Tag Archives: resource curse

The Power Plays in Africa

As the overthrow of despot Robert Mugabe entered a stalemate on November 17,  2017, eyes turned to China — Zimbabwe’s largest foreign investor and a key ally — amid speculation over its role in the military coup.Source in Harare believe the Zimbabwean conflict within the ruling party Zanu PF is involving two rival camps has direct links to China and Russia with both countries trying to control and protect their own economic interests.

The army chief General Constantino Chiwenga, visited Beijing l — just days before tanks rolled into the streets of Harare. President Mugabe has been been hostile to the Chinese in recent years accusing them of plundering the countries diamonds worth $15 billion.  On October 2017 First Lady Grace Mugabe was in Russia where she represented her 93-year-old husband at a function where he was honoured with some accolade in Russia at the World Federation of Democratic Youth (WFDY) in Moscow.

“It is a BRICS internal rivalry with both Russia and South Africa on one side trying to protect their economic interests and China on the other side,” a regional think-tank in London said on November 17, 2017… Russia has been investing in several projects in southern African nations, for example, the ALROSA group of diamond mining companies is engaged in several projects in Zimbabwe, while mining and steelmaking company Evraz and Severstal steel and steel-related mining company conduct their business in South Africa.

Russia and South Africa, which together control about 80% of the world’s reserves of platinum group metals, have created a trading bloc similar to OPEC to control the flow of exports according to Bloomberg.

Zimbabwe, Canada, and the U.S. are among other major platinum group metals producers.

Russian and South African officials signed a memorandum of understanding today to cooperate in the industry.South Africa mines about 70 percent of the world’s platinum, while Russia leads in palladium, a platinum group metal used in autocatalysts, with about 40% of output, according to a 2012 report by Johnson Matthey Plc.

According to the Chamber of Mines of Zimbabwe (CMZ) and geologists, Zimbabwe has far bigger platinum reserves than Russia. The country currently has the second known largest platinum reserves after South Africa. Experts say underfunding and limited exploration has over the years stifled growth of the mining sector.

The Zimbabwe chamber is on record saying it seeks to increase production to the targeted 500 000 ounces per annum requires the setting up of base and precious metal smelters and refineries, investment of $2,8 billion in mines, $2 billion in processing plants and between $200 and $500 million to ensure adequate power supply. Already, the country’s major platinum miners – Zimplats, Unki and Mimosa who are currently processing the metal in neighbouring South Africa – have undertaken to construct the refinery….

Miles Blessing Tendi, a lecturer in African history and politics at the University of Oxford, says there is no way to be certain if China knew about Mugabe’s fate but believes China’s respect for sovereignty would make their involvement uncharacteristic.

Excerpt, It gets ugly as Russia and South Africa gang-up against China over Zimbabwe coup, http://www.thezimbabwemail.com/, November 17, 2017

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How Oil Dictates the Future of South Sudan

South Sudan’s oil fields have become a battleground in the struggle for power in Africa’s newest nation, encouraging Western nations and regional mediators to consider international monitoring of crude revenues as a way to remove a major bone of contention from such conflicts.  South Sudan sits on Sub-Saharan Africa’s third-biggest crude reserves, and its oil fields were early targets in fighting that erupted in December 2013 and has rumbled on despite two ceasefire deals and U.N. warnings that a man-made famine looms.

It marks an alarming slide into dysfunction by a nation whose creation three years ago the United States hailed as a foreign policy success. Instead of lifting the nation out of grinding poverty, oil is blamed for stoking a war…Diplomats and regional mediators said monitoring revenues was gaining traction as an idea for discussion, though the mechanics of such a system and how the warring sides would be pushed towards a deal have not been determined….

South Sudan’s oil output has tumbled by about a third to 160,000 barrels a day since the fighting began in December 2013, but it remains the main source of cash for President Salva Kiir’s government both by selling crude and by borrowing against future earnings, digging the nation deeper into debt.  As of June 25, 2013 South Sudan owed $256 million to China’s National Petroleum Corp, which has 40 percent of a venture developing South Sudan’s oil fields, and a further $78 million to oil trader Trafigura. [a Dutch multinational commodity trading company] It plans to borrow about $1 billion from oil firms in fiscal year 2014/15, equal to about a quarter of forecast revenues.

Rebel leader Machar, who was fired as deputy president last year, said oil sites would be a “legitimate target” unless funds were put into a neutral escrow account pending any deal.

But President Salva Kiir’s government says such outside intervention would violate its sovereignty and insists it has not bought arms since fighting began.  “We are not the protectorate of anyone,” presidential spokesman Ateny Wek Ateny said. “We have the right to buy arms, but we haven’t bought anything since December,” he said, despite rebel claims of weapon shipments arriving in recent months.  Kiir and Machar come from rival ethnic groups, and the conflict has re-opened deep ethnic divisions in the country.

Monitoring revenues is on the table for talks sponsored by the regional African grouping IGAD, though diplomats acknowledge it can only be part of a broader deal on how to share wealth and power in the divided nation…South Sudan has already lost billions of petrodollars in its young life. Kiir wrote to 75 former and serving officials in 2012 seeking the return of $4 billion that disappeared since 2005. No significant amounts were repaid, diplomats said.  Though the country – the size of France – has almost no roads and only a third of its 11 million people can read, South Sudanese now watch more wealth frittered away on fighting than on building roads or paying for schools….Fighting has killed at least 10,000 people, displaced 1.5 million and left a third of the population facing the prospect of famine as they have not planted crops…

But Western diplomats say pressure for a deal on oil monitoring needs to come from the region, led by heavyweight neighbours such as Kenya and Ethiopia.China, with its oil interests, would need to support the move, though diplomats said it had worked with the West during the crisis. Alongside China, other oil investors are India’s ONGC Videsh and Malaysia’s Petronas.”  If they can get the oil sector right, share the oil revenues in a much more inclusive manner, then that will dictate the country’s future,” said Luke Patey, author of a book on Sudan and South Sudan’s oil industry.

Excerpts from South Sudan conflict drives idea of oil wealth monitoring, Reuters, Aug. 1, 2014]

Dumping Coal in the Sea: Drummond in Colombia

In Colombia coal companies load barges with coal.  The barges sail out to waiting ships where a floating crane transfers the coal onto the ships

Until recently Colombia was lax in enforcing its environmental laws. So it came as a shock to the country’s mining industry when, in January, the government halted coal exports from a port operated by Drummond, an American miner, in a row over pollution. The suspension has been costly not only for Drummond: its operations generate $66m a month in royalties and taxes for the Colombian treasury.

The mining minister, Amylkar Acosta, confirmed this week that the government would let the company resume its exports later this month, when it completes improvements to the port facility to prevent contamination of nearby beaches. The government has been under pressure to take action since environmentalists photographed an incident last year in which more than 500 tonnes of coal were dumped into the Bay of Santa Marta to stop a barge from sinking. Last month six employees at the port were charged, and face possible jail sentences. Drummond has been fined $3.6m and told to clean up the mess.

The case is an illustration of how the government, having welcomed foreign miners, is now having to contend with public disquiet over both pollution and the way the country’s mineral wealth is shared. In an election in May, President Juan Manuel Santos will seek a second term. So he cannot ignore the “hostile” climate of public opinion on the issue, says Alvaro Ponce, a Colombian mining expert.

Protests by nearby residents have delayed several big projects, including AngloGold Ashanti’s proposed gold mine in Tolima province and Eco Oro’s planned gold and silver mine in Santander province. A study by Colombia’s national audit office, published in January, found that economic and social development in towns next to large mining operations is worse than in places where illegal coca crops are grown for making cocaine.

The environment ministry is seeking new powers to require licences for exploration as well as extraction. Mining firms grumble that the process of getting projects approved is already tortuous enough. This and the recent fall in world prices of some minerals mean that up to $7.3 billion of investments are stalled, they say. Mr Acosta says the miners must accept that besides getting their official permits, they have to convince local communities to accept their presence, earning a “social licence” to operate. “Without that, the projects become unviable,” he says.

The backlash against mining has been building for some years. In the mid-2000s, when commodity prices were booming and Colombia’s internal conflicts were subsiding, the government offered incentives for foreign firms to come in and create mining jobs. It awarded exploration permits for swathes of territory, including in areas hitherto off limits, such as the fragile páramo tundra in the Andes. “The floodgates were opened,” says James Lockhart-Smith of Maplecroft, a risk-analysis firm.

But Colombia’s regulators were ill-prepared. In 2011 the government stopped accepting new applications for licences while it dealt with a backlog of 19,000. It rejected 90% of these, then turned its attention to 10,000 projects that had already been given licences, finding that 92% were failing in some way to comply with their conditions.

Despite all the stumbles and setbacks, Colombia is getting somewhere in its drive to exploit its mineral reserves. In 2013 mining investment was $3.6 billion, 21% more than in 2012. Mining already accounts for 2.3% of GDP and 7% of exports, and foreign companies are still lining up to explore new prospects. By the standards of resource-rich emerging economies, it is a fairly well-run place, so the chances are that it will succeed in coming up with a licensing regime that eases public worries without deterring investment. As in richer countries, mining projects will still be welcomed, but not at any price.

Mining in Colombia: Digging itself out of a hole, Economist, Mar. 15, 2014, at 61

Oil Curse and the the Unending Violence in Sudan

The United States accused Sudan of targeting civilians in recent airstrikes, including one that destroyed a Bible school in South Kordofan, an oil-rich Sudanese province that borders the newly-created independent country of South Sudan….The Sudanese government could not be immediately reached for comment, but has said in the past that it is targeting rebels in the area….

More than 78,000 people have fled South Kordofan and Blue Nile states since August last year after an armed rebellion took root, the United Nations reported. The Sudanese government is thought to have responded to the rebellion by conducting sustained air raids with the use of Russian-made Antonov bombers, which have raised concerns over civilian casualties.

Decades of civil war between the north and south, costing as many as 2 million lives, formally ended with a U.S.-brokered peace treaty in 2005. But before South Sudan gained independence in July of last year, human rights monitors expressed concerns that longstanding grievances could again lead to violence consuming the region.  In November, there were several days of bombings near an entry point for refugees at the border, the United Nations reported. It did not specify who launched the bombs.

U.S. accuses Sudan of bombing civilians, CNN.com, Feb. 3, 2012

Mining the Oil Sands of Congo, ENI. More of the Resource curse?

Italian oil major Eni will launch a pilot of its estimated 500 million and 2.5 billion barrels reserves of recoverable oil sands project in the Republic of Congo, Eni’s chief executive said Thursday (Oct.6, 2011).”Eni-Congo’s great future project for Congo is the oil sands. We have put in place a small pilot which will start next year,” Paolo Scaroni said after meeting Congo’s president Denis Sassou N’Guesso on Thursday in Brazzaville. Eni signed a deal in 2008 with the government of Congo to explore and develop the oil sands field with a surface area of about 1790 square km, in the south of the oil-producing Central African nation. Eni had said it planned to invest 3 billion in the project over the four-year period from 2008-2011. The project has however drawn under criticism from environmental groups which warned that exploiting the non-conventional oil in tar sands could destroy Congo’s rainforest and bio-diversity. Scaroni said the Congo project will be carried out with respect to the environment. “All this will be done, taking into account the environment, which is the number one priority of our activity in Congo,” he said. Congo is one of sub-Saharan Africa’s top crude oil producers. Eni and French group Total and the main operators.

Eni to start Congo pilot oil sands project in 2012. Reuters, Oct 6, 2011

Resource curse

 

The Continuing Elite Curse: Africa

Six of the ten fastest-growing countries in the world in 2000-10 were African; Angola grew faster than anywhere else on the planet…Sadly, many [African] countries are squandering their best chance in decades. Equatorial Guinea’s elite hoards a fortune in opaque accounts. Chad channels wealth to bent officials. In Sudan they inflate the cost of infrastructure projects and siphon off funds. And state firms in Nigeria are “privatised” by handing them over to crony managers.

The failure is about more than just predictable corruption. Africa suffers from the resource curse, which blights countries nature made rich. Corrupt states become more powerful because revenues from natural resources flow straight to them. Health and education suffer as poorly paid doctors and teachers take jobs in oil firms. Fighting over resource-rich areas like the Niger Delta frightens investors.

The effects of the resource curse are painfully clear in Africa. Insiders and profiteers are increasingly using oil revenues to take over service industries. They crowd out entrepreneurs and create their own monopolies. At first glance, countries like Angola look as if they have thriving private sectors, but those firms are really loose cartels run by the oil-rich elite. Some governments are also using resource cash to maintain control. Cronies buy independent media and foreign leaders hear that access to oil depends on turning a blind eye to the brutal silencing of domestic critics.

And even good intentions often fail the poor. Africans joke that the animal they see most often these days is the white elephant—high-profile investment projects that serve no purpose. Angola has built 24 new hospitals, but cannot staff them because, although it has 18m people, it has only 1,500 doctors. Although among Africa’s richest countries, it is the only one in the world with cases of urban polio. Elsewhere, Africa’s rulers have spent billions on their armies. Global defence spending has fallen by 35% since the end of the cold war: in sub-Saharan Africa it increased by almost a third.

Excerpt from: Africa’s natural resources: Spread the Wealth, Economist, Feb. 14, 2011