Southern Africa failing on resource governance
Revenue Watch Resource Governance Index 2013 highlights weaknesses in natural resouce governance across southern Africa with none of the region's countries earning a 'satisfactory' rating and five of them earning either a 'weak' or 'failing' rating.
It will come as no surprise that southern African countries do not fare too well in the latest assessment of natural resource governance by the Revenue Watch Institute. While Zambia and South Africa score above average, the other five countries from the region all languish in the bottom half of the index of 58 mineral-rich nations – with the Democratic Republic of Congo (DRC), Mozambique and Zimbabwe all deemed to be ‘failing’.
Angola scrapes into the ‘weak’ category alongside Botswana, while even the region’s top two performers only partially meet key standards – and are still well short of ‘satisfactory’. It is a damning indictment of the way the region manages its natural resources, which could – indeed should – be the engine of genuine socio-economic growth in southern Africa but all too often end up merely enriching a political and economic elite.
The Resource Governance Index 2013 scores and ranks countries based on the quality of four key governance components - Institutional and Legal Setting; Reporting Practices; Safeguards and Quality Controls; and Enabling Environment. It also includes information on three special mechanisms used commonly to govern oil, gas and minerals – state-owned companies, natural resource funds and subnational revenue transfers.
Zambia is the sixth-largest producer of copper in the world and the fifth-largest producer of cobalt and the extractive industries accounted for 87 percent of exports in 2010. Zambia received a ‘partial’ score of 61 in this year’s RGI, ranking it 17th out of 58 countries. Strong performance on the Institutional and Legal Setting, and Safeguards and Quality Controls components was partly undone by a ‘failing’ Enabling Environment score.
It is surely no coincidence that Zambia appears high up the list and that civil society groups – and communities – are playing an increasingly influential role in the country’s extractive sector, led by the Southern Africa Resource Watch (SARW).
Civil society is also strong in South Africa, which received a ‘partial’ score of 56 – ranking it 21st out of 58 countries. A ‘failing’ score on the Reporting Practices component contrasted with ‘satisfactory’ performances on the Safeguards & Quality Controls, and Enabling Environment components. There is an urgent need for South Africa, which must have assumed that it would at least top the list of southern African nations, to improve its mining governance since the extractive sector – including gold, diamonds and a wide range of industrial minerals – remains absolutely critical for the country’s development and still accounted for 46 percent of exports in 2011.
Before the index was released, most people would have guessed that Botswana would be somewhere towards the top of the list, given its status as southern Africa’s most stable and functional democracy. But the worlds’ largest diamond producer received a ‘weak’ overall score of just 47 – ranking it 30th out of 58 countries, due to a ‘failing’ score for Reporting Practices and ‘partial’ scores for the other components.
And while many people might have been surprised by Botswana’s low-ranking, Angola’s ‘weak’ overall score of 42 and 41st place on the index might also have come as a higher-than-expected shock to many – given its well-earned reputation for a lack of transparency and accountability, and grand corruption. But sub-Saharan Africa’s second-largest oil producer has taken several important steps since 2010 to improve revenue and expenditure transparency, including the publication of budgets.
However, the reforms have been incomplete and the country’s extractive sector remains opaque – alarmingly for a sector that accounted for 79 percent of government revenues in 2011. Indeed, Angola does not require any reporting on the oil, gas or mining sector. In the index, Angola’s higher marks for Institutional and Legal Setting, and Safeguards and Quality Controls were countered by a very low Enabling Environment score.
The DRC has extensive deposits of copper, cobalt, and coltan, as well as diamonds, gold, tin, iron ore, and oil. In 2010, the extractive sector made up 20 percent of gross domestic product. However, DRC is plagued by poor governance in all areas and the extractive sector is no different, even though it does – like few other African countries – disclose extractive licenses and contracts with companies. But the Extractive Industries Transparency Initiative (EITI) reports are the best – and often only – source of information on oil, gas and mining revenues.
Overall, the DRC received a ‘failing’ score of 39 – ranking it 44th out of 58 countries, partly due to an extremely low Enabling Environment score and weak Safeguards & Quality Controls.
Mozambique has been the talk of the town in recent years in terms of its massive gas and coal reserves. Indeed, newly discovered gas reserves are estimated at 4.5 trillion cubic feet, promising to transform the economy of the country. But the RGI clearly shows that Mozambique has an enormous amount of work to do in terms of natural resource governance – something that will not come as a shock to anyone who has looked into the coal boom around Tete and the poor behaviour of multinational mining companies. A ‘failing’ score of just 37 left it ranked 46th out of 58 countries, despite a relatively strong showing on the Institutional & Legal Setting component. Its Reporting Practices score was particularly poor at just 26 – and like the DRC, EITI reports are usually the best bet for information.
And last of all the southern African countries comes Zimbabwe. Now one of the poorest countries in the world, Zimbabwe depended on the extractive industries for 36 percent of export earnings in 2010. However, the political climate surrounding the country’s critical extractive sector – and particularly its diamonds – is characterised by hostility, mistrust and lack of transparency. All of which contributed to Zimbabwe’s appallingly low overall score of 31 – clearly a ‘failing’ score and ranking it 51st out of 58 countries. A ‘partial’ score on Safeguards & Quality Controls contrasted with a particularly low Enabling Environment score. Indeed, Zimbabwe performed poorly on every aspect of Enabling Environment, lacking effective corruption controls, press freedoms and the rule of law—all essential preconditions to effective resource governance.
Despite these poor marks, Southern Africa is not the worst performing region – it just missed out on that dubious honour, which went to the Middle East & North Africa – but it clearly needs to implement major reforms to improve its resource governance. And Revenue Watch Institute proposes six key recommendations:
- Adopt freedom of information laws, which are critical to promoting accountability and guaranteeing the public has a say in how its resources are used;
- Disclose contracts with companies to allow citizens to evaluate the benefits their country receives in exchange for publicly owned resources and hold companies and the government to their contractual obligations;
- Join the Extractive Industries Transparency Initiative to promote greater transparency and create opportunities for public scrutiny;
- Require resource ministries and regulatory agencies to publish timely, comprehensive data on each project;
- Open state-owned companies to public scrutiny since these companies play a key role in the generation, management and allocation of resource revenues, yet often operate without effective public oversight; and
- Publish timely reports on the assets, transactions and investments of natural resource funds.