Don't Blame Africa's Underdevelopment on Corruption and 'Bad Governance'.
✑ GYEKYE TANOH (INTERVIEW)` ╱ ± 12 minutes
The discourse of ‘good governance’ suggests that the States in developing countries are deeply and congenitally corrupt. It ignores, even obscures, the deep structural dynamics that push a country to become merely the exporter of raw materials.
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Once you have hidden the structure, then you can blame the pettier parasitic bribery as the author of the misery.
![](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgdNXLX6fb3m9uro87nNYObx-UkcJwolFqeoWb_HlSh4n-mqgT4oGcHMaNL2NqOP7EDII6jOBRsohbh4x6NbLJkSHe4riSjbaRc8GAFILCRKNs6j8jU4PVWuIhf_VElWAZ4SAtXxmXhUUbC/s1600/Gyekye-Tanoh.jpg)
The discourse of ‘good governance’ suggests that the States in developing countries are deeply and congenitally corrupt. It ignores, even obscures, the deep structural dynamics that push a country to become merely the exporter of raw materials.
From: Tricontinental Institute, May 2019. ╱ About the author
Gyekye Tanoh is head of the Political Economy Unit at the Third World Network-Africa based in Accra (Ghana), conducting
research and advocacy on globalization, trade and development. He is a regular contributor to African Trade Agenda and a number of other publications on a wide-range of subjects considering impacts of globalization issues in Africa. He is also deputy National Coordinator of the Ghana Coalition Against Privatization.
In May 2011, the International Monetary Fund (IMF) published a Working
Paper by Burcu Aydin called ‘Ghana: Will It Be Gifted Or Will It Be
Cursed?’ (WP/11/104). Oil had just been discovered off the shore of Ghana.
This anticipated a bounty of revenue for the country. Aydin asks whether
Ghana will face the ‘resource curse’. The resource curse – also known as
the Dutch Disease – occurs where revenue from sale of this resource rushes
into a country, appreciates the currency and causes a major crisis in other
parts of the economy. Looking at 150 middle- and low-income countries,
Aydin came up with a strong finding: ‘Results show that there is a poverty
trap for poor resource-rich countries due to their low institutional
quality’. Bad governance and poor macroeconomic management, Aydin suggests,
diminish the possibility for the onrush of revenues from natural resources
to enhance a country’s development. There is no mention, in the IMF’s
Working Paper, of the other actors in the process – namely, the
multinational companies that dominate the natural resource extraction
business. The pro-corporate literature explains problems in the resource
economy in two ways: 1) poor macroeconomic management that allows revenues
to flood the economy and appreciate the currency, 2) bad governance because
of corruption and theft by government officials.
The growing dependence on raw material exports meant growing dependence on
foreign corporations and foreign markets. This was demanded by the World
Bank and sanctified by a document it put out in 1992. This document crisply
states that governments should shift their policy ‘towards a primary
objective of maximizing tax revenues from mining over the long term, rather
than pursuing other economic or political objectives such as control of
resources and enhancement of employment’ (World Bank, Strategy for African
Mining, 1992). In other words, governments should merely export raw
materials and allow foreign mining companies to thieve resources. There
should be no attempt to ‘control resources’ or to create jobs.
Read the rest of the interview (pages 16-32) on thetricontinental.org.
Nothing in the IMF document interrogates the role of multinational firms.
If anything, the Western scholarship and media will point a finger at the
Chinese firms in Africa – almost as a way to distract from the fact that
the most powerful firms in the natural resource extraction business are not
Chinese.
The top ten multinational firms that operate on the African
continent are:
-
Anglo-American (UK)
-
Rio Tinto (Australia)
-
Vale (Brazil)
-
BHP, formerly BHP Billiton (Australia)
-
Barrick Gold (Canada)
-
Freeport-McMoran (US)
-
Newmont Mining (US)
-
Teck (Canada)
-
Goldcorp (Canada)
-
Alcoa (US)
To ignore the power of these firms that take the vast bulk of the revenue
from the resources extracted from the African continent is to miss a key
institutional problem faced by the African countries: colonialism. That is,
African countries face plunder at a colonial scale, which is to also say
that these countries do not have sovereignty over their own resources.
Western, pro-corporate scholarship suffocates the possibilities for a
future. There is little space given to the struggles for the people on the
continent against the surplus extracted out of their countries and from
their labour power. Alien to this entire literature is any debate about an
exit from the capitalist relations that structure the resource extraction
from the continent. It is in this context that we are interested in the
possibilities of resource nationalism or resource sovereignty.
Can resource nationalism or resource sovereignty provide tools around which
to build a national-popular collective will against the capitalist
depredations of the continent?
To elaborate on these themes of capitalist plunder and resource
nationalism, Tricontinental: Institute for Social Research spoke with
Gyekye Tanoh, head of the Political Economy Unit at the Third World
Network-Africa based in Accra (Ghana).
One of the great scandals of the 21st century is the theft of resources
from the African continent. Could you please put that theft in some
context?
GT: Africa, from its colonial history to its post-colonial history, has
specialised as a source and supplier for raw materials for the rest of the
world. Much of the region’s political policy slates continue to be
dominated by foreign powers as well as by international financial
institutions, such as the World Bank and the International Monetary Fund.
History, from slavery and colonialism to the present, has created a
landscape where the dominance of foreign companies is immense, more
pronounced than in any other part of the world. A defining feature of this
dominance is the tremendous power imbalance in which there is an immense
influence of corporations to exploit the continent’s labour and resources,
to destroy the environment and to dictate policy to the governments. In
other countries – let’s say Canada – a corporation is forced to respect
certain laws, relatively speaking, regarding environmental regulations,
corporate tax legislation and some labour standards. But the Canadian firm
in Africa operates without any of these restrictions. What’s good for
Canada is not good for Cameroon.
A recent report from the Bank of Ghana offered some shocking statistics. It
said that of the $5.2 billion worth of gold exported by foreign-owned
mining firms from Ghana, the government received only $68.6 million royalty
payments and $18.7 million in corporate income taxes. In other words, the
government received a total of less than 1.7% share of the global returns
from its own gold. Since these figures grossly under-estimate the value of
gold exports, the returns to Ghana would be much less. What’s even more
shocking is that – based on the analysis of the Bank of Ghana – the share
of the wealth that goes to the communities directly impacted by the mining
is 0.11%.
This particularly aggravated structure of plunder has roots in the period of the debt crisis of the 1980s.
Was this always the case? No doubt that the African continent has been
exploited for a very long time, but this particularly aggravated structure
of plunder has roots in the period of the debt crisis of the 1980s. Before
this, in the era of national liberation, states tried to protect their raw
materials and gain better trade agreements. But the debt crisis weakened
their bargaining power. African governments in the late 1980s and 1990s
were pushed by international finance institutions and transnational
corporations to adjust their bargaining attitude. They were urged to
rapidly promote export-led growth based on comparative advantage theory. It
mattered little that the ‘comparative advantage’ of most of the continent
was in the export from extractive sectors rather than from the industrial
sector (which has higher value-added potential). Export of unprocessed or
barely processed raw materials earned revenue, which was not ploughed into
domestic investment but was used to pay back the debt.
What we saw as a result of this export of raw materials and export of
revenue to pay back the debt was premature deindustrialisation. In 2003,
the UN Conference on Trade and Development (UNCTAD) put forward this
concept of premature industrialisation to explain what was ongoing in the
Global South. It refers to the collapse of the manufacturing sector before
it has become integral to the economy. If manufacturing does not develop,
then the political class drums up revenue by the export – in the African
case – of raw materials. Domestic economies retrogressed, with productive
employment and resource mobilisation shrinking and with aggregate demand
falling. People could not afford to save or invest in local production or
constitute viable demand outlets and supply linkages for production
elsewhere in their local economies. Nor could the State raise enough
resources to provide social goods and infrastructure. The structural
marginalisation of the people weakened their ability to shape the State’s
policy framework.
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World Bank, Strategy for African Mining, 1992. |
As the World Bank and other international finance institutions pushed
governments on the continent to export raw materials and not bother with
the wider goals of development, an interesting dichotomy opened up. There
was a new suggestion that ‘resource rich countries’ were ‘governance poor’.
In other words, that the problem of corruption was not in the system as
such, but it was in the political class and in the State. Is the discourse
on poor governance another way to undermine social forces and institutions
that might have pushed to democratise State policy?
GT: From the 1990s onwards, the term ‘governance’ was installed at the heart of
development discourse. Everything was about ‘good governance’ and its
importance. There is something very shallow about the conversation. It
ignores, even obscures, the deep structural dynamics that push a country to
become merely the exporter of raw materials and that give transnational
firms power to set prices and to determine the share of revenue to be
handed over to the States. It is not the ‘corruption’ of the government
officials that brings Ghana only 1.7% of the gold revenues to the State’s
coffers. The entire system that was set in place since the 1980s to force
countries to rely upon raw material exports and to become dependent on
foreign buyers is what leaves countries like Ghana with such a minuscule
amount of the wealth taken from Ghana’s land. ‘Good governance’ is not
going to solve this, unless ‘good governance’ refers as well to the deep
structural dynamics.
It is not the ‘corruption’ of the government officials that brings Ghana only 1.7% of the gold revenues to the State’s coffers.
The mainstream discourse around resource governance – the language of ‘good
governance’ – has several deeply distorting impacts. It implies that it is
only the aberrant behaviours of the public officials that should be seen as
corruption. Yet of course the lack of resources available to accountable
public institutions makes it impossible to create or sustain meaningful
domestic anti-corruption mechanisms. The overwhelming power of the
transnational corporation makes it virtually impossible to apply genuine
democratic and developmental governance norms to these firms when they
operate in Ghana or Zambia or Papua New Guinea.
If the discussion goes to the low revenue numbers, then the international
finance institutions turn the discussion towards natural market shocks.
There are, they say, commodity booms and commodity busts. But this is
insufficient as an explanation. Even in times of commodity booms – we find
– the revenues are minuscule. It is in this time that we can see the
political economy of extraction in its sharpest relief. An antidote to the
boom and bust cycle, which does exist, is for public resources to be
substantively dedicated to enhancing the productive activities of working
people and the productive capabilities within the economy. This is possible
in resource-rich States that have diversified economies, have autonomy from
imperial domination and have social democratic institutions won by the
struggles of working-people. These states create Sovereign Wealth Funds
(SWF) from their natural resource export earnings. Norway is an oft-cited
example of this. This should be a minimum requirement for all natural
resource dependent countries: save in times of surfeit and use the SWF in
times of scarcity. But during a commodity boom, there is simply
insufficient revenue to build infrastructure and provide for the basic
needs of the population. To expect Zambia or Ghana to build up that kind of
sovereign fund from such paltry revenues and from such a narrow economic
base that is so completely dependent on foreign markets and foreign capital
is unrealistic.
In the era of financialization most SWFs invest mainly in financial
securities. This was the case with Angola’s SWF, a huge chunk of which went
to buying up financial securities especially in Portugal, its former
colonial ruler. It lost out heavily on these ‘investments’ when Portugal
got embroiled in the financial crisis of the Eurozone after 2008. Rather
than invest in financial markets, States such as Angola and Nigeria could
make direct investment in production through development banks. These banks
would provide credit for agricultural and industrial cooperatives and other
such initiatives that generate employment and goods and services to satisfy
real needs. This requires States to control the financial sector and to
have the public’s well-being at heart.
The language of ‘good governance’ is used to delegitimise any aspiration
for nationalisation and the creation of a State monopoly. One striking fact
is that Zambia’s copper industry was better for Zambia during the time of
the State monopoly from 1970 to 1998. The returns to the State treasury
from the copper industry in the post-State monopoly period have been just
3% of what they were in the bad old days of the State monopoly. This is an
uncomfortable fact for the champions of privatisation. The discourse of
‘good governance’ suggests that the States in developing countries – like
Zambia – are deeply and congenitally corrupt. The only salvation, they say,
is for the country to adopt free market regimes. But of course, the result
has been terrible. ‘Government deficits’ or ‘bad governance’ do not explain
the deindustrialisation of Zambia nor do they explain the rollback from
economic diversification. Because Zambia is now utterly reliant on copper
exports, the international copper price movements have a preponderant and
distorting effect on the exchange rate of the Kwacha [Zambian currency].
This distortion and the limited revenue from copper exports impacts upon
the competitiveness and viability of other, non-copper exports, as a result
of the fluctuations of the Kwacha. The fluctuations also impact the social
sector. A study done in 2018 showed that changes in the exchange rates
oscillated between -11.1% to +13.4% in the period between 1997 and 2008.
The loss of funds from donors to the Ministry of Health in Zambia amounted
to US $13.4 million or $1.1 million per year. Because of the collapse of
the Kwacha between 2015 and 2016, per capita health expenditure in Zambia
fell from $44 (2015) to $23 (2016).
The language of ‘good governance’ is used to delegitimise any aspiration for nationalisation and the creation of a State monopoly.
Corruption implies that perverse outcomes are the result of someone
breaking the rules instead of as a result of the normal functioning of the
system. Everything I have described is based on normal functioning. When
the State allowed foreign firms to take control over raw material
extraction and when the economy become dependent on the export of these raw
materials at the expense of a project of diversification, the outcome is
going to be less revenue for the people and an economy in long-term crisis.
The discourse on ‘good governance’ avoids the normal functioning.
The resource governance discourse stands reality on its head. First, we get
premature deindustrialisation, which leads to the terrible reality of
poverty and hopelessness. Then we get the emergence of the discourse of
corruption to explain the poverty and hopelessness. But it is not the
corruption that creates the situation. It is the structure that weakens
domestic capacities and democratic, participatory economic planning that
can best ensure State accountability and effectiveness, sets aside the
project of diversification and industrialisation and turns over the raw
materials to foreign multinational corporations. Once you have hidden the
structure, then you can blame the pettier parasitic bribery as the author
of the misery. That’s what this resource governance discourse does.
Read the rest of the interview (pages 16-32) on thetricontinental.org.
Top image: Cover of World Bank, Strategy for African Mining, 1992. |
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