Thursday, November 18, 2010

China's African resource safari needs to be more transparent - World Bank

The World Bank's managing director said Tuesday that Chinese companies must stop making closed-door deals and that that investors in Africa needed to work more with local communities.

Author: David Stanway and Lucy Hornby (Reuters)

Posted: Tuesday , 16 Nov 2010

Chinese companies eying African mineral resources must stop making closed-door deals and become more transparent in their investments, a senior World Bank executive said on Tuesday.

Ngozi Okonjo-Iweala, the World Bank's managing director, told Reuters on the sidelines of one of China's biggest mining conferences that investors in Africa needed to work more with local communities in order to avoid conflicts and eventually even reduce costs.

"China's investment is welcome -- Africa has an investment deficit and there is room for everyone, but investment needs to have sound principles whether it is from China, Europe or the United States," she said.

In her address to the conference, Okonjo-Iweala urged miners to consider a more "value-added" approach to investment in Africa, creating local jobs rather than just stripping away their resources and shipping them home.

According to World Bank calculations, Africa needs an additional $31 billion a year in foreign investment in order to build the infrastructure needed to drive its economy forward, and energy or transportation projects need to play a part in the plans of big foreign mining companies, Okonjo-Iweala said.

The "dysfunctional relationship" between investors and local communities actually raised the cost of investment by forcing companies to spend heavily on security, she told delegates, citing the activities of oil companies in the Niger Delta as an example.

China's investments in Africa have come under increasing scrutiny, and it has faced accusations of propping up rogue governments in order to gain access to some of the continent's most promising deposits of oil and minerals.

It has played a crucial role in the development of oil in Sudan, where the government is engaged in a brutal civil war with rebels in the Darfur region. It has also sought to expand its presence in mineral-rich Zimbabwe, long considered a pariah by the west.

Less controversial investments in the Zambian mining sector have also aroused opposition, and two Chinese managers at a local coal mine were recently arrested for opening fire on their workers during a protest over pay and conditions.

Okonjo-Iweala said she did not want to discuss specific cases, but said China's propensity for closed-door government-to-government deals was part of the problem.

"The whole point is not to just focus on the support of an elite few in a country -- governments change, and the people need to know what a company is up to, and that applies not just to China but to every investment."

She acknowledged that African governments were also responsible for the problems.

"Transparency works both ways and it is for the company as well as the countries -- their people need to know and the more they know what is being done for their benefit, the more they will be supportive."