"EITI helps African Governments break new ground" by Peter Eigen
Africa’s economy grew by 5.6 per cent in 2006. Much of this growth was due to an increase in oil production and a surge in oil prices. A similar, if somewhat less dramatic story, can be told about Africa’s mineral wealth. In simple terms, Africa has plenty of natural resources and is beginning to benefit from them.
Sadly, however, on past evidence this wealth will not be shared. Governments have been ill equipped to manage the sudden flow of resources and much of them have been squandered, fought over and, in some cases, stolen.
But some countries have escaped this resource curse. Botswana is the best African example. Although diamond mining accounts for more than one-third of GDP and for 70-80 per cent of export earnings, Botswana has maintained one of the world’s highest economic growth rates since its independence. Through fiscal discipline and sound management, Botswana has transformed itself from one of the poorest countries in the world to a middle-income country with a per capita GDP of more than $11,000 in 2006.
A pattern begins to emerge – a determination to bring the resources back to the people is the only way to ensure that these resources are a blessing and not a curse. Transparent systems of managing the resource wealth are a necessary, though not sufficient, means to do this. Transparency increases the accountability of the key decision-makers, both in governments and in companies.
Global public goods, such as increased transparency, can only be achieved by collective approaches. The Extractive Industries Transparency Initiative (EITI) aims to create conditions that are more transparent. The EITI is a focused and collective effort between private companies and host governments aimed at transparency, leading to greater accountability of resource-rich governments to their citizens. It only seems fair and obvious that a country’s citizens should know how and what its government earns when its natural resources are sold off. There are three key elements to this:
1. Companies publishing what they are paying
to government,
2. Host governments publishing what they are receiving from the companies, and
3. Civil society in the country acting to monitor the payments to ensure full disclosure.
The Economist has called the EITI “the curious coalition”, referring to its multi-stakeholder nature with governments, oil companies such as ExxonMobil and campaigning NGOs such as Global Witness sitting at the same table. The reason for this curious coalition is simple: all parties have something to gain. Resource-rich countries implementing the EITI can benefit from an improved investment climate. Companies and investors, by supporting EITI in countries where they operate, can help mitigate investment risk. Civil society can benefit from an increased amount of information in the public domain about those revenues that governments manage on behalf of citizens.
The EITI is now a global initiative. Universal principles and the content of EITI have been agreed upon. A process for quality assurance has been put in place. Some twenty-three countries are actively implementing it - in Africa, Asia, Middle East, and Latin America. Sixteen of those countries are in Africa. These countries are signing up to have their implementation independently validated once every two years and six of them have already produced fully audited reports – Cameroon, Gabon, Ghana, Guinea, Mauritania, and Nigeria. In addition, Thirty seven oil, gas and mining companies have agreed to support the initiative, plus institutional investors managing assets amounting to over $14 trillion.
Growth – and therefore the meeting of the Millennium Development Goals - in Africa depend to a significant extent on natural resource extraction. For this resource extraction to really lead to growth depends on its being managed responsibly and transparently by the governments that manage the resources, the large international companies that dominate the sector, and civil society that seeks to represent the citizens who are the resource’s real owners. The EITI is, I believe, leading the way.
Peter Eigen is Chairman of the Extractive Industries Transparency Initiative (EITI), Founder and Chair of the Advisory Council of Transparency International, and member of the Africa Progress Panel
Sadly, however, on past evidence this wealth will not be shared. Governments have been ill equipped to manage the sudden flow of resources and much of them have been squandered, fought over and, in some cases, stolen.
But some countries have escaped this resource curse. Botswana is the best African example. Although diamond mining accounts for more than one-third of GDP and for 70-80 per cent of export earnings, Botswana has maintained one of the world’s highest economic growth rates since its independence. Through fiscal discipline and sound management, Botswana has transformed itself from one of the poorest countries in the world to a middle-income country with a per capita GDP of more than $11,000 in 2006.
A pattern begins to emerge – a determination to bring the resources back to the people is the only way to ensure that these resources are a blessing and not a curse. Transparent systems of managing the resource wealth are a necessary, though not sufficient, means to do this. Transparency increases the accountability of the key decision-makers, both in governments and in companies.
Global public goods, such as increased transparency, can only be achieved by collective approaches. The Extractive Industries Transparency Initiative (EITI) aims to create conditions that are more transparent. The EITI is a focused and collective effort between private companies and host governments aimed at transparency, leading to greater accountability of resource-rich governments to their citizens. It only seems fair and obvious that a country’s citizens should know how and what its government earns when its natural resources are sold off. There are three key elements to this:
1. Companies publishing what they are paying
to government,
2. Host governments publishing what they are receiving from the companies, and
3. Civil society in the country acting to monitor the payments to ensure full disclosure.
The Economist has called the EITI “the curious coalition”, referring to its multi-stakeholder nature with governments, oil companies such as ExxonMobil and campaigning NGOs such as Global Witness sitting at the same table. The reason for this curious coalition is simple: all parties have something to gain. Resource-rich countries implementing the EITI can benefit from an improved investment climate. Companies and investors, by supporting EITI in countries where they operate, can help mitigate investment risk. Civil society can benefit from an increased amount of information in the public domain about those revenues that governments manage on behalf of citizens.
The EITI is now a global initiative. Universal principles and the content of EITI have been agreed upon. A process for quality assurance has been put in place. Some twenty-three countries are actively implementing it - in Africa, Asia, Middle East, and Latin America. Sixteen of those countries are in Africa. These countries are signing up to have their implementation independently validated once every two years and six of them have already produced fully audited reports – Cameroon, Gabon, Ghana, Guinea, Mauritania, and Nigeria. In addition, Thirty seven oil, gas and mining companies have agreed to support the initiative, plus institutional investors managing assets amounting to over $14 trillion.
Growth – and therefore the meeting of the Millennium Development Goals - in Africa depend to a significant extent on natural resource extraction. For this resource extraction to really lead to growth depends on its being managed responsibly and transparently by the governments that manage the resources, the large international companies that dominate the sector, and civil society that seeks to represent the citizens who are the resource’s real owners. The EITI is, I believe, leading the way.
Peter Eigen is Chairman of the Extractive Industries Transparency Initiative (EITI), Founder and Chair of the Advisory Council of Transparency International, and member of the Africa Progress Panel
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