Why do natural resources in poor countries continue to cause such conflict? The esteemed Oxford development economist, Paul Collier, probably says it best — he argues that mineral "rents" are too often the seeds of democratic failure. That is to say: mineral-rich governments don't need taxpayers as they receive so much money from the mining companies. Commonly, this results in a limited interest in providing for all their constituents.
Low income countries are most vulnerable to this problem as there are few, if any, other industries to provide the revenue that exploitation of natural resources can provide. In the struggle for resource rents, other state functions typically diminish and the supply of things like education and health declines.
Also, natural resources are usually concentrated in a contained area within a country. Local secessionists often use the argument "Our resources are being taken by this central government. We are getting no benefit". Hence the potential for civil war is much more likely around mineral repositories. The money that can be made from mining rents further perpetuates the arming and funding of militia groups — and the cycle continues.
Furthermore, when mining dominates, the rest of the export economy contracts, depressing the long term growth rate and making the economy vulnerable to shocks from volatile mineral prices.
But despite the troubles mining can cause, the truth is that leaving it in the ground is not an option. The economic reality in most African countries means we have to have mining, but we have to have mining that benefits whole communities — not just interest groups. Public scrutiny is crucial for transparency and accountability.
This is where countries like Australia can help. We need our companies, particularly our mining companies, to be accountable and transparent and not promoting the cycle of corruption that has lead to so much decay. The Extractive Industries Transparency Initiative (EITI), whereby companies sign on to publish the revenues they share with the governments of the countries they are operating in, is a practical way in which all our resource companies can do this. It gives communities on the ground the information they need to hold their governments to account, too.
This month's Africa Downunder! conference in Perth was worrying for what it did not address. When our Foreign Minister, Stephen Smith, presented to the conference he made no mention of the transparency initiative or even the need for our mining companies to be socially responsible in their dealings with the war-torn continent. BHP-Billiton is a signatory to the EITI, but too few of the other Australian mining companies who fronted up to the conference have also signed up.
Australia's renewed engagement with Africa presents a great opportunity to really make a difference in the troubled continent, to build stronger community involvement on the ground and to bring together Australian interests in ensuring this development can be sustainable. This opportunity needs to be grasped as one that benefits not just our miners, but also makes a real effort to lift Africa out of extreme poverty.
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