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Africans should reap the benefits of their resource bonanza

Canada is about to take pole position in a race that will determine the well-being of a billion people. The poorest countries on Earth, many in Africa, are in the throes of massive new resource bonanzas. In the past, such bonanzas have been the path to plunder rather than prosperity. The default option is that this dismal history gets repeated: Corruption and violence remain powerful drivers. But across Africa, many brave people are saying "never again."

In this momentous struggle, on which the future of a billion poor people hangs, Canadians must now decide where they stand. Although this is a struggle that must be won in Africa, Africans alone do not have the power to win it.

Guinea is a brutal current example of the limitations of what decent African governments can do. For decades, the country was mired in dictatorships, culminating in a military coup so grim that the African Union refused to recognize the regime. International pressure worked: In 2010, the country gained its first properly elected president, the long-exiled democracy campaigner Alpha Condé. He appointed as Finance Minister Kerfalla Yansané, a respected technocrat who had refused to serve previous regimes.

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Their top priorities were to stanch the hemorrhage of public money, and to assess the resource contracts inherited from the illegitimate past. To stanch the hemorrhage, they chose the indomitable Aissatou Boiro to oversee the Treasury. To address inherited contracts, they launched a legal review. For example, the world's finest iron ore deposits are alleged to have been signed away to a company for next to nothing by a military dictator on his deathbed. Mo Ibrahim, the African telecoms billionaire, summed up this transaction: "Were the Guineans who agreed to this deal idiots, or criminals, or both?"

So far this appears to be an encouraging story of a democratic African government doing the right thing. But now we encounter the severe limits to the power of such governments. This month, Ms. Boiro was gunned down in the street: Some people evidently do not want the hemorrhage to be stanched. As to the review, the company concerned is refusing to recognize the review process and is threatening legal action. As fancy Western lawyers menace impoverished African governments, the rule of law is in danger of degenerating into the rule of lawyers.

So why is this sorry tale pertinent for Canadians? Because, in the relay race for integrity in resource governance, the baton is being handed to you. The first leg of the relay was run by the United States, which passed the Cardin-Lugar Amendment to the Finance Act of 2010. This required American-listed resource extraction companies to report payments made in winning contracts. We know this to be effective because some oil companies, fearing being disadvantaged, are engaged in a doomed and demeaning legal challenge.

The baton is currently held by Europe: Next month, the European Parliament is expected to pass equivalent legislation. Toronto is home to the world's most important financial market for frontier resource-extraction companies, so what Canada now does really matters. Either you grasp the baton from Europe, or you become the exception that blows a hole in the struggle for transparency – the issue for which Ms. Boiro has just died.

Canada is a global model for resource-based development. It has built both the technical expertise and the systems for integrity. During the financial crisis, Canada has enhanced this reputation by being an island of good governance in an ocean of incompetence and deception. So, it is now fitting that Canada should take forward the resource transparency agenda, a move indeed widely supported among Canadian companies. The alternative is too degrading to contemplate.

Paul Collier is a professor of economics and public policy at Oxford University. This article is based on the Hagey Lecture, delivered at the University of Waterloo on Nov. 22.

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