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Despite optimism, scramble for resources fuels graft

Publish date: 14 February 2012
Issue Number: 466
Diary: Legalbrief Africa Old
Category: African Focus

Africa is in a stronger financial position than ever before.

Years of rising exports have contributed to sustained growth, despite the global financial turmoil. Legalbrief reports that a World Bank reports points to the fact that the economic tide finally appears to be turning. This was evidenced by President Jacob Zuma who last week announced that the SA Government is planning to invest nearly $40bn to build water, road and rail infrastructure all over the country. Two-thirds will be dedicated to rail projects. 'For the year 2012 and beyond, we invite the nation to join government in a massive infrastructure development drive,' he said during his State of the Nation address. In addition to roads projects, dams and utilities, most of the infrastructure work is aimed at improving the country's vibrant mining industry by making better rail connections between mining areas and ports. According to a report on the atlanticcities.com site, much of this investment will be focused on the northernmost province of Limpopo, where Zuma wants to 'unlock the enormous mineral belt' of coal, platinum, palladium, chrome and other minerals. Full report on the atlanticcities.com site

In a Daily Maverick column, Simon Allison notes that the continent now has plenty of strong, innovative companies and is developing a solid middle class. There are also a record number of billionaires around and the economic leaders are finally beginning to cooperate with one another. 'The future is bright; the future is African. The only dark cloud on the horizon of African economic optimism is the decline of western economies. Africa doesn't trade with itself, but with Europe, America and Asia. If the continent's really going to move forward, this needs to change - but there are plenty obstacles to overcome first. 'The spectre of a major European market collapse looms over the continent, already slowing growth and threatening to reverse the gains made in the last few years. Africa is the healthy, growing child standing next to its sick European grandmother and ailing American uncle, with everyone asking one question: How infectious is the west's economic disease? That might be up to Africans to decide. At the moment, the economies of African countries depend wildly disproportionately on trade with America, Europe and increasingly Asia. Trade between African countries is negligible, representing only 10% of the continent's total. This leaves us extraordinarily and unnecessarily vulnerable to the vicissitudes of the global markets. If Africa wants to protect itself, it needs to rectify this tricky, but not insurmountable problem. Along the way, we might just kickstart the engines of Africa's economic development. In other words, Africa needs to start trading with itself. Sending goods across borders, creating major continental companies, moving into services and manufacturing rather than just the usual minerals and primary commodities. But this is easier said than done.' Full Daily Maverick column

The 191-page World Bank report released last week examines what has been stunting intra-African trade for so long. It notes that South African grocer Shoprite spends $20 000 a week in import permits to truck meat, milk and other goods to its stores in neighbouring Zambia. One of its trucks may need as many as 1 600 documents to cross a border in Southern Africa. Another major South African retailer, Woolworths, pays full tariffs to transport food and clothing to its franchise stores within the Southern African Development Community (SADC) regional trade bloc because some documentation is too costly. Moneyweb reports that such examples of red tape and trade barriers are costing Africa billions of dollars and depriving the region of new sources of economic growth, according to the World Bank report. Last month, a leaders' summit of the African Union in Ethiopia called for a continental free trade area by 2017, a move that means more countries will have to align their policies and institutions to create an Africa-wide market. Blocks of countries have taken steps to integrate but higher trading costs have also led to significant price differences between countries. According to the report, World Bank research shows that maize in Juba, in South Sudan, is about three times more expensive than in neighbouring Uganda. Africa's economies are growing faster than almost every other region in the world except for developing Asia, and more trade would boost growth, reduce poverty and create more jobs, the World Bank said. Full Moneyweb report

In a Moneyweb column, Alex Hogg notes that any African could get excited about the goings-on at last month's World Economic Forum annual meeting in Davos, Switzerland. Everywhere the news was good and in one session after another, delegates got to see a wave of emerging African leaders who care more about their people than Swiss bank accounts. Hogg says Naspers' bossman, Koos Bekker, a regular at the Davos gathering, put it best during a well-attended session assessing investment opportunities by explaining that Africa is simply normalising. 'Finally breaking a vicious cycle of guilt-driven handouts by former colonisers fuelling widespread corruption. As democracy tightens its grip, the old style "Big Men of Africa" are being disposed of by voters. Ushering in more efficient allocation of resources that is translating into improved economic growth. While most countries struggled through 2011, 45 of the 46 countries in Sub Saharan Africa posted positive economic growth. Another happy fact is that during the last decade, Africa gave the earth six of the top 10 performing economies. The continent, too, is the only one whose growth path did not get interrupted by the Global Financial Crisis. Cynics, of course, will snipe about the low starting point. They will dismiss African exuberance as premature while millions still survive on handouts from the Rich North and where corruption remains endemic in many countries. Where do-gooders like the Bill and Melinda Gates Foundation has upped its disease-combating fund to $750m while fretting that's still not nearly enough. All true. And all reflective of very real challenges at ground level.' Full Moneyweb column

Despite this upbeat outlook, the scramble for oil and mining contracts in Africa's most resource-rich countries risks aggravating corruption and instability on the continent, Global Witness has warned. The Wall Street Journal reports that the natural resource industry watchdog raised alarm over oil and mineral deals involving shady local companies with politically connected shareholders and foreign firms that vehemently resist efforts to increase transparency. The report notes the group called on the US, Europe and China to make companies publish what they pay governments to operate mining and drilling projects, and for resource-rich African countries to disclose who benefits. According to the report, the organisation said it found a deep lack of transparency in a series of case studies on the awarding of oil and mineral rights in Angola and Nigeria, the continent's top oil producers, and in the DRC, famed for its wealth of cobalt, copper, diamonds and gold. The report - titled Rigged: The Scramble for Africa's Oil, Gas and Minerals - found evidence that senior government officials in Angola and Nigeria had taken advantage of local investment requirements meant to benefit small businesses to acquire stakes in oil licences, the paper notes. Full Wall Street Journal report Rigged: The Scramble for Africa's Oil, Gas and Minerals