Countries throughout Africa are discovering an abundance of minerals, gas and oil beneath their territory. Madagascar is touting trillions of dollars in potential profits from its offshore gas reserves. Zambia continues to pull almost 1900 tonnes of copper from the ground every day – contributing to year-on-year economic growth rates of over 6 per cent.
Ethiopia, where I live, is currently home to 19 million people living on less than $1 per day, and appears to be pinning at least part of its financial security on discovering two to three billion barrels of proven oil reserves. Uganda, Kenya and Tanzania are also looking to exploit newly discovered gas and oil fields, just as Ghana and Nigeria shore up their investments in these sectors.
And yet “supporters of Canada’s foreign aid” are busy criticising the Canadian International Development Agency and International Co-Operation Minister Julian Fantino for what amounts to a very minor engagement with extractive industries. After Mr. Fantino announced a new policy in which the private sector, especially mining companies, would be more directly involved in the delivery of foreign aid alongside CIDA, the response from many quarters was nothing short of venomously hateful. Indeed, many in Canada’s aid community appear to be against any engagement by the private sector in reducing global poverty.
This is not a constructive approach to reducing poverty.
Critics are right to point out that efforts to extract Africa’s resources have historically caused more grief than anything else. “On average, resource-rich countries have done even more poorly than countries without resources,” writes Joseph Stiglitz, a former chief economist with the World Bank. This “resource curse” fuels conflict and corruption, and the profits from these sectors are too often removed from the continent by foreign-owned companies.
But Canadians – through CIDA – should be focused on precisely these challenges. Working with the African Development Bank, as CIDA does, to improve domestic legislation and regulatory structures is beneficial to companies and the countries that are courting them. Helping small and medium businesses in developing countries become more effective suppliers to large and multi-national investors is good business. Helping people in those same countries learn the necessary technical skills to become valued members of the workforce is good for investors and good for employees.
Canada, more than any other country, has the opportunity to play a critical role on these issues: both as an industry regulator and as an aid-donor.
Canadian companies – some of the largest in the world – will either benefit massively, or be left out in the cold. Here in Ethiopia, three of Canada’s largest oil companies are actively exploring for new reserves. But will Canadian companies accept Africa’s desire to renegotiate contracts, raise taxes, and even nationalize parts of their newly discovered resources? Will regulatory regimes that focus on better transparency mechanisms and outcomes that benefit Africans be endorsed by the Toronto Stock Exchange, and tolerated by companies listed in Canada? Will investors be short-termist and chase a quick buck in a race to the bottom with China, or will they pursue sustainable profits in cooperation with African economies, and African businesses, stimulating a race to the top? How will companies react as miners go on strike for more pay, and more rights, as they have done in South Africa?
These are the kinds of issues that the aid community in Canada need to focused upon. Blanket statements about the dangers of working with extractive industries are not only outdated – they’re not helping the world’s poor. 49 of the 54 countries in Africa are either producing or actively looking for oil. The Ethiopians I speak to every day welcome constructive partnerships in this sector.
Indeed, whether Ethiopia and other newly resource-rich countries in Africa will govern these resources like Nigeria or Norway could be defined in large part by the role Canada chooses to play in this sector.
That’s why a number of aid experts globally are looking to Canada – and CIDA in particular – to take some leadership on this issue. Canada spends over $2-billion on development assistance in Africa every year . Given our country’s important role in the gas, oil and mining sectors, Canada might be wise to focus even greater energy on natural resource management on the continent.
To be clear: that does not mean supporting window-dressing projects. Real change to business practices are needed if “ordinary Africans” are to benefit from these new riches. How the Canadian government and Canadian companies choose to engage over the next 12 months could well determine whether or not this happens, and whether Canadians profit in the long term. Those two possibilities should not be seen as mutually exclusive.
Lucas Robinson was a senior adviser with the Canadian International Development Agency. He now lives in Ethiopia and teaches at Addis Ababa University.