Mining CEMAC: Dependence that undermines the economy of the community of States

Hermann-Habib KIBANGOU,
Researcher - Research Officer at Centre d’Etudes et de Formation pour le Developpement (CEFOD) in N’djamena (Chad)

(Credit: Gerhard Michael Free, Shutterstock)

The Central African Economic and Monetary Community known as CEMAC, is made up of six States in Central Africa, namely: Gabon, Cameroon, the Central African Republic (CAR), Chad, the Republic of the Congo and Equatorial Guinea.It is no exaggeration to say that CEMAC countries rely heavily on the exploitation of Extractive Industries (EI) for their respective development. Yves Alvarez et al. note that “like many other countries in Africa, the member countries of the CEMAC rely heavily on the exploitation of raw materials to support growth. However, for many reasons, these countries find that industrial exploitation based on foreign direct investment (FDI) does not create sufficient wealth to maintain growth and sustainable development.”[1] Does heavy reliance on the exploitation of raw materials enough to sustain growth? 

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What do we see in the CEMAC area? Countries whose principal activity is to extract and exploit natural resources provided by nature" in their solid forms (mineral resources), liquid (oil resources) and gas (gas resources) - have become a central theme of political, economic and social analyses of African countries rich in natural resources. Two main reasons justify this. First of all, the Extractive Industries “represent a significant share of Gross Domestic Product (GDP) and account for a large share of the GDP of these countries, more than half of GDP for the most part. Secondly, “Extractive Industries are predominant in exports, sometimes representing almost 100% of export earnings.”[2] For instance, in 2005, the subsurface resources in exports of countries in the region CEMAC, according to BEAC (Bank of Central African States) were: Gabon (90%), Cameroon (more than 60%), the Central African Republic (49%), Chad (86%), the Republic of the Congo (92%) and Equatorial Guinea (91%). Thus, “The income of most countries is heavily dependent on the incomes of Extractive Industries within CEMAC, and for a large part of the oil and gas.”[3] The EI contributes to more than 80% of revenues from exports. 
 
Paradox of wealth and economic diversification
 
While the discovery of these natural resources promises CEMAC some development and a better future, populations might have to deal with the bitter fact of not having profited from the revenues inherent in the operation of extractive industries. Indeed, CEMAC population lives on less than one US dollar a day[4]. Just compare the evolution of GDP to that of the HDI (Human Development Index) to realize this. The HDI takes into account three important indicators: a long and healthy life, access to knowledge and a decent standard of living.[5] This comparison of GDP and HDI shows that "rising income member countries is not correlated with the improvement of living conditions of the population." Several reasons justify this asymmetry: poor governance, volatility, and the rentier state. For instance in Chad, the need to publish oil revenues is increasingly felt. In their study, Van Vliet and Magrin (2012: 143) show the need for Chad to publish the upstream accounts, but also to encourage downstream transparency by showing how the sums of the oil rent are broken down into the state budget. Another country is the Congo which, due to the drop in the price of the oil barrel, sees its economy heavily affected. Outside these two countries, all countries in the oil-producing Cemac zone are affected, having pillaged the petroleum to the detriment of agriculture and livestock production.
 
The poorest people who are living in the CEMAC zone are witnessing the impoverishing growth due to the mismanagement of revenues associated with these resources. Firstly, oil revenues (and those of other natural resources) are not properly used by political leaders to help their populations out of poverty. Secondly, poor management of natural resources and embezzlement are handicaps that seriously delay the development of the CEMAC. Furthermore, one could speak of volatility, which is a term used to speak of oil, gas, and mining revenues. These resources are considered exhaustible, and therefore could destabilize a country’s economy. In other words, if the CEMAC countries are excessively dependent on income from those resources, these countries are unable to respond to the slowdown in the extractive industries effectively.  
 
Making use of IE a lever for development
 
Faced with these multiple problems, many challenges remain, and many solutions are needed. The first priority is good governance (a healthy way to manage public affairs and public resources) by promoting economic and social justice which benefits all the people of the CEMAC. “The concept of justice leads us to two other concepts: commutative justice and social justice. On the one hand, commutative justice is focused on individuals (equality of opportunity in the exchange) and on the other hand social justice is based on the notion of rendering to each according to his economic productivity or according to his functions, his responsibilities, rank or needs.” (Kibangou: 2011, 65). Here, it is important to enforce the basic rule of law. “The judicial power must be independent of political power. In Congo as in most African countries, judicial power is intermingled with political power.” (kibangou: 2011, 113). The role of civil society in the CEMAC zone is fundamental for helping to build a social ethics of common good management. 
 
The second priority is the need for transparency. Contracts between CEMAC member states and extractive companies establish their rights and responsibilities. Transparency promotes the stability of the extractive investments in the interest of companies, to the extent that past agreements are balanced and minimize the risk of subsequent re-negotiation. Finally, transparency is necessary because it prevents scandals based on corruption and reduces poverty. This is achieved when public finances are used appropriately to benefit current and future generations.
 
The third priority is the diversification of the economy. In Central Africa, the oil producing countries must learn to value other sectors of the economy. The oil-producing states of CEMAC must learn from the financial and economic crisis that occurred as a result of the second oil shock of 1979. The effects of the 1979 crisis, combined with adverse exogenous factors, have seriously affected public finances and external accounts. This was revealed by the difficulties of states in pursuing certain policy directions, such as guarantee pricing policies for consumption, the recruitment in the public service, and creating infrastructure to monitor uncontrolled social demand.
 
Finally, producer states are encouraged to follow the spirit of EITI (Extractive Industries Transparency Initiative). Specifically, EITI is a coalition of governments, companies, organization of civil society, investors and international organizations, with new standards and innovations. Ultimately, EITI has the goal of a global standard to enhance transparency and accountability in the oil, gas and mining industries. The main innovations of the new standard require governments to provide other useful information, including a description of updating the regulatory framework, detailed data on domestic production, titles and agreements granted during the period covered by the report, benchmarks on governance from state corporation operating in the extractive sector and the fiscal and sub-allocation of income, among others.
 
The mining vision of Africa

These innovations increase transparency and admissibility of the sector. This standard requires such respect for transparency in all that relates to the procedures for granting permits and approvals, legal frameworks, the spending of oil public companies, gas and mining, and the redistribution of income to the sub-national governments. This serves as a reminder of the importance of the Africa Mining Vision, which is a new vision of the mining regime in Africa in 2050. Adopted in late 2008 by the African Ministers responsible for Mineral Resources Development, it aims to foster sustainable development and industrialization in countries rich in natural resources. Thus, although CEMAC countries are rich in EI, one question remains: are CEMAC countries in good health economically, politically and socially?

​This article is an adaptation of a piece first appeared in French in Dossier: Economie et Developpement (Tchad et Culture N ° 348 - Juin 2016)

Reference: 

[1] Yves Bertrand Alvarez et al., Rapport : État des lieux de la RSE dans les industries extractives et son application au sein de la CEMAC. (Project Consult : octobre 2012), p. 6.

[2] Yves Bertrand Alvarez et al., Rapport : État des lieux de la RSE, p. 6.

[3] Yves Bertrand Alvarez et al., Rapport : État des lieux de la RSE, p. 8.

[4] Yves Bertrand Alvarez et al., Rapport : État des lieux de la RSE, p. 8. 

[5] ​Report State of play of CSR in mining and its application within the CEMAC. October 2012.