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Africa: Reviewing the Bank
AfricaFocus Bulletin
Sep 27, 2004 (040927)
(Reposted from sources cited below)
Editor's Note
As the International Monetary Fund and the World Bank gather for
their annual meetings on October 2 and 3, World Bank reports not
yet released are said to indicate a continued failure of the
Heavily Indebted Poor Countries (HIPC) program to provide debt
sustainability, even by the Bank's own criteria. The U.S. and
British governments are reported to have two competing plans for
writing off more of the debt owed by the poorest countries.
African countries and debt relief campaigners are watching closely
to see if any significant new debt cancellation will result from
decisions in these meetings. However, campaigners and critics also
are taking advantage of this 60th "unhappy birthday" of the World
Bank to detail other critiques of the two giant international
financial institutions which play such a prominent role in Africa.
Today's Bulletins highlight two such critiques. This issue includes
an essay by an analyst at Third World Network Africa, focused on
the World Bank's Extractive Industries Review, one of a series of
multi-year exercises in which the Bank has engaged with critics and
outside reviewers only to end up rejecting their advice. Another
issue sent out today includes excerpts from a new report from
several Washington-based groups highlighting the contradiction
between IMF-imposed guidelines on government budget policies and
the need to commit adequate resources to combat the HIV/AIDS
pandemic.
For additional references to previous issues of AfricaFocus
Bulletin on related topics and to other sources, see the links at
the end of this Bulletin.
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Ignoring the EIR {Extractive Industries review): How Industry,
Government and the Bank Chose Profits over People
Abdulai Darimani*
Pambazuka News
http://www.pambazuka.org/index.php?issue=174
* Abdulai Darimani is Programme Officer, Environment Unit, Third
World Network-Africa. This is an edited and updated version of an
article that was published in African Agenda, Issue volume 7 No.3,
2004.
[See http://www.africafocus.org/docs04/wb0404b.php for additional
background and links on the Extractive Industries Review.]
Mining always seems to have had an exploitative nature,
representing massive wealth for some and grinding poverty for
others. Take the case of gold mining in South Africa, where under
apartheid enormous profits were made by wealthy mineowners while
their workers toiled underground for low wages, only to be sent
home to die when they developed occupational diseases. The World
Bank's Extractive Industries Review (EIR) was supposed to change
all of this, but any hope that it would fizzled out last month with
a few outraged NGO press releases. Bank management had met and
failed to adopt the recommendations that would have placed people
over profit.
This year marks what many activists have dubbed the unhappy
birthday of the World Bank and International Monetary Fund. It is
60 years since the creation of these institutions in Bretton Woods,
New Hampshire, and in that time period both have come to have a
profound and controversial influence on the world. Pambazuka News
is profiling a series of articles that aim to examine the role of
these institutions in the context of Africa. This week in our
Comment and Analysis section we carry the fifth article in this
series which looks at Extractive Industries Review of the World
Bank. Abdulai Darimani from Third World Network Africa explains
some of the political machinations that conspired against the
adoption of the review's recommendations.
The Extractive Industries Review (EIR) final report was
particularly critical of the World Bank's role in policy reforms in
the extractive industry sector which have led to negative impacts
on communities, the environment and human rights abuses and
recommended that the bank radically change its approach to funding
such projects and even stop supporting some.
The President of the World Bank Group Mr. James Wolfenson set up
the extractive industries review (EIR) secretariat under the
Chairmanship of Dr. Emil Salim, former Environment Minister of
Indonesia. The EIR secretariat was tasked to assess the impacts of
the World Bank Group's intervention in the extractive industries,
and to recommend its future role in the oil, gas and mining
industries. The secretariat was specifically tasked to identify the
negative impacts of the Bank's operations in extractive industries;
assess whether the Bank's activities in these sectors can advance
its mandate of poverty reduction through sustainable development;
and recommend whether, or under what circumstances, the Bank should
continue to support extractive projects.
The review, a consultative process that included regional
workshops, research projects, visits to four project sites,
attendance at international conferences and informal consultations
with a range of rights holders, released its final report following
the final consultative meeting in Mid-December 2003. The report
affirmed the criticisms and concerns long expressed by African
civil society and many other groups across the world.
The recommendations demanded that the Bank adopt significant
reforms including doing more to reduce poverty; immediately ceasing
funding for coal projects worldwide and phasing out its support for
oil production by 2008; enhancing human rights protection; prior
informed consent for indigenous peoples and communities affected by
extractive sector activity; and an end to support for destructive
mining technologies.
The report also recommended that the Bank should prepare and
publish net-benefit analyses; update and fully implement the
Natural Habitat Policy as a basis for clear No-Go-Zones, and should
not finance any oil, gas or mining projects or activities
(including through policy lending and technical assistance) that
might affect existing World Heritage properties, current official
protected areas, or critical natural habitats or areas planned in
the future to be designated by national or local officials as
protected.
Some African governments and mining industry representatives and
their associations viewed these recommendations with scepticism,
calling them anti-development indicators for mineral-endowed
African countries. During the consultative process some governments
and industry tried to water down many of the progressive
recommendations. However, facts could not be beaten and African
civil society and their global colleagues worked hard to retain
them in the report.
In the past years, the World Bank Group (WBG) have promoted
extractive sector reforms in Africa through support in trade and
investment liberalisation; privatisation of state-owned companies;
institution and capacity building; apparently to improve conditions
for foreign direct investment in the extractive sector; and direct
finances of private sector extractive industry projects through
equity investments, loans and guarantees.
The World Bank affiliates have helped fund major but highly
controversial private sector extractive projects in Africa. In the
oil/gas sector the Bank supported the Chad-Cameroon pipeline
project. In the mining sector, the Bank has supported
highly-controversial projects in Zambia, and Tanzania. Former
artisanal and small-scale miners from Tanzania claimed that a
Canadian company and the Tanzanian authorities forced tens of
thousands of villagers away from the site of the Kahama Mines in
the Bulyanhulu gold tract in 1996. The Multilateral Investment
Guarantee Agency (MIGA), a private guarantee arm of the World Bank
Group, supported this project three years later.
Early this year, a group of African Ministers of Mines meeting in
Johannesburg, South Africa, expressed misgivings about the
recommendations of the EIR final report. They called on the World
Bank not to adopt all the recommendations of the EIR final report,
which they believed could spell disaster for mineral endowed poor
countries banking on mining projects in these sectors for
development.
The Ministers were reported to have indicated that the EIR final
report had not given sufficient consideration to the fact that the
extractive industries are essential to economic growth and poverty
reduction, and that for some countries the extractive industries
represent a very important means of creating revenue for government
programmes. The ministers also expressed concern about the
precondition of WBG investment in countries that have robust and
transparent governance criteria in place. They believed that a
country's inability to meet WBG governance criteria should not
prevent that country from gaining access to the support, both
financial and structural, that is required in order to develop such
governance mechanisms. Otherwise, countries that are most in need
of such developmental assistance could be excluded and would either
remain mired in poverty or find less desirable paths to develop
their extractive potential.
Two reasons could have influenced the ministers to present this
view. The first is a response in self-defence. The second is the
apparent influence from industry and their home governments. For a
very long time, the extractive sector in Africa has been one of the
areas for endemic corruption and abuse of power. The endemic
corruption in the sector benefits those in power and the rich while
marginalising the poor and local communities.
The unequal distribution of benefits also explains why many
governments in Africa continue to supervise the abuse of community
and citizens rights, lowering of standards and net benefits of
mining, oil and gas extraction on the continent. The EIR
recommendations were a signal not just to the World Bank but also
to all major players in extractive industries to put an end to the
corruption and abuse of power. Even more so implementation of the
recommendations would have set the stage for up-scaling similar
recommendations for governments, which would have meant ripping
governments of their dictatorial powers and minimising corruption
in the sector.
The view of the African ministers was echoed by mining companies
and mining industry associations, in particular the London-based
International Council on Mining and Metals (ICMM) and the Mining
Industry Associations of Southern Africa (MIASA), which groups
chambers of mines from Botswana, Namibia, South Africa, Tanzania,
Zambia and Zimbabwe.
These bodies argued that many of the recommendations in the EIR
final report were not based on sound research and would, in fact,
inhibit poverty alleviation and sustainable development. Mark
Moody-Stuart, who served as a member of the EIR advisory group
during the second half of last year, expressed the view that the
net effect of the EIR final report's recommendations would be a
virtual disengagement of the World Bank from mining, oil and gas.
The ICMM expressed concerns at the proposed governance
prerequisites for World Bank investment, which included the quality
of the rule of law and the absence of conflict or even risk of
conflict. The Council believed that these could be too demanding
even for developed countries. The South African Chamber of Mines
CEO Mzolisi Diliza shared the ICMM's concerns. Writing to the World
Bank President, James W�lfensohn, on behalf of MIASA, he noted that
much of the content of the EIR report undermined the legitimate
role of governments.
They all concluded that adopting the EIR report's recommendations
in their entirety would result in a massive reduction in foreign
direct investment going to emerging markets, for which
extractive-industries projects are sometimes their only available
path to development. This is all industry rhetoric and manipulative
tactics rooted in the narrow conception that the only path to
economic development is foreign direct investment in the extractive
sector. The current paradigm of mineral resource extraction does
not benefit mineral endowed African countries. While foreign direct
investment in extractive industries in Africa has increased over
the last two decades poverty has not reduced, if at all poverty has
increased in those countries.
Southern Africa is noted for its mineral potentials and its long
historical association with mineral extraction, yet the region's
human development record has not improved. According to the 2003
edition of the United Nations Development Programme's Human
Development Report, an estimated 20-million people - or 19% - of
the total population of the six MIASA countries live on less than
a dollar a day, while 47-million people - or 44% - live on less
than two dollars a day. The current paradigm of mineral resource
extraction in Africa is therefore exploitative.
Why was industry so concerned about the World Bank pulling out of
extractive industries when the Bank provides less than 5% of the
financing required for projects in the mining, oil and gas
industries? It sounds amazing how when threatened the industry
suddenly became the greatest advocate of the poor when ICMM's
Kathryn McPhail (who used to research for the Bank) said: "What
worries us most are not the implications for the mining industry as
such, but the implications for development in emerging markets".
This argument was carried on by a letter from the Equator Banks, an
investment group to the World Bank that says: "We believe that the
EIR has not given sufficient consideration to the fact that the
extractive industries are essential to global economic growth and
poverty reduction."
Two reasons explain why industry was concerned about the EIR final
report's recommendations. First, the decision could be emulated by
other financial institutions' withdrawal from the sector, which
would drastically shrink lending to industry. Secondly, and even
more important, was the fear of diminishing influence of the Breton
Woods institutions on host governments' policies and practices
which are critical to ensuring low standards for industry. The
World Bank influences the development strategies and practices of
developing countries by making them compromise their economic
policies, investment regulations, and projects that benefit large
transnational corporations.
The United States government is by far the most influential force
in establishing the priorities of the World Bank. It can veto any
significant shifts in policy and by custom appoints its president,
who is usually a product of the financial sector. Given the new
American imperialist offensive, under the so-called war on terror,
the US has thrust Africa's extractive resources forward as a prize
to be controlled as it seeks alternative sources of oil. Along the
Gulf of Guinea now referred to as the "New Persian Gulf" the United
States aggressively seeks military bases. Under these
circumstances, it is not surprising that some African governments
worked with the World Bank to roll back the progressive
recommendations of the report.
Despite support for the recommendations made by the EIR gaining
momentum worldwide, the Bank's board decided in August to act on
very few of the recommendations made in the report. It thus failed
to change the way the Bank does business in Africa, missing an
opportunity to show a genuine commitment to respecting human rights
and the needs of communities affected by extractive industries.
Considering the World Bank's own vested interests, the opposition
of powerful industry players, the complicity of African governments
and the existing global political climate, the decision came as no
great surprise.
Previous issues of AfricaFocus Bulletin on related topics
Apr 13, 2004 Africa: World Bank Industry Review
http://www.africafocus.org/docs04/wb0404b.php
Apr 13, 2004 Africa: World Bank Protests/Policy
http://www.africafocus.org/docs04/wb0404a.php
Jan 16, 2004 Africa: Oil and Transparency
http://www.africafocus.org/docs04/oil0401.php
Additional Recent Related Documents and Sources
"The International Monetary Fund and World Bank in Africa: a
'Disastrous' Record",
by Demba Moussa Dembele, Director, the Forum
for African Alternatives in Dakar, Senegal
Pambazuka News
http://www.pambazuka.org/index.php?issue=175
An overview of the critique of structural adjustment and poverty
reduction policies.
Operations Evaluation Department, World Bank
http://www.worldbank.org/oed
IFIwatchnet
http://www.ifiwatchnet.org
Bank Information Center
http://www.bicusa.org
Structural Adjustment Participatory Review International Network
(SAPRIN)
http://www.saprin.org
World Bank Bonds Boycott
http://www.worldbankboycott.org
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with
a particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.
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