The Long Reach of Africa’s Resource Curse

2 May 2011

The resource curse is alive and well in Africa. The paradox that sees African countries rich in oil and minerals suffer from high levels of poverty and civil war is often blamed on corrupt and repressive leadership. But the resource curse extends from local areas to international markets.

The Danish Foreign Ministry is holding its annual Danida Development Days at Asiatisk Plads on Copenhagen’s scenic harbor front. It was there, at Eigtveds Pakhus in the mid 1700s, Copenhageners came to browse through exotic and valuable goods brought home from the Far East by the Danish Asiatisk Kompagni. But rather than marvel at porcelain and silk, the development practitioners, experts, and policymakers who will gather in the old storehouse will be discussing how Africa can benefit from its abundance of oil, minerals, and other natural resources.

Africa is experiencing an economic boom thanks to its natural resource wealth. In recent years international prices for oil, gold, and copper have been soaring due to high demand from China and India. Africa also has amble amounts of rare earths, crucial in the production of high-tech devices from iPhones to cruise missiles. The key now is to ensure that this fortune does not go to waste. But it is going to be an uphill battle. Time and time again natural resources have been more of a curse than an opportunity in Africa.

African countries rich in oil and minerals paradoxically suffer from high levels of poverty and civil war. The cause of Africa’s resource curse is typically blamed on corrupt and repressive leaders who squander fortunes with luxurious spending habits and on senseless wars to satisfy their delusions of grandeur. But there is more to the picture. The reach of the resource curse extends all the way from the local areas where the natural resources are extracted to the international markets where the oil and minerals are consumed.

It is easy to blame Africa’s leaders for the resource curse. Take the President Omar al-Bashir of Sudan, for example. During the over 20 year long civil war with the Sudan People’s Liberation Army, Bashir used hundreds of millions of dollars in oil revenues to buy bombers and helicopter gunships to kill and displace civilian populations in the country’s rebellious southern region. Then there is President Teodoro Obiang of oil-rich Equatorial Guinea. With a population of fewer than 700,000, Equatorial Guinea should be the ‘Kuwait of Africa’. Its people should be living lives of good health and comfort. But the opposite is true. Obiang’s flagrant corruption has kept the majority of the population lingering in abject poverty. But in spite of many dreadful examples of abhorrent leadership, the resource curse can also be found locally inside African countries and outside of Africa’s borders altogether.

Sudan demonstrates how the resource curse has a tendency to turn a national problem into a local one. After a yes vote for independence this January, South Sudan is set to become Africa’s newest country and take the majority of Sudan’s oil resources with it. But the former rebels who are in charge have spent much of the over $10 billion of oil revenues they’ve earned so far on government salaries and security. Most southern Sudanese remain grievously poor. In fact, the guerrilla fighters turned government bureaucrats are already facing rebellions of their own. South Sudan appears to be on its way to becoming another Niger Delta. Nigeria’s oil-rich region has suffered from decades of development neglect, environmental devastation, and armed conflict. Again, this is not just a national problem. The former governor of the Delta State from 1999 to 2007 remains mired in corruption charges for embezzling millions of dollars. Elsewhere in east Congo, military commanders and rebel groups fight over profiting illegally from the region’s valuable mineral resources far from the capital Kinshasa. The local population remains caught in between, facing murder and mass rape from both sides. And from the depths of central Africa the resource curse touches international shores.

Equatorial Guinea shows the international affliction of the resource curse on Africa. In 2003, American oil companies were found to have deposited over $300 million dollars into an account under the control of President Obiang at the Riggs Bank in Washington D.C. The account was used to among other things purchase a luxury home for Obiang in the United States. Riggs later closed the account and received a hefty fine from the US government. But Obiang’s son, Teodroin, continues to spend millions in ill-gotten gains in the United States, a major consumer of Equatorial Guinea’s oil. The Obiangs are just following in the footsteps of other African leaders in Angola, Nigeria, and Gabon.

Just down the street from Riggs Bank in D.C., Global Financial Integrity, an advocacy organization, estimates that Africa lost an average of over $40 billion per year between 2000 and 2008 in illicit financial flows. This astonishing amount stunts Africa’s development. But it reflects an international problem, not an African one. In fact, Africa only represents 4.5% of total global illicit flows among developing countries. Why should Obiang and others listen to western advocacy groups when it is in their countries they store their fortunes? Nicholas Shaxson, the author of Treasure Islands, a new book on tax havens, rightfully warns that in order to completely tackle Africa’s resource curse, the international infrastructure that enables corruption must be reigned in.

Eigtveds Pakhus may now be empty of precious goods from the far reaches of colonial Denmark, but Africa is full of valuable resources and the opportunity of a prosperous future. Participants at this year’s Danida Development Days can only begin to help cure Africa’s resource curse if they first understand its long reach.

Opdateret: 02/05/11