Putting an End to the Paradox of Plenty?

There is a great paradox in many African countries. While there is an abundance of natural resources throughout the continent and its countries, there are major issues with how these resources are being used. Despite residing in these ostensibly wealthy countries in which massive quantities of minerals are extracted, local communities continue living in abject poverty. This escalates into deeper economic issues and contributes to a continuous cycle of stunted economic growth and development. Companies in the United States and countries in Europe and Asia are benefitting from these mineral riches while locals are starving.

A President with a Plan

On a mission to address these issues in the mining industry, the President of Tanzania John Magufuli has initiated a range of renegotiations of mining contracts his country has with various mining companies. He started with a review of Petra Diamonds Ltd. who owns 75% of the mines while the government owns 25%. After confiscating export diamonds to the value of US$15 million, it was revealed that the true value of the consignment was close to US$30 million. According to Phillip Mpango, the Finance and Planning Minister of Tanzania, the country could be losing as much as US$46 million every year from exporting under-cleared diamonds. President Magufuli and the Tanzanian government plan to increase the country’s ownership of mines up to a minimum of 50% while decreasing the percentage that foreign companies like Petra Diamonds own.

Not Just Tanzania

While Tanzania is taking a strong stance against exporting under-cleared diamonds, it is by far not the only country struggling with the harsh after-effects of trade mispricing. Patrick Chinamasa, Finance Minister of Zimbabwe spoke to the media recently and said that there are diamonds worth around US$15 billion missing because of this practice. He further stated that corrupt political figures benefitting from corrupt deals in the industry are also a large part of the problem. Being the second largest producer of copper in Africa, one would imagine that Zambia is a relatively wealthy country. Unfortunately this is not the case – instead Zambia is one of the poorest countries on the African continent! The biggest copper mine in Africa is situated there and belongs to an Indian company, Vedanta Resources. Vendanta officials have been quoted as saying that the company gets well over US$1 billion back every year. Again, locals are trapped in poverty.

Are all African Countries Abused in the Mining Sector?

Although it was once the third poorest country in the world, Botswana has since been overhauled and is one of the few African countries that are reaping the benefits of its natural resources. What Botswana did differently to other African countries is renegotiate diamond mining deals, with the interests of the country in mind. Botswana is also known for its moral standing and significantly lower levels of corruption in comparison to other African countries. Just like Botswana has done, and Tanzania has started doing, other African countries should follow suit. The only way forward is for all African countries to start renegotiating for fair mining deals with foreign companies, and fast.