Africa’s extractive industries came under scrutiny yet again when representatives from governments, civic society, academia and the private sector gathered at the New York City offices of the National Minority Business Council, Inc. (NMBC), to assess practices in those industries and explore ways to increase the benefits they bring to local populations.
NMBC Global, the NMBC’s international unit, partnered with the government of Nigeria’s Office of the Special Advisor to the President on Ethics & Values and with Devconia LLC, a U.S. based international development, sustainability and cross-cultural management firm, to conduct the November 20 half-day forum on “The Role of Ethics and Values in the Effective Management of Africa’s Extractive Industries.”
“Africa is largely used as an extractive point and we need to change that. Solutions are necessary – implementable, actionable solutions,” said Ken D. Johnson, co-founder and principal of Devconia and convener and chair of the forum.
Kingsley Mamabolo, South Africa’s ambassador to the United Nations, who participated in the forum, said: “Part of the solution is building strong institutions on the ground. There must be some intervention by the government to make sure their citizens are benefiting…What are our African institutions doing? There must be this balance between the international institutions and what we are doing ourselves. There is progress in Africa but not fast enough.”
Africa is estimated to host 30 percent of the world’s mineral reserves, and an even higher proportion of deposits of gold, platinum, diamonds and manganese. The continent has 10 percent of the world’s reserves of oil, 40 percent of the world’s gold, and 80 percent to 90 percent of the world’s chromium and platinum.
These massive resources earn billions of dollars in annual profits for oil and gas and mining interests, with little, if any, benefit accruing to local African communities or national economies. Instead, environmental degeneration, labor abuses, chronic health ailments, corruption, violence, and even war, too often are associated with extraction operations, government and watchdog groups say.
Two reports by Nigerian authorities found that some 70 locally based importers may have used a range of techniques that add up to massive fraud, including falsifying import papers in order to over–declare the scale of oil imports and to collect more subsidy.
Nigeria, one of the world’s top ten oil producers and Africa’s biggest, in 2004 launched the Nigeria Extractive Industries Transparency Initiative (NEITI) under a global initiative aimed at following due process and achieving transparency in payments by extractive industry companies to governments and government-linked entities.
“If corruption is a social cancer, you immunize the society with ethics so the corruption does not continue to spread as a cancer,” declared Sarah N. Jibril, Ph.D., special advisor to the President on ethics and values for the government of Nigeria, who headlined the forum hosted by the NMBC.
Jibril’s hard-hitting remarks on the impact of Africa’s extractive industries on local societies and environments were unequivocal in its vision for an Africa where ethics and values shape the way business is conducted. She challenged institutions such as the United Nations, the Commonwealth, and the Africa Union, to be more proactive in advancing the importance of ethics in advocacy and legislation, and urged “accountability to our consciences, not our pockets.”
“AK47s do not kill mosquitoes,” she said, referring to weapons toted by extractive industry security personnel.
According to the Berne Declaration, a Swiss-based international financial watchdog group, Swiss traders in 2011 bought 35 percent (US$ 8.7 billion) by value of Nigeria’s oil exports from the state-owned Nigerian National Petroleum Corporation and Nigerian traders with a Swiss-based subsidiary bought another 21 percent ($ 5.3 billion). In some cases the NNPC sold oil at prices lower than market rates to Geneva-based Vitol Group and Trafigura, two of the world’s largest trading companies, the group says.
Sales at below-market prices suggest that officials are taking bribes. The Berne Declaration says no less than $6.8 billion of unjustifiable subsidies were paid out in 2009 and 2011, the equivalent of nearly four times the Nigerian health budget for 2013.
The November 20 NMBC deliberations coincided with the publication the same month of the 2013 Africa Progress Report by the Africa Progress Panel, a group of distinguished public and private sector individuals, chaired by former U.N. Secretary General Kofi Annan, who advocate for shared responsibility between African leaders and their international partners to promote equitable and sustainable development in Africa.
The panel’s bombshell report, subtitled “Equity in Extractives,” urges the international community to promote a global transparency standard, develop a credible and effective response to tax avoidance and evasion, and to tackle money laundering and anonymous shell companies.
Explaining the report’s significance at the NMBC forum, Peter Eigen, Ph.D., founder and chairman of the Advisory Council of Transparency International and a co-author of the report, gave insights into corruption and governance in the conduct of multinationals in the extractive industries. He said considerable progress has been made in areas such as transparency, but that cannot hide the fact that multinationals paid $54 billion to Nigeria’s power elite in last year alone, just for oil and gas contracts.
“At least twice that was taken out of the country by oil companies and ministers,” Jibril added.
O. Natty B. Davis, senior public policy consultant at Devin Corporation and former chair of the National Investment Commission of the Republic of Liberia, drew attention to the small and medium-sized enterprises and identified segments of the extractive industries where opportunities exist for such enterprises. He advised SMEs to follow a three-step process of preparation, negotiation, and execution in order to effectively operate in the extractive industries.
Forum participants identified several actions that could lead to a higher ethics-and-values quotient in the sector, including implementing policies that provide for greater transparency and sharing of information and transparence; issuing revenue bonds to allow governments to be in control of their resources; land management that allows only leasing with accountability and a trial period instead of outright sale to investors; and greater citizen/grassroot participation in policy setting.
“Listening to citizens will drive change, put pressure on companies. People who are being impacted are not usually at the table. This has got to stop,” Johnson said.
