Following Switzerland's wins Chris Jordan from Action Aid blogged on Publish What You Pay, about Glencore's Mopani copper mine in Zambia and how secrecy means Zambians are not getting a fair deal for their resources.
During the Olympics Andy Murray won a stunning gold, trouncing Switzerland’s Rodger Federer. While the Swiss get the consolation of their first silver medal of the games, Zambia remain rooted to the foot of the medal table.
While Zambians may take some consolation in the vast mineral wealth buried under its soils - which could be turned into medals aplenty - the sad fact is that the country simply isn’t getting a fair deal for the metals mined by multinationals. The Swiss mining and commodity trading giant Glencore, which owns a majority stake in Zambia’s second biggest copper mine, is a case in point.
Despite operating the Mopani mine for over ten years, the operation is yet to declare a profit or pay any corporation tax in Zambia. In a country where two thirds of the population live below the poverty line and just £15 is spent on education for each child a year, the lack of tax revenues has a direct impact on lives of millions of ordinary Zambians. Teachers aren’t hired, hospitals built or roads maintained.
Even more outrageous is the evidence, which came to light last year, suggesting that Mopani may have been deliberately cooking the books to reduce its tax bill. A leaked audit report commissioned by the Zambian government (which Glencore disputes) accused the company of various tax dodges, which would have enabled it to shift profits of Zambia and into the tax haven of Switzerland.
Based on the figures in the report, ActionAid estimated that Zambia could be losing up to £76 million a year. That amount far exceeds the British aid budget in the country, which stands at £59 million.
The minister for mining believes that his country may be owed as much as $1 billion by mining companies. He was frank in his admission that "Once [the mineral] leaves, where does it go? We don't have a clue".
The lack of international transparency means that overstretched revenue officials in Zambia struggle to investigate. Speaking at a recent ODI event, the Zambian vice president Guy Scott expressed his frustration with this – and the blind eye turned by many western governments:
“I’ve tried a lot of things (some of which I can’t even tell you) to get into the undergrowth and see what’s happening. It’s not feasible because you’re not getting cooperation from Western governments and I think it’s something we ought to start pushing on, even though it’s going to take a long time to get progress on. After all – you get tax evasion on a massive scale in Britain, so what are we supposed to do from Zambia?”
The Zambian government, pushed by energetic campaigners from local civil society, is continuing to try andcrack down on tax dodging by companies like Glencore. But without proper levels of transparency from tax havens like Switzerland, they’ll always be swimming against the tide.
So if we’re serious about enabling African countries to become independent of international aid, we have to crack the veil of secrecy provided by tax havens to multinational companies. Only then will countries like Zambia be able to compete on a level playing field with the corporate giants in Switzerland.
But without proper levels of transparency from tax havens like Switzerland, they’ll always be swimming against the tide.
So if we’re serious about enabling African countries to become independent of international aid, we have to crack the veil of secrecy provided by tax havens to multinational companies. Only then will countries like Zambia be able to compete on a level playing field with the corporate giants in Switzerland.
This blog was first published on the 6th of August 2012. For more, have a look at Publish What You Pay's Olympic blog series focussing on gold, silver and copper mining in resource rich countries as well as on gold, silver and copper mining companies.
Image One of Ruckomechi Camp in Mana Pools National Park. Zambia is across the river.
Guest blog by Lord McConnell, former First Minister of Scotland appointed to the House of Lords in June of 2010. He was also the Prime Minister’s Special Representative for Peacebuilding from 2008-2010.
This month, South Sudan celebrates its first birthday. While this should be cause for elation, we must pause to recognize that the world’s youngest nation may perhaps also be the most vulnerable.
The peaceful secession of South Sudan last July was a remarkable outcome after decades of conflict and dispute. The agreement to a referendum, execution of that vote and implementation of the result could yet become an example of real democratic progress. But the conflict between North and South has not come to an end. Since the referendum, the two states have been locked in disputes concerning borders, territory and oil revenues.
At the centre of these issues is ownership of the Abyei region, which was one of the most contentious points in the 2005 Comprehensive Peace Agreement (CPA) negotiations. Abyei is an oil-rich region that falls along the border between the North and the South. Although it was a stronghold for rebel forces during the civil war, Sudan refused to define Abyei as part of the South during peace talks.
In order to secure an agreement, Abyei was awarded “special administrative status,” and the issue was left unresolved. Since then, a referendum has been postponed indefinitely, opening the door to competing claims and military actions.
Sudanese forces took control of the area in 2011, displacing and endangering tens of thousands of people. Numerous military clashes have occurred along the border since, including South Sudan’s invasion of Heglig in April, which escalated tensions to the brink of war.
It was only after the United Nations threatened to impose sanctions that Sudan and South Sudan entered into negotiations in Addis Ababa, their first direct high-level talks since the referendum.
The negotiations, which are being mediated by the African Union, will aim to draw up a safe demilitarized zone along the border. This should be seen as a prerequisite for progress in other areas – as Abyei is the first of many obstacles to sustainable peace in the region. These disputes are causing hardship on a terrible scale.
In April, the UK’s own Department for International Development reported that a humanitarian crisis loomed in South Sudan, as refugee influxes and heavy rains have created severe food shortages around the disputed border region. Last week, the Associate Parliamentary Group on Sudan heard from Government Minister Stephen O’Brien MP following his recent visit. It was not a positive report. Tensions remain, people are suffering and the international agencies seem slow to act.
Among alarming recent developments, human rights groups have been warning that the forced relocation of South Sudanese by Sudan is resulting in overflowing refugee camps. Meanwhile, reports suggest that fighting between Khartoum and rebel forces in the Nuba Mountains has created a separate humanitarian crisis, as hundreds of thousands of civilians are trapped in conflict zones, with no access to food.
All our international experience tells us that the combination of ongoing territorial dispute and a growing humanitarian crisis leads straight back to violent conflict. I am fully aware that global diplomacy and international political debates are currently focused on Syria and the Eurozone, but it would be tragic if this great step forward in Sudan and South Sudan in 2011 was to be followed by failure in 2012.
International pressure is often the key to brokering negotiations between parties with deep-seated animosities, and the lead is rightly with the AU. But the United Kingdom can and should use its position of leadership on development to support these efforts and push hard for solutions, including a referendum in Abyei, and a commitment by both sides to respect the outcome.
In the context of the looming humanitarian crises, it is even more imperative that the UK and others sustain their financial commitment to international development, which is essential for both state-building and emergency response.
The long-term effects of civil war are not easily forgotten or remedied. From 1983 to 2005, an estimated two million people died in Sudan’s internal conflict. From these ashes, a new state has arisen – one that requires sustained commitment and support. As leaders in the global community, it is our responsibility to ensure that the progress made towards peace is not undone. The human cost is simply too great.
*This blog can also be found on the Lord's of the Blog blogsite, alongside other pieces from Lord Mcconnell.
I’ve spent the better part of the past four months campaigning with a team of grassroots organizers through 30 states, 60 cities, reaching 10,000 people with one important message: Ending extreme poverty can truly be our generation’s greatest achievement. But no matter the cultural, socio-economic or geographic differences in the places we visited, our audiences primarily wanted to know one thing: How can one individual make an impact on such a daunting issue as extreme poverty?
So I wanted to highlight an organization that provides the opportunity for individuals to take immediate action—the Enough Project. Enough’s work is particularly important not only because of the tangible impact of their activism, but also because they are addressing an issue in which we as consumers are all deeply implicated—conflict minerals in the Democratic Republic of Congo.
A couple of years ago, I stumbled across a video that caught me completely off-guard: a four-minute narrative in which Enough’s co-founder John Prendergast explains the intricate supply chain linking our electronic gadgets to a cycle of extreme violence and poverty in the DRC. For those who aren't familiar, I'll let you watch the video to truly see the magnitude of the issue, but here it is in a nutshell: Congo’s vast mineral reserves + violent profiteering militias + global supply chains = our electronics products coming at the expense of massive human suffering.
The “conflict minerals” narrative has gained a bit of traction in the major media of late, notably in The New York Times and VICE. This is good news, as press coverage is needed to bring public and government attention to the issue. But a key piece is still missing in order for this situation to truly change: we need a consumer movement to demand ethically sourced electronics products.
Our team had the pleasure of sitting down with Enough to discuss how exactly they are building this consumer movement through their Raise Hope for Congo campaign. So watch the interview, then visit Raise Hope for Congo’s “Take Action” page, where you’ll see a number of different opportunities to join the movement for peace in Congo, such as sending petitions to leading electronics companies to demand conflict-free products sourced from Congo, and pressuring your campus to go conflict-free by joining the Conflict-Free Campus Inititiative (which, since filming our interview with Enough, has grown to 100 campuses across the country).
This is a true example of the power of the individual in the fight against the myriad factors that create extreme poverty. We've already shown with the blood diamonds movement that consumer demand dictates supply, and that companies don't have to choose between "doing the right thing" and making a profit. The Apples, HPs and Dells of the world know this to be true; let’s show them that we do too.
If a government official receives a sketchy wad of cash, there has to be someone handing him the briefcase, right? Apparently not, if you're asking the extractive industries. They defend under-the-table transactions as being necessary to "protecting the sovereignty of their producer country." Well Shell… I'm not buying it.
And perhaps nobody will: if oil-companies continue to fight against legal efforts to increase transparency in the extractive sector through the Cardin-Lugar amendment, calls for a public boycott in the US could be on the horizon. In Europe, the movement has been catalyzed by 200 Ugandans mailing a petition to number 10 Downing Street.
The Ugandans are concerned that a recent discovery of oil in their country will circulate a plague often referred to as 'the resource curse'. Tullow Oil is the major extractive company operating in Uganda, which is listed on the London Stock Exchange. The discovery appears as a blessing (for a country with a GDP per capita of $US 1,300) and certainly has the potential to be one. Uganda is estimated to produce up to 250,000 barrels per day in coming years, and the Ugandans are excited about this forecast. However, they are also conscious of the destructive potential this kind of discovery is likely to produce without the international legal protections towards transparency.
The letter to 10 Downing Street read: 'The revenue generated by the oil has the potential to transform our economy and push the country towards middle-income status. The fight against poverty and disease could be intensified and social services for all Ugandans improved. However, world experience tells us that oil can be a curse as well as a blessing. Many African countries rich in natural resources have been plagued by instability, corruption and huge inequality.'
They cite the DRC as an example of a country that should be one of the world's wealthiest, now an example of a 'failed state'. Andnot forgetting Nigeria, which has enriched the pockets of a select few, denying the rest of its population access to their rightful, shared resources. This is not the path Ugandans want to take, nor is it a path that should be so easily walked by other developing nations.
The letter comes at a time when the European Commission is debating the introduction of legislation to amend the EU's Transparency and Accounting Directives. If approved, this legislation will require all European Union listed (or large unlisted) oil, gas, mining and logging companies to disclose their payments to governments, with Germany taking the lead in the push to fill the legal vacuum. The US have already made efforts towards transparency through the Cardin- Lugar amendment to the Dodd Frank Act - this will require all extractive companies to publish payments to the US and foreign governments in the countries where they operate. However, the amendment is receiving pushback from oil companies (such as Shell) reluctant to comply with new regulations, and consequently has now been delayed.
The push against new transparency laws has not stopped Ugandans from taking initiative to fight the odds of the resource curse. These demands are not made specific to their own government, but to other governments and international companies, highlighting the interconnected nature of corruption. This letter acknowledges the cooperative efforts needed to vaccinate against the infection the discovery of oil will likely generate. We need to recognize corruption as a trans-continental virus as the Ugandans do. Transparency can act as the vaccine.
It's easy to think about the common denominator in the resource curse as being "African government" while the role the international extractive companies play goes overlooked. Ugandans will not alone be held responsible for the corruption festering in their borders because of trans-border resource trading. They recognize the international responsibility in the resource curse - the need to root out the external influences breeding the corruption Uganda and other developing nations battle; by filling an international legal void.
Dear Prime Minister David Cameron, this is not a fight Uganda can win on its own. Evidently the Ugandans themselves are aware of the mutually reinforcing nature of back ally deal making, the sort that doesn't even really need to take place in the back ally because there's no law against it in the first place.
It's easier to accuse Uganda of "self-corrupting" and turn a blind eye to the role that our governments are playing. We ignore the silent western complicity in all of this. It's an easy excuse to cut aid too;the get-out clause. The viral argument made against the effectiveness of aid usually goes something like: 'The governments are all corrupted and unreliable, where is the money going?' Well, 'where is your money going Tullow Oil? Shell?' It's easier to place all the responsibility on the part of the developing country and make it look like it's all their fault. Then we don't have to feel guilty when we're cutting the budget, right? Ugandans however have made clear: Dear Prime Minister David Cameron, we are not taking the blame for this one.
Publish What You Pay state that secrecy in the energy and mining sectors has put the brakes on development around the world. The Ugandans have reached out, so what can we do? Sign the petition at Publish what you pay. Your signature asks your MEP to support the adoption of new transparency laws, which will put the foot of economic development back on the gas.
Africa is a region abundant in natural resources and rich in vast oil reserves. In recent years a number of African economies have seen an accelerated GDP growth rate. In many cases the petroleum industry has played a pivotal role in this growth. Some would see the widespread presence of oil as route to unlocking growth and securing development in the region. However, a number of oil rich countries have become victims to the “resource curse”, a term reserved for those countries which have a wealth in minerals, fuels and resources but “tend to have less economic growth and worse development outcomes than countries with fewer natural resources.”
To what extent and at what cost, human and environmental, will oil shape the future of Africa? How will this dwindling resource cope with rapid extraction and trade at a time when global energy demands are ever increasing? And why is the wealth from overseas trade in oil not passing down to the citizens of developing countries? These are some of the questions we will be asking in today’s blog.
Earlier this year, President Jonathan’s administration announced plans to remove fuel subsidies as part of the 2012 budget; a controversial act that was met with fierce opposition across Nigeria. As the price of petrol for Nigerians rose sharply, threats of strikes and civil protests erupted, serving as a reminder of our ever-increasing dependency on fuel.
Today Nigeria is the third biggest economy in Africa, largely due to the share of crude oil in its exports. In 2000, oil and gas exports accounted for 98% of earnings in Nigeria. Nigerian GDP at purchasing power parity more than doubled between 2005 and 2010. However, the country’s human capital and its overall living standards are still lagging far behind. Wealth generated by oil revenues has not passed down to the citizens of Nigeria, as 45% of the population still live below the poverty line. How do we make sense of this paradox?
For many years Nigeria’s oil industry has been plagued by corruption and mismanagement. The World Bank has estimated that as a result of corruption, 80% of energy revenues in the country only benefit 1% of the population. Moreover, the agricultural industry, which accounts for 26.8% of GDP and two-thirds of employment, has seen a decline in productivity due to years of neglect. The country was once a lead exporter in cocoa, rubber, and palm oil - now production of all three over the past 25 years has declined sharply. Nigeria is country that has immense potential to be a key exporter of food and livestock, yet it now relies on imports of food to support its rapidly growing population.
Nigeria is a country whose relationship with oil over the decades has been volatile. The oil rich Niger Delta region has become the site of an intense and controversial struggle between the state and the indigenous population. Local indigenous people have become incensed by foreign oil corporation reaping the rewards of this resource, when they themselves have seen little if any improvement in their standard of living. In fact, the effects of oil extraction for the environment and the Niger Delta communities have been devastating. According to Nigerian federal government figures, there were more than 7,000 oil spills between 1970 and 2000. This has led to serious ecological damage in the fragile region. In the last decade, a militant group called the Movement for the Emancipation of the Niger Delta (MEND) has emerged. This group have launched many attacks on oil workers and pipelines, attempting to shut down production in the region.
Another example of an oil rich country affected by the ‘resource curse’ is Sudan. The recent partition of what was once Africa’s largest country, created a new republic - South Sudan. Most of the region’s oil wealth is located in the south, but the agreement surrounding the division of this sought-after resource has been highly contentious. It is feared the dispute over division of oil wealth could eventually be a cause for renewed conflict between the states.
Before the country's divide, Sudan produced around 500,000 barrels of crude oil per day. The International Monetary Fund estimates that South Sudan’s independence will cost Sudan more than $7.7 billion in lost revenues over the next four years. Being a newly independent state, South Sudan’s economy is currently weak and underdeveloped. It relies heavily on its oil and agricultural sectors. As with Nigeria, the decline in productivity within the Sudan’s agricultural sector can be traced back to when the country first started exporting oil. A lack of food security due to a weak agricultural sector spells disaster for a region susceptible to drought and famine. The country also relies on the import of livestock and food to feed its population despite having largely fertile and arable lands. The resource curse strikes again.
China has recently expressed interests in both Sudan and Nigeria. In 2010, it was announced that China was to construct an $8 billion oil refinery in Lagos, Nigeria. China will also build two other refineries, in Bayelsa and Kogi. It is also in China’s interests to develop Sudan’s weak oil infrastructure as the Chinese National Petroleum Corporation (CNPC) is the biggest investor in the country through its 40% stake in the Greater Nile Petroleum. China has purchased 70% of Sudan’s crude oil exports, and has also funded developments in the region such as the $2 billion hydroelectric Merowe dam.
Demand for oil in China and many other OECD nations is expected to continue growing over the coming decades. This increases competition and puts more pressure on countries like Sudan and Nigeria to continue developing their oil sector instead of investing funds and research into renewable sources of energy.
Our expanding global population’s energy demands mean that we are living in a time of voracious crude oil consumption. Although Africa’s oil boom has spelt joy for oil corporations, the rewards will be costly and short-lived. The global dependence on a naturally limited resource is clearly unsustainable. Instead of exploiting this resource at the cost of social and environmental damage, developing African nations will benefit far more from directing attention back into renewable energy, and developing their manufacturing and agricultural industries.
So if we’re serious about enabling African countries to become independent of international aid, we have to crack the veil of secrecy provided by tax havens to multinational companies. Only then will countries like Zambia be able to compete on a level playing field with the corporate giants in Switzerland.
If a government official receives a sketchy wad of cash, there has to be someone handing him the briefcase, right? Apparently not, if you're asking the extractive industries. They defend under-the-table transactions as being necessary to "protecting the sovereignty of their producer country." Well Shell… I'm not buying it.
