Why Africa needs its own OPEC

Mar 27, 2007 02:00 AM

by Kuseni Dlamini

The world is seeing the rise of resources nationalism, with potentially far-reaching implications for South Africa and Africa, which are richly endowed with natural resources. Countries in South and Central America, Europe and Asia are crafting and implementing strategies to maximise returns from their natural resources to promote development and prosperity for their own people.
Africa, however, has thus far failed to leverage its natural competitive advantage as a force for prosperity and global competitiveness. It conspicuously lacks the appropriate strategic approaches to maximise returns from its mineral resources for the broader public good. African people constitute the majority of the world's poorest and yet their own backyards have abundant gold, platinum, diamonds, coal and other minerals.

Even South Africa has about half of its population living below the poverty line, according to the United Nations (UN) Development Programme. This is a dismal and collective failure of leadership in government, business, academia and civil society -- which future generations would be right to judge harshly.
Resources nationalism runs contrary to the basic logic of the process of globalisation. Globalisation produces winners and losers. The rhetoric of resources nationalism revolves around the importance of maximising the winners and minimising the losers from globalisation.

Globalisation as we know it is based on a minimalist and passive role for the state in economic affairs. It emphasises the primacy of market forces and the role of the state as an enabler of free markets and global competitiveness. Resources nationalism, on the other hand, entails a prominent and active role for the state in regulating the market in ways that are aimed at increasing the state's share of the profits from resources. Resources nationalism manifests itself in various forms in different countries.
It is redefining the landscape for multinational companies in significant ways. But what isresources nationalism?

It is the notion that natural resources are an inextricable part of the national patrimony and, as such, the benefits that flow from them should, above all else, accrue to the nation. It is the confluence of this instinct and the global boom in commodity prices that has unleashed super profits for multinational resources companies, and it is this that underpins the new wave of resources nationalism.
From Bolivia to Iran, Venezuela, Russia, China and even the UK and the US, we are seeing increasingly assertive governments implementing policies that are inimical to the basic logic of globalisation. It was the logic of resources nationalism that made the US congress veto the takeover of Unocal -- the third-largest US oil company -- by CNOOC (Chinese National Offshore Oil Corporation) in 2005. The UK has higher taxes on profits from oil companies than Algeria, China, Ecuador and Russia. That's resources nationalism.

Resource-rich countries are pursuing policies designed to maximise the gains and benefits that accrue to their people from the wealth generated from their natural resources. Venezuela is currently renegotiating all contracts with western multinational oil companies which have not been overhauled yet as part of the process driven by the country's left-wing populist president, Hugo Chavez.
Vladimir Putin's Russia has upped the ante against global resources giants such as BP and Royal Dutch Shell. No foreign mining company can dream of owning 100 % of any mining asset in Russia. The same applies to China and India.

In Africa, the African Mining Partnership provides a platform for African ministers of mining to shape the way in which Africa's resources unlock lasting benefits for current and future generations. However, African countries lack effective strategic approaches that can leverage their massive natural resources to deliver lasting and tangible prosperity for generations. The recent African Indaba, held in February in Cape Town, is more of a talk shop and a platform for wheeling and dealing than a space to craft effective strategies that can make Africa leverage its resources to be a globally competitive winning continent.
Africa's and South Africa's mineral resources need to be leveraged to deliver prosperity and development for current and future generations. Developed countries are the masters of resources nationalism. However, they always discourage it in developing and poor countries.

In Latin America, Venezuela and Bolivia are examples of the current tide of resources nationalism that has unleashed the winds of economic change across the resource-rich countries of the world. All countries and regions that are winners have mainly become so by deploying their comparative advantages.
Africa is the only exception. It has unsurpassed comparative advantages in mineral resources, which it has failed to leverage effectively. As a result, it occupies the unenviable paradoxical position of being the world's most resource-endowed continent which is, simultaneously, the world's poorest. To add insult to injury, there are no signs of change, even after 50 years of independence in countries such as Ghana.

Why? It is because of a deficit in strategic thinking and planning on how best to leverage Africa's resources to lay a firm foundation for a better life for current and future generations. This must end.
Oil-producing countries are doing it through OPEC. Gas-producing countries might form their own OPEC, an idea Putin said recently was "an interesting one". Ethanol-producing countries are formulating mechanisms to underpin the trade in ethanol as a commodity. That was central to US President George Bush's recent visit to Brazil.

Africa is the world's leader in the production of gold, platinum, diamonds and other minerals and has huge untapped oil reserves. But Africa has no structures or mechanisms in place to ensure that the benefits from its natural resources accrue, in tangible and meaningful ways, to current and future generations.
The case for an OPEC of Africa's mineral producers is as compelling as it is strategically important if Africa is to assert itself in the mainstream of global economic affairs.

If others can do it in areas in which they have natural comparative and competitive advantages, why can't Africa? Bush's recent visit to Brazil was partly about crafting a strategic pact that would ensure that these two countries, which account for two-thirds of the world's ethanol production, also control the global ethanol market in ways that advance their respective national interests.
In a world that is ruthlessly competitive, we must learn to leverage our core strategic advantages to advance our national interests.

Kuseni Dlamini is a member of the national council of the South African Institute of International Affairs at Wits University.

Source: Business Day
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