Scramble for Africa

Towards the end of 2006, at Cape Town’s swanky Victoria and Alfred Waterfront, businessmen and African politicians networked and closed deals. They were attending Africa Oil Week, a key annual event that attracts the energy sector’s biggest players, such as ExxonMobil, Shell and Chevron. One candidly named conference session, “The Scramble for Africa”, suggested the motives of those attending: to profit from the continent’s wealth of natural resources.

With oil, gas, timber, diamonds, gold, coltan and bauxite, Africa is home to some of the largest deposits of natural resources in the world. Revenues from their extraction should provide funds for badly needed development, but instead have fuelled state corruption, environmental degradation, poverty and violence. Rather than being a blessing, Africa’s natural resources have largely been a curse.

The 19th-century scramble for Africa saw the great powers rush to control land so they could exploit natural resources. Today, there is a new scramble for Africa taking place, and the continent has again become a vital arena of strategic and geopolitical competition between the United States, France, Britain, China and India. The key question for many is: will the exploitation of Africa’s rich resources benefit anyone other than the continent’s elites?

Oil is perhaps the most important lure, with competition between foreign states and companies to secure resources so intense it attracts more than 50% of all foreign direct investment (FDI). Last year, annual FDI rose to a historic high of $38.8 billion (£19.4 billion), exceeding record levels of 2005 — a growth rate of 78% from 2004.

According to the United Nations World Investment Report, FDI inflows were concentrated in a few industries, notably oil, gas and mining. And six oil-producing countries — Algeria, Chad, Egypt, Equatorial Guinea, Nigeria and Sudan — hogged around 48% of the continent’s investment inflows. So, who’s investing?

First, there is the US. It is interested in the region as a cheap and reliable alternative to the increasingly volatile Persian Gulf. West Africa already supplies about 12% of US crude oil imports, and America’s National Intelligence Council (NIC) predicts that this share will rise to 25% by 2015.

As is often the case with oil, military involvement follows closely behind trade, and in February 2007 the US set up an Africa command (AFRICOM). It has established bases in and signed access agreements with Senegal, Mali, Ghana, Gabon and Namibia. Africa is becoming strategically important to the US because of its oil production and China’s increasing influence in the region.

Meanwhile, European firms represent roughly two-thirds of total FDI in Africa. More than half of European investment originates from the United Kingdom and France, going mainly to countries with which they have historic ties. French oil companies such as Total, locked out of the Middle East due to France’s opposition to the Iraq war, have made large investments in francophone countries such as Cameroon, Chad and Gabon.

The new entrant to the scramble is China. Despite its large land area, it is a resource-poor country and Africa offers the natural resources vital to fuel its rapidly growing economy. China looks to the Democratic Republic of Congo (DRC) and Zambia for copper and cobalt, to South Africa for iron ore and platinum, and to Gabon, Cameroon and the Republic of the Congo (Congo-Brazzaville) for timber. For oil, it has been wooing Nigeria, Angola, Sudan and Equatorial Guinea. China is now the second-largest consumer of crude oil after the US, and was responsible for 40% of the global increase in demand between 2001 and 2005. It imports 25% of its crude oil from Africa.

Beijing has charmed African rulers with a triple whammy of arms sales, cancelled debt and soft loans. In 2006, president Hu Jintao and prime minister Wen Jiabao visited 10 African countries, and this increasingly intimate relationship was consummated at the China-Africa summit in October, when Beijing rolled out the red carpet to almost 50 African heads of state and ministers.

The global demand for natural resources will bring benefits such as FDI, increased exports and good balance of trade figures for Africa. But what kind of cloud accompanies this silver lining? One of the main concerns is that the scramble for Africa is fuelling corruption, environmental degradation and internal dissent. Salil Tripathi, senior policy advisor at the peace-building non-governmental organisation (NGO) International Alert, says: “Unless properly managed, the windfall gains from resource extraction cause more problems. It reduces a state’s incentive to impose a free and just taxation system, and encourages corruption and acquisition of weaponry."

Those problems include human-rights abuses, which the great powers scrambling for African resources seem happy to tolerate. In Equatorial Guinea — where US companies such as ExxonMobil and Chevron are active — president Teodoro Obiang Nguema has been heavily criticised over torture, electoral fraud and corruption. Despite this, he was welcomed at the US State Department by the secretary of state, Condoleezza Rice, in April 2006 and described as a "good friend".

China is also willing to work with repressive regimes, particularly Zimbabwe and Sudan. Its support, including arms sales, to the repressive regime in Khartoum, has come under the spotlight. Sarah Wykes, a senior campaigner at Global Witness, an NGO that campaigns for better natural-resource governance, says: "Sudan has purchased about $100 million in arms from China and has used these weapons against civilians in Darfur."

The environmental impact is also alarming. The clearing of forests for timber exports increases vulnerability to erosion, river silting, landslides, flooding and loss of habitat for plant and animal species. Gas flaring from oil production, where unusable waste gas is burned off, pumps large amounts of carbon dioxide into the atmosphere. It is estimated that flaring in the Niger delta emits 70 million tonnes of carbon dioxide (CO2) a year. (To put this into context, Sweden emitted 69.9 million tonnes of CO2 in 2004.) These flares have contributed more greenhouse gases than all of sub-Saharan Africa combined, according to the World Bank.

The environmental and social impact of extractive industries is already acknowledged as a key factor in conflicts in Sudan and Nigeria. There is a fear among NGOs that access to natural resources will fuel the kind of violent conflict seen recently in Sierra Leone, the DRC and Liberia.

A number of initiatives have been launched recently in an attempt to deal with the "resource curse", including the UN’s Global Compact and the Extractive Industry Transparency Initiative (EITI). Such moves are welcome, says Wykes, but they are voluntary codes of conduct, and many companies and countries have not signed up to them — notably China.

"Northern transnational corporations may not themselves always be shining champions of corporate best behaviour, but it is clear that Asian state-owned companies do not have the same corporate governance regulations," Wykes says. "China’s Africa policy explicitly states that economic assistance will be given with ‘no strings attached‘."

Charities and NGOs working on the issue believe that even governments that are members of the Organisation for Economic Cooperation and Development (OECD) are reluctant to investigate allegations against western companies of corruption or complicity in human rights abuses. What is needed, says Tripathi, are more effective regulatory mechanisms. "We need identifiable universal standards, and law, if necessary, to regulate the conduct of companies, particularly to prevent grave abuses of human rights," he says.

So far, there’s not much evidence that it is taking place — so this century’s scramble for Africa could be as undignified, and as deadly, as the last.

Asset stripping

Exports to southern European countries still dominate, but China is the principal destination for timber from east Africa, most notably Mozambique. The exploitation of timber resources in Liberia was a key source of funding in its civil war. The American Forest and Paper Association (AF&PA) estimates that in Cameroon, Equatorial Guinea, Gabon, Ghana and Liberia, 30% of production is "suspicious"; other estimates put it as high as 50% in Ghana and Cameroon, and up to 100% in Liberia.

Sub-Saharan Africa is home to eight oil exporters: Nigeria, Angola, Congo-Brazzaville, Gabon, Equatorial Guinea, Cameroon, Chad, the DRC and Sudan. Nigeria is the largest producer in Africa and 11th in the world. Angola is the second-largest, with production expected to reach 2 million barrels per day by 2008. Sudanese production and export has risen rapidly in the past few years despite internal unrest in Darfur, although output dropped back a little last year. Sub-Saharan Africa has about 7% of proven world oil reserves. Of the 8 billion barrels of oil reserves discovered by prospectors worldwide in 2001, 7 billion were in the fields off west and central Africa’s Atlantic coast. The US is the largest importer of African oil, with China second.

West Africa is one of the fastest growing gold-producing regions in the world. According to figures from precious metals research firm GFMS, South Africa is still the world’s largest gold producer, despite a drop in production last year. Ghana produced 62.8 tonnes of gold in 2005, while Mali mined 45.9 tonnes. Sierra Leone, Tanzania, Rwanda and the DRC are also significant sources. The DRC is also rich in copper, coltan and cobalt. A 2002 UN report on the DRC conflict heavily criticised neighbouring countries (particularly Rwanda) and companies for fuelling the conflict in their attempt to gain access to these natural resources.

The trade in diamonds is worth around $37.6 billion a year. Botswana, the DRC, Sierra Leone and South Africa hold the biggest reserves. At 22%, the DRC has the largest share of the world’s production of industrial diamonds. The US is the largest market for industrial diamonds. The diamond industry was forced to institute the Kimberley Certification Scheme after investigations showed that illegal exports of diamonds was fuelling the bloody wars in Sierra Leone, the DRC and Angola.

Africa has rich and underdeveloped natural gas resources. It has the fastest growth rate in natural gas production worldwide, with supply set to rise by 4.9% each year from 2003 to 2030. A considerable amount of the incremental production in Africa — from Algeria, Nigeria, Libya, and Egypt — is for export, both by pipeline and in the form of liquefied natural gas. According to the US Energy Information Administration (EIA), Africa’s production of world natural gas is projected to rise from 5.1 trillion cubic feet in 2003 to 18.5 trillion in 2010. The reserves-to-production ratio is estimated at 96.9 years (exceeded only by the Middle East).

Mandy Turner is an honorary visiting research fellow in peace studies at Bradford University.

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