The Role of Transparency for Africa to Benefit from its Extractive Industry


Among the defining characteristics of the African continent is its colossal endowment in natural resources. These resources range from almost all sorts of minerals, gemstones, oil, gas and different flora and fauna. Fighting financial secrecy is a key to make African countries benefit from these resources, Dr. Honest Prosper Ngowi argues in an article published in the Tanzanian independent newspaper The Citizen. Ngowi was one of more than 160 delegates at the _Financial secrecy, society and vested interests_ conference in Bergen. Read Mr. Ngowi's article here.

Contribution written by Prosper Ngowi. The article was first published in The Citizen

If there is any continent in the world that God has abundantly rewarded with natural resources, then Africa is one of them and it deserves more than a footnote in any writing on natural resources endowment in the world. Standard international economics literature would always attribute natural resouces endowment to Africa’s comparative advantage. Looking at the prosperity of the continent however, one hardly sees a reflection of such rich resources endowment. Partly, this is attributed to a lack of transarency by various actors in the natural resources exploitation on the continent.

Emerging views

Among the emerging views on the need for transparency in Africa’s extractive industry are those aired in the international conference on Financial Secrecy, Society and Vested Interests. It was a conference organized by Publish What You Pay Norway and the Norwegian School of Economics and Business Administration (NHH) in November 2012. In the spirit of individual social responsibility, the author of this article who took part in the said confence, shares some of the emerging views on the need for transparency if Africa is to benefit from its natural resources.

The nature of the problem

 Whereas the endowment of natural resources in Africa is a common knowledge, there is huge lack of transparency on a number of issues related to these resources. The secrecies as a result of lack of adequate transparency, if at all, are in various nodes of the very long and highly diverse natural resources commodity chain. Among the secrets are the contracts and agreements between various countries on one side, and companies extracting these natural resources on the other. There is also information assymetry between companies on one side and the government on the other. What the companies know about, say commercial quantities of available natural resources, costs involved to extract them, amounts extracted at any point in time, actual sales prices, profits and therefore tax liabilities is not always what the government know.

Key transparency issues

 Key current issues of discourse in the area of financial secrecy, include issues related to tax havens in which huge financial sums may be transfered thereby affecting African countries negatively. When governments cannot establish the status of the issues listed under the nature of the problem above, for whatever reason, they stand to lose a lot of revenues. At the end of the day what matters most is the result of the financial resources that are lost due to financial secrecy. The worst of the results include deaths due to inavailability of funds for better health, water and other essential social services.

Who are the actors?

 Transparency in the management of natural resources in Africa is an issue that involves many actors who have various roles in the equation. The requirement for transparency has by and large been directed to companies involved in the exploitation of natural resources. Over time, however, there is an increasing demand for governments and their institutions to be transparent to their various stakeholders. Inter alia there is an increasing call for governments to put in the public space all kinds of agreements with, among others, the extractive industries.

These agreements include, but are not limited to, those related to financial stability clauses, tax exemptions and incentives and terms for the same. Among those advocating for transparency include a number of like-minded individuals, civil society organizations, the academia, media and various professional associations. Among the names that are known to be associated with demanding transparency, is the Government of Norway, Publish What You Pay, Changemaker, Global Witness and many others.

Interventions on the ground

 There are a number of interventions on the ground that aim at incresing transparency in various transactions ancluding in the extractive industry. Among the emerging intervention for transparency is the Country By Country Reporting initiative where companies will be required to report their transactions in all the countries they are investing and their home countries too.

Ways forward for Tanzania

 The above issues are very relevant for Tanzania. With all its natural resources endowment, it is a shame that Tanzania is scoring badly in various poverty indices. Partly by subscribing to transparency initiatives and calls, Tanzania stands to reduce what it has lost and what it can lose financially due to secrecy in the extractive industry. The emerging debates on transparency could not have come at a better time than now when the country is on the path towards becoming an oil and gas economy.

The country might have lost colossal sums of revenues from the mining sector, partly due to various forms of secrecy. If the country avoids the transparency debate opportunities in the ever unfolding oil and gas sub-sector it will have itself to thank if it does not benefit from the potentially extremely huge revenues embeded in these resources.