Neo-extractivism & the new scramble for African resources

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Reflections from the SADC People Summit 2016


 N.B. The views expressed are the author’s own and do not necessarily represent the views of the organisation


In our age of hypercapitalism, characterised by the unbridled expansion of consumerism, the spread of offshore financial centres and the growingly de-territorialised nature of economic actors, the so-called “paradox of plenty” appears to be an inescapable trap for naturally well-endowed countries in Africa.

The global resource boom and the explosion of mining activities in the continent, almost totally controlled by transnational corporations (TNCs), is undoubtedly a lucrative business for greedy and aggressive companies which easily find their way into heavily corrupt countries, offering loose regulatory frameworks and consolidated neopatrimonial practices.

The access to raw materials and natural resources has been progressively handled to TNCs over the past decades through the shortsighted and Western-centred imposition of what is known as the “Washington consensus”, a series of economic policy prescriptions, laid down by Washington based international financial institutions (IFIs), promoting unrestrained trade liberalisation and financial deregulation in highly indebted developing countries in the global South. Leaving aside the debate around the concept of “odious debt”, and the extent to which is it fair and just for the citizens of those countries to bear the burdens of loans from which they have received no benefits, is it however undeniable that the same international economic architecture, rooted in the neo-liberal dogma of perfect competition and the “invisible hand” of markets maximising common good, has offered the perfect shield for the neo-colonial scramble for natural resources in the South to be used for the prosperity and consumption of the advanced economies in the North. Paraphrasing the famous quote by Clausewitz, we could affirm that trade liberalisation and market friendly investment regimes have been, hence, the continuation of colonial foreign policy by former empires, first among those the United Kingdom.

In his presentation to the Permanent People Tribunal, indeed, Tom Lebret from the UK based NGO War on Want clearly illustrated the revolving door game between London and the corporate capital which finds in the City a (fiscal) paradise where to prosper and flourish, whilst the South remained trapped in its role of global raw materials supplier. He reported that 338 companies, mostly operating in the oil, gas and mineral sector, are listed in the London Stock Exchange totalling a value of $586 billion; of these 101 TNCs are operating in 37 countries in Africa and control over 1 trillion of African mineral resources. Needless to say, they are all headquartered in tax heavens, a quarter of them in the same London, where they pay little or non-existent taxes on profits through formally legal but ethnically unfair profit-shifting strategies, which transfer assets coming from the extraction of natural resources to low-tax jurisdictions, thus depriving the same commodity exporting countries of the revenues they could and should use for providing good and services to their populations.

The magnitude of this asset transfer and the resulting revenue loss present deep consequences for the economy of these naturally rich developing countries, which see every year their capital outflows outweighing by far the inflows their receive as aid and FDIs. However, as various other panellists pointed out during the PPT, confronting such a impunity architecture appear to be arduous, primarily because of the very “stateless” nature of TNCs, whose advanced ITCs and geographical dispersion make difficult to held them accountable and help them to easily unravel in the complex conundrum of international legislation. Furthermore, national and international tax systems currently present serious loopholes which facilitate asset transferring and focus only on tax evasion as a punishable offence whilst denying the bigger dimension of the problem – tax abuses at large and their very human rights related consequences!

The problems with extractivism as a new colonial strategy at the service of the North-dominated global economy are, hence, multiple and unprecedented due to their current transnational scale. However, the debate about the nature of natural resources extraction per se and its potential role in driving African industrialisation remain still unsolved. Some experts, even among those attending the PPT, acknowledge the potential role of extractivism as conducive to economic growth and development, if accompanied by a proper governance of natural resources by domestic actors and a greater transparency of TNCs. This author, however, remains more sceptical about the very essence of extractive economies and their serious implications, which are intimately connected to the same economic logic of exporting primary commodities for external markets’ appetite. Extractive industries are intrinsically unsustainable over the long term; the rush of developing countries to open up to foreign investors pillaging their natural endowment inevitably leads to the contamination of environment and to the irreversible degradation of vast swaths of land and waterways because of the massive impact of mining activities which are draining the non-inexhaustible resources of our planet. Furthermore, the tendency to be caught in the “Dutch disease”, consisting in the progressive deterioration of terms of trade for countries specialising in the export of primary commodities, and the enclave logic of extractive industries, which remain isolated and incapable to integrate with the other sectors of the economy, have generally resulted in a situation where the (corporate) capital “hops” from a pocket of intense production of wealth (the mining company and its affiliate) to another, leaving behind the majority of population in conditions of poverty and marginalisation through arbitrary and highly selective patterns of integration. These are worrisome signals that should make us start thinking about a transition towards a definite overcoming of extractivism. Any farsighted and long-term reflection, however, should go hands in hands with the reshaping of traditional concepts of “developmentalism” and “sustainable development”: by their very nature, indeed, and due to the international power structure where these same concepts emerged and affirmed over time, they are intrinsically rooted in a neo-liberal rationale which, now more than ever, needs to be challenged and confronted by alternative ways of production and economic wellbeing, more respectful of natural ecosystems and less harmful to the life and dignity of people and communities in the global South.

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