"Africa's collective GDP, at $1.6 trillion in 2008, is now roughly equal to Brazil's or Russia's," continues the report, titled "What's Driving Africa's Growth," "And the continent is among the world's most rapidly growing economic regions. This acceleration is a sign of hard-earned progress and promise."
Resource driven
The primary secret driving an average GDP growth of 4.7 percent in Sub-Saharan Africa is Africa's resources: Six of the world's 10 major diamond producers in the world are African nations, while almost 10 percent of global gold production is produced in Africa, with South Africa alone hosting 40 percent of gold. More than 9 percent of proved global oil reserves are on African soil, as well as 40 percent of the world's mineral resources such as cobalt, 15 percent of fertile land, and 10 percent of freshwater sources.
To this end, South African President Jacob Zuma announced the continent "was open for business, for trade and investment."
Drawing on data produced by the Kennedy School Index of Good Governance, identifying improved governance in 38 nations since 2000 and the African Union's Peer Review Mechanism hosting 30 signatory nations, Zuma stated that the world was "finally beginning to move beyond myths about Africa," often portrayed as an poverty-stricken undifferentiated mass, mired in conflict, with an innate incapacity for civilization.
Zuma's speech replicated the language of former South African President Thabo Mbeki's declaration at previous G8 Summit in Kananaskis, hosted by Canada in 2002: "signifying the end of the epoch of colonialism and neocolonialism."
The Summit (2002), hosted the year of the African Union's birth, catapulted Africa to the fore of the "development" agenda via the G8 Africa Action Plan, a set of eight commitments by G8 countries, tasked to African Personal Representatives (APR) appointed by G8 governments.
But as the report indicates, the most significant vehicle of progress in Africa may no longer be the G8 nations i.e.: traditional "creditors" and resource-importers making up the Organization for Economic Cooperation and Development's Development Assistance Committee. Instead, new entrants, chiefly China, Brazil, and the Gulf countries have quickly become power players on the continent, earmarking 30-50 percent, 27-30 percent, and 11 percent of aid budgets for Africa.
In contrast to the West's framing the continent as innately rather than deliberately impoverished through odious debt payment to multilateral institutions including the World Bank and IMF, emerging nation investors such as China and Brazil generally perceive Africa's 53 nations as equal partners.
During the recent Forum on China-Africa Cooperation, Chinese Premier Wen Jiabao revealed that Beijing has already developed 2,200 km of railways, 3,300 km of roads and 1,600 processing projects, a significant step forward for a continent receiving just 4 percent of FDI allocated toward infrastructure prior to Beijing's entry.
Dealing with resources
While the APR identified six key issues for priority attention, including resource-related transparency, equitable wealth redistribution, fulfillment of financial and other support from foreign partners, policy coherence in development policies and gender empowerment, little attention was actually provided as to how "requirements" could be accomplished.
The means is critical: Close to 80 percent of the continent's exports are primary resources. Some $200-$400 billion annually is lost to illicit flight on the part of corrupt multinationals, siphoning 60 percent of flight capital, and governments, 5 percent.
As a recent World Bank report revealed, resource concessions and revenue agencies are subject to "informal" payments to curry favor over lucrative deposits. In oil and diamond rich Angola, 38 percent of firms are "expected" to provide kickbacks, not too dissimilar from other major oil, uranium, iron and gold countries such as Nigeria (44 percent), Niger (80 percent), Guinea (75 percent), Tanzania (42 percent), Liberia (51 percent) and Republic of Congo (75 percent).
But civil society movements and governments have not been idle. A classic case of corporate resource exploitation in Liberia, negotiated by Mittal Steel, is instructive.
In 2005, just five months prior to democratic elections in Liberia, Mittal Steel, one of the world's largest steel producers, engaged the transitional government of Liberia concerning Liberia's vast iron ore concessions. While Mittal described the deal as "helping Liberia jumpstart its economy after being devastated by 14 years of civil conflict," others, such as Patrick Alley, Director of NGO Global Witness, declared the deal "heavily weighted against the Liberian Government, ceding important sovereign and economic rights to Mittal - almost creating a state within a state."
Terms of the contract, as revealed by Global Witness, included: control over the amount of royalties, reducing revenues remitted to the state. This is possible because Mittal failed to specify pricing mechanism, enabling the company to artificially "misprice" the cost of ore below market value.
Thanks to the efforts of Global Witness, obtaining and analyzing the contract, as well as the immediate efforts of the democratic government under President Ellen Johnson-Sirleaf, the agreement was successfully renegotiated. The new agreement, signed in December 2006, was ratified by the Liberian legislature one year later.
Under the new terms, the parent company is responsible for debts incurred, the five year tax holiday that could have been indefinitely extended has been removed as was control over national infrastructure such as the railway and port, and the price of ironore is to be determined via market prices rather than by the company. However, though Mittal is no longer exempt via the "stabilization clause" from human and environmental rights, the agreement still takes precedence over Liberia's national laws concerning royalties and taxes owed to the government.
The deal constitutes an important example of the do's and don'ts related to resource-contracts, obscure and complicated agreements largely formulated by multinationals.
These include factors like the presumed legitimacy of contracts negotiated exclusively between multinationals and governments seen as autocratic and/or illegitimate, confidentiality clauses preventing disclosure of predatory agreements and the lack of corporate country-by-country reporting (CbC) tracking trade between different subsidiaries of the same corporation.
Revealing truths
Mittal-Liberia's renegotiated contract reveals a truth familiar to more than a few African governments, hosting similar agreements, namely the lack of skilled human resources working for, or with, the state, to investigate and negotiate equitable returns.
It also reveals the perceived commitment on the part of democratically elected governments to respond appropriately when problems - and solutions, are brought to their attention.
While the AU has been received during the past few years as a dormant continental body, the key vehicles - such as CbC, mandatory information exchange, and the elimination of tax competition, remain fundamental legal and financial "accountability" tools designed to level the playing field.
Examples are diminishing "investment" in arms facilitating the conflicts that cost the continent $18 billion annually, increasing tax base from equitable resource revenues, and finally enabling African citizens to benefit from open, transparent and responsive governments.
Not only would "captured illicit flight" sever Africa from the "aid model" that has destroyed local industries through IMF and World Bank-imposed trade liberalization, but - as with the case in China, it would result in a strong state willing and be able to represent the interests and needs of citizens, rather than foreign investors. The result?
Fiscal Independence.
Africa's future, in this regards, looks brighter than ever before.
