http://www.cncd.be/IMG/pdf/20090812_Natural_Resources.pdf   

Executive summary

While, on the one hand, it is widely acknowledged that Africa has great natural resource potential, on the other hand, one cannot but regret that the complex interplay between political and economic factors at the national and international level appears to make it impossible to use a more substantial part of the revenues from the exploitation and trade of these resources for the promotion of the well-being of people at the grassroots level.

This paper, which concentrates on non-renewable natural resources, aims to disentangle some of the processes that explain the paradox between Africa’s natural wealth and its relatively limited level of economic development. It shows that the state of affairs in the resource sectors of most African countries is still to a large extent determined by external factors. Extractive industries in Africa tend to be export-oriented and contribute disappointingly little to local development.

The paper is divided into six chapters. The first chapter is dedicated to definitional issues and to the discussion of a number of applications of non-renewable natural resources. It is demonstrated that these resources are indeed of vital importance for the production of a wide variety of products, devices and instruments. The second chapter pays attention to Africa’s position in the global economy. It is shown that, despite its natural wealth, the continent only plays a marginal role, not only in terms of production but also in terms of trade.

An attempt is made to account for Africa’s marginality and vulnerability by looking at the most significant developments in the continent’s twentieth-century economic history. The third chapter zooms in on Africa’s energy, metallic and non-metallic minerals. It does not only discuss Africa’s production and consumption of these minerals, but it also makes a comparison with other producers and consumers across the globe. Chapter 4 contains a description of the outstanding expansion over the last years in the commodities sector and the mechanisms that explain this exceptional growth. The chapter provides a short assessment of how the financial crisis that arose in the US suddenly harmed the world economy. It also discusses how the global crisis affects the mining sector, specifically in Africa.

Chapter 5 tries to answer the question whether we are witnessing a new scramble for Africa’s natural resources. An attempt will be made to portray the actions of some of the main players in Africa at the moment, including the EU, the US, and China. The chapter offers an analysis of some of the special interest groups, their involvement in shaping policy and the influence that the aforementioned countries hold in the mineral sector. Finally, chapter 6 looks at how African governments can develop resource policies that have a positive impact on their national economies.

Contents

Executive summary 3
1. Definitions 7 
    1.1. Classification 7 
    1.2 Definitions 9 
    1.3 Applications 9
2. Africa in the world economy 11 
    2.1 Africa and global production 11 
    2.2 The Seventies: North against South 12 
    2.3 The Eighties and Nineties: Downturn 15 
    2.4 Recent evolution 17 
    2.5 Reaction to the economic crisis 18
3. Africa’s minerals 20 
    3.1 Energy minerals 21 
    3.2 Metallic minerals 26 
    3.3 Non-metallic/Industrial 32
4. Economic perspectives 33 
    4.1 Growth perspectives 33 
    4.2 Price boom because demand-supply relationship is under pressure 35
5. Political perspectives: The Race is On! 51 
    5.1 Western Europe 52 
    5.2 United States of America 57 
    5.3 East Asia 60
6. Natural Resources and Development 66 
    6.1 International Commodity Agreements 66 
    6.2 Mining Reviews 67
Annexes 70
    Annex 1 - Applications 70
    Annex 2 – Mineral Statistics 72
List of abbreviations 87

5. Political perspectives: The Race is On!

For a number of years, the world’s major economies have been conducting an active policy that ensures oil- and gas supply for their inhabitants and businesses and avoids a possible standstill. Mineral non-fuel commodities have not been as closely monitored. Not until 2005 did these leading economies become active in assuring their supply of nonfuel minerals for their industries. Many countries, such as the EU member states and the US, have since concluded that Africa is of vital importance to secure their supply for resources. The EU and the US are not alone, and countries like China and the emerging economies of the South are increasingly supplying themselves with African raw materials. This race for resources has made some commentators to describe the current situation as “a new Scramble for Africa”.

The continued disagreement between Russia and Canada over the North Pole illustrates perfectly the strategic importance of territories “blessed” with natural wealth. Under the North Pole, the bottom of the ocean contains presumably unique reserves of natural resources. Because of the melting of the Northern polar ice pack, the Arctic territory is becoming more accessible. Within the near future, ships will be able to pass regularly through the Northwest Passage and shipping routes from Europe and the American East Coast to Asia will become considerably shorter.
As the desire and enthusiasm for the territory grows, tensions rise.

As mentioned in the previous Chapter, in August 2007, a Russian expedition planted a Russian flag at the bottom of the ocean under the Arctic ice pack. Moscow formally claimed the territory, including its resources. The Russian stunt however provoked some harsh resistance from other economic powers surrounding the North Pole. Canada decided to spend $3 billion on icebreakers to enable its Navy to patrol the area. Canada, furthermore, is planning to build a military base in Resolute Bay and a deep-sea port in Nanisivik.235 In May 2008 Russia, Canada, Norway, Denmark and the US settled their dispute over the control of the North Pole, at least for the time being.

In 2008, Global Business Network constructed several scenarios that outlined how the quarrel for the Arctic might evolve. The American think tank came to the following conclusion, “High demand and stable governance lead to a healthy rate of development that includes concern for the preservation of Arctic ecosystems and cultures. High demand and unstable governance set the stage for a ‘no holds barred’ rush for Arctic wealth and resources”.236 Now that the world economy is enduring a crisis and as instability spreads, the rivalry for regions endowed with natural resource wealth might increase exponentially. The access to and the control over natural resources provoke more and more aggressive statements by the leading world powers.

Are we really witnessing a new Scramble for Africa? This Chapter will portray the actions of some of the biggest players in Africa at the moment: the EU, the US, China, and Japan. For each of these actors, we will look at some of the special interest groups from the mineral industry, their involvement in shaping policy and the influence that particular countries hold in the mineral sector.
5.1 Western Europe

Natural resources are finite; the number of deposits is limited, consumers are numerous and consumption is rising. In addition, the leading economies of the EU are confronted with the problem of how to ensure supply security. Contrary to climate change, where the parties search collectively for a solution, conflict-thinking is the dominant method when it concerns access to natural resources.

5.1.1 The European Union

In a 2003 report on its Security Strategy, the EU alerted that, “Competition for natural resources - notably water - which will be aggravated by global warming over the next decades, is likely to create further turbulence and migratory movements in various regions. Energy dependence is a special concern for Europe. Europe is the world’s largest importer of oil and gas. Imports account for about 50% of energy consumption today. This will rise to 70% in 2030. Most energy imports come from the Gulf, Russia and North Africa.”237 The next five years, until 2008 this assessment was translated into more precise declarations and actions.

At the European Commission the elaboration of the EU’s policy was conducted above all by the Directorate-General Enterprise and Industry through consultations with the industry sectors and lobby groups. In 2006 and 2007, consultations were held with the European metal industry and the European mining and quarrying sectors. A 2006 Commission Working Paper states, “For over 20 years the European Union has been the biggest consumer and one of the major producers of ferrous and non-ferrous metals in the world. The use of most metals is still higher in the EU than in China, USA or Japan”.

In 2003, the working paper said, the European steel industry achieved a turnover of about €227 billion and employed 1,06 million people. However, the extraction of these metals within the borders of the EU is plunging and the industry is consequently becoming more and more dependent on imports. For example, the price of ores continues to rise, especially with the increasing demand of China and India. According to the Working Paper, the key challenge for the EU is to remain competitive.238

The opinions of special interest groups were included in the policy formulation. Comments from the Non-Energy Extractive Industries Panel (NEEIP)239 and the Union of Industrial and Employers’ Confederations of Europe (UNICE) can be found in the working document of the European Commission from June 2007.240 The European industry fears it will lose a secure supply of various minerals as some developing countries start to consume their own resources; through exploitation rights or by entering Joint Ventures. This is currently the case in Africa.

In the EU’s opinion, in order to stay competitive and secure its supply, it will have to take Canada, Australia and six emerging resource-rich countries into account. To provide an example, below are some key passages from the 2007 Working Paper:

Globally, demand for minerals has been increasing steadily for many decades, but the rate of increase has accelerated significantly in recent years, mainly because of the rapid industrialisation of highly populated countries such as China and India. This has resulted in large increases in the cost of some raw materials and bottlenecks in supply.This has raised questions about whether Europe’s manufacturing industries will be able to obtain reliable and steady supplies of raw materials at competitive prices.

A longer-term concern expressed by some stakeholders is that, without a strategic resource policy for the EU, some minerals could become unavailable to European industry as developing countries make increasing use of their indigenous resources and/or secure access to resources in third countries, for example in Africa, by purchasing mineral rights or by entering into joint ventures. One potential effect is an avoidable loss of some sectors of manufacturing to countries outside the EU. Concerns have also been voiced that in some parts of the EU the sector’s ability to optimise domestic production is being unnecessarily constrained by factors such as over-regulation and inefficient, costly and inconsistent decision-making. (page 7) The growing importance of China, Australia, Canada and a number of developing countries (the six resource-rich countries are Chile, Peru, Brazil, the Congo, Zambia and South Africa) contrasts with the relative decline in production in Europe, Russia and the USA. (page 45)  

Over time, the EU Foreign and Security Policy gradually picked up the sentiments of the industry. In March 2008, EU High Representative Javier Solana warned the member states to be prepared for conflicts over natural resources. He states in a text for the European Council in Brussels that, “The overall effect is that climate change will fuel existing conflicts over depleting resources, especially where access to those resources is politicised.” 241

Africa has a prominent position in the EU’s external relations, as reflected in 2005, when the EU launched a Strategic Partnership with Africa. In the partnership document, the European Commission states that, “Europe is Africa’s long-standing partner and closest neighbour …”.242 Africa indeed has long-standing ties with Europe, especially in relation to the colonial past with, for example, Great Britain, France, Portugal and Belgium. Signs of the colonial past are still seen today in policy practices from a number of countries. For example, France maintains a prominent relation with the Zone Franc, which includes fourteen West-African countries, all with a common currency, linked to the French Franc/Euro.

The historical ties, however, also create suspicion. When negotiating the Economic Partnership Agreements with African countries, in the framework of the EU-ACP (Africa, the Caribbean and the Pacific) relationship, the EU meets a large amount of difficulties and mistrust. During the December 2007 EU-Africa Summit in Lisbon, Africa, as a bloc, opposed the EU free-market policy. The vote also reflected Africa’s disagreement with the exclusion of some of its leaders (the UK’s resistance concerning the presence of President Mugabe) and against the paternalism and the colonial past.243

Box D - The EU’s Raw Materials Initiative

According to a European Commission report, the EU is highly dependent on imports of strategic raw materials, which are increasingly affected by market distortions.244 They are especially dependent on high-tech metals such as cobalt, platinum, rare earths and titanium; all materials that are essential to the development of sophisticated products. The EU also relies on secondary raw materials such as scrap The report states that many emerging economies are pursuing industrial strategies aimed at protecting their resource base to generate advantages for their downstream industries. Over 450 export restrictions on more than 400 different raw materials (e.g. metals, wood, chemicals, hides and skins) were identified and the main culprits were China, Russia, Ukraine, Argentina, South Africa and India.

The EU’s Policy Response is that the EU should agree on an integrated raw materials strategy. The first set of measures proposed by the Commission is to actively pursue raw materials diplomacy with Africa. With emerging resource-rich countries such as China and Russia, they would like “to remove distorting measures” and with other resource-dependent countries such as the US and Japan to “devise joint actions and common positions in international forums”.

However, there might be a contradiction in the Commission’s stance: are trade restrictions condemned only when applied by competitors, not when done by the European industry? This contradiction is made apparent at a EU sponsored conference on Raw Materials in Brussels on September 29, 2008. Mr. Rémi Charpigny, representing the French copper firm KME Brass, presented the case of the EU “brass mill” industry and stated that 50% of the industry’s output was based on recycled metal. According to Mr. Charpigny, between 1999 and 2007, some 900.000 tonnes of “copper scrap” disappeared to buyers outside the EU who were keen to pay a high price, “sometimes even more than the price of new metal”.245 With this statement, Charpigny implicitly pleads for EU-restrictions on recyclable copper.

The former EU-Commissioner for Trade, Peter Mandelson246, in his concluding remarks, sneered at India (where iron ore exports are taxed at 50 rupees a tonne), and China (which imposed a 120% export tax on yellow phosphorous) which are thus impeding exports of raw materials. Mr. Mandelson admits that such measures “can be an attempt to shield domestic consumers from high international commodity prices and price inflation” but in a globalized economy, he did not believe that governments should take refuge with resource nationalism. He said, “the strengthening of infant industry or ensuring a stream of government revenue from commodity exports can be better addressed through more focussed measures”. Instead, Mr. Mandelson repeated his firm belief in “an open global market completely free of all distortions on trade in energy and raw materials”.247

5.1.2 Germany

Germany is a major economy; therefore, it takes a prominent position in the EU as well as in the EU’s external commodities policy. Berlin took the lead in 2005 regarding supply security. Bundesverband der Deutschen Industrie (BDI), the large employer’s federation, organised its first conference on natural resources. At the conference, a Task Force was established, under the command of the metal industry federation (WirtschaftsVereinigung Metalle, WVM) and in close collaboration with the German government, to study how to ensure a steady, international supply of resources for the German industry.

In the Task Force a number of important enterprises and research institutes did the bulk of the work. Karl-Heinz Dörner of Norddeutsche Allianz (NA), self-declared as “the biggest copper group of Europe”, together with some other NA directors, were important contributors to the Task Force. Furthermore, the Bundesanstalt für Geowissenschaften und Rohstoffe (BGR) and dr. Rudolf Adam (Director of the Bundesakademie für Sicherheitspolitik, BAKS, between 2004 and 2008) offered scientific support. This working group in the meantime publishes several reports.
The work of the BDI Task Force is important because it raised the awareness that Germany is very dependent on imports for oil and all metals.

This awareness existed to a certain degree for the supply with energy, but not for other raw materials. Politicians were more preoccupied with promoting German exports than with the security of imports, wrote Security-expert Rudolf Adam.248 The BDI concluded however that for metal commodities “the understanding of the problem is clearly underdeveloped”.249 In 2007, the Task Force found that the problem of supply with metals was related to the sharp increase in demand for natural resources, particularly because of the “resource hunger” from the emerging economies, especially China.

The BRIC countries, are transforming themselves from commodity exporters to importers. On the other side, the market is confronted with a tight supply, partly because of the low amount of investments. From 1997 onwards, exploration investments for raw materials diminished and reached their lowest point in 2002. The divergence between supply and demand made the prices grow. This trend is further reinforced by some speculation on the commodity exchanges.
According to the Task Force, the increased concentration in the oil and mining sector further strengthened the supplydemand divergence. A decreasing number of enterprises control a growing share of the supply.

For example, three companies (Anglo American, Norilsk Nickel250 and Impala Platinum Holdings251) control over 78,1% of the palladium supply and 69% of the platinum supply. The Task Force states that the formation of oligopolies in the mining industry carries a number of potential threats with it.252 In addition to the formation of oligopolies, another threat to the industry is that there is an increase in the geographic concentration of the minerals. The exploitation of the most essential ores is concentrated in a small number of countries. The centre of the oil extraction lies in the “strategic ellipse”, stretching from the Middle East over the Caspian Basin to Northwest Siberia. If the supply from these regions is ever disrupted, the international resource market feels it immediately.

In spring 2006, Germany’s resource dependency acquired an explicit military dimension. The German government was confronted with some harsh resistance in Parliament because it wanted to send German troops to the DRC, in the framework of EUFOR. In addition to Parliament, the German peace movement was against the proposal. On March 17, 2006, Minister of Defence Franz Josef Jung defended the deployment of German troops to the DRC by saying, “It concerns a vital security interest for our country. If we do not render a contribution to pacify the Congo, it might bring about a huge refugee stream, even more dramatic than the one caused by the Bosnian war. (…) Economic interests are not of uttermost importance. Stability in this resource-rich region, however, is for the good of the German economy”.253

The German economy cannot function without mineral riches, “from A like in Aluminium to I like in Iron and Z like in Zirkonium”.254 With a bit of drama, the president of the German Metals Industry Federation Mr. Dörner stated, “Ohne den Import vieler metallischer Rohstoffe, stehen in unserne Land die Räder still”.255

In the Task Force’s recommendations, it suggests the traditional remedy of diminishing the risks of dependency by diversifying supply. In practice however, the situation is more complicated, as half of the mining is located in “political(ly) unstable or extreme(ly) unstable countries”. For example, when mining iron, this is the case for more than 60% of the exploitation. The Task Force focused particularly on Central Africa and Central Asia.256 According to dr. Rudolf Adam “nine out of ten important oil suppliers are politically unstable”.257 Mr. Dörner described Kazakhstan (“the second world supplier of chromium”) and the DRC (“the world’s leading supplier of raw cobalt”) as “unpredictable regimes”.258

In consecutive documents, the BDI Task Force makes recommendations for German policy on minerals. With the intention of influencing German policy, they also wish to have an influence on EU policy. Spring 2007 presented the perfect opportunity to do just that. During this time, Germany held the presidency of the EU and organised a summit of the G8 in Heiligendam. The German metal industry wanted to use the opportunity for its lobby strategy. This is shown below in a graph, presented by Hans-Gerhard Hoffman from the NA during a conference in 2007 in Mainz.259 Over the past three years, German activities have shown that ‘Konsens 2’ (“State and Industry work together to formulate a strategic raw materials policy”) was always relevant. The mineral industries have cooperated intensively with the state, for example with the defence department, to create this policy.

5.1.3 France

In August 2007, President Nicolas Sarkozy and Prime Minister François Fillon established the Commission pour la Libération de la Croissance Française, under the command of Jacques Attali. The commission, as it was clearly mentioned in its title, had to find ways to improve growth of France’s economy. After a few short months, in January 2008, the Attali Commission presented the final report and conclusions formulated as 300 Décisions. Décision 87 related to supply security.

The Commission determined that Western Europe was aware of the precariousness surrounding energy minerals, but was not aware of the tensions around the supply of industrial metals that were of vital interest for the Western industries. “The Anglo-Saxon countries, Russia, China and Brazil are conducting an actual scramble for the control over natural resources and the securing of their supply chain”. The Commission therefore concluded that a “European champion” should rise or be established in the industrial metals sector to guarantee the supply of minerals necessary for France’s major industry sectors. According to the Attali Commission this was a condition for growth in the future.260

One of the Commission’s suggestions is that more French SMEs should be established to serve as juniors active in mining. In addition, these new companies should strive to be listed on the Paris Alternext market. Alternext now counts only a hundred enterprises, with a market value of $5 billion, while the Commission estimates there are about 1.600 companies listed on London Alternative Investment Market (AIM), with a market value of €75 billion. These figures show that while the international mining shares are flourishing on the financial markets, France is absent from this sector.

Some of the ideas from the Attali Commission were picked up in a working group of the extractive industries, the Mouvement des Entreprises de France (MEDEF)261. In April 2008, the MEDEF Working Group finished a report and according to African Mining Intelligence : “Le groupe recommande (...) la création d’une compagnie européenne - publique ou parapublique- de courtage en matières premières, ainsi que d’un fonds souverain (français ou européen) prenant le contrôle d’actifs stratégiques; l’émergence de juniors minières et énergétiques sur le territoire français par le biais d’un cadre juridique et fiscal incitatif jusqu’à leur introduction en Bourse sur le marché parisien Alternext… Ce dernier pourrait se poser en rival de l’AIM à Londres ou du Toronto Venture Exchange”262.

Members of MEDEF are a.o. large transnational corporations and in the working group of extractive industries some of them are represented, for example, Total, the Société Générale and BNP Paribas. The group is chaired by Zephirin Diabré, a close collaborator of Anne Lauvergeon, who chairs the French energy group Areva.263 Areva, a key player in the world energy sector, is leading the debate in France concerning the mineral commodities supply. This is not surprising, knowing that 87% of Areva is in the hands of the state (mainly through the Commissariat à l’Energie Atomique)264.

President Sarkozy has conducted a remarkable economic diplomacy for the benefit of Areva. When the French president visited South Africa in February 2008, he said, “Je le dis au gouvernement sud-africain, on va se battre pour obtenir le marché des centrales, charbon comme nucléaire, parce que nous, on est comme cela. On a compris que tout prendre c’est plus facile que prendre à moitié.”265 Other examples of Sarkozy’s diplomacy for Areva took place in Niger and the DRCongo.

In Niger, France intervened in July 2007 when Niger accused Areva of helping the Tuareg rebellion with financial support. The French president tried to find a solution and explained in a press conference, “Niger is an important country for France as it is one of the main producers of military-grade uranium, which explains the presence of Areva”.266 In the DRCongo, president Sarkozy obtained an uranium mining contract for Areva in March 2009.267

The French mining sector is small and accounts of no more than a few actors. Next to Areva, there is Eramet (of which Areva is a joint owner) and the geological service Bureau de Recherche Géologique et Minière (BRGM). Compared to the others, Areva is an international giant. The company has acquired the Canadian uranium group UraMin for an amount of US$2,36 billion as part of its international expansion policy aimed particularly at Canada, Niger and Namibia. Areva furthermore calls itself, “the only fully integrated player” in the global nuclear business, as the group builds atomic power plants, exploits uranium mines and produces and recycles nuclear fuel.268

In the field of Defence too, France has been considering its strategic interests and how to defend them. Based on comprehensive hearings in the fall of 2007, a Livre Blanc was published in June 2008, called Defense et Sécurité Nationale, which discussed French (and European) defence and security policy.

During the hearings it was Anne Lauvergeon, again, who supplied the overriding analysis concerning energy supply. Ms. Lauvergeon was worried because Europe was behind in comparison to the rest of the world in the field of natural resources. She stated, “Look at the activism the Brazilian, American and Canadian groups develop in Africa”. According to her, Europe was not fully aware of what was happening in the world around the strategic resources. When she discusses strategic resources, she refers to “tout ce que vous mettez dans l’acier, du charbon, du fer, du manganèse, du nickel, du chrome, du cuivre. Tout ce qui était considéré il y a huit ans comme des commodités ? sans intérêt”.269 Although France is one of the top uranium producers in the world, Ms. Lauvergeon suggests this may change because, “aujourd’hui nous assistons à un Kriegsspiel mondial d’accès aux réserves”.270

In addition to the race for reserves, exploitation licenses and concessions, there is an intensive consolidation taking place by the major mining groups that has far-reaching consequences. Regarding this topic, Ms. Lauvergeon commented that, “I fear that when we wake up, we’ll have to face an extraordinary consolidation of big global mining groups and incredible financial capacities, because we see how the transforming companies are being absorbed by the mining groups. (…) We are at the heart of an extremely important evolution which is not at all analysed in Europe. I fear that we will wake up with dramatic consequences for the industrial sector and its costs ”.271

The Livre Blanc expresses quite a gloomy sentiment. In the future, most experts indicate that France will need to take into account various threats and be able to respond with military force. “We live in a world full of threats”, ex-Minister Hubert Védrine stated. He observed two conflicting evolutions, “Americans and Europeans are losing the monopoly of history”, while at the same time, about fifteen emerging countries are increasing their involvement. Mr. Védrine provokingly said, “We must give a Nato and occidentalist answer to the threats ”.272

In the opinion of General Bentegeat, the Frenchman who is head of the EU Military Committee, there is no doubt that, Europe will be drawn into very intense regional conflicts in the future. General Bentegeat believes the conflicts will arise due to the convergence of three factors: tensions around the supply of energy, water and raw materials, primarily because of the rise of China and India; secondly, the multiplication of centres of terrorism; and thirdly, the distribution of weapons of mass destruction and ballistic missiles. General Benteget believes that the potential crises can be avoided by forging partnerships with the African Union and that maintaining a close collaboration between NATO and EU is indispensable.273

Collaboration may be the buzzword, but the primacy of national interests will always remain. Thus, as MEDEF acknowledges, a consensus may be reached over climate change and how to tackle it but that consensus on supply security of national resources is a completely different matter.274

5.2 United States of America

In the US, the friction among European countries and natural resources does not go unnoticed. For example, regarding Russia and its natural gas policies towards the EU, before President Bush visited Europe in May 2008, a US government report observed, “European nations are not of one mind in addressing energy security”.275 Although there are divisions running throughout American society, when it comes to the matter of decision-making, the US does not suffer from the handicap of competition among member states, as the EU does.

In 2001-2002, the US decided to shift its energy supply towards new technologies and, geographically, to new suppliers such as West Africa, with the intention of reducing its dependence on oil from the Middle East by 75%. This choice was made to ensure sustained support for the economic growth of the world’s leading economic power. “Africa holds 7% of world oil reserves and comprises 11% of world oil production. Along with Latin America, West Africa is expected to be one of the fastest-growing sources of oil and gas for the American market”, as was described in the US National Energy Policy of May 2001.

The general conclusion was that a concentration of world oil production in any one region of the world was a potential contributor to market instability. The Policy stated, “Growing levels of conventional and heavy oil production and exports from the Western Hemisphere, the Caspian and Africa are important factors that can lessen the impact of a supply disruption on the US and world markets”.276

The National Energy Policy remains a key document for US policy in general and some of its conclusions were used in the National Security Strategy of September 2002. Taking into consideration the need to diversify the US’s resource sources, the document reads, “We will strengthen our own energy security and the shared prosperity of the global economy by working with our allies, trading partners and energy producers to expand the sources of global energy supplied, especially in the Western Hemisphere, Africa, Central Asia and the Caspian Region”.277

Other organisations have acknowledged the need for the US to seek out other geographic areas as well. The Center for Strategic and International Studies (CSIS), an influential bi-partisan Think-Tank, pointed at the Gulf of Guinea as a “nexus of vital U.S. foreign policy priorities”.278 As President Bush famously stated in his State of the Union address in 2006, “America is addicted to oil”; and he once more emphasized the importance of technological and geographical diversification.
The US’s statements have been put into practice. The US has increased its political, economic and military/security presence in a number of natural resource producing locations, for example in the Gulf of Guinea. In this region, Nigeria and Angola are the main oil suppliers.279 But, as CSIS has observed, “Competition for influence in the Gulf is fierce”.280

Just as shown in the analysis of the EU, the US anxiously observes the supply of other minerals, which are of strategic importance for American industries and the military. A report produced by the National Materials Advisory Board (NMAB), the top advisory body for policy, industry and universities, pointed out some interesting inconsistencies regarding the supply of minerals.281 On the one hand, the earth’s minerals are geographically distributed very unequally. On the other hand, mineral deposits in the US and Europe are largely depleted.

According to the report, industry has exploited the “world class deposits”, these are the biggest and richest ore deposits with the highest ore contents. Some examples are cobalt in the DRC; chromium, platinum metals and manganese in South Africa; wolfram, rare-earth metals and antimony in China; bauxite in Jamaica manganese in Ukraine; platinum metals in Russia; nickel in Canada and molybdenum in the US.

In the US, mining and the processing of minerals have lessened. Consequently, the exploration for and exploitation of new supply sources will have to move to farther removed regions of the world. This, however, will be more expensive and greater political risks will be involved, as the report says. Besides, the US will have to face the BRIC countries in the global market that have become the “dominant materials consumers”. According to the NMAB Report, by 2040, the BRIC countries will together be economically stronger than France, Germany, Italy, the UK, Japan and the US combined.

The report found yet another inconsistency: it stated that the US National Defense Stockpile (NDS) was wholly ineffective. NDS is a structure with raw materials stockpiles for the defence sector, established just before WWII. It has stored dozens of raw materials that can be used in case of a crisis. However, the report argues, “neither the federal government nor industry leaders have enough accurate information to know how secure the supplies of these minerals are. This lack of information also extends to the area of national defence. (...) National Defence Stockpile (NDS), a cache of material in place to deal with national emergencies, is wholly ineffective for responding to modern needs or national security threats”.282

In fact, in 1992 the US Congress directed the Defense National Stockpile Center (DNSC) to sell the bulk of its assets and restructure its activities. The number of physical stock deposits started to decrease. According to a budget draft for Fiscal Year 2009, 2 of these sites would remain in 2013 as compared to 18 in 2008. In 2007, DNSC’s inventories stood at US$882,7 million against US$7,1 billion in 1992.283 Since 1992, total sales from the NDS have accounted for approximately US$6,6 billion.284

In the US’s point of view, defence and matters of supply security are closely tied together. These sentiments were projected by the Project for a New American Century (PNAC) and inspired some of the policies of the Bush Administration in 2001. In the PNAC’s Statement of Principles, the authors said that they were going to make the case for American global leadership by re-promoting “essential elements of the Reagan Administration’s success: a military that is strong and ready to meet both present and future challenges; a foreign policy that boldly and purposefully promotes American principles abroad; and national leadership that accepts the United States’ global responsibilities”.285

Listed among the authors were Dick Cheney (Vice-President under George W. Bush), Donald Rumsfeld (State Secretary of Defence), Paul Wolfowitz (State Secretary of Finance, later World Bank President), the political activist writers Francis Fukuyama and Donald Kagan, and Governor Jeb Bush (brother of former President George Bush and Governor of Florida). As evident from the ties the organisation had to the Bush Administration, it is not a surprise that the PNAC’s policy suggestions were well received by the White House.

In order to pursue its national interests, the US started to intensify its relationship with Africa on various levels: diplomatic, economic and militarily. In 2000, the US introduced a trade scheme with Africa, called the African Growth and Opportunity Act, which aimed at lowering commercial trade barriers between the US and Africa. In 2002, the US government transformed the African Crisis Response Initiative (ACRI, launched in 1997-98) into the African Contingency Operations Training and Assistance (ACOTA). From 2005 to 2007 the bulk of African military personnel trained under ACOTA came from Ghana (3.213 troops), Nigeria (1.555), but mainly from Rwanda (7.453).286

The aim of ACOTA is to prepare African army units for “Africa owned” crisis interventions and to tighten communication lines between American and African command structures. For example, the Rwanda Defence Force engaged in the Darfur peace operation UNAMID, which is partly funded by the US through the African Union. The US deployed its Pan Sahel Initiative in Northern Africa and occupied a military base in Djibouti. They also actively deployed their naval forces and Coast Guard in the Gulf of Guinea, clearly to secure the maritime transportation routes from the oil fields in the region to the main markets in the North.287

Recently, some US analysts have become more realistic and the conquering rhetoric that was portrayed by groups such as the PNAC seems to be waning. In February 2006, US Lieutenant Colonel Gregory C. Kane wrote an article titled “The Strategic Competition for the Continent of Africa”. He said that, “the US is unarguably the pre-eminent nation in the world” but then admitted that at the same time the US is the “largest debtor nation” and that its “worldwide security commitments stretch our military to the breaking point”.288 In November 2008, the 2025 projections of the National Intelligence Council foresaw the US to be only “one of a number of important actors on the world stage, albeit still the most powerful one”.289

China’s appearance on the African stage has been met in the US with more diplomacy than elsewhere in the West. However, there are still different opinions on how the US should respond towards China. In his paper, Lieutenant Colonel Gregory Kane observes, “China has been aggressively pursuing economic goals on the continent and parlaying those economic ties into diplomatic clout”. He later concludes that the US and China should work together by stating, “The US needs to continue to build a partnership with China in Africa to promote stable oil markets, defeat terrorism and counter-proliferation, and ensure safe shipping lanes”.290

While the paper was being published, an Africa-China- USA Trilateral Dialogue was taking shape with a first conference held in August 2006.291 In 2007, however, Peter Pham, Senior Fellow of the Foundation for Defence of Democracies, maintained a more hawkish opinion. During a US House hearing he declared that, “this natural wealth makes Africa an inviting target for the attentions of the People’s Republic of China whose dynamic economy has an almost insatiable thirst for oil and other natural resources to sustain it”. He added, “many analysts expect that Africa will increasingly become a theatre for strategic competition between the United States and its only real near-peer competitor on the global stage, China, as both countries seek to expand their influence and secure access to resources”. 292

There is an important military component linked to the economic and political ambitions of the US in Africa. In 2007, the US officially announced that it was interested in opening an Africa Command (AFRICOM) somewhere on the continent. Since the end of the 1990s, the US has developed several programs of military training and assistance with African countries, for example to establish African rapid reaction forces that were partially equipped by the US. Until 2007, the command for US military operations in Africa was divided over three existing command structures293. In 2006-2007, the US authorities decided to create one single military command structure for Africa, AFRICOM.

This structure became operational on October 1, 2008 but for the time being its headquarters remains outside of Africa. Indeed, in 2007, AFRICOM faced disapproval by all African countries, except for Liberia, and the Pentagon did not succeed in moving the Africa Command to a new headquarter on African soil. “For the foreseeable future”, as the command’s website says, “AFRICOM is headquartered in Stuttgart, Germany”.294

Despite the setback, the US has not abandoned its strategic concept for Africa. The National Intelligence Council, which represents the different US intelligence agencies, suggested the following, “If AFRICOM, the new US military command, does not present an overly militarized face to citizens in African countries, and humanitarian and economic developmental aid continues, the survey suggests African opinion about the United States will remain favourable”.295 It appears that the US has followed this advice. The AFRICOM project has been repackaged to present it as a common endeavour of several American public services in Africa who share humanitarian and aid objectives as well as diplomatic and military goals. It is still too early to tell if this new version of AFRICOM will be accepted on the continent.

5.3 East Asia

The following section will focus on two of the largest and most influential countries in East Asia-Africa relations: China and Japan. Similar to the previous sections on the EU and US, we will discuss the policies and the companies that are the most influential in natural resources and their relations with Africa.

5.3.1 China

Over the last few years, a new independent spirit has been blowing through Africa. To a significant extent, this is due to the fact that Africa has managed to find new partners, including China. The Senegalese President, Abdoulaye Wade, described the new state of affairs aptly at the EU-Africa Summit in Lisbon in December 2007, “Europe has nearly lost the battle of competition in Africa. With the price of one European car you can buy two Chinese cars”. 296 China’s relationship with Africa dates back to the post-World War II era when Beijing was supportive of the anti-colonial and independence struggle of African countries.297

The Bandung Conference held in 1955 where the Non-Aligned Movement was created, represented one of the highlights of this period.298 Chinese Prime Minister Zhou En Lai, one of the key figures of this movement, made his first Africa trip at the end of 1963. His diplomacy lead to China assisting Africa’s post-colonial development, with early investments made essentially in the infrastructure sector.299 For example, in the beginning of the 1970s, China built the Tanzania-Zambia Railway.300

Since the 1990s, Chinese trade and investment flows with Africa have dramatically increased, especially to the astonishment of Africa’s traditional, and often ex-colonial, partners. The evolution of the relationship can only be appreciated when looking at the numbers: Total trade between China and Africa grew from US$10 billion in 2000 to US$18 billion in 2003 but reached US$50 billion by the end of 2006.301 In the first three quarters of 2008, two-way Sino-Africa trade reached US$74 billion, up 62% from 2007. Beijing then warned that trade between the two partners might be affected by the global financial crisis, nullifying the good results of the first eight months.302

Exports from Africa to Asia have been accelerating. Between 1990 and 1995, exports grew annually, on average, by 15% and between 2000 and 2005 by 20%. In addition, exports to China grew even faster, by 48% annually between 1999 and 2004. Currently about 10% of Sub-Saharan exports are destined for China, while this was not even 3% in 2000.303 However, it should be noted that China is not Africa’s main trading partner. When two-way trade between China and Africa was US$50,5 billion in 2006, the trade between the US and Africa amounted to US$71,1 billion.

Another factor to consider is that Asia is important for Africa, but Africa has less importance for Asia. Africa represents only 1,6% of the exports shipped to Asia from all over the world whereas this share is 32% towards the US and 20% towards the EU.304

China’s interest in Africa stems from the growth of the Chinese economy, which began after major reforms were decided in 1978. As Chris Alden of the London School of Economics explains, “In 1978 the new leader Deng Xiaoping set China on a gradualist road of capitalist-oriented development that produced three decades of nearly double-digit growth and a rising in living standards that has brought a nine-fold increase in per capita income to US$ 1.700 in 2005”.305

Another set of reforms was initiated in 1991 when China created the Go Out (and Join Global Competition) Strategy. After a few years, around 120 State Owned Enterprises were selected to spearhead the overseas expansion. From 1998 onwards, Chinese SMEs joined the Chinese TNCs in this endeavour.306 China’s economic growth lead to a dramatic reversal in trade fluxes and from a net exporter of raw materials, China became the first importer of raw materials in the world. This major development is completely changing the existing global economy.

China’s current political strategy is to strengthen ties with Africa. In 2000, the first Forum on China-Africa Cooperation (FOCAC) was held and two others were to follow in 2003 and 2006. At FOCAC-3, the Chinese government “committed itself to an ambitious programme centred on provisions for US$5 billion in loans and credits, the doubling of its development assistance by 2009 and, in a bid that would make China Africa’s largest trading partner, increasing two-way trade to over US$100 billion by 2010”.307 There are a few factors that are important to understand China’s Africa policy.

First, China conducts most of its relations through bilateral agreements with individual countries, and second, all government levels in China, from national to local, are involved in the programs abroad. All levels of government must respect the principles that officially guide relations with foreign countries. These principles have been developed over the years and were outlined in a White Paper titled “China’s Africa Policy”308. According to the Belgian scholar Jonathan Holslag (then an associate researcher at the European Strategic Intelligence and Security Center - ESISC) it is striking, how Beijing adheres to a well-conceived official discourse that is carried out consistently at every occasion.309

Jiang Zemin, then President, laid the foundation of this discourse in 1996, when he summed up five cornerstones of China’s Africa policy: sincere friendship, equality, unity and cooperation, common development, and looking into the future. In 2003, this approach was modified slightly by his successor [Hu Jintao, IPIS note] who formulated six pillars that can be summarized as: non-interference, African ownership in dealing with problems, mutual trust and cooperation, the increase of economic assistance without political conditions, to appeal the international community to pay more attention to Africa, and to promote a more friendly international environment for Africa’s development 310.

Through its domestic development and global trade, China collected the managerial and financial resources to sustain expansion. In 2005, the export surplus with the US amounted to US$202 billion, but, in July 2007, it was estimated that the surplus would reach US$300 billion. The trade surpluses with the EU for 2006 and 2007 were estimated to be around EUR€128 and 170 billion. Thus, the estimate of the international reserves with the Chinese Central Bank totalled more than US$1 trillion in 2007.311

China’s historical experience of lifting hundreds of millions of people out of poverty and its stance on international relations appealed greatly to African leaders. As Harry Broadman, then the Economic Adviser for the Africa Region at the World Bank, wrote in 2007, “these two prodigious countries’ newfound interest [China and India, IPIS note] in substantial international commerce with Africa—home to 300 million of the globe’s poorest people and the world’s most formidable development challenge—presents a significant, and in modern times, rare, opportunity for growth, job creation, and the reduction of poverty on the Sub-Saharan continent”.312

The “East Asian Miracle”, with China in particular seeking an original solution to poverty, has become a role model to many in the South. Moreover, Beijing has a comparative advantage because it shares a common (anti-) colonial past with many Third World countries. Although it is the third economic power today it still remains a developing country itself. China’s adherence to non-interference and un-conditionality also enhances the establishment of trade links with Africa. As Senegalese President Abdoulaye Wade wrote, “I have found that a contract that would take five years to discuss, negotiate and sign with the World Bank, takes three months when we have dealt with Chinese authorities”. 313

Government policies and economic urgency made China look overseas and especially towards Africa for solutions. In this context, we refer to the preceding chapters to stress once again that Africa’s wealth in natural resources is relative. The most visible and questioned part of China’s presence in Africa relates to China’s need to secure its supply with raw materials. According to Jonathan Holslag, “Beijing opts for a control-over-the-well-strategy because it does not have confidence in the liberal approach of the commodity market”.314 Therefore, a number of companies are created, from wholly owned Chinese companies to Joint Ventures or jointly operated companies.

A series of tools are used to foster a relationship between two countries. Apart from diplomacy, such as the FOCAC meetings, foreign assistance is essential. A crucial component of expanding China’s presence in Africa has been the use of foreign assistance to tighten and build new relationships with different regimes. Africa is the single most recipient of China’s development assistance; this assistance amounts to US$1,8 billion or 44% of China’s total development assistance.

Another tool used is the lending of money. Chinese authorities have put financial institutions at the disposal of Chinese foreign investment such as the China Development Bank and especially the China Export-Import Bank (EXIM Bank), created in 1994. The state owned EXIM Bank supports Chinese enterprises by providing credit and loans. The EXIM Bank has a considerably larger budget than the Western counterparts. In 2005, it had US$15 billion invested in several projects. The EXIM Bank endured much criticism because it ignored environmental and social standards in some of its projects. To counter that such actions happen again, in May 2007 the EXIM Bank and the World Bank signed an agreement to improve practices.315

Besides the EXIM Bank, the creation of funds can allow investments to be made. An initiative created during FOCAC-3 in 2006 was the China-Africa Development Fund (CAD Fund). It became operational in June 2007 as an equity investment fund with a US$1 billion capital injection from the China Development Bank. Through these instruments, China has become a key actor in the development of Africa’s infrastructure.

In a 2008 report, the World Bank wrote, “China’s financial commitments to African infrastructure projects rose from less than US$ 1 billion per year in 2001-2003 to around US$ 1,5 billion in 2004-2005, reached at least US$ 7 billion in 2006 and then trailed back to US$ 4,5 billion in 2007 (…) Infrastructure resources by emerging financiers were around US$ 8 billion in 2006, broadly comparable in magnitude to the Official Development Aid of OECD donors amounting to US$ 5,3 billion in 2006”.316 The bulk of the infrastructure projects were given to Nigeria, Angola, Sudan and Ethiopia.

Commenting on the projects, Reuters reported that such projects were welcome because, “ in a region where only one in four Africans have electricity, and travel along major export routes takes two to three times longer than in Asia”.317 Obiageli Ezekwesili, World Bank Vice President for Africa said,“China’s investments are helping fill $22 billion a year in financing needs for roads, railways and power across Africa”.318

China’s investment scheme in Africa is not unique and is known as the “Angola model”. This term describes the financing scheme where the repayment of a loan is done through the exporting of natural resources. In this case, China allocates loans for infrastructure projects and is granted the exploitation of mineral resources in return. The EXIM Bank uses the scheme when confronted with countries that cannot provide adequate collateral to their loan commitments. Instead, a framework agreement is signed. The EXIM Bank provides finances to a Chinese construction company that works for the beneficiary government. In exchange, the government renders some oil or mineral concessions to Chinese extractive companies that service the debts to the EXIM Bank.

The ‘Angola model’ was used in Angola, which received US$5 billion in Chinese loans since 2004 in order to extract Angolan oil for delivery to China. Since 2002, Angola has been China’s leading supplier of oil in Africa and 15% of China’s oil imports come from Angola. Angola is now China’s largest trading partner in Africa.319 The model was also used in a US$9 billion contract with the DRC to extract copper and cobalt in return for the construction of roads, hospitals, schools and the rehabilitation of two major mineral deposits.

Oil is currently the number one export commodity to China accounting for 62% of African exports. China’s suppliers are concentrated in five countries, which produce 85% of all African oil exports to China: Angola supplies 47%, Sudan 25%, Congo 13%, Equatorial Guinea 9% and Nigeria 3%.320 China signed its first oil-producing contract with Sudan in 1996. Since then, over US$15 billion has been invested by China in Sudan, primarily in the oil industry and related infrastructure projects. A network of refineries, roads, railways, hydroelectric dams and telecommunication services has been established in the country. Bilateral trade between the two partners totalled US$3,9 billion in 2005, from US$890 million in 2000.

China’s growing presence in Africa does not take place unnoticed. China’s policy of un-conditionality in relations with other countries has been the focus of much criticism. With such policies, many say that Beijing is actively supporting pariah regimes. Some consider Sudan to be an example of a pariah regime. Apparently, Beijing is sensitive to such criticism. In 2006, and on the day of the FOCAC-3 opening ceremony, President Hu Jintao urged Khartoum, to cooperate with UN diplomacy over Darfur. China was even prepared to authorize UN peacekeepers to reinforce the African Union (AU) mission.

However, as China’s economic interests in Sudan remain important, Beijing does not want to fundamentally change its relationship with Sudan.321 One reason is that China needs the support of the African countries for its diplomatic actions against Taiwan, which Beijing considers a province of mainland China. Moreover, in some way, African countries need China to serve as a new strategic partner or at least an alternative option to the traditional counterparts of Europe and the US.

Another criticism of China relates to the conduct of Chinese entrepreneurs, mostly of SMEs who tend to avoid punishments both from Chinese and African authorities and ignore labour and environmental legislation.322 How to address this topic seems to be one of the Chinese government’s biggest concerns. In the DRC for example, 300 Chinese illegal immigrants were expelled in February 2008 by the governor of the copper province of Katanga with the approval of China’s Ambassador to Congo Wu Zexian. Those expelled were working for small metallurgical companies that were paying very low wages. The Chinese Embassy stressed that Chinese employees recruited within the scope of the contract between DRC and the consortium of China Railways Engineering Corp. -SinoHydro-Eximbank were treated much better.323

Box E - China, “The Hungry Monster”

“Hunger”, “thirst”, “appetite”: These descriptions have been made in numerous articles and analyses on the “dragon” or the “giant” China. By doing so, their authors have shaped an ever recurring spectre of a monster creeping into Africa, an image that strongly appeals to (and probably emanates from) Western fears of being pushed out of its traditional markets in a continent with which strong ties exist, often tracing back to a colonial past. Not always do these articles give evidence of professionalism. An example is “The New Colonialists”, published by the Financial Times (FT) on November 17, 2007 and written by FT’s Bureau Chief in Johannesburg, Alec Russell.

The article describes Russell’s experiences with the Chinese in Angola. “This much is clear”, he writes, “with the largest oil-revenues in sub-Saharan Africa aside from Nigeria - worth $10,6bn last year - Angola has proved an alluring destination for resource-hungry China”. Therefore, literally innumerable lots of Chinese slip into Angola. Russell asks how many expatriates are working in Angola; however, he is in not able to give an answer to this “Chinese puzzle”. He heard that “a Chinese diplomat told a western counterpart that they had issued work permits for only 5.000 Chinese in Angola”. He noted the “suggestion from one senior Western diplomat that there could be more than 100.000”. He took down the estimate of between 20.000 and 30.000 Chinese nationals, given by a scholar from the Centre for Chinese Studies at the University of Stellenbosch.

It seems that Russell has interviewed many counterparts for the answer, but missed one important category of sources: Angolan institutions and observers. “They have limited capacity to track the number of Chinese nationals”, the scholar cautioned. “In such a climate wild rumours abound”, Mr. Russell wrote. Being a staff reporter from a highly reputable British newspaper, one would expect him to deconstruct rumours. Alec Russell does the opposite.

“A popular stereotype”, he goes on, “of the typical Chinese expatriate has taken hold in the West: they arrive in secrecy to work for giant state Chinese companies as foot-soldiers in Beijing’s new African strategy; they deprive locals of jobs and they have little or no interaction with their host countries”. What is true then of the stereotype? There is no way of knowing because, unfortunately, “the most memorable aspect of the trip was not what I could see of the Chinese but what I couldn’t”. Five months later, The Economist in its March 13, 2008, wrote an article called, “A ravenous dragon”. The opening sentence reads, “China’s hunger for natural resources has set off a global commodity boom”, which is not exactly new news. What is surprising is the following sentence, “this report will argue that concerns about dire consequences of China’s quest for natural resources are overblown”.

African media often take a different stance. For example, in the March 2008 edition of the New African: “What compounds the West’s worries is the fact that everyone can clearly see through its inconsistencies, such as the colonial legacy which contradicts claims of democratisation in Africa, its notable Cold War protection and support of corrupt dictators and, even worse, its stark failure to come up with any real economic success story in Africa, despite decades of policies devised by its technocrats”.

5.3.2 Japan

In 2007, Japan was the world’s second largest economy. In the 1970s and 1980s, Japan had its mind set only on engagement in South East Asia. Its relationship with Africa is a very recent one. A good illustration is the fact that in January 2001, Prime Minister Mori Yoshiro was the first Japanese leader ever to pay a visit to Africa. Today however Africa, which accounts for 20% of the world’s land mass and for 10% of the world’s population and is rich in natural resources, is indispensable for any major world player.324 Consequently, Japan’s ties with Africa have been growing steadily since the end of the Cold War and most prominently through its development assistance.

In 1993, Japan co-hosted the first Tokyo International Conference on African Development (TICAD) where it presented itself as a partner in development assistance. Since then, four TICAD Summits have taken place.325 Development assistance is the primary focus of the TICAD process. When Japan created TICAD, it was the world’s leading aid donor. At that time, Tokyo held a progressive discourse by emphasizing “African ownership” and “relations based on equality” in development assistance. Despite the progressive sounding policies, some observers have pointed out that the TICAD declarations have always endorsed a neo-liberal view on development.326

Japan’s aid policies have indeed been inspired by the country’s position within the group of leading Western economies and its alignment with US international policy. It is also widely agreed that political and economic drivers are just as important to Japan when strengthening its ties with Africa. For example, Tokyo has tried, so far without success, to promote its accession to the UN Security Council with support from African countries. Its last attempt in 2005 failed because of insufficient support, especially from Africa, which represents only 25% of the 192 UN-members.

From an economic perspective, Japan engages through TICAD in order to secure a sustainable supply of Africa’s natural resources, as well as for the potential represented by the African market. There is also the rivalry with China in this field; however, Japan is obviously losing.327 According to government data of both countries, Japan’s trade with Africa in 2007 amounted to US$27,7 billion, only half of China’s trade with Africa. Japanese aid to Africa has also fallen 40% from its peak in 1995 to US$6,7 billion in 2007.328 Criticism from African officials on TICAD has grown louder and higher visibility from China’s initiatives is overshadowing Japan’s once pioneer initiative.

This trend is reflected in the fact that only US$415 million or 0,4% of Japan’s total FDI went to Sub-Saharan Africa between 2002 and 2004. 329 This means that the attention given to Africa in Japan’s foreign policy was not echoed in its foreign economic activity.

At the fourth TICAD meeting in May 2008, Tokyo adjusted its policies to include clear pledges and fast actions. The need to take care of its own interests became more apparent, now that the US could no longer fully secure them. In his opening speech, Prime Minister Fukuda emphasized the crucial link between infrastructure works and private investment. Therefore, he proposed the establishment of a US$ 2,5 billion fund, called Facility for African Investment for the period of 2008 up to 2012, within the Japan Bank for International Cooperation (JBIC). The initiative was set up to help Japanese companies in Africa.

The fund will offer direct financing for Japanese investments in Africa and guarantee loans provided by Japanese banks.330 This initiative also targets Africa’s natural resources because, as the JBIC writes, it must support “projects in such areas as manufacturing, energy and natural resource development, and infrastructure development in Africa’s power and port sectors”.331 In the end, Japanese private investment in Africa is expected to double. At the last TICAD meeting Japan also promised to put US$4 billion in soft loans at Africa’s disposal for infrastructure improvement and Prime Minister Fukuda announced that Japan will double its Official Development Aid to US$1,8 billion 332 by the next conference333.

Japan is now sending Joint Missions for promoting trade and investment to Africa. The Joint Missions are composed of business, government representatives and politicians.334 The first Africa mission went to Botswana in September 2008. According to Japan’s Vice Minister of Economy, Trade and Industry, Takamori Yoshikawa, the main areas of interest were minerals and energy. Mr. Yoshikawa said, “I believe that with the advanced technology that will be transferred to Botswana and the SADC countries, and the chance that it avails for rare metals to be detected for new mineral investment projects by Japanese companies, we will be in a position to meet the ever increasing demand for rare metals in Japan.”335

In May 2008, Japan had already signed a Memorandum of Understanding (MOU) with Namibia to secure a mineral supply to the Japanese industry. “Since Namibia is endowed with abundant natural resources such as diamonds, uranium and natural gas”, so the memo said, “Japanese firms take great interest in resource-related businesses, and are actually participating in resource development projects in this country.”336

6. Natural Resources and Development

The economic crisis, which has been manifesting since September and October 2008, poses serious threats to the development of Africa, and in particular to the development of resource rich countries. This is a troubling fact for Africa, the most marginal player in the world’s economy. The extreme volatility of commodity prices during and after the summer of 2008 shows the vulnerability of raw-material-exporting countries for sudden price shocks. This raises the question whether commodity agreements might constitute a buffer against such shocks.

Another problem is the long term planning of mining companies. Many mining companies or other players in the extractive industries are reconsidering their investment projects. Many have slowed down their activities or “mothballed” specific mining projects; be it for lack of credit or for bad profit perspectives. While the project is put on hold, the host country with the resources is left without incoming revenue, which it would have received in exchange for the resources. Now, they too have to turn back budgets and future planning. It will be difficult to maintain any sustainable development planning in this context.

In this chapter, we will touch on questions of this kind without developing them thoroughly or giving solid answers. Our answers should be the result of thorough exchanges and consultations to be developed between actors in the North and the societies concerned in Africa.

6.1 International Commodity Agreements

Commodity dependency combined with volatile and low prices of raw materials are frequently stated as major causes of structural underdevelopment of many African countries. Such circumstances raise the question if International Commodity Agreements (ICAs) are a valuable way of devising solutions. Such agreements aim at keeping the volatility of prices and downward trends under control. When in the second half of the 20th century, the resource rich countries were confronted with worsening terms of trade and instability in commodity prices and revenues, this problem came on top of the agenda of UNCTAD’s first conference, in Geneva.337

Later on, international support for an Integrated Programme for Commodities (IPC) gained vigour and it was approved at UNCTAD’s fourth conference in 1976 in Nairobi.338 The idea was to negotiate commodity agreements that would, through their own resources as well as resources borrowed from a common financing facility, be able to finance buffer stocks in order to reduce price fluctuations, and to obtain stable and acceptable prices for producers. Negotiations led to the establishment of the Common Fund for Commodities (CFC), an instrument to fund buffer stocks of core commodities that were to form part of the IPC. The results of ensuing efforts were disappointing.

Although intense negotiations took place during the next years, only one new commodity agreement was negotiated within the context of the IPC, the International Rubber Agreement. Moreover, some existing commodity agreements even disappeared with the approaching global recession of the 1980s, resulting in depressed prices. When the agreement establishing the CFC (adopted in 1981) entered into force in 1989, its objective to finance buffer stocks was suspended, and the bulk of the commodity agreements were shut down.

It seemed that market intervention through commodity agreements was no longer acceptable in the world economy of the 1980s, where (price) liberalization and deregulation promoted by programmes such as the International Financial Institutions’ Structural Adjustment, got the upperhand.339 Still, it is good to know that ICAs have existed for several commodities. These agreements were launched for sugar, rubber, coffee but also for some metallic minerals. For example, the International Tin Agreement, Intergovernmental Council of Copper Exporting Countries, the International Bauxite Association, and the Association of Iron Ore Exporting Countries.

The establishment of the ICAs tried to provide stability in different ways, but the two most common factors were used: buffer stocks and export quotas. The International Tin Agreement (ITA), for example, in which producing countries and consumers were represented, consisted of both elements. The buffer stock was the main instrument. It bought tin when the price would reach a level equal or below a floor price. When the tin price rose up to a ceiling price, the buffer stock had to sell tin to make the prices decrease.340 When the buffer stock alone failed to support the price range, then export quotas were used.

None of the commodity agreements survived. One theory is that it is hard to manage output when productivity increases make the supply expand. The World Bank thinks that supply control attracts new entrants on the market, as occurred on the coffee market. It is also clear that it is difficult to agree on price ranges for the long term satisfying producers as well as consumers. Another difficulty is the lack of enforcement mechanisms.341 Other analysts state that to overcome these problems and to make the agreements work is a matter of political will be backed by adequate financial resources.342

It would be too simple to state that since these experiences did not work in the past, it is likely they cannot work in the future. One has to look at the context from the particular point in time in order to analyse the failures. UNCTAD’s IPC and CFC became operational in the era of neo-liberal reforms, hostile to any suggestion of market intervention. Free riding and counter-policies played an important role in thwarting the commodity agreements. For example, the ITA was upset by the US’s stockpile and Russia’s huge tin sales in the 1950s.

For ICAs to succeed, some conditions are favourable such as the domination of the market by a small number of producers, strong political alliances between them and a certain dependency with the consumers where, for example, stocks or home production are relatively small.343 The experiences of the oil producing cartel OPEC and the creation of the consumers counter-cartel, the International Energy Agency, raises the question whether producers and consumers should stick to their own camps or work for partnerships that involve both sides.

If the main objective of commodity agreements is to diminish short-term price fluctuations and to reach a long-term balance between increased supply and demand, is such a partnership not to the advantage of both producers and consumers? Since the 1980s, neither the commodity dependency nor the vulnerability for price volatility has disappeared. On the contrary, the 2008 crisis shows that state intervention is not only accepted (at least for a short while), but also is actively solicited by financial institutions and manufacturers (such as the car manufacturers in the US). Could this mean that new opportunities for state controlled and South-South agreements will arise?

6.2 Mining Reviews

The emergence of new global players thoroughly changes the international playing field. New South-South partnerships are developing. Demand for natural resources from Africa has increased. Against this setting, African public opinion and leaders have been showing a self-awareness that has not been seen for a long time. Now, several evolutions are taking place at the same time. Around the Millennium, half a dozen of African leaders launched a new program for the continent and created the New Partnership for African Development (NEPAD).

Almost a decade later, NEPAD is not so much of an achievement, it rather seems to be a philosophy or a set of guiding principles of how to organise an appropriate environment for business in Africa. While its philosophy may be liberal and may come down to a repackaging of models for free market economies, it nevertheless also expresses a shared voluntarism to enhance national or regional economies on the continent that have the capacity to integrate into and exist (or survive) within the globalized economy.

Partnerships offered from abroad are mostly seen as opportunities, as long as the counter-parts respect African sovereignty and the programs are Africa-owned. Occasionally however, this trend runs into open conflict with the North, as we have shown above. The US is therefore switching tracks to save its AFRICOM project. The EU for its part learned a hard lesson at the Lisbon summit in December 2007 where Africa collectively refused the EU’s free trade approach of the Economic Partnership Agreements. At the same time, because of the boom in global demand, resource rich countries have gained bargaining power and have been designing policies to raise more revenue from their extractive industries.

The start of the process in Zambia was criticized in 2007 by Professor John Lungu. Zambia is a major exporter of copper and cobalt. Prof. Lungu recalls that the Zambian government at the time sold the state owned mines “when the price of copper was low and the company incurring year-on-year losses. This made it a buyer’s market, and the assets were given away cheaply with few strings attached. The World Bank also pushed the government to sell the assets quickly”.344 The principal aim of privatization according to Prof. Lungu was to “establish an attractive investment environment to bring in new money. This was prioritised above ensuring that new investors accepted responsibilities to share in the wealth that would flow from their operations”.

Now, asks Prof. Lungu, was this situation as good in development terms as it was economically for the private companies and had the Zambian government been able to collect enough revenue from the copper price explosion to enable it improve social provision and infrastructure? “We found”, his answer is, “that the Zambian government has incurred losses in tax revenues through the subsidies given to the private mining companies”. In 2007, Prof. Lungu wrote, “Today the economic conditions worldwide have changed. The price of copper has gone up dramatically compelling civil society and the opposition political parties in Zambia to mount pressure on the government to renegotiate” the so-called development agreements.

During the run up to the 2006 elections in Zambia, one of the contesting parties had campaigned with the claim of increasing mineral taxes and reducing personal taxes for the mine workers. This campaign promise became reality, due to the changing global economy when the Zambian government raised taxes for mining companies from 25 to 30 % and introduced a “windfall-tax” for exceptional profits.

In 2008, this new fiscal system was to raise US$ 415 million of supplementary revenue for the Zambian Treasury. Elsewhere in Africa, a similar trend to renegotiate or review existing contracts between the state and (foreign) investors took root.345 In Guinea, the top producer of bauxite, the review of the mining contracts was launched in early 2007, when a general strike against the regime of President Lansana Conté paralysed the country. In the DRC, reviews were launched for the first time since independence in 1960. They took place in April 2007 shortly after the Parliament had been elected and a government formed out of the Parliament’s majority.

Here an inter-governmental committee concluded that of the 61 reviewed conventions, not one was valid. As a result, 22 had to be cancelled and 39 had to be renegotiated.346 Overall, a dozen African countries have undertaken a mining tax reform or a mining contract renegotiation, without, that is, turning back the privatizations. International financial institutions have supported these efforts but only to some extent. The African Development Bank for example has been working on a mining review framework for West Africa.

The effects of the economic crisis will certainly put this mining review process under pressure. In the view of the Multilateral Investment Guarantee Agency (MIGA, a World Bank affiliate), they believe mining reform must be slowed down “to stem a growing tide of investment uncertainty”. Thus, MIGA’s acting head Mamadou Barry negatively labelled mining reform as relating to Resource Nationalism and said, “So we are seeing African governments revisiting old contracts and this presents a new environment in which to manage new risk factors which can help turnaround emerging international perceptions that Africa is posing greater mining risk”.347 A similar opinion was voiced in a World Bank statement on Congo.348

The process encounters strong opposition from private and sometimes heavyweight mining companies and lobbies. In South Africa, Zambia and Tanzania the mining industry’s representatives campaigned against higher taxes. In Congo and Guinea, powerful US and Canadian lobbies tried to influence the contract reviews to the benefit of US transnational corporations. In Tanzania in June 2008, staff from Canada’s High Commissioner intervened to convince members of parliament and sway them to reject the conclusions of the Presidential Mining Sector Review Committee.

For example, the review committee proposed the establishment of a Mining Authority and the introduction of taxation and royalties to be paid by the mining companies. Of course, Canada felt the urge to get involved because it is the second investor in Africa’s mining industry.349 Yet, only a few days earlier a consortium of African mining activists at the African Initiative on Mining, Environment and Society meeting in Accra made the recommendation that “all pressures and policy prescriptions for Africa and African governments must cease forthwith so as to allow African governments and people to enjoy the right to policy choices, review their laws and mining contracts without any limitation”.350

How and by whom can, or must, newly generated mining revenues be spent? This is the subject of yet another international debate. In Angola, a discussion took place in the course of 2008 on the revenues of the production of some 2 million barrels of oil per day. According to the specialized newsletter Africa Energy Intelligence, a Swiss law firm advised the Angolan Central Bank to create a sovereign wealth fund, a plan that is said to have irritated the state oil company Sonangol. Finally, it is Sonangol who will now manage this fund and use it to invest abroad.351 This example illustrates the presence of competing forces within a given political setting.

It also raises the fundamental question of whether revenues from extractive industries should be reinvested simply to make money or should lead to the expansion of the national economy. The UNECA has advanced some principles on this subject. A general principle is that in attracting foreign direct investment, countries should be cautious and selective and “encourage FDI in sectors that have linkages to the rest of the economy and ensure that it leads to the transfer of knowledge and local capacity building. They should also give preference to sectors that have high-added value and significant potential for employment creation”. For oil exporting countries specifically, UNECA says that they “need to manage oil revenues to ensure diversification of the sources of growth and of the export base”.352

In general, this issue raises concerns about good governance and corruption. Governments will have to draw the mining sector out of a vicious circle. They will have to ensure that mining operations generate revenue needed to fund a properly functioning institutional apparatus and, vice versa, that the institutional apparatus imposes itself so as to get revenue out of the mining operations to serve public interest and, in the long run, the needs of development.353 Good governance has become a condition in North-South partnership frameworks; it remains to be seen and how South-South partnerships will contribute to solve this endemic disease. 350

Research & text: Raf Custers
Additional research & text: Ken Matthysen
Editing: Didier Verbruggen, Jeroen Cuvelier, Devin Cahill
Antwerp, August 2009

*IPIS is member of the Fatal Transactions network. Through research, public awareness activities and advocacy work, the members of the network are dedicated to transform Fatal Transactions into Fair Transactions: Transactions that truly contribute to sustainable peace and reconstruction in Africa. The current European members of the network are IPIS (Belgium), Broederlijk Delen (Belgium), Niza/Action Aid (The Netherlands), IKV Pax Christi (The Netherlands), Oxfam Novib (The Netherlands), Bonn International Centre for Conversion (Germany), Medico International (Germany) and Wroclaw University (Poland).

For more information:  www.fataltransactions.org

Disclaimer: Opinions expressed in this article are those of the writer(s) and not do necessarily reflect the views of the AfricaFiles' editors and network members. They are included in our material as a reflection of a diversity of views and a variety of issues. Material written specifically for AfricaFiles may be edited for length, clarity or inaccuracies.

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