Monday, October 30, 2006

Chinafrica(6) - Watching for PRC Influence in Africa

2 stories from The Economist


China in Africa
Never too late to scramble
From The Economist print edition
China is rapidly buying up Africa's oil, metals and farm produce. That fuels China's surging economic growth, but how good is it for Africa?

AFPIN HIS office in Lusaka, Zambia's capital, Xu Jianxue sits between a portrait of Mao Zedong and a Chinese calendar. His civil-engineering and construction business has been doing well and, with the help of his four brothers, he has also invested in a coal mine. He is bullish about doing business in Zambia: “It is a virgin territory,” he says, with few products made locally and little competition. He is now thinking of expanding into Angola and Congo next door. When he came in 1991, only 300 Chinese lived in Zambia. Now he guesses there are 3,000.
Mr Xu reflects just a tiny part of China's new interest in Africa. This year alone many bigger names than his have come visiting. Li Zhaoxing, China's foreign minister, swept through west Africa in January; President Hu Jintao visited Nigeria, Morocco and Kenya in April; and the prime minister, Wen Jiabao, knocked off seven countries in June. In the first week of November Chinese and more than 30 African leaders will gather at the first Sino-African summit in Beijing. And Chinese companies, most of them owned by the state, have been marching in the footsteps of their political leaders. But is this all good for Africa? Is it bringing the trade and investment that Africa so badly needs, or just meddling and exploitation?

The summit in Beijing is being greeted by Chinese officials and the country's state-run media with an effusion reminiscent of the cold-war era, when China cosied up to African countries as a way of demonstrating solidarity against (Western) colonialism and of outdoing its ideological rival, the Soviet Union. It supported African liberation movements in the 1950s and 1960s, and later built railways for the newly independent countries, educated their students and sent them doctors.

China's main aim then was to gain influence. Now China wants commodities more than influence. Its economy has grown by an average of 9% a year over the past ten years, and foreign trade has increased fivefold. It needs stuff of all sorts—minerals, farm products, timber and oil, oil, oil. China alone was responsible for 40% of the global increase in oil demand between 2000 and 2004.

The resulting commodity prices have been good for most of Africa. Higher prices combined with higher production have helped local economies. Sub-Saharan Africa's real GDP increased by an average of 4.4% in 2001-04, compared with 2.6% in the previous three years. Africa's economy grew by 5.5% in 2005 and is expected to do even better this year and next.

Which countries are the main beneficiaries? For copper and cobalt, China looks to the Democratic Republic of Congo and Zambia; for iron ore and platinum, South Africa. Gabon, Cameroon and Congo-Brazzaville supply it with timber. Several countries in west and central Africa send cotton to its textile factories.

Oil, however, is the biggest business. Nigeria, Africa's biggest oil-producer, has been getting lots of attention. CNOOC, a state-owned Chinese company, paid $2.7 billion in January to obtain a minority interest in a Nigerian oilfield, and China recently secured exploration rights in another four. In Angola, which has now overtaken Saudi Arabia as China's biggest single provider of oil, another Chinese company is a partner in several blocks. China has shown similar interest in other producers such as Sudan, Equatorial Guinea, Gabon and Congo-Brazzaville, which already sells a third of its output to Chinese refiners.

Just the beginning
As a result, trade between China and Africa has soared from $3 billion in 1995 to over $32 billion last year. But China's commerce with the world also expanded over the same period, so Africa makes up only 2.3% of the total. This constitutes about 10% of Africa's total trade (see chart).

However, trade between China and Africa is expected to double by 2010. Although Europe remains Africa's main partner, its share has melted from 44% to 32% of the region's foreign trade within the past ten years, whereas America's share has, like China's, risen. For some countries, the redirection of exports has been dramatic. China now takes over 70% of Sudan's exports, compared with 10% or so in 1995. Burkina Faso sends a third of its exports, almost all of which are cotton, to China, compared with virtually nothing in the mid-1990s. China is now Angola's largest export market after the United States.

Africa has found more than a new buyer for its commodities. It has also found a new source of aid and investment. According to China's statistics, it invested $900m in Africa in 2004, out of the $15 billion the continent received. This was a huge increase (see chart), though most of it went to oil-producing countries. But its aid is spread more widely. It has cancelled several billion dollars of African debt, which has helped to build roads, railways, stadiums and houses in many countries.

This largesse is sometimes an entry ticket. In Nigeria China's promises to invest about $4 billion in refineries, power plants and agriculture were a condition for getting oil rights. In Angola a $4 billion line of low-interest credit enables Chinese companies to help rebuild the bridges, roads and so on that were destroyed in decades of war. The debt is repaid in oil.

Fewer complications
For Angola, which has been keen to get going with the reconstruction of its infrastructure, China's straightforward approach is an attractive alternative to the pernicketiness of the IMF and the Paris Club of creditors, which have been quibbling over terms for years. So it is with many African countries, fed up with the intrusiveness of Europeans and Americans fussing about corruption or torture and clamouring for accountability. Moreover, the World Bank and many Western donors were until recently shunning bricks-and-mortar aid in favour of health and education. China's credit to Angola is not only welcome in itself. It has reduced the pressure from the West.

Thanks to China, therefore, workers from the Middle Kingdom in straw hats are now helping Angolans to lay down new rails on the old line from Luanda to the eastern province of Malange. Another railway, from Benguela to Zambia, once used to carry copper, is also being rebuilt. China is happy: the work helps offset some of its trade deficit with Angola. The Angolan government is also happy: it is rebuilding its shattered economy at last.

For José Cerqueira, an Angolan economist, China is welcome because it eschews what he sees as the IMF's ideological and condescending attitude. “For them,” he says, “we should have ears, but no mouth.” Others are pleased because China is ready to pass on some of its technology. It is, for example, helping Nigeria to launch a second satellite into space. Some African officials, disillusioned with the Western development model, say that China gives them hope that poor countries can find their own path to development.

And now the snagsThe love affair with China, however, may be sour as well as sweet. For countries that do not sit on oil or mineral deposits, higher commodity prices make life harder. Even for producers there are risks. A recent report by the World Bank argues that Africa's new trade with China and India opens the way for it to become a processor of commodities and a competitive supplier of cheap goods and services to Chinese and Indian consumers. But another report, from the OECD, a club of industrialised countries, argues that China's appetite for commodities may stifle producers' efforts to diversify their economies. Oil rigs and mines create few jobs, it points out, and tend to suck in resources from other industries. And if Africa is to escape its vulnerability to the capricious movements of world commodity prices, it must start to export more manufactures. On this the World Bank adds its own warning: China and India must end their escalating tariffs on Africa's main exports.

China is also bringing irresistible—some say unfair—competition to Africa. All over Africa Chinese traders can now be seen selling cheap products from the homeland, not just electronics but plastic goods and clothes. In Kamwala market in Lusaka a host of Chinese shops have appeared over the past couple of years. “Two years ago,” says Muhammad, a local trader of Indian origin, “I did not have time to sit down; now I'm sitting doing nothing.” Though his shelves are full of clocks and radios made in China, he blames his enforced idleness on the competition brought by Chinese traders.

Zambian and other African consumers do not share his despondency. They like Chinese prices. But in some countries consumers are less well organised than textile workers, and in South Africa the trade unions have succeeded in getting the government to negotiate quotas on Chinese clothing imports. Still, the power of China's productivity and economies of scale—never mind government subsidies—certainly hurts local industries. Textile factories in places like South Africa, Mauritius and Nigeria have been badly hit. In tiny Lesotho, where making clothes for Europe or America is the only industry around, this has been catastrophic.

The working conditions, as well as the prices, set by Chinese employers are also a concern to some Africans. The alleged ill-treatment of workers in a Chinese-owned mine in Zambia in July led to a violent protest in which several workers were shot. And many Chinese firms bring in much of their own labour, rather than hiring locals. China brought in thousands of its own workers to build the 1,860km (1,160-mile) Tazara railway between Lusaka and the Tanzanian port of Dar es Salaam in the 1970s. It was finished ahead of schedule, but Tanzania and Zambia still have to rely on Chinese technical help to maintain it. African hopes of technology transfer may be over-optimistic.

Human rights are optional
Some say China's involvement will erode efforts to promote openness and reduce corruption, especially in oil and mining. Nigeria insists that Chinese companies must respect its new anti-graft measures, and the latest bidding round for oil blocks in Angola has been the most open so far. In both countries it is unclear whether China's presence is making corruption better or worse. It is clear, though, that China is not interested in pressing African governments to hold elections or be more democratic in other ways. That helps to explain why China directs so much money towards Sudan, whose odious regime can count on China's support when resisting any UN military intervention in Darfur. China invested almost $150m in Sudan in 2004, three times as much as in any other single country. When American and Canadian oil companies packed their bags there, China quickly stepped in, drilling wells and building pipelines and roads. The Chinese are supposed to be building an armaments factory as well.

China's lack of interest in human rights is something that President Robert Mugabe of Zimbabwe can also be thankful for. Shunned by the West, and with his country's economy in a shambles, he has turned to China for political and economic support—and got it. After he launched Operation Murambatsvina last year, in which 700,000 people had their homes or businesses destroyed, China neutered all attempts at discussion, let alone condemnation, in the UN Security Council. However, despite this, China may not want to squander any more money in a country that has no oil and few mineral rights left to dispose of.

But China's friendship and support at the UN comes with one important political string attached: the endorsement of the one-China policy. To date 48 African countries have paid due obeisance to Beijing: Chad, Senegal and Liberia are the latest to have abandoned their recognition of Taiwan. The suggestion by Michael Sata, the main opposition candidate in Zambia's presidential election on September 28th, that he would have recognised Taiwan if he had won was enough to bring the first public intervention by China in the internal affairs of an African country; the ambassador said that China would consider cutting diplomatic relations if Mr Sata won (which he did not).
That is a warning to Africans that this new interloper in their continent is no more altruistic than its predecessors. Still, that does not mean China's involvement is bad and it is certainly not to be stopped. It is up to Africans to ensure that they get a fair deal from it. If so, both China and its African partners can be winners.


Africa and China
Wrong model, right continent
Oct 26th 2006
From The Economist print edition

China knows what it wants from Africa and will probably get it. The converse isn't true
AFP THE characters for "Africa" in the Mandarin language mean "wrong continent". But the Chinese have often ignored this etymological hint. In the 15th century the emperor's emissaries sailed as far as Mozambique, carrying silk and returning with a giraffe. In the cold war Maoists dotted Africa with hospitals, football stadiums and disastrous ideas.

Next week China will host more than 30 African leaders from the wrong continent in Beijing, offering them a pinch of debt relief, a splash of aid, plus further generous helpings of trade and investment. China already buys a tenth of sub-Saharan Africa's exports and owns almost $1.2 billion of direct investments in the region (see article). A Chinese diaspora in Africa now numbers perhaps 80,000, including labourers and businessmen, who bring entrepreneurial wit and wisdom to places usually visited only by Land Cruisers from international aid agencies.

What is in it for China? It no longer wants Africa's hearts, minds or giraffes. Mostly, it just wants its oil, ores and timber plus its backing at the United Nations. Thus, even as the Chinese win mining rights, repair railways and lay pipelines on the continent, Africa's governments are shuttering their embassies in Taiwan in deference to Beijing's one-China policy.

This suits Africa's governments. The scramble for resources invariably passes the ministerial doorstep, where concessions are sold and royalties collected. China helps African governments ignore Western nagging about human rights: its support has allowed Sudan to avoid UN sanctions over Darfur. And some Africans look on China as a development model, replacing the tough Washington Consensus with a "Beijing Consensus": China's economic progress is cited by statists, protectionists and thugs alike to "prove" that keeping the state's grip on companies, trade and political freedoms need not stop a country growing by 8%-plus a year.

Think again, AfricaThe Chinese part of this puzzle is easier to deal with: even if it is not the first resource-hungry power to behave poorly in Africa, China should be condemned wherever it bribes, cajoles or (in the case of Sudan) permits genocide. But what about the African hope that China provides an economic model?

Sadly, China's success is an obstacle, as well as an inspiration. Its rise has bid up the price of Africa's traditional raw commodities, and depressed the price of manufactured goods. Thus Africa's factories and assembly lines, such as they are, are losing out to its mines, quarries and oilfields in the competition for investment. Even if Africa's labour is cheap enough to compete with China's, its roads, ports and customs are far from good enough. If they are to provide jobs for their workers, not just rents for their governments, Africa's economies must find less-exposed niches in the world economy, such as tourism or cut flowers. And they should look not to China, but to Chile or Botswana for examples of how to turn natural bounty into shared prosperity.

China is doing its bit to improve infrastructure, building roads and railways. But it could do more to open up its own markets. China is quite open to yarn, but not jerseys; diamonds, but not jewellery. If it has as much "solidarity" with Africa as it claims, it could offer to lower tariffs on processed goods. Chinese firms have also ignored international initiatives to make project finance greener (the "Equator Principles") and to make mining industries cleaner (the "Extractive Industries Transparency Initiative"). Even with China's backing, these outside efforts might not succeed: honesty and greenery come from within. Without it, they will certainly fail.

For their part, Africa's leaders could also play their hands rather better. They should talk to each other as well as their hosts in Beijing. If they negotiated as a block, they could drive a harder bargain. Just as China insists that foreigners enter into joint ventures with its companies, so Africans should make sure they get China's know-how, not just its money.


'Do not look where you fell, but where you slipped' A proverb of the Vai people of Liberia advises ...

Sunday, October 29, 2006

China in Africa: 2 from The Economist

Africa and China
Wrong model, right continent
Oct 26th 2006
From The Economist print edition

China knows what it wants from Africa and will probably get it. The converse isn't true

China in Africa
Never too late to scramble
From The Economist print edition

China is rapidly buying up Africa's oil, metals and farm produce. That fuels China's surging economic growth, but how good is it for Africa?

Tuesday, October 24, 2006


Liberia Program Director, Conservation International, Monrovia
Conservation International Program Director - Liberia Program: Africa and Madagascar Division Reports To: Country Director Location: Monrovia, Liberia The Program Director is responsible for designing and implementing CI's conservation Strategy in Liberia. He/she ensures that all projects undertaken and supported buy CI and its partners are technically well integrated and managed appropriately. He/she is also responsible for establishing and maintaining relationships and partnership

Read full job description at Society for Conservation Biology site

Thursday, October 12, 2006

Disturbing Statement in Reuters Mittal Steel Story

Disturbing Statement in Reuters Mittal Steel Story

"Liberia sees steel deal with Mittal soon", Thu Oct 12, 2006 10:34am
ET, By Tom Bergin

This statement is telling:

"Boakai (Vice President Joseph Boakai) also suggested that Mittal may be prepared to move on one of the key sticking points -- control of the country's main port and railway line, which the deal awarded to Mittal."

One point! Is that all the people of Liberia can expect!

As we have said in early August, we hope all goes well with the renegotiation, paving the way for mining to start by late 2007. But not just any contract will do.

With all due respect Mr. Vice President, please to listen to the people. Certainly, Nimba is interested in the renegotiated contract meeting international standards. Mr. Boakai, ownership of the railway and the port is not enough.

From what has been revealed of the contract. All modern mining practices have been thrown out. Even issues of Liberia's sovereignty has been threatened.


Some principles we must insist on are that Mittal Steel and their sub-contractors conduct their activities in a manner that recognizes the needs of society and the needs for economic prosperity, national security and a healthy environment.

Mittal Steel must commit on paper to integrating social, environmental, and economic principles in their mining operations from exploration through development, operation, reclamation, closure and post closure activities, and in operations associated with preparing products for further use.

Take a look at the Rio Tinto contract with Guinea. It is a good example of what we may be missing.

There should be real and tangible targets for development. We should never go down the road of growth without development. It is never too late for public debate. Nimba County should be the model for the future development of Liberia as a whole, not example of the pathetic concessions of the past.

EarlyBird Foundation

Friday, October 06, 2006

Chinafrica(5) - Watching for PRC Influence in Africa

China mixes rice and neo-colonialism
October 6, 2006 By ANDnetwork .com

When China, one of the world's most corrupt countries, starts dishing out tens of billions of US dollars in aid and business contracts in Africa, the world's most corrupt continent, alarm bells go off in Washington and other Western capitals. The fact that China turns a blind eye to widespread human-rights abuses on the continent further heightens concerns in the West.To secure oil supply is a major reason for China aggressively to expand its economic ties with Africa. To fuel its phenomenal economic growth, which has averaged more than 9% annually for the past 20 years, China needs oil as well as raw materials. Not rich in oil reserves, China is becoming increasingly dependent on imported oil. According the Ministry of Commerce, oil imports accounted for 47% of the country's total consumption in the first half of this year.

Last year, the US Congress successfully blocked the attempted takeover of the US oil company Unocal Corp by CNOOC Ltd, a subsidiary of China National Offshore Oil Corp, one of China's three largest energy firms. Energy security rose to the top of the national agenda and Chinese oil companies became even more aggressive in search of possible petroleum sources in other parts of the world.

Africa is home to 8% of the world's oil reserves, which has prompted Beijing to spend billions of dollars to secure drilling rights in Nigeria, Sudan and Angola and to negotiate exploration contracts with Chad, Gabon, Mauritania, Kenya, Equatorial Guinea, Ethiopia and the Republic of the Congo. The continent now accounts for 25% of China's oil imports.

In addition, the Chinese are also key investors in the copper industry in Zambia and the Democratic Republic of Congo. And they are buying timber in Mozambique, Liberia, Gabon, Cameroon and Equatorial Guinea.

In exchange for securing energy, mineral resources and other raw materials, China has been doling out aid and providing technical assistance and interest-free loans to business-friendly African governments. At the same time, Chinese companies are winning contracts to build highways, pipelines, hydroelectric dams, hospitals and sports stadiums and to upgrade railways, ports and airports.

In recent years, China has been increasingly aggressive in diverting and expanding its trade with other parts of the world as its trade frictions with the United States and the European Union intensify. Hence China's trade with Africa continues to soar and, not coincidentally, the long-suffering economies of sub-Saharan Africa are enjoying their fastest growth in 30 years.

According to the Chinese government, China's trade with Africa has increased from US$10.6 billion in 2000 to $39.7 billion last year. During that same period, the International Monetary Fund reports, the economic growth rate in sub-Saharan Africa has nearly doubled. This year's 5.8% rise, the IMF says,is the best Africa has seen since 1974.

Where Western companies fear to tread because of small profit margins or environmental or political concerns, the Chinese have plunged in. China's state-owned companies have the ability to put short-term profit aside and focus on the government's long-term economic plans.

As for environmental and political qualms, Chinese leaders have made it clear that they don't have many. In that way, China's no-strings-attached approach to doing business in Africa flies in the face of Western concerns about democratic development and respect for human rights.

So despite the largely negative reaction in the West to China's push into Africa, Chinese investment is clearly paying off. But how and for whom? Those are the sticky questions.

For China, the benefits have been substantial, and Chinese leaders hope to build on their success at the third Ministerial Meeting of the Forum on China-Africa Cooperation, to be held in Beijing next month.

Premier Wen Jiabao summed up the Chinese strategy at a stopover in Brazzaville during his Africa tour in June: "China has been developing relations with Africa under principles of mutual benefit and non-interference in Africa's internal affairs."

Wen was only reinforcing the see-no-evil, hear-no-evil policy that President Hu Jintao had articulated during his earlier visit to the continent in April.

The offer is clear: in return for securing the raw materials necessary to feed its voracious economy, China will not meddle in the internal affairs of African governments, even if those governments are known for rampant corruption and human-rights abuses.

From Beijing's perspective, the partnership is working brilliantly.

Africa's ruling elite are also happy as the Chinese pump money and cheap manufactured goods into their economies without the ritual hectoring about democracy and human rights that they have grown accustomed to hearing from Western partners.

Thanks to China, demand for African oil, copper and platinum is surging, and everything from Chinese-made T-shirts to kitchen utensils to motorcycles is widely available across the continent at prices lower than those for comparable goods imported from elsewhere. Two companies in South Africa have announced plans to sell cheap Chinese automobiles.

And certainly African leaders such as Zimbabwe's Robert Mugabe and Sudan's Omar Hasan Ahmad al-Bashir are grateful for China's promise of an "equal partnership" with their nations.

President Mugabe, 82, who has ruled Zimbabwe since 1980, has the Chinese to thank for the blue-glazed tiles on the roof of his new $13 million, 25-bedroom presidential palace. The tiles came gratis, but the Chinese have also won contracts totaling hundreds of millions of dollars to provide hydroelectric generators for Zimbabwe's power authority, which happens to be run by the president's brother-in-law.

In addition, China is supplying jets to the perennially mismanaged Air Zimbabwe and buses -1,000 of them - to the country's municipalities. Zimbabwe's air force has also been strengthened by China, to the tune of $200 million. The Chinese are even farming about 1,000 square kilometers of the land that has been seized from white farmers since 2000.

In Sudan, Beijing is one of Bashir's leading arms supplier and has supported the president's resistance to the stationing of United Nations peacekeeping troops in the Darfur region, where the United States alleges government-sanction ed genocide has killed hundreds of thousands. Chinese support should come as no surprise, since more than half of Sudan's oil exports go to China. Overall, Sudan accounts for 5% of China's oil.

China National Petroleum Corp owns 40% of the Greater Nile Petroleum Operating Co. Sinopec (China Petrochemical Corp) is building a 1,500-kilometer pipeline to Port Sudan on the Red Sea, where the China Petroleum Engineering and Construction Group is constructing a tanker terminal.

It's safe to say that the Sudanese president won't be hearing many complaints from Beijing - unless, of course, the oil stops flowing.

In Washington, China's relationship with such nations as Sudan has officials worrying that Chinese investment could, either directly or indirectly, be used to support terrorists. To Beijing, this is just another example of alarmist thinking from a White House that seems determined to contain China's rise as a world power.

While Chinese and African leaders are celebrating what Beijing describes as their current "win-win" relationship, the average African may not be so thrilled. On a continent where nearly half the people live on less than $1 a day, a cheap car or air-conditioner- or even a new T-shirt - is still out of reach of ordinary people.

Africans need jobs. And while there is no question that Chinese projects have created jobs in some places, they have also clearly taken them away in others. In South Africa and Lesotho, for example, cheap Chinese imports are blamed for the loss of tens of thousands of local jobs in the textile industry, while in Angola, China has insisted on using Chinese laborers as it upgrades the country's railways.

In Zambia, opposition party leader Michael Sata has tapped into resentment of the Chinese with his suggestion that they be expelled from the country along with other foreign workers who he claims have taken jobs away from locals. Sata was defeated last week by incumbent Levy Mwanawasa in a presidential election that his supporters claim was rigged.

In Zimbabwe, Mugabe may be admiring the blue tiles on the roof of his palace, but ordinary citizens have coined a new phrase to describe Chinese goods - from buses that break down to clothing that falls apart - as substandard in quality: "zhing-zhong" . Some Zimbabweans have even started using this epithet to describe Chinese people.

Although China's Africa policy has won the hearts and minds of the continent's rulers, the people themselves appear to lag behind. They are waiting to see whether the Chinese model of engagement with the continent is going to be any different than those of the exploitative colonial powers of the past.

So far - with China using the continent as a source of raw materials and a dumping ground for its own manufactured goods - the formula seems much the same.

Kudos - Liberian forestry sector

So...Liberia passed the long awaited new forestry law. Great! Long live Liberia and green be her fame! Congratulations to all the FAO staff and thank you Mrs. President for the support. Next up, mining reform.

Bless you all.

Tuesday, October 03, 2006


First, a little review of what has been shown to us to date. As is turns out Mittal Steel has been revealed for what it is: a transnational corporation seeking to maximize profit by taking advantage of a country in a desperate situation. The contract presented to the Transitional National Government has a fantastic set of advantages to Mittal Steel built in, leaving only hollow promises to the Liberian people.

When we say, advantages let us be clear. The known details of the contract under consideration:

1) Two major public assets of Liberia, a railway and the port of Buchanan, would be transferred to Mittal Steel and the GOL will only be allowed to use these facilities if there is spare capacity (read, Rio Tinto Mine in Guinea would have access before Liberians);

2) The GOL has no way of guaranteeing the cost of transportation of the iron ore isn't inflated. This could reduce the profitability of the Liberian venture and the state's royalty revenue;

3) The Concessionaire has far-reaching authority to possess public and private land (Hello Nimba) without providing adequate compensation or the means to seek effective redress;

4) The company structure created by Mittal protects the parent company from guaranteeing or bearing the risk of the activities and liabilities of its subsidiary;

5) Under the stabilization clause, the contract freezes the laws in the concession area, Mittal will be able to opt out of Liberian laws governing human rights or environmental standards and they will pay no tax for five years, in a deal which appears to be renewable by them;

6) The provisions for the maintenance of a security force by the Concessionaire fail to adequately establish the limits of its authority, which could be particularly harmful in Liberia, in view of the historic involvement of private security forces in human rights abuses;

7) Mittal Steel would enjoy a five-year extendable tax holiday in Liberia and, once this is over, has created an international tax regime that encourages repatriation of profits to low tax regimes in Cyprus and Switzerland, thereby potentially denying Liberia significant taxrevenues. When they do finally pay tax, it will be at a price set by them;

Finally, 8) There is no guarantee for the Liberian government of how much money they will actually receive.

Negotiations are set to resume later this month. Which way will Mittal go?

It turns out that Mittal needs Liberia. The Chinese market for future steel is beckening. Mittal is planning to almost double in size in the next 25 years and half of the ore needed for that expansion is set to come from Liberia. In repeated statements, Mittal has professed that they will be a good corporate citizen. Its investment would be "of considerable benefit to the people of Liberia. Not only do we plan to invest US$900 million over 25 years but we are also committed to make extensive social investments to benefit the communities where the mines will be operating." Sweet mouth Mittal Steel.

Well, Mittal Steel... If you are such a pineapple, let's see your juice!


Monday, October 02, 2006

The scramble for Africa (part 1)

The scramble for Africa (part 1)
The Statesman (Ghana)
posted to web 2 Oct 06

Tilbury dock, on the sea-reach of the Thames, is a bizarre industrial landscape patrolled by strange beast-like machinery: trucks lift sea-containers in their jaws and place them on railway wagons and lorries. Towering over them are giant cranes and mountain ranges of coal and scrap metal.

Docked in one of the berths, a ship's belly yields up cargo, its container crates stacked high in the warehouses. In the previous week the ship has nudged up the west coast of Africa loading goods at the war-ravaged cities of Luanda, Matadi, Monrovia and Freetown before arriving here in London.

Across from Tilbury on the far bank of the Thames, barely visible through the slanting grey rain, is the old Gravesend pier where Joseph Conrad began his 1899 tale of colonialism and atrocity in the Belgian Congo, Heart of Darkness. His story opens on the ship Nellie as the protagonist Marlow waits with the rest of the crew for the turn of the tide in order to depart.

'The sea-reach of the Thames stretched before us like the beginning of an interminable waterway," Conrad wrote. 'The air was dark above Gravesend, and farther back still seemed condensed into a mournful gloom, brooding motionless over the biggest and the greatest town on earth... "And this also," said Marlow suddenly, "has been one of the dark places of the earth."'

Conrad's 'heart of darkness' was not just a reflection of the racist view of Africa as 'the dark continent', but a reference to complicity in an African holocaust, the taint of blood on goods acquired in shameful circumstances and Europe's plunder of Africa's wealth. Standing on the banks of the Thames under an overcast sky, the London of today seems shrouded still by Conrad's 'mournful gloom'.

At Tilbury dock today there is nothing to prevent the importation of timber sold to fund distant conflicts. Just beyond the circle of the M25 motorway, diamonds arrive at Heathrow airport, where customs can't detect 'blood' gems sold for arms by warmongers.

Mobile phones made with the mineral coltan - a rare substance traded by brutal combatants in the Democratic Republic of Congo " are ubiquitous. In the financial heart of the City, unpoliced investments and financial institutions have profited from some of Africa's bloodiest wars.

Private interests from warlords to unscrupulous corporations to arms dealers and organised crime have helped to fuel African conflicts over the past decade as they vie for control over valuable resources.

Globalisation has added a key dimension to contemporary warfare - armed groups from some of the world's most remote places can be directly linked with commerce in the 'technological heartland of metropolitan society'.1
A complex international network of smugglers, brokers and traders means that everything from diamond rings and garden furniture to the components of mobile phones and Playstations may have originated as the booty of Africa's conflicts.

Everything from diamond rings and garden furniture to the components of mobile phones may have originated as the booty of Africa's conflicts It was a ship worker who first discovered the truth about Belgian King Leopold's brutal exploits in the Congo. In 1897 Edward Morel stood on the quayside at Antwerp watching shipments being unloaded from the Congo.

He noticed that though ivory and rubber of enormous value were being brought in by ship, the only goods being sent back to the Congo in exchange were bullets and firearms. He deduced that there was just one explanation for this - slave labour.2

He wrote: 'I have stood on that quay in Antwerp and seen the rubber disgorged from the bowels of the incoming steamer. To my fancy there was mingled with the sound of musical chimes of the old cathedral tower another sound - a sigh breathed in the gloomy Equatorial forest by those from whose anguish this wealth was wrung.' He went on to form the worldwide international human rights campaign, the Congolese Reform Movement.

At Tilbury docks today, amidst the clatter of the late industrial global economy, one might hear a faint echo of that same sigh. But we who end up with Africa's wealth - when we fill up our petrol tanks, buy a gold watch or throw away a mobile phone - do not see the connection or the plunder at the other end of the resource chain. For the brutal reality of where many of these raw materials originate is a far cry from abstract notions of virtual wealth and seamless trade.

The paradox of plenty

Africa is vastly rich in natural resources but the continent has paid a terrible price for this wealth. In the past decade horrendous wars in Angola, Sierra Leone, the Democratic Republic of Congo, Sudan and Liberia have been fuelled by fighting for control over diamonds, timber, gold, minerals and oil.

An old joke popular in Sierra Leone is bitter testimony to this fact: 'When God created the world, He endowed Sierra Leone with such a wonderful wealth of natural resources that the angels protested. "Don't worry," God replied. "Just wait until you see the people I've put there."'3 In a 10-year-long horrific civil war, warlords from the armed rebel group the Revolutionary United Front (RUF) amputated hands to terrorise the population and sold diamonds to fuel killing sprees with names like 'Operation No Living Thing'.

Some 75,000 people died in the war and over two million were displaced. Ibrahim Kamara, Sierra Leone's UN ambassador, said in July 2000: ' We have always maintained that the conflict is not about ideology, tribal or regional difference... The root of the conflict is and remains diamonds, diamonds and diamonds.'4

This is the 'paradox of plenty': the more a country is enriched by the extraction of primary resources and the more its dependency on them deepens, the lower its ratings for human development drop.

Thus while the soil is rich with diamonds, the average Sierra Leonean can expect to live for just 34.5 years.5
Angola, too, has diamond and oil wealth of enormous value, yet a quarter of all Angolan children die before the age of five. Angola's diamonds and oil were used by rebels and the Government to enrich themselves and to buy arms to fight one another at the expense of an impoverished, brutalised population.

In a quarter of the roughly 50 wars and armed conflicts active in 2001, resource exploitation has played a key role.6 These are known as 'resource wars' and with good reason.

A poor country with weak infrastructure, few options for making money and possessing significant 'lootable' resources is four times more likely to experience war than a similar country without them.7

In a vicious circle, resource exploitation fuels war, and war facilitates continued exploitation of the resource. Groups making money from war have a vested interest in perpetuating conflict. Thus these wars are less about one side winning, than about the ability to engage in profitable crime under the cover of warfare.8

Only 120 people are responsible for most of the small arms going to Africa

Of course resources are not the only cause. Conflict comes from a complex combination of political, social, economic and military factors. And the states that descend into chaos are typically weak, repressive, undemocratic and economically vulnerable. But how do such states get into this situation?

The benefits of activities such as mining and logging typically go to a tiny oligarchy of foreign and local business and government élites. Thus a state heavily dependent on oil and mineral extraction is statistically very likely to be highly corrupt, authoritarian and maintaining a massive military budget - all of which leads to a heightened risk of civil war. And though there are exceptions to the rule, such as Botswana, they are few and far between.9

Across sub-Saharan Africa many governments are in a state of decay. Under pressure from Northern governments and institutions such as the World Bank and the International Monetary Fund to repay debts and restructure their economies, the public sector and social infrastructure have been decimated.

Meanwhile leaders and their politically powerful cronies siphon off state revenues for personal gain.
Young men typically join rebel groups in these places because the government provides nothing and there is little else for them to do. Seizing valuable resources is their ticket to wealth and power.

These factors create a brutal dynamic. Resource wars often feature 'extreme and conspicuous atrocity' against the population,10 because corrupt governments' power relies on large resource revenues not popular support. Meanwhile fighters are only interested in loot and have no need to win over local hearts and minds. In fact quite the opposite is true. Plunderers clear resourcerich areas they wish to control by terrorising civilians through systematic rape and torture. Others are forced to serve as prostitutes, semi-slave labourers and child soldiers.

The fog of war

At the height of the war in Sierra Leone it emerged that RUF rebels - whose favoured way to terrorise people was to amputate their hands - were selling diamonds that were ending up on the world market.

A rumour went round the diamond world that a British industry man was having nightmares about a famous jewellery advert featuring a hand adorned by a glinting diamond ring in which the slogan had been changed to: 'Amputation is forever'.11

So what, if any, is the degree of complicity among consuming nations? How do diamonds get from an artisanal mine in Africa to a ring on your finger? How does the mineral coltan get from a mine in the Democratic Republic of Congo into a mobile phone you might buy in the local shops?

Between the two are complex networks of smugglers, fixers and arms brokers. International commerce is the key to understanding how these networks operate so effectively. The illegal economy feeds into the legal economy in this underworld of crime and high finance.

Arms trafficking is a crucial link in the chain. According to one source, perhaps only 120 people are responsible for most of the small arms going to Africa, including those who armed the genocidal Rwandan militias.

Resource commodities often get sold or swapped for illegal arms shipments coming in the opposite direction (see pages 13-22 to trace the trail of plundered resources from the mines to the smuggling networks).

Shipping and aviation companies have also played a crucial role. In October 2002, a UN Expert Panel issued an exhaustive report on the exploitation of natural resources in the Democratic Republic of Congo, which alleged connections between the atrocities committed there and 85 businesses operating in Europe, Asia and North America. It showed how coltan, among other substances, was smuggled into Dubai and then on to other trading zones.
At the other end of the trail, traders in places like Antwerp, Oostende, London and Tel Aviv receive the conflict loot. The diamonds, coltan or gold, now shed of their bloody associations, enter the legal economy.

The truth is that the UN has no definition of 'conflict resources' to help stop the trade and there are no workable mechanisms for governing the behaviour of transnational corporations in conflict zones.d l

The UN Expert Panel tried to use the voluntary OECD Guidelines for Multinational Corporations to enforce investigations into the corporate role in the conflict in the Democratic Republic of Congo; but governments of the OECD - the Organisation for Economic Cooperation and Development, the world's most industrialised nations - have thus far taken no action.

Perhaps the International Criminal Court may prove more robust. Its Chief Prosecutor, Luis Moreno Ocampo, has intimated that foreign business people who knowingly supplied cash or weapons in exchange for conflict resources to people guilty of war crimes could be prosecuted: 'Follow the trail of the money and you will find the criminals. If you stop the money then you stop the crime,' he said last year.

A probe into possible war crimes, genocide and crimes against humanity in the Congo begins soon, in what Ocampo has called 'the most important case since World War Two'. He added that among the countries where links to the purchase of blood diamonds had been found were the US, Canada, Britain, Russia, Finland, Zimbabwe and

Breaking the cycle

Yet despite the horror stories, there is hope. In 1999, a fifth of all Africans lived in war-torn countries. Today, for the first time in five years, no major conflagrations are taking place, though fighting continues in some hotspots.
The brutal conflicts in Sierra Leone and Angola ended with peace deals in 2001. In the Democratic Republic of Congo, a negotiated peace deal in 2002 has resulted in a ceasefire except in some pockets in the east. Liberia's war ended officially in August 2003. In Sudan peace talks are ongoing, as are talks in Burundi and in Côte d'Ivoire.
Perhaps most positive of all, the African Union has agreed a new peacekeeping mandate to intervene in members' conflicts. The complex problem of disarmament is ongoing and many of the countries that are officially at peace are plagued with instability while fighting and economic exploitation continues.

If you stop the money then you stop the crime

But barely have the peace deals been signed than the investors begin circling.

The talk among the extractive industries is of a new 'African gold-rush', with the World Bank granting concessions in the Democratic Republic of Congo and Liberia. The idea that the exploitation of natural resources will bring 'development' to shattered economies, however, has been thoroughly discredited - not least by the World Bank's own recent report into the extractive industries.13The question must be asked: has anyone learned the terrible lessons of Africa's resource wars?

For peace in these countries to hold, for poverty to be eliminated, for societies to be rebuilt, the underlying causes of the conflicts that tore them apart need to be resolved.

Opening the floodgates to international investment before the original exploitation has ended, let alone been investigated and justice brought, is likely to sow the seeds of further corruption and war.

This strategy repeats the pattern of plunder rather than breaks the cycle of war. As Patrick Alley of the NGO Global Witness confirms, ' Resource exploitation and conflict is a cyclical thing. If we can stop the cycle, we can begin to talk about war prevention.'

[end part 1]
To be contd.
© Copyright of Statesman 2005