Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Gertrude Lesaumako sorts diamonds at the Diamond Trading Company in Gaborone. Botswana is the world's biggest producer of diamonds. Under an agreement with diamond producer De Beers, diamond-processing jobs are shifting from London to Botswana. (The Globe and Mail/Peter Power)
Gertrude Lesaumako sorts diamonds at the Diamond Trading Company in Gaborone. Botswana is the world's biggest producer of diamonds. Under an agreement with diamond producer De Beers, diamond-processing jobs are shifting from London to Botswana. (The Globe and Mail/Peter Power)

Africa Next

Africa’s investment boom offers valuable lessons Add to ...

In this finale of a six-part series, Globe and Mail Africa correspondent Geoffrey York investigates how Africa's growth is changing its future.

Within sight of the biggest gold mine in Burkina Faso, hundreds of children are slipping silently into starvation.

They live in flimsy wattle or mud huts in a scrub wasteland. They help their parents scrounge for flecks of gold in the sand. And every month, hundreds are so malnourished that they need emergency food at the village clinic – just a short walk from the perimeter of the massive high-tech gold mine, owned by a Canadian company.

AFRICA NEXT: A SIX-PART SERIES

I’ve seen the same contrasts and inequities across Africa: poverty and hunger in the shadow of gleaming new mines and plantations; luxury hotel towers rising near crowded slums; villagers gaining jobs from multinational projects while others lose their land; local entrepreneurs capitalizing on the economic growth even as most of the profits go to foreign shareholders.

Today’s investment boom is Africa’s biggest opportunity in decades, but will it seize the moment or squander it? Some African countries are getting it right and there are lessons to be drawn from their successes.

Lesson 1: Use your resources to create new industries

On the outskirts of Gaborone, visitors enter the ultra-modern Diamond Trading Company through a series of airlock-like security doors. The sorting floor is watched by 500 cameras, capable of zooming in on the smallest diamond that the 100 sorters are handling. “This is the safest building in the world – safer than the Pentagon,” says Kago Mmopi, corporate affairs manager at the trading company. “Theft is almost non-existent.”

The high-tech building is just one example of how Botswana has exploited its mineral resources to create thousands of jobs in gem processing. This small semi-desert country, with just two million inhabitants, is aiming to turn itself into a new version of Antwerp or Tel Aviv: a diamond hub where rough stones are turned into polished gems, to the benefit of the local economy.

When it gained independence in 1966, Botswana was one of the world’s poorest countries. Over the next three decades, as a result of massive diamond deposits, it became one of the fastest-growing countries in the world, expanding at 9 per cent annually. But its government realized that the growth would vanish if it didn’t figure out a way to move beyond a rudimentary mining sector.

Beginning in 2006, Botswana has been insisting on a bigger share of the processing industry, which was traditionally based in Europe and India. Today, after intense negotiations with diamond producer De Beers, there are 21 diamond factories and more than 3,200 processing jobs in Botswana. The government holds a 50-per-cent share of the new trading company and De Beers is transferring its rough-stone sorting and trading division from London to Gaborone.

Lesson 2: Keep it transparent and democratic

Last year, Iamgold Corp. paid more than $100-million to Burkina Faso in taxes and royalties – part of a dramatic rise in the government’s mining revenue in the past three years. Yet corruption is widespread in Burkina Faso and the same regime has ruled the country since a military coup in 1987. What it does with its revenue is often opaque.

Burkina Faso could learn from the more inspiring example of Ghana, the second-biggest gold producer in Africa and now an oil producer as well, forecast to receive $1-billion in annual oil-export revenue over the next 20 years.

Ghana is considered one of the less corrupt countries in Africa, with relatively strong institutions, a vibrant democracy and a degree of transparency in its mining and oil revenue. It has published all of its oil contracts on a government website for anyone to see. It benefits from a vigorous civil-society movement, which acts as a watchdog on the government. And, not completely coincidentally, Ghana has become one of the fastest-growing economies in the world, reaching the status of a middle-income country last year.

Many other African countries have discovered oil or natural gas in recent years and there is growing awareness of the need for transparency in their resource deals. More than 20 African countries have joined – or applied to join – the Extractive Industries Transparency Initiative, which requires them to publish their resource revenues and submit them to an independent monitor. It’s a key step for reducing corruption and ensuring that Africans finally benefit from their own resources.

Lesson 3: Put the people first

One of the world’s biggest coal-and-gas booms is taking place in one of the world’s least-developed countries. An estimated $50-billion in foreign investment will flow into Mozambique’s offshore gas fields over the coming decade, producing up to $400-billion in revenue over the next 40 years. Mozambique also contains some of the world’s biggest untapped coal reserves, generating billions more in investment by mining companies.

Yet little of this bonanza is helping ordinary Mozambicans. Corruption and poverty are widespread. Most people earn less than a dollar a day and 60 per cent are unemployed.

The discontent is growing. When about 1,000 families were relocated to make room for a $1.7-billion coal mine in northern Mozambique, they were angered by the cracked walls of their new homes and the lack of water, electricity and farmland at their new site. Early this year, they rose up in protest, barricading a railway and clashing violently with police.

Last month, the government introduced new rules to require the mining and gas companies to give enough land and infrastructure to every relocated community – or face the loss of their operating licences and potential fines of up to $175,000. Civil-society activists say it doesn’t go far enough, but it’s a step in the right direction.

United Nations experts, meanwhile, are quietly lobbying the Mozambique government to improve its mining and tax laws and its management of its resource revenue, learning from models such as Botswana. And they are urging the government to protect the rights of affected communities and to invest a bigger share of its resource profits in health and education.

Lesson 4: Take advantage of your strengths

Most African countries have struggled to create a full system of telephone land lines to serve their people. But, paradoxically, this weakness has produced a new strength: mobile technology. There are more than 700 million cellphone subscribers in Africa today, with the number surging by 20 per cent annually, and Africa has become a world leader in mobile banking.

In Kenya, about 19 million people (nearly half of the population) are using mobile money – primarily a system called M-Pesa, a phenomenally popular technology for paying bills and sending money through ordinary cellphones.

Now the technology is shifting down to remote villages and isolated farmers.

In Uganda, the microfinance-focused Grameen Foundation is reaching more than 70,000 farmers through their cellphones, sending them crucial agricultural information such as market prices, weather reports and expert tips on how to treat animal diseases.

By the end of this year, the program aims to reach 250,000 farmers – most of whom are earning less than $2 a day. Similar projects, called iCow and M-Farm, are helping farmers in Kenya. And many more innovations are churned out every week in technology laboratories in Nairobi and across the continent.

Follow on Twitter: @geoffreyyork

 

Topics:

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories