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Corruption and the Resource Curse

Unpicking the reasons why corruption takes place is a complex matter. However, there has long been an established relationship between corruption and resource producing countries. As such, while Africa is blessed with around 30 per cent of the world’s known mineral reserves, several countries on the continent have struggled to capitalise on this wealth for the benefit of ordinary citizens. Instead a phenomenon known as ‘the resource curse’ has all to often seen a small elite enriched at the expense of broad-based, sustainable development.

One of the most striking examples of the curse can be seen in Equatorial Guinea, where oil revenues have translated to the highest per capita income in Africa. Despite this, life expectancy and infant mortality rates remain below the average.

Closer to home, the Katanga region in the DRC has not only struggled to translate the region’s reserves of diamonds, gold and tantalum into tangible benefits for the people, but it appears to have precipitated increased conflict and violence.

Corruption has plagued mining deals in the region. In recent years it has been revealed how Israeli businessmen Dan Gertler’s close relationship with President Joseph Kabila allegedly led to the award of a number of highly lucrative mining contracts, with Gertler using an intricate network of offshore accounts in tax havens to channel funds out of the country.

When a country has a high value and highly concentrated asset its government is less dependent on citizens in order to raise revenues. While this could be seen as a positive, enabling lower taxation levels and boosting income, this arrangement can also result in lower levels of accountability. Citizens and civil society can more easily be kept in the dark about what revenue has been raised and how it is spent, meaning large amounts can be siphoned off.

The resulting cost is not just missed and misspent revenues. Corrupt deals in the sector can also impact communities through increased conflict, displacement and human rights violations.

However, mineral wealth, corruption and poverty do not always go hand-in-hand. Botswana, for example, has largely managed to avoid the resource curse through good governance. A strong emphasis on accountability and leadership has seen the country invest the additional revenues generated by the sector in long-term development and measures to boost sustainable prosperity.

One of the key defining factors in determining whether citizens see the benefit of their country’s natural resources is transparency. In this respect the Extractive Industries Transparency Initiative (EITI) has played an important role in encouraging governments, companies and civil society to push for the transparent and open reporting of activity in the sector.

Countries that are committed to international standards of transparency and ensure companies awarded licenses are similarly committed squeeze the space available for corrupt actors to operate and illegally siphon off revenues.


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