IN THE STOPE
Despite their immense mineral potential, their populations have
not enjoyed the benefi ts of those potentials.
I am well aware that a profound ideological dispute exists to
explain this scandalous state of aff airs, with the right blaming
poor governance and low skills, and the left blaming neo-
colonialism and imperialism.
I stand somewhere in the middle of that debate: yes,
colonisation and imperialism created profoundly unequal
societies whose economies were exploited for the benefi t of the
‘north’; and yes, post-colonial policies across Africa have failed to
achieve sustainable economic transformation mainly for internal
reasons. There are ample examples of successful transitions
to diversifi ed, more equal societies in Asia, Latin America and
the Middle East. I don’t believe that Africa is condemned to be
a lesser performer. What I do believe, and have seen over and
over, is poor governance. That is what must change.
There has been progress and reversals in progress over the past
20 years. Although President Joseph Kabila is often criticised, I
do believe he has done something extraordinary in stabilising
the country and an economy which has grown by leaps and
bounds. But I have two major objections: fi rstly, the economy
has remained far too dependent on the export of raw mineral
resources; secondly, that dependency has fostered a political
culture of rent seekers that undermine diversifi cation and
sustainability. I see nothing over the past two decades – and
I have worked in the DRC almost continually since 2009 on
economic diversifi cation – that shows seriousness in resolving
this deep structural issue. That is the resource curse at play: in
the DRC it is the easy option to increase dependency on raw
exports, and the recycling of the mineral rent in expensive
imports of consumer goods. Once, in a World Bank book titled
Resilience of an African Giant, I called Kinshasa an immense
‘import consuming zone’ as a play on the concept of the export
processing zone, which does the opposite and progressively
allows domestic value accretion.
We need to take an expansive view of how the resource curse
works. A sudden improvement in mineral exports and revenues
does not mean that the curse has been defeated – exorcised. That
improvement usually leads to Dutch disease, the commensurate
appreciation of the currency, which lowers the relative
competitiveness of the country’s other sectors and damages
these sectors’ exports. And when prices go down – as they
always do – we end up with economic crisis, led by a collapse of
government revenues that have imprudently been allowed to
expand. For that particular problem, look no further than Zambia.
A country can defeat the resource curse by skilfully leveraging
mineral endowment through the cycle. Policies must be in
place to counteract the cycle. This is a form of natural resource
nationalism that I wholeheartedly endorse. See what most
Middle Eastern countries have done. And Chile, and Norway.
For all the talk of resource nationalism in our corner of the world
I have yet to see beyond Botswana and Namibia something
that is founded on solid principles, eff ective policy, patient
implementation that look well beyond the next election.
There are quite a few examples in Africa of countries that
seems to get it right and then suddenly score an own goal.
Why is this happening?
Yes. Recent examples include the DRC, South Africa, Tanzania,
Zambia and, perennially, Zimbabwe.
www. africanmining.co.za
African Mining Publication
Do you think a country like the DRC, despite its challenges,
has made progress in the last few years?
Claude Baissac, CEO of consultancy fi rm Eunomix.
These are case studies in resource curse mismanagement, to
obvious varying degrees, and with varying eff ects. But let’s
explore this a minute: here are well-endowed countries whose
leaders are universally intending to see mining expand as a
foundation for growth. They seek to diversify their economies
through mineral benefi ciation. But as you say, end up scoring
against their own interests. I have studied these countries. I have
analysed their performances. I have looked at their strategies.
They all share a few common attributes:
Firstly, they fail to learn from experience. Theirs and that of
both their ‘failing peers’ and their ‘succeeding peers’. Their own
pasts contain precious lessons, but these are not heeded. Their
neighbours have often tried, and either failed or succeeded,
but aren’t studied.
Secondly, they take short term views on policy, and,
unfortunately, allow electoral considerations to dictate their
actions. But, as is known by all including many of the same
leaders, mining is a long game.
Thirdly, and because of the two previous attributes, policies
change too often and at the wrong time in price cycles. I have
spent a lot of time looking at the data, and it is astounding how
often this happens. But, to simplify, governments tend to be
far too liberal with investors when prices are down and far too
restrictive when prices are up. And policy moves too slowly to
adapt. It lags pricing by up to a decade, leading to some curious
inversions in the policy/price relationship. Therefore, policy
lacks balance and resilience to cycles. This in turn accentuates
the domestic economic cycle of booms and busts, which is
characteristic of the resource curse.
Currently we are at a stage of the policy/price cycle in an
investment-negative phase, where policy is too restrictive,
hungover from a commodity super cycle that is long gone but
that political leaders feel failed to benefi t their countries. This
African Mining
African Mining November 2019
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