Tuesday, December 29, 2015

Africa Rising?

Nigeria, Africa's biggest oil producer, gets more than 90 percent of its foreign earnings and two-thirds of its tax revenue from oil exports. Yet there are many reasons why that hydrocarbon bounty is a mixed blessing.

For starters, it can drive up the value of a nation's currency, making other exports less competitive and imports more attractive. As Burgis points out, textiles used to be Nigeria's most important manufacturing industry. But cheaper Chinese imports smuggled in by Nigerian gangs (an illicit trade worth more than $2 billion a year) have devastated the industry -- one example of why Africa produces just 1.5 percent of global manufacturing output, despite its abundance of cheap labor.

Billions of dollars in oil revenues are also a tempting pot of money for bent politicians. One 2012 report said corruption had swallowed up $37 billion worth of Nigeria's oil money over the last decade. That surpasses the annual economic output of more than half the nations in Africa as well as Nigeria's annual federal budget. Such corruption has other toxic effects. Dirty money from bribes and kickbacks has to be laundered, and because those doing the cleaning don't care so much about profit or productive investment, their infusions of cash distort the value of assets.

Nigeria's reliance on oil for tax revenues also creates a perverse political dynamic: As Burgis puts it, "the ability of rulers of Africa's resource state to govern without recourse to popular consent." Instead of having to do right by taxpayers to win their votes, politicians focus on controlling and dispensing mineral wealth to bolster their patronage networks. "Politics becomes a game of mobilizing one's ethnic brethren," Burgis notes -- a contest with dangerous destabilizing effects in Nigeria's fractious polity. In fact, as one Nigerian governor explains, if he failed to share the wealth, ill-gotten or otherwise, "I've got a big political enemy."

Nigeria is far from the exception. At least 20 African countries are what the International Monetary Fund calls "resource-rich": that is, their natural resources account for more than one-quarter of exports. From the coltan mines of the Democratic Republic of the Congo and Guinea's rich bauxite and iron ore deposits to the diamond fields of Zimbabwe.


This looting depends on an all-too-willing cast of outside partners, whether Western mining and oil companies that bribe and abet massacres, or shady shell companies in the British Virgin Islands. The World Bank's International Finance Corporation, backs visibly corrupt, environmentally destructive, or just plain inequitable oil and mining ventures in Chad, Guinea and Ghana -- all countries it was supposed to be helping. Western criticism of China's growing presence in Africa carries a distinct whiff of hypocrisy. 

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