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Poor unlikely to benefit from billions in African mineral wealth
February 2, 2014, 10:13 am

Since 2012, Kenya has made a series of mineral discoveries, including unearthing 62.4 billion dollars 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 Kenya to enter a market that has long been dominated by China.

In 2012, Kenya also discovered 600 million barrels of oil reserves in Turkana County, one of the country’s poorest regions. It was recently announced that two more wells struck oil, increasing estimate reserves to one billion barrels of oil. But Kenya, East Africa’s economic powerhouse, is not the only African nation that has made fresh mineral discoveries.

The recent boom in new mining discoveries in countries such as Niger, Sierra Leone and Zambia are expected to attract billions in foreign direct investments. Last year, both Uganda and Mozambique discovered oil; the initial find in Mozambique was over 200 million barrels. In 2006, an estimated two billion barrels of oil reserves were discovered in western Uganda, and, with last year’s discovery, brings Uganda’s total oil deposits to 3.5 billion barrels. Tanzania is also expecting to attract billions in investment due to petroleum finds there.

With these discoveries in minerals and oil, worth billions of dollars, an increasing number of investment opportunities, and an economy of over two trillion dollars, Africa is rapidly shedding its image as a development burden.

“While overall global direct investment has shown some decline, dropping by 18 percent in 2012, in Africa foreign direct investment rose by five percent,” says Ken Ogwang, an economic expert affiliated with the Kenya Private Sector Alliance (KEPSA). Ogwang predicts that recent discoveries will soon see African countries dominating the list of the 15 fastest-growing economies in the world.

Many African countries now favor 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 favorable environment for foreign investors. For instance, Kenya’s local mobile phone industry is dominated by foreign investors who find the favorable regulatory policies very attractive.

“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 dollars, which is more than the country’s current 18.4-billion-dollar national budget,” says Ogwang.

Even more importantly, African countries are increasingly strengthening their partnerships with the East. Statistics by the Africa Economic Outlook, which provides comprehensive data on Africa economies, show that China is the largest destination for African exports, accounting for a quarter of all exports.

Trade with Brazil, Russia, India and China — the economic bloc referred to as BRICs — now accounts for 36 percent or 144 billion dollars of Africa’s exports, up from only nine percent in 2002. In comparison, Africa’s trade with the European Union and the United States combined totals 148 billion dollars.

But all is not rosy on Africa’s economic front. Terry Mutsvanga, director of the Coalition Against Corruption, an anti-corruption 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 will continue to have the worst poverty levels globally,” says Mutsvanga.

Independent economic analyst 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,” notes Gatawa.

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 Congo (DRC) 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 percent 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 percent 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 ordinary people in the streets..

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