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Anglo American Corporation was founded in Johannesburg in 1917 with £1 million (what today would have been £75 million, adjusting for inflation according to one inflation calculator).
It has since grown into a publicly traded behemoth with a market capitalisation of £31.2 billion and revenues of £29.3 billion (2013). It’s headquarters is now in London and the company is now known as Anglo American Plc, the fourth largest mining company in the world.
Although a net ‘loss’ of $961 million was declared in 2013, Anglo American is undoubtedly one of the big boys in the industry. To give you a scale of just how big they are, Anglo American Plc owns 85% of Luxembourg registered De Beers Investments, the holding company of De Beers, another prominent mining giant which is well-known in Southern Africa. But if that’s not convincing enough then how about this: Anglo American recently walked away from a gold interest worth $300 billion, after investing over $541 million it it. Apparently, the withdrawal is related to environmental risks, in particular the threat the Pebble Mine would pose to Alaskan Salmon (there’s even a campaign), although Anglo’s chief executive claimed the withdrawal was in fact a way of prioritizing “.. capital to projects with the highest value and lowest risks.”
Both Anglo American and De Beers have been criticised over their practices in Africa, including price-fixing, low wages (for Anglo American recently in Chile here) and lack of transparency. In particular, according to a Wikipedia entry:
In 1977, the company [Anglo American] demanded that the paper it owned, Rand Daily Mail, tone down its equal-rights support after exposing the murder of South African activist Steve Biko amid the subsequent government backlash. [words in parenthesis for clarity]
Further, a British charity, War on Want, published a report in August 2007 that accused Anglo American of profiting from the abuse of people in the developing countries in which the mining giant operates. According to War on Want:
“in the Philippines and South Africa, local communities threatened with Anglo American mines have faced severe repression in their fight to stay on their land, while in Ghana and Mali, local communities see little of the huge profits being made by AngloGold Ashanti but suffer from fear and intimidation and from the damaging impact of its mines on their environment, health and livelihoods”
In response, the company subsequently published a report defending itself and disclosing its finances.
Malawi’s first president Dr Hastings Kamuzu Banda could have begun a state owned mining company in Malawi in the late 1960’s. He could have hired specialists from abroad, bought equipment from Britain or the US, begun prospecting for minerals, and by 1970 laid a foundation for a functional mining industry. The technology was available, and when Malawians had been travelling to South Africa in their thousands to work in the mines, labour would not have been a problem.
Banda didn’t begin a mining company. Instead he focussed on agriculture, which traditionally does not reap large profits as the sort which mining companies the likes of De Beers and Anglo American have been known to reap.
That decision could be a contributory factor further explaining Malawi’s economic woes today. While others were investing in assets and initiatives having huge long-term yields, Malawians were dabbling with agriculture and tobacco.
But to give him credit, while Dr Banda could have thought mining was not a priority to the newly independent country, he must have known that Malawi didn’t have enough capital resources to waste on ambitious projects whose very returns were unknown if not a gamble?
Further, having just broken away from the Federation of Rhodesia and Nyasaland, it’s understandable that while Britain could have been willing to extend Malawi a line of credit, as single-minded as Banda was known to have been, it’s inconceivable to think that he would have wanted to be constrained by such kind of favours from the very same people he so vehemently denounced. As he once declared: “We have no minerals. The soil is our gold mine”. In any case, what did a medical doctor who barely 10 years previously had been running a clinic in London know about the mining industry of the 1950’s and 60’s.
Having said this, would Dr Banda have started a state-owned mining company if he knew what treasures lay beneath the surface of Malawi’s geology? If he knew the value of such treasures on the international market?
Especially since there was information available as early as 1966 as to the Mineral deposits and mining potential of Malawi, according to a research paper titled MINERAL RESOURCES OF MALAWI AND MINING POTENTIAL by Rodney Mshali (The Society of Malawi Journal Vol. 62, No. 2 (2009), pp. 27-35 published by: Society of Malawi – Historical and Scientific ). Banda could have decided to take the risk if he wanted to.
Whichever way, it’s not my place to make a determination on Dr Banda’s judgement at this time.
But what does all this have to do with the current mining landscape in Malawi?
Well, as can be seen in the following links in Zambia, Chile, South Africa and Ethiopia , some mining companies have been known to be a menace to the countries they operate in. Issues of ownership, corruption, tax evasion in the form of profit shifting, low pay and poor working conditions, and of environmental degradation are often always lingering. In Malawi, recently, it has emerged that Paladin was considering to discharge ‘contaminated’ sludge kept in a dam near its Kayelekera mine into Malawi’s rivers systems for fear that if they did not do so, the rain season would cause their dam to overflow.
Thus, when news broke just under two weeks ago that the government of Malawi had suspended all oil and gas exploration licenses on Lake Malawi, so as to allow government to scrutinise and review each Licence that was issued or signed, I didn’t really know what to make of it. After all, Malawi has had its fair share of sorry episodes of bad contracts married with irresponsible management, with the Paladin saga at Kayelekera. Although appearing diligent, uncovering any such lax agreements will just remind us all how deep in muck the country really is. It will not be a cause for celebration.
So then, what will the government do?
If they plan to review the oil exploration licenses in all good faith, and if necessary use legal mechanisms to resolve any indications of foul play -including unfair or prejudicial contract terms that do not benefit Malawians; if they plan to bring the miscreants to justice, then the suspension is a noble move.
In addition, the government of Malawi could work with charities [such as SHERPA (France), the Center for Trade Policy and Development (Zambia), the Berne Declaration (Switzerland), l’Entraide Missionnaire (Canada) and Mining Watch (Canada) ] which in 2011 filed complaints against mining companies Glencore International AG and First Quantum Minerals Ltd, to the Swiss and Canadian National Contact Points (NCP) for violating the OECD guidelines for multinational enterprises including for Tax avoidance in Zambia.
However, if the suspension of oil and gas exploration in Malawi is a veiled attempt at ‘rent-seeking’, as is rumoured to have taken place not only during Bingu Wa Mutharika’s regime, but also during the People’s Party administration, then it would be unfortunate because the government would have lost an opportunity to harness the resources that Malawi has. DPP would have lost a chance to show transparency.
One more thing; how can Peter Mutharika be sure that the value of assets or mineral resources declared by Oil companies interested in prospecting, or already prospecting is accurate, and not under-declared/under-valued ? For example, if the actual value (or near estimate) of viable crude oil deposits under the basin of Lake Malawi was US$400 billion, what is to stop the Oil companies holding the exploration licenses from misinforming the government that they had found only US$100 billion worth of confirmed deposits under the lake? Especially when the government was unable to verify those figures?
Wouldn’t an independent state-owned Mining company, that had its own equipment, and that owned a stake in each exploration site, and that was jointly involved in the exploration, so as to be able to verify the findings by its own independently undertaken mapping and surveying reduce such a risk?
Finally, it goes without saying that for them to be successful, any state-owned organisation (including parastatals) should be run and managed by people who by merit are fit to do so, and not by public appointees with little or no experience in the relevant technical field or area.
It was delightful to hear news that Kenya in collaboration with the Chinese government will be investing $13.8 billion to build a railway line to link its port city of Mombasa with the capital Nairobi. It is hoped that the line will eventually extend to the landlocked countries of Uganda, South Sudan and Rwanda. This is great news not only because of its Pan-African connotations, but also because it’s a step forward towards getting Africa’s infrastructure interconnected and closer to global standards ( for example to the level of the Eurotunnel).
Whenever foreigners come to Africa to visit, they always exclaim how challenging and long it can take to get from one place to another in certain areas. It’s incredible how disconnected Africa remains. The same applies to movement of goods (a factor essential for commerce and business). Often and comparatively with say Asia, it takes longer (and costs a lot more) than must necessarily be to send goods, or receive goods from one African country to another, which is not desirable.
The vastness and distances may be a problem, and environmental degradation such projects cause is also a major consideration, but that doesn’t mean that there are no workable solutions to such challenges. Often the cause of inaction or lack of progress appears to be bad politics and selfish financial interests, which end up frustrating well-meaning projects whose economic and social benefits could be significant for a country and its neighbours, and far outweigh the negative impacts.
Take Malawi for example. Mota Engil the Portuguese conglomerate was contracted by the government of Bingu Wa Mutharika to construct a port in Nsanje (see animation of the Nsanje Inland Port via YouTube), at great expense to the Malawian tax payer.
The project was part of a project known as the Shire-Zambezi Water Way, and whose total cost was said to be US$6 billion would have reduced the cost of importing goods by 60%.
The Malawi section of the project took years to build, and costed the Malawian government €25 million dollars. Now, almost 2 years after the sudden death of Mutharika, the first ship is yet to sail to the port. There is little or no dialogue about the way forward, the current Malawian president is in no rush to resurrect the project, even when the Malawi Trade & Investors Quarterly Magazine in 2007 wrote that Malawi spends at least US$200 million annually to import or export goods via ports in Mozambique or Tanzania. My question is this: isn’t reducing the cost of imports for landlocked countries in Africa a priority to the whole of Africa? Shouldn’t it be a priority to all Africans? Think about it… look at the US, or for that matter the European Union, and their policy of free movement of goods.
How can the countries in Africa, let alone the continent ever develop when leaders do not collaborate or are only too willing to impede such meaningful projects before they even commence? Why can’t African leaders (including the chiefs of the African Union, SADC, COMESA and African Development bank) begin to practise continuity, and put pressure on the stakeholders to get to grips with the project? Of the countries who signed the memorandum of understanding of the Shire-Zambezi Water Way, why does it appear like no one is actively seeking to resurrect and resume the project ( Is the said feasibility study Mozambique was demanding underway? If so what is the progress on that front?), since it’s undeniable that there will be mutual benefits to the greater economy of Southern Africa?
Looking at half-hearted comments from those who think they have something to lose (other shallow comments from here), you will find that the Mozambicans have to shoulder part of the blame for the stalling of the project. Against all appearance of conventional wisdom, it seem they have been dragging their feet from throwing full support behind the project, with talk of environmental assessments, etc and greater emphasis of development of roads?? Can such a massive project have been commenced and physical construction at Nsanje began without first assessing or undertaking an environmental assessment?
I’m not convinced. Either there’s something about this project that ordinary folk like us have not been told, or there was a massive miscalculation on the part of Mutharika to begin building the port. Else, it was visionary (see YouTube marketing clip ‘overselling’ the idea here), a quality often lacking within leadership across Africa.
Having said that, it is more likely than not, that the reason some people in Mozambique are unwilling to fully support the project is to do with the alleged financial loss they expect if goods are able to go straight into Malawi or Zambia and Zimbabwe, and not via Beira or Nacala.
Such a selfish narrow viewpoint undermines any potential benefit a new transportation link may create for the region. Surely, a thoughtful and better-informed African leader would have recognised the overall impact (e.g. jobs, increased trade, tourism, easier flow of resources, cheaper import costs and societal advancement) the port will have not only to the Mozambican towns near Nsanje, but also to the greater Southern African economy of Malawi, Zambia and Zimbabwe, or even to Rwanda and Burundi.
Very few African countries geographically formed themselves into the shape they currently take. In fact only Liberia and Ethiopia were never colonised, but even their national polity formation had a lot to do with regional colonial activity around and about them. Thus, most decisions that determined the geographical shape of African countries were made by colonialists, a figment of history most Pan Africanists would rather forget. This to me means that it is shortsighted, regressive, a deficiency in intellect and a great fallacy (most often perpetuated by ignorance), for leaders of African countries today to be fighting against each other, or indeed dashing each others economic fortunes – when there is every chance that had colonialism never occurred (as we understand it), Africa could have ended up as a vast continent of undivided Kingdoms, each with access to the sea. Something that would have looked like this:
That is precisely why Uhuru Kenyatta must be applauded for the visionary Mombasa Nairobi railway link.
I prefer to ask (and answer) the above question, that references to the ‘stage’ or ‘point’ (not physical location) when asked ‘Why is Africa not manufacturing?’ . I’ve been asked this question so many times, by people beffudled as to how Africa pretty much fails where everybody else has succeeded. The reason I prefer to answer the above question is because unlike popular belief Africa is in fact manufacturing, just not as much as everyone else, and just not always visibly (you don’t hear these stories on Tv, and they are rarely in the mainstream media publications – unless you read FT – although that’s arguably not mainstream)
Similar to the questions of manufacturing is that of whether the skills for the establishment of a bigger manufacturing sector are readily available for investors to tap into?
I’ll start with the bad news:- If the skills are available on the continent, then as things stand, they are in severe shortage and are not really of African origin. According to research from OECD [see BBC link here], by the end of this decade (emphasis required, that’s by 2020) 4 of every 10 young graduate is going to be either from India or China. Looking at the list of countries listed, not even a single one is an African country. What does that say? Well, a number of things; that we are not producing enough graduates, or that the number of African graduates with skill sets (and of a high calibre) who can compete with their contemporaries from Chinese and Indian universities is comparatively insignificant. Which is worrying, because it essentially means Africa’s manufacturing is nowhere, or only material if driven and held together by non-African effectors.
In the past the Education of Africans has received very little support from those who should know better. Most dictators who took over from the colonialists did too little to maintain the standard and level of Education (or Higher Education) across Africa, focussing instead of consolidating their rule. With a few exceptions, multiparty governments that came after dictatorships followed suit, by not investing anywhere near enough as was necessary. The donors that were bed-fellows with the dictators (and those that came after) arguably weren’t as sympathetic or visionary. According to an ESSA paper (quoted in this paper titled “THE ROLE OF HIGHER EDUCATION IN AFRICA” by Prof.Dr.Birgit Brock-Utne of the Institute for Educational Research at the University of Oslo) the World Bank once viewed Higher Education in Africa as a luxury:
Expenditure on education was merely a self-serving budgetary exercise, and it didn’t matter what the result was, or whether indeed Africa would be ‘left-behind’ as a direct consequence of the under-investment, what mattered was only that money had been saved.
Without research into what their policy position currently is, I wouldn’t be able to tell you whether this view has changed or not.
Investors with the means have been to put it mildly, shy of investing on the continent let alone into skills development. A paper by a researcher named Paul Bennell which addresses the issue of whether structural adjustments programs ( these are those stringent rules imposed on African countries as part of loan agreements from the likes of IMF and World Bank) over a 15 year period have indeed achieved the desired response (i.e. increasing foreign investment in the hope of triggering technology transfer from the industrialized countries to Africa) paints a depressing picture. To quote Bennell (via this link):
Surprisingly, the share of net earnings from UK manufacturing investments in Africa remitted each year to the UK was higher than the global average between 1985 and 1990 . . . While UK companies have been keen to reinvest very sizable proportions of their profits in North America, Europe and Asia, investment opportunities in manufacturing have generally been very limited in Africa and thus, given the option, most parent companies would like to remit the bulk of subsidiary profits from the region
In other words, Africa was where you went to make your money, and not a place to reinvest your profits.
But it isn’t all bad news.
Recently, the African Development Bank’s (AfDB) approved a US$ 45 million grant for the creation of a Pan African University (PAU) that will consist of five Pan African Institutes focussing mainly on science, technology and innovation. The background to the story reads:
Africa has only 35 scientists and engineers per million inhabitants, compared with 168 for Brazil, 2,457 for Europe and 4,103 for the United States. Shortage of skills has been a major constraint to Africa’s progress in science, technology and innovation. Due to low investment in research and development, Africa ranks low in global competitiveness and productivity. African students tend to opt for economics, business, law and social sciences rather than science, engineering and technology, hampering the continent’s competitiveness and growth. The result is a mismatch between skills produced and private sector jobs.
While one would hope this initiative will be a success, and the Institutes will not falter under the common problems that beset universities and research institutions across much of Africa, it will be interesting to see how this develops.
As is well understood universally, innovation is the lifeblood of industry, and without the creation of ground-breaking and new products, a country cannot advance or gain a competitive advantage. It was the case during the industrial revolution, during the rise of countries such as Germany, Russia, Japan and even Brazil. The exception (only to an extent) to this rule appears to be China, but that’s for a whole load of other reasons that distinguish it from the rest of mankind
But as the African Development Bank correctly observed above, in order to create ground-breaking innovations and products, and in order to influence global scientific research and technology, you need a skilled workforce. That’s why the AfDB initiative represents a realignment of Africa’s potential in the right direction.
Across Africa, there are many success stories that are truly inspirational, although as i stated above, these are not shouted about in the mainstream media. One such inspirational story is that of Fabrinox, a south African company manufacturing sheet metal that was formed in 1993, and that has seen turnover in recent years hit US$5.8 million. Asked what had been the best decision he had made to grow his company, the company founder says:
To have followed the advice of my business mentor Johan Beyers to not restrict Fabrinox and its people to one geographical area, product or service, but to take a global view in running the business. For instance, it means that we think globally in terms of our supply chain, and are most willing to service clients beyond the boundaries of the Western Cape province in which we are located, and South Africa for that matter.
In addition to such success stories, there are also many partnerships between foreign manufacturers and agricultural producers across Africa, and some of those partnerships are genuinely beneficial to Africans. Who knows maybe some of these could one day pave way for an African manufacturing industry of its own, if some haven’t began to do so already? After all, manufacturing in industries such as motorcycle build and assembly in China began when after purchasing equipment from Japan, the Chinese assemblers began to modify the Japanese made components; fast forward a couple of decades, and China was making its own motorcycles which essentially were improvements (i.e. “innovations” more or less) of the original Japanese models.
The partnerships article above correctly points out that:
The level of mechanisation in African farming is still very low. Kenya had 25 tractors per 100 square kilometres of arable land in 2009 while Nigeria has almost seven, according to the most recent data from World Bank. That compares with an average of 271 machines in the US.
There are also some manufacturers who are looking towards Africa not because it’s ideal, but because they are getting sick and tired of the happenings in Asia (workplace safety that in recent years has become a major issue, levels of corruption, the increasing fees demanded by some factory owners, etc)
But before anybody gets too excited, look, the Chinese are planning on setting up shop in Africa! (see here and here). Although here one must wonder, does that mean Chinese labour (as they have been known to do in some African countries across the continent) or will these factories use African labour?
As for the power that will drive everything and get every bit of machinery working (in some countries – putting an end to years of intermittent blackouts), that’s about to get much more exciting. At least that’s what Obama seems to be saying.
While you’ll find several references to Infrastructure on this site, I think this time around I’ll leave it to the experts to do the convincing. Paja akulu anati mutu umodzi siwusenza denga…
And if one takes time to browse through the cited references below (some of which are straight off page 1 + 2 of Google), it’s hard to argue against the fact that Infrastructure is one of the essential drivers of economic development. In this sense, and for the avoidance of doubt, infrastructure is not limited to roads, railways, airports and buildings (for hotels, schools, Universities, hospitals, business centres, research facilities, etc), but also includes for example a good telecommunication network (internet, voice, data and the like) and power supply.
Infrastructure for sustainable development – European Commission
Intro reads: ” Good quality infrastructure is a key ingredient for sustainable development. All countries need efficient transport, sanitation, energy and communications systems if they are to prosper and provide a decent standard of living for their populations. Unfortunately, many developing countries possess poor infrastructure, which hampers their growth and ability to trade in the global economy. “
Infrastructure’s value to economic growth – Richard Lee, Partner, KPMG (via BBC)
which includes the statement : “…In fact, a recent KPMG International survey found that an overwhelming majority – 90% – of business executives said that the availability and quality of infrastructure affects where they locate their business operations…”
My next guest is an Accountant and someone who I have known for many years.
Mr Lusayo Mwalilino, thank you very much for taking the time to do the 100 Voices interview. But before we begin, could you please take some time to summarise your background?
My name is Lusayo Mwalilino, I am an accountant, currently working as an auditor, in Lilongwe. I come from Karonga, bachelor, challenge addict, some say I’m extremely cool, but that’s their opinion… 🙂
100 Voices is a collection of reflections, views, opinions, ideas and thoughts by Malawians across the world, regarding the past, present and future of Malawi.