed?’ (WP/11/104). Oil had just been discovered off the shore of Ghana. This anticipated a bounty of revenue for the country. Aydin asks whether Ghana will face the ‘resource curse’. The resource curse – also known as the Dutch Disease – occurs where revenue from sale of this resource rushes into a country, appreciates the currency and causes a major crisis in other parts of the economy. Looking at 150 middle- and low-income countries, Aydin came up with a strong finding: ‘Results show that there is a poverty trap for poor resource-rich countries due to their low institutional quality’. Bad governance and poor macroeconomic management, Aydin suggests, diminish the possibility for the onrush of revenues from natural resources to enhance a country’s development. There is no mention, in the IMF’s Working Paper, of the other actors in the process – namely, the multinational companies that dominate the natural resource extraction business. The pro-corporate literature explains problems in the resource economy in two ways: 1) poor macroeconomic management that allows revenues to flood the economy and appreciate the currency, 2) bad governance because of corruption and theft by government officials.
- Anglo-American (UK)
- Rio Tinto (Australia)
- Vale (Brazil)
- BHP, formerly BHP Billiton (Australia)
- Barrick Gold (Canada)
- Freeport-McMoran (US)
- Newmont Mining (US)
- Teck (Canada)
- Goldcorp (Canada)
- Alcoa (US)
To ignore the power of these firms that take the vast bulk of the revenue from the resources extracted from the African continent is to miss a key institutional problem faced by the African countries: colonialism. That is, African countries face plunder at a colonial scale, which is to also say that these countries do not have sovereignty over their own resources.
Western, pro-corporate scholarship suffocates the possibilities for a future. There is little space given to the struggles for the people on the continent against the surplus extracted out of their countries and from their labour power. Alien to this entire literature is any debate about an exit from the capitalist relations that structure the resource extraction from the continent. It is in this context that we are interested in the possibilities of resource nationalism or resource sovereignty.
Can resource nationalism or resource sovereignty provide tools around which to build a national-popular collective will against the capitalist depredations of the continent?
To elaborate on these themes of capitalist plunder and resource nationalism, Tricontinental: Institute for Social Research spoke with Gyekye Tanoh, head of the Political Economy Unit at the Third World Network-Africa based in Accra (Ghana).
One of the great scandals of the 21st century is the theft of resources from the African continent. Could you please put that theft in some context?
Africa, from its colonial history to its post-colonial history, has specialised as a source and supplier for raw materials for the rest of the world. Much of the region’s political policy slates continue to be dominated by foreign powers as well as by international financial institutions, such as the World Bank and the International Monetary Fund. History, from slavery and colonialism to the present, has created a landscape where the dominance of foreign companies is immense, more pronounced than in any other part of the world. A defining feature of this dominance is the tremendous power imbalance in which there is an immense influence of corporations to exploit the continent’s labour and resources, to destroy the environment and to dictate policy to the governments. In other countries – let’s say Canada – a corporation is forced to respect certain laws, relatively speaking, regarding environmental regulations, corporate tax legislation and some labour standards. But the Canadian firm in Africa operates without any of these restrictions. What’s good for Canada is not good for Cameroon.
A recent report from the Bank of Ghana offered some shocking statistics. It said that of the $5.2 billion worth of gold exported by foreign-owned mining firms from Ghana, the government received only $68.6 million royalty payments and $18.7 million in corporate income taxes. In other words, the government received a total of less than 1.7% share of the global returns from its own gold. Since these figures grossly under-estimate the value of gold exports, the returns to Ghana would be much less. What’s even more shocking is that – based on the analysis of the Bank of Ghana – the share of the wealth that goes to the communities directly impacted by the mining is 0.11%.
Was this always the case? No doubt that the African continent has been exploited for a very long time, but this particularly aggravated structure of plunder has roots in the period of the debt crisis of the 1980s. Before this, in the era of national liberation, states tried to protect their raw materials and gain better trade agreements. But the debt crisis weakened their bargaining power. African governments in the late 1980s and 1990s were pushed by international finance institutions and transnational corporations to adjust their bargaining attitude. They were urged to rapidly promote export-led growth based on comparative advantage theory. It mattered little that the ‘comparative advantage’ of most of the continent was in the export from extractive sectors rather than from the industrial sector (which has higher value-added potential). Export of unprocessed or barely processed raw materials earned revenue, which was not ploughed into domestic investment but was used to pay back the debt.
What we saw as a result of this export of raw materials and export of revenue to pay back the debt was premature deindustrialisation. In 2003, the UN Conference on Trade and Development (UNCTAD) put forward this concept of premature industrialisation to explain what was ongoing in the Global South. It refers to the collapse of the manufacturing sector before it has become integral to the economy. If manufacturing does not develop, then the political class drums up revenue by the export – in the African case – of raw materials. Domestic economies retrogressed, with productive employment and resource mobilisation shrinking and with aggregate demand falling. People could not afford to save or invest in local production or constitute viable demand outlets and supply linkages for production elsewhere in their local economies. Nor could the State raise enough resources to provide social goods and infrastructure. The structural marginalisation of the people weakened their ability to shape the State’s policy framework.
The growing dependence on raw material exports meant growing dependence on foreign corporations and foreign markets. This was demanded by the World Bank and sanctified by a document it put out in 1992. This document crisply states that governments should shift their policy ‘towards a primary objective of maximizing tax revenues from mining over the long term, rather than pursuing other economic or political objectives such as control of resources and enhancement of employment’ (World Bank, Strategy for African Mining, 1992). In other words, governments should merely export raw materials and allow foreign mining companies to thieve resources. There should be no attempt to ‘control resources’ or to create jobs.
As the World Bank and other international finance institutions pushed governments on the continent to export raw materials and not bother with the wider goals of development, an interesting dichotomy opened up. There was a new suggestion that ‘resource rich countries’ were ‘governance poor’. In other words, that the problem of corruption was not in the system as such, but it was in the political class and in the State. Is the discourse on poor governance another way to undermine social forces and institutions that might have pushed to democratise State policy?
From the 1990s onwards, the term ‘governance’ was installed at the heart of development discourse. Everything was about ‘good governance’ and its importance. There is something very shallow about the conversation. It ignores, even obscures, the deep structural dynamics that push a country to become merely the exporter of raw materials and that give transnational firms power to set prices and to determine the share of revenue to be handed over to the States. It is not the ‘corruption’ of the government officials that brings Ghana only 1.7% of the gold revenues to the State’s coffers. The entire system that was set in place since the 1980s to force countries to rely upon raw material exports and to become dependent on foreign buyers is what leaves countries like Ghana with such a minuscule amount of the wealth taken from Ghana’s land. ‘Good governance’ is not going to solve this, unless ‘good governance’ refers as well to the deep structural dynamics.
The mainstream discourse around resource governance – the language of ‘good governance’ – has several deeply distorting impacts. It implies that it is only the aberrant behaviours of the public officials that should be seen as corruption. Yet of course the lack of resources available to accountable public institutions makes it impossible to create or sustain meaningful domestic anti-corruption mechanisms. The overwhelming power of the transnational corporation makes it virtually impossible to apply genuine democratic and developmental governance norms to these firms when they operate in Ghana or Zambia or Papua New Guinea.
If the discussion goes to the low revenue numbers, then the international finance institutions turn the discussion towards natural market shocks. There are, they say, commodity booms and commodity busts. But this is insufficient as an explanation. Even in times of commodity booms – we find – the revenues are minuscule. It is in this time that we can see the political economy of extraction in its sharpest relief. An antidote to the boom and bust cycle, which does exist, is for public resources to be substantively dedicated to enhancing the productive activities of working people and the productive capabilities within the economy. This is possible in resource-rich States that have diversified economies, have autonomy from imperial domination and have social democratic institutions won by the struggles of working-people. These states create Sovereign Wealth Funds (SWF) from their natural resource export earnings. Norway is an oft-cited example of this. This should be a minimum requirement for all natural resource dependent countries: save in times of surfeit and use the SWF in times of scarcity. But during a commodity boom, there is simply insufficient revenue to build infrastructure and provide for the basic needs of the population. To expect Zambia or Ghana to build up that kind of sovereign fund from such paltry revenues and from such a narrow economic base that is so completely dependent on foreign markets and foreign capital is unrealistic.
In the era of financialization most SWFs invest mainly in financial securities. This was the case with Angola’s SWF, a huge chunk of which went to buying up financial securities especially in Portugal, its former colonial ruler. It lost out heavily on these ‘investments’ when Portugal got embroiled in the financial crisis of the Eurozone after 2008. Rather than invest in financial markets, States such as Angola and Nigeria could make direct investment in production through development banks. These banks would provide credit for agricultural and industrial cooperatives and other such initiatives that generate employment and goods and services to satisfy real needs. This requires States to control the financial sector and to have the public’s well-being at heart.
The language of ‘good governance’ is used to delegitimise any aspiration for nationalisation and the creation of a State monopoly. One striking fact is that Zambia’s copper industry was better for Zambia during the time of the State monopoly from 1970 to 1998. The returns to the State treasury from the copper industry in the post-State monopoly period have been just 3% of what they were in the bad old days of the State monopoly. This is an uncomfortable fact for the champions of privatisation. The discourse of ‘good governance’ suggests that the States in developing countries – like Zambia – are deeply and congenitally corrupt. The only salvation, they say, is for the country to adopt free market regimes. But of course, the result has been terrible. ‘Government deficits’ or ‘bad governance’ do not explain the deindustrialisation of Zambia nor do they explain the rollback from economic diversification. Because Zambia is now utterly reliant on copper exports, the international copper price movements have a preponderant and distorting effect on the exchange rate of the Kwacha [Zambian currency]. This distortion and the limited revenue from copper exports impacts upon the competitiveness and viability of other, non-copper exports, as a result of the fluctuations of the Kwacha. The fluctuations also impact the social sector. A study done in 2018 showed that changes in the exchange rates oscillated between -11.1% to +13.4% in the period between 1997 and 2008. The loss of funds from donors to the Ministry of Health in Zambia amounted to US $13.4 million or $1.1 million per year. Because of the collapse of the Kwacha between 2015 and 2016, per capita health expenditure in Zambia fell from $44 (2015) to $23 (2016).
Corruption implies that perverse outcomes are the result of someone breaking the rules instead of as a result of the normal functioning of the system. Everything I have described is based on normal functioning. When the State allowed foreign firms to take control over raw material extraction and when the economy become dependent on the export of these raw materials at the expense of a project of diversification, the outcome is going to be less revenue for the people and an economy in long-term crisis. The discourse on ‘good governance’ avoids the normal functioning.
A worker at Agbogbloshie, the world’s largest electronic waste dump in Accra, Ghana, carries material through what used to be a wetland area (September 27, 2018). Photograph by New Frame / Ihsaan Haffejee.
The resource governance discourse stands reality on its head. First, we get premature deindustrialisation, which leads to the terrible reality of poverty and hopelessness. Then we get the emergence of the discourse of corruption to explain the poverty and hopelessness. But it is not the corruption that creates the situation. It is the structure that weakens domestic capacities and democratic, participatory economic planning that can best ensure State accountability and effectiveness, sets aside the project of diversification and industrialisation and turns over the raw materials to foreign multinational corporations. Once you have hidden the structure, then you can blame the pettier parasitic bribery as the author of the misery. That’s what this resource governance discourse does.
Could you give us your assessment of the Extractive Industries Transparency Initiative, the Natural Resource Charter and the New Partnership for Africa’s Development (NEPAD)? It seems that each of these, in different ways, is key to the proliferation of the discourse of good governance to discipline political movements and State institutions.
Of these three, the New Partnership for Africa’s Development – or NEPAD – comes first. It was adopted in 2001 by the African Union as a policy framework for the continent. NEPAD promoted the idea that democracy and good governance are the preconditions for development. The structure of plunder was once more out of the discussion. The Extractive Industries Transparency Initiative (EITI) came in 2003 out of the World Summit on Sustainable Development, which was held in Johannesburg (South Africa). The Natural Resource Charter emerged out of these – particularly the African Union’s steering committee for NEPAD – in 2011. These initiatives all follow the same logic. They do not aim for any real engagement over the distribution of rents and the ownership and control over production – the fundamental problems for the African continent. Nor do they interrogate the political economic relations that underlie the plunder. On this last point, if they did open up the question of the relations of plunder, then they would have to pay attention to the inequitable distribution of benefits and the lack of compensation for the natural owners of the subsoil resources and the labour that actually creates useful or valuable products out of these endowments. They might also have to discuss the priorities for a country, and the mal-development that ensues when a government is reduced to merely the conduit for raw material export.
It is important to point out that the Natural Resource Charter, while adopted by the African Union, was drafted by intellectuals from the international finance institutions. These intellectuals include Paul Collier, who was from the World Bank, and Anthony Venables, who is a professor of economics at Oxford. In 2013, the National Resource Charter and the Revenue Watch Institute were folded into each other to form the New York-based Natural Resource Governance Institute. It is headed by Daniel Kaufmann, who worked in the World Bank. This Institute is devoted to promoting the Natural Resource Charter.
For these initiatives, the values of transparency and accountability are self-sufficient ends. If your government is transparent, then that is well and good. Transparency and accountability are not proposed as means towards another end. If that were the case, then what is the end apart from a very generic term, sustainable development? Would the end be a government able to provide necessary social goods or a population that has its needs taken care of and which can therefore shine?
It is important to underline that ‘transparency’ in this context has its own specific meaning. It means that a government must align its policies to the basic principles of the international financial institutions. These principles include trade-related rules for liberalisation of investment and strengthened intellectual property rights. If a government accedes to these principles, then it is a transparent government. The language of anti-corruption was often mobilised by the World Bank and Transparency International against governments that were not prepared to surrender to these principles. Such governments that tried to maintain some measure of sovereignty were branded as ‘governance poor’. By the way, no ‘resource rich’ country in the core – such as Australia and Canada – was ‘governance poor’ even though there are scandals in these countries. The Canadian government is in the midst of a scandal over bribes paid by SNC-Lavalin (a Canadian company) to Libyan officials. Transparency International says that Canada is at no. 9 out of 180 – in the top ten of least corrupt countries (Denmark leads the world, by the way). Libya, meanwhile, is at no. 170 out of 180 (Somalia is the most corrupt country, by this index). What makes Canada, whose company gives the bribe, less corrupt and Libya, whose official received the bribe, more corrupt is part of the way in which ‘transparency’ operates in our time.
NEPAD – rooted on the African continent – promotes the work of the EITI and NRC at the expense of autonomous African institutions and decision-making. One example of an African-led development initiative is the African Mining Vision, which was adopted in February 2009 by the African Union. In October 2008, African ministers who work in the fields of mineral resource development had met to draft this document. It reflected frustration that a region with great resource wealth could be at the same time so very poor. Central to the African Mining Vision is the call to integrate the mining question into a broader development agenda. These aspects of the African Mining Vision were also in part the outcomes of popular struggles in communities and by workers in resource sectors.
Makhebengwana Hadebe stands in his kitchen doorway and gestures to where he will be relocated because of Ikwezi Mining’s Newcastle Project in South Africa (March, 29 2019). Photograph by Madelene Cronjé.
The Western-driven frameworks – such as the Natural Resource Charter – set aside the African-driven initiatives. The policy frameworks and institutional credibility of the African-driven processes – however limited they might be – are undermined by the intellectual and political dominance of the Western-driven frameworks. This so-called intellectual paucity provides more evidence that ‘resource-rich developing countries’ are automatically ‘governance poor’, for after all they don’t even have a framework to deal with ‘corruption’. This so-called absence justifies the external help of the ‘international community’, namely the Western states and their institutions, to define the norms of governance and it gives them the legitimacy to mobilise sub-national communities and civil society actors to police implementation. The purpose of the EITI and NRC is to ensure that the fundamentals of the system – the plunder – remain undisturbed or rather that these fundamentals are perpetuated and extended.
Could you walk us through an alternative to the ‘good governance’ paradigm and towards ideas such as ‘resource nationalism’ and ‘resource sovereignty’?
A large share of the raw materials in Africa are owned by a small group of powerful corporations, but this is made even worse by the fact that most of them also happen to be foreign companies. These companies act with the full weight of the power of their governments. Barrick Lumwana, for instance, is one of four foreign companies that account for 80% of Zambia’s copper production. Barrick Lumwana is a subsidiary of Barrick Gold. The name is misleading. Lumwana is a town in Zambia. Barrick Lumwana merely gives Barrick Gold Corporation, a Canadian company, a Zambian name and makes it appear less foreign. Barrick Gold is fully backed by the Canadian government in its Zambian operations.
During the global commodity boom, from 2000 to 2014, Latin America as well as Africa experienced the impact of the rise in prices for raw materials. But the two regions experienced them in radically different ways. In the case of Africa, due to the near monopoly control that corporations have over the continent’s natural resources, the benefits of the natural economy were marginal for African governments and populations. The benefits were skewed in favour of foreign companies and their respective countries. The vast benefits of the commodity boom were absorbed by the foreign firms and by a tiny local elite.
The experience of the African continent during the last commodity boom shows that it is necessary and logical for a resource-rich country to seek full national control over its natural resources. It is a reasonable response to a reality that is otherwise profoundly unjust and destructive.
The first aspect for reform should be the economic asymmetries that have emerged as a result of the present resource grab culture. With economic asymmetries there are three immediate problems:
- Wage disparities (also an expression of super-exploitation)
- Tax incentives
- Capital flight through profit repatriation and offshoring
The composition and structure of employment in the extractive industries is glaring. Higher skilled positions are typically held by expatriates, mostly from the West. The pay differences between the expatriates and the Africans are enormous; in mining firms, this is sometimes as high as 600 to 1. As a matter of fact, in the export sectors, we are witnessing the growth of the phenomenon of ‘super-exploitation’, which is payments to labour below the cost of survival and cost of living for the labourer. And since technology is monopolised by transnational corporations, the only way for locally produced exports to remain price competitive in international markets is this drastic domestic deflation, which mainly impacts local labour and other producer groups lower down the food chain of the global value chain.
The other issue is plunder through the tax system. In addition to the tax breaks that all foreign investors get – such as a ten-year tax holiday as well as a faster rate to write off capital losses – we have something called the mining list. This mining list includes everything that the mining company imports from abroad, such as toilet paper, tissue paper, bottled water and even toothpaste. All these things are tax exempt. Many of the things that have nothing to do with the mining sector directly enter the country without any tax duty. They forgone tax on these goods, if the value is aggregated, can be considerable for an economy that has weak foreign exchange reserves.
The overwhelming majority of returns are either retained or returned offshore as profits, capital gains, interests on dubious intra-company loans, management fees or intellectual property rents. It is the phenomenal growth in multiplying sources of surplus extraction and profit extraversion in the last decade or so that has attracted global media and policy attention as ‘illicit financial flows’, which in relative terms is growing faster in Africa than anywhere else.
So, whether it is wage exploitation or tax incentives or profit and revenue share, the associated benefits from natural resources extraction are grotesque and highly inimical for the countries that have natural resources and for the majority of their populations. From that point of view, there is validity in the pursuit of resource nationalism as a political project.
We have to be precise about our sense of resource nationalism. In the example of mining, it could include the complete nationalisation of mines or it could include much milder reforms such as the imposition of higher taxes on foreign companies. It could also include a higher basic wage for workers, which would translate into more of the share of the mining activity staying in the communities that live above the resources. Countries could also insist upon higher royalties and upon royalties based on the final market price of the resources rather than the prices that they set – which are often lower. These various policy interventions form the basis of resource nationalism.
Retrenched mineworkers from Gold Fields’ South Deep mine photographed at Borwa, South Africa (March 21, 2019). They face losing their homes after being retrenched in December 2018. Photograph by New Frame / Mujahid Safodien.
But I think it is important here to underline some misconceptions that might come into our discussion. Firstly, it needs to be understood that the problem of the continent is not merely cheating, corporate malpractice from some otherwise exemplary norm. The entire form of mining – within the capitalist system – is developed around the exploitation of labour power, the creation of surplus value that is then accumulated by capital as workers go home with a shrinking share of the surplus. Secondly, the implication of this is that one cannot assume that resource nationalism is merely a state-centred political project. Workers – miners in this case – are a key agent of change, building their own struggles against the normal functioning of capitalism. The struggles of the workers enrich society, raising questions of ethnicity and gender and other forms of oppression into the debates around what kind of society one wants to produce and live in. The class struggle within our societies is central to the development of the project of resource sovereignty, since otherwise the matter rests on a debate between an imperialist bourgeoise and a national bourgeoise without raising the important question of the impoverishment of the workers and of society in general.
I’d like to expand on the idea of resource nationalism. It does not merely refer to minerals, gas and oil. It includes water and land as well as the conditions of agrarian production. In Southern Africa, the land question is central as we have seen in Zimbabwe and as we see in South Africa. The issue has been put on the table by the dispossessed, whether through land occupations, boycotts or strikes. Discussions over resource sovereignty are very useful in this context. They allow for a broadening of the political consciousness of all sectors of society. The framework of resource nationalism does not see the resource questions from the standpoint of one farmer in a remote hamlet whose trees are being cut down by a corporation and who seeks compensation. I mean, that farmer should get compensation, but that is not the whole of the framework of resource nationalism. The framework takes in both the farmer whose trees are being cut down and the fisherfolk who are being denied access to the use of rivers or parts of the sea as well as the agricultural workers who lack irrigation. They are all denied use of crucial resources, which are often handed over to corporations. Popular struggles for compensation and for irrigation are brought into the same framework, allowing the struggles to develop common strategies out of a systematic analysis of dispossession. Of course, resource nationalism can bring immediate material benefits for the working-class and the peasantry who live in resource-rich countries.
Whatever the limitations of resource nationalism, and there are many, it is an important framework for the continent. It is a reaction – a first reaction against neoliberal globalisation – and it is important that we encourage discussions about it.
But I do think we need to be very aware of the limitations of resource nationalism, particularly if nationalism obscures the class interests at stake. If you have a narrow North-South lens, then there is a temptation to be blind to the labour exploitation within the South, where a Southern bourgeoisie operates against the interests of the Southern working-class and the peasantry. A much more careful class analysis is necessary.
To give you an example of the pitfalls, take the case of the Congo. Mining companies as well as the Belgian, British and the US governments were totally opposed to Patrice Lumumba’s wing of the nationalist movement not only because of what they perceived as the possible threat of nationalization of resources but also of the rising tide of class struggle from workers and miners. It was this wave of struggles that catapulted Lumumba and the Congolese National Movement into ascendency amongst a fractious and sectarian collection of pro-independence organisations. At the close of 1959, Lumumba sat in prison, but within six months he was the Prime Minister of a vast, resource rich and newly independent country. And this is where the question of class becomes important. Moïse Tshombe, Lumumba’s rival, was the leader of the Katanga province which was where the bulk of the Congo’s resource wealth is located. Tshombe drove an ethnic nationalist agenda that won him the vote in Katanga and allowed him – on a putative platform of resource nationalism – to claim secession. Lumumba was arrested, eventually assassinated, and Tshombe’s nationalism dissolved into total capitulation to imperialism. Le mal Zairois, the Zairean Sickness, is a term developed during the era of Tshombe’s successor Mobuto to refer not only to Mobuto’s personal corruption but to the theft of the wealth of the Congo (then Zaire) by Western corporations.
At the same time as Congo’s hopes dissolved into plunder, Bolivian tin miners and landless agricultural workers led a struggle – including a historical hunger march through La Paz, Bolivia’s capital – that overthrew the government. This was the Bolivian National Revolution of 1952. The new government put in place agrarian reforms and control over the mines, but economic pressure led to the collapse of all the new institutions a decade later. However, the memory of the Revolution remained and was awakened in the new century – in 2000 – when the people of Cochabamba fought the privatisation of water. Again, workers from the fields and mines, many of them from indigenous communities, rose up to create genuine resistance from below based on a working-class resource nationalism. On their agenda was water rights, but also the rights of coca growers and oil workers, the rights to culture and representation, the rights to be the earth and of the earth. This broad class movement from below defined the next phase of Bolivian history. One of Latin America’s weakest countries was able to enact the most far-reaching changes in the resource sector because of this class-based movement.
We must be bold and uncompromising about our commitment to a class-based movement that defends the natural world and that defends the common rights of the people to resources. We need to formulate an alternative resource governance agenda that is defined by a democratic, class-based development project that is not sectarian but internationalist.
Residents of the Lesetlheng village community from the North West celebrating outside the Constitutional Court after the court set aside the high court interdict evicting the Lesetlheng community from their farming land (October 25, 2018). Photograph: Ihsaan Haffejee.