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  Too Much of a Good Thing: The Curse of Natural Resources

Too Much of a Good Thing The Curse of Natural Resources

By Jens Glüsing, Alexander Jung, Uwe Klussmann and Thilo Thielke

Part 4: Models for Africa

Forty years ago, when the British protectorate ended, Botswana was one of the most underdeveloped states in the world. Then geologists from the mining corporation De Beers discovered diamonds. Today the country is the leading exporter of diamonds in terms of value. One-fifth of all the world's diamonds come from Botswana -- about five tons a year.

Botswana has become Africa's model state. Yearly income rises year by year; per capita income is higher than almost everywhere else in Africa. "Botswana is using its resources in an especially responsible manner," Donald Kaberuka, the president of the African Development Bank, says praisingly.

Hardly any other country invests as large a portion of its GDP in education. The health system functions well, as does the education system. Most citizens can read and write; seven percent hold a university degree. Elections are conducted properly, even if the same party wins every time. There is only one problem the country has been unable to bring under control: About one-third of its adults are HIV-positive. Still, half of those who are ill with AIDS or HIV receive free medical treatment.

There are various explanations for why Botswana has achieved what others have been unable to. Some think the recipe for success consists in the way the private economy and the state cooperate: Equal parts of the Debswana corporation, which holds a monopoly on diamond production, are owned by the state and by De Beers. Others point to the tradition of the British legal system, emphasizing that it still holds sway in the country today -- especially in terms of the protection of private property. Still, others emphasize that most of the country's inhabitants are members of the same ethnic group. Not only is Botswana less ethnically fragmented than other African states, but the population (1.8 million) is also of a manageable size.

Whatever the essential factor may be, in the end what is decisive is that the state governing a country rich in natural resources is strong -- that it has the authority to establish and enforce the rule of law. In and of itself, a market economy is not enough to guarantee that a country will develop positively, according to political scientist Francis Fukuyama. He argues that while the 20th century was characterized by clashes between large, powerful and well organized states, the instability of the 21st century is rooted in the weakness of states.

The comparative prosperity of Botswana is all the more striking considering that terror, misery and chaos have reigned for a long time in nearby Angola and Zambia. The situation in those countries has now improved slightly. The so-called Kimberly Process has been implemented for the past three years. The civil rights group "Global Witness" helped to initiate it.

The agreement is meant to suppress trade in diamonds from war zones. The 69 signatories represent virtually the entire world of diamond production. The agreement is voluntary and the compliance of the undersigners is not guaranteed -- nevertheless, the agreement represents a promising strategy against corruption, misgovernment and mismanagement.

Working together with civil rights groups, businessman and philanthropist George Soros established the "Publish What You Pay" initiative four years ago. Under the program, governments and companies involved in the extraction of natural resources commit to the full disclosure of their financial transactions.

Another project, the "Extractive Industries Transparency Initiative" (EITI), which is supported by British Prime Minister Tony Blair, also stipulates that those active in the business of raw materials disclose their business dealings.

The undersigners of EITI include the Anglo-Australian mining corporation Rio Tinto, the second-largest global player in the mining industry. It certainly isn't altruism, but rather pure self-interest, that causes such giants of the mining inudstry to get on board. They themselves suffer when they can't rely on law and order. After all, they plan ahead for decades when they initiate a mining project. "The lack of responsible governance and the existence of corruption in many countries remain the main obstacles to long-term investment," says Rio Tinto CEO Leigh Clifford.

Nonetheless, the mining and oil companies continue to be caught in a dilemma: They would be happiest if they were simply considered guests in the country where they operate, so that they could go about their business without intervention from the outside. At the same time, they are often the most important economic factor in the country; they have considerable influence. Some of them use it.

Shell, BP and Exxon build schools and hospitals and contribute to infrastructure such as electricity grids and roads. They make themselves useful in the place where they operate -- but they don't do much more than that. "Our responsibility has limits," BP CEO Jürgen Cuno points out. He says oil corporations can't influence how a state chooses to use its revenue.

And why should they, when even Western governments don't always provide a good example in this respect? FDP politician Addicks complains that corrupt regimes and rogue states with no respect for human rights continue to be supported by German development funds. "If we're serious about promoting good governance," he says, "we have to make the availability of aid conditional on it."

It's "no natural law" that countries rich in natural resources profit from the wealth nature has provided them with so seldom, says Cobus de Swardt of Transparency International. "The problem can be solved," he adds. "What we need is the political will."