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The East African : February 3rd 2014
30 The EastAfrican OUTLOOK FEBRUARY 1-7,2014 D E VE LO PME N T Will resource boom in Africa see end to poverty? Some of the wo≥ld’s poo≥est people a≥e said to live on the continent, with one out of two Af≥icans living in ext≥eme pove≥ty A JOINT REPORT IPS W ith its two-trillion-dollar economy, recent discover- ies of billions of dollars’ worth of minerals and oil, and the number of investment opportunities it has to offer global players, Africa is slowly shedding its image as a development burden. “While global direct invest- ment has shown some decline, dropping by 18 per cent in 2012, in Africa foreign direct investment rose by five per cent,” said Ken Ogwang, an economic expert affiliated with the Kenya Private Sector Alliance (Kepsa), which has a membership of over 60 businesses. Since 2012, Kenya has made a series of mineral discoveries, including unearthing $62.4 billion worth of Niobium — a rare earth deposit. The discovery in Kenya’s Kwale County has made the area among the world’s top five rare earth deposits sites, and allows the country to enter a market that has long been dominated by China. In 2012, Kenya discovered 600 million barrels of oil reserves in Turkana County, one of the country’s poorest regions. It was announced on January 15 that two more wells struck oil, increasing estimated reserves to one billion barrels of oil. But Kenya, East Africa’s eco- nomic powerhouse, is not the only African nation that has made fresh mineral discoveries. “The recent boom in new min- ing discoveries in countries like Niger, Sierra Leone and Zambia will attract billions in foreign direct investments. Other countries like Mozambique, Tanzania and Uganda will similarly attract billions due to petroleum discoveries there,” said Antony Mokaya of the Kenya Land Alliance, a local umbrella network of NGOs and individuals working on land reforms. Last year, both Uganda and Mozambique discovered oil. In 2006, an estimated two billion barrels of oil reserves were discovered in western Uganda, but last year’s discovery brings Uganda’s total oil deposits to 3.5 billion barrels. Mozambique’s first oil discovery last year is estimated to be 200 million barrels. Mr Ogwang predicts that these discoveries will soon see African countries dominating the list of the 15 fastest-growing economies in the world. “More African countries, Kenya being a model example in East Africa, now favour a market-based economy, which is highly competitive and the most liberal economic system. In this system, market trends are driven by supply and demand with very few restrictions on who the actors are. [It is] a favourable environment for foreign investors,” he said, referring to the local mobile phone industry, which CONDITIONS Four key elements are needed to turn natural resources into jobs, optimise resource revenues and help investors and locals to make the most of linkages: - Access to larger and more competitive markets. - Sound land management, balanced and effective tax systems and the right mechanisms and incentives. - Equitable distribution of the natural resources. - Providing adequate infrastructure. Africa Economic Outlook has been dominated by foreign investors because of its favourable regulatory policies. “As a result, growth in this sector is phenomenal. In the first 11 months of 2013, Kenya’s mobile phone money transactions were $19.5 billion, which is more than the country’s current $18.4billion-national budget,” said Mr Ogwang, adding that even more importantly, African countries are increasingly strengthening their partnerships with the East. Statistics from Africa Economic Outlook, which provides comprehensive data on African economies, show that China is the largest destination for African exports, accounting for a quarter of all exports. Trade with Brazil, Russia, In- dia and China — the economic bloc referred to as BRIC — now accounts for 36 per cent or $144 billion of Africa’s exports, up from only nine per cent in 2002. In comparison, Africa’s trade with the European Union and the United States combined totals $148 billion. But Terry Mutsvanga, director of the Coalition Against Corruption, a lobby group in Zimbabwe, cautioned that Africa will first have to rein in its corrupt politicians before its resources can enrich its own people. According to the World Bank, some of the world’s poorest people live in Africa, with one out of two Africans living in extreme poverty. “Without Africa dealing with the cancer of political corruption blighting the continent and robbing it of revenue from mineral resources through corrupt politicians receiving bribes from investors … the continent shall [continue to have] the worst poverty levels globally,” said Mr Mutsvanga. Independent economic ana- lyst Jameson Gatawa from Zimbabwe agreed. “Underhanded dealings in the mining of diamonds and other rich minerals here have fuelled poverty. The rich are getting richer with the poor becoming poorer,” said Mr Gatawa. Zimbabwe’s case Zimbabwe is one of the world’s top 10 diamond producers. But six out of every 10 households in Zimbabwe, a country of about 13 million people, are living in dire poverty. This is according to a 2013 poverty assessment report by the Zimbabwe National Statistics Agency. The Democratic Republic of China is the largest destination for African exports, accounting for a quarter of all exports.” Statistics from Africa Economic Outlook Congo is another African country rich in diamonds, with its mineral wealth estimated in the trillions of dollars. But according to the United Nations, about 75 per cent of its people live below the poverty line. More than half of these have no access to drinking water or to basic healthcare. Three out of every 10 children are poorly nourished, with up to 20 per cent of them predicted to die by the age of five. While Ogwang says Africa’s best economic years are yet to come, it remains to be seen if the billions of dollars Africa has in natural resources will trickle down to people like Mutavara. By Miriam Gathigah and Jeffrey Moyo Somali wate≥s still not safe as fi≥st ca≥go ship since 2012 is seized By PAUL REDFERN Special Correspondent THE FIRST seizure of a large merchant vessel by Somali pirates since 2012 has led naval forces to stress that the dangers across the Red Sea and off the eastern coast of Somalia have not gone away. The vessel, identified as the MV Marzooqah, sent a distress signal on January 18, although when it was seized it was in Eritrean territorial waters. The number of attacks by Somali pirates dropped sharply last year, largely because of the presence of international naval forces. However in 2013, there were still 13 reported incidents involving Somali pirates. But maritime experts have said that the problem will remain as long as gangs operating out of Somalia are not disbanded on land. Lieutenant Commander Jac- queline Sherriff, an EU NAVFOR spokeswoman said, “Because the conditions in Somalia have not changed significantly or to any great extent, we have been saying there is no room for complacency.” The MV Marzooqah was crewed by Indians, Egyptians and Syrians and boarded by a gang of eight or nine pirates. The ship was also reported to have been attacked in 2011, but had escaped that time. European shipowners have been urging the EU to continue with its counter-piracy naval force off the Somali coast until at least 2016. The European Community Ship- owners Association said that it is imperative that the naval force remain for another two years despite the fall in piracy attacks in recent years. Earlier this month, the Interna- tional Chamber of Shipping (ICS), the principal global trade association for shipowners, issued a policy statement highlighting the issues facing the shipping industry from Somali-based piracy during the period 2007 to 2013. “The intention is to identify lessons learned in order to shape future policy responses, $6- $18b The cost of piracy on the world economy according to the World Bank wherever in the world they may be needed,” said ICS secretary general Peter Hinchliffe. The paper emphasises that Soma- li pirates are active and retain the capacity to attack far into the Indian Ocean. The ICS statement said that it is “premature to conclude that the crisis is over, with seafarers still held hostage in Somalia, some of whom have now been in captivity for three years.” The shipowners statement fol- lows two reports at the end of last year from the World Bank and from Oceans Beyond Piracy that said that the naval force may be unsustainable. The two organisations acknowledged the role played by the international naval force in dramatically reducing piracy attacks over the past year but the World Bank in particular noted that the presence of such a force would have to become permanent in order to prevent a resurgence of piracy. “Because of their high cost, in the long run (the naval force) may be simply unsustainable,” said the World Bank. Despite the drop in piracy at- tacks, the World Bank said that Somali piracy is still costing the world economy between $6 and $18 billion a year because of armed guards on ships, the higher cost of insurance, increased pay for seafarers travelling in high-risk areas and the money spent by international governments on counter-piracy operations.
January 27th 2014
February 10th 2014