Harare – Moves by Lesotho to secure majority shareholding in its lucrative diamond mining sector, as well as historic inaugural domestic auction of the gems, is symbolic of growing demands by Africans to get ownership of their resources.
Until late last month, Lesotho – which is the world’s seventh most important diamond producing country in terms of value – had been exclusively auctioning the gems in Antwerp, Belgium.
For instance, in 2017 Lesotho sold all its diamond production, valued at US$342 million, through Antwerp.
Mining Minister Serialong Qoo says the in-country auction will go a long way in empowering locals at a time the government is opening up the diamond mining sector to artisanal miners and is pushing for a minimum 51 percent ownership of all operations.
“This is a big move as parliament has now embraced the idea of letting Basotho mine with their picks and shovels legally,” said Minister Qoo at the auction.
Deputy Prime Minister Mathibeli added: “This occasion gives me hope that soon, all of Lesotho’s diamonds will be sold in-country and benefit it economically.”
Lesotho produces some of the world’s biggest diamonds.
Letšeng Mine in May dug up a high quality 370-carat Type II white diamonand a 254-carat Type II white diamond. In August 2020, Letšeng unearthed a 442-carat rough diamond worth US$18 million, and in February of the same year, it dug up three gems weighing 183, 89 and 70 carats.
Letšeng is the world’s highest dollar per carat kimberlite mine in the world, and the government wants to start ensuring Basotho start benefiting more from such rich resources.
It is something Zimbabwe tried when it enacted its Indigenisation and Empowerment Act in 2010. In a nutshell, the law required 51 percent local ownership of mines.
The law was subsequently scrapped, and formal mining remains dominated by foreign firms. However, artisanal mining has been legalised, thus giving an entryway for tens of thousands of indigenes to enter the mining sector, particularly in gold extraction.
Across the border in South Africa, long-standing calls for greater benefits to accrue to locals have been turning violent.
On June 5, 2021, some members of the KwaZulu-Natal community around Richards Bay Minerals, owned by Australian giant Rio Tinto, set ablaze heavy machinery at the mine.
This came a month after a senior manager at the mine, Nico Swart, was shot dead while on his way to work.
Indications are that the community is increasingly frustrated by not benefiting much directly from the mine, which makes billions annually.
Elsewhere in Southern Africa, the DRC sits on half the world’s known reserves of cobalt, and 60 percent of the global supply comes from a belt stretching from that country to Zambia. And yet, according to the World Bank, 73 percent of the DRC’s population – or roughly 60 million people – live on less than US$1.90 per day.
The DRC’s known mineral reserves are estimated to be worth in the region of US$30 trillion, and most of these are owned and controlled by American, Asian and European companies, often backed by overtly or covertly by their governments.
Quite often, expatriates and state security agents feel the wrath of poor people living in close proximity to rich mineral resources.
Tom Burgis, the author of The Looting Machine, has spoken about the paradox of “the continent that is at once the world’s poorest and, arguably, its richest”.
“The multinational companies hold enormous economic and political power in post-independence African countries,” he writes. “In this way, there is a pretty straight line from colonial exploitation to modern exploitation… (Almost) everywhere that receives a significant share of its income from oil or mining is badly run and often violent – it’s in the nature of these industries to cause these problems.”
A consequence of this skewed ownership of resources has been illicit financial flows from Africa.
According to a 2020 report by the UN Conference on Trade and Development (UNCTAD), Africa loses about US$88.6 billion in illicit capital flight every year, equivalent to 3.7 percent of the continent’s GDP.
These illicit flows include revenues from illegal activities, tax avoidance, abusive profit-shifting, trade mis-invoicing, human and drug trafficking, corruption, among others.
The billions Africa loses annually to IFFs are almost equal to official development assistance and FDI combined.
UNCTAD director Mr Paul Akiwumi, in an interview with Africa Renewal, says: “The analysis in the report focuses on trade mis-invoicing and capital flight. This is important for Africa because the continent gets 85 percent of its resources from the extractive sector. Most IFFs are happening in that sector. Africa loses between US$30 billion and US$52 billion per year due to trade mis-invoicing, particularly under-invoicing in the extractive sector.”
He continues, “Many African countries with large amounts of illicit financial flows spend 25 percent less on the health sector and 58 percent less on the education sector than countries without such problems.”
Cumulatively, Africa has lost US$1.3 trillion in illicit financial flows over the past 40 years, and five Southern African countries – Angola, Botswana, the DRC, South Africa and Zambia – feature in the continent’s top ten in this regard.
This is according to the Africa Growth Initiative.
“The top four emitters of illicit flows — South Africa, the Democratic Republic of the Congo, Ethiopia, and Nigeria — emit over 50 percent of total illicit financial flows from Africa. Among the top 10 emitters of illicit flows, nine countries attribute a significant portion of total exports to natural resources: mining products in South Africa, the Democratic Republic of the Congo, Botswana, and Zambia, and oil and gas in Nigeria, the Republic of the Congo, Angola, Sudan, and Cameroon,” the organisation says.
In essence, collusion between foreign firms, corrupt governments and pliant local executives mean not only are Africans locked out of the mining sector, but that they also billions annually in stolen wealth.
What to do?
So what are African nations to do?
The obvious answer is greater local resource ownership. But as was seen by Zimbabwe’s hasty retreat from its indigenisation policies, Lesotho’s tentative efforts to head in that direction, and the longstanding stiff opposition to such ideas taking root in the DRC and South Africa, it is unlikely that it is a road many will choose to walk anytime soon.
In the absence of greater local control, author Tom Burgis suggests that moving up the value chain” has worked well for Botswana and South Africa. This entails developing high-skill industries rather than exporting raw materials. He also suggests that African countries should implement high tariffs to protect domestic industries.
More importantly, Burgis says Asian and Western governments and companies must be brought to account for their actions.
“The lesson for those in the West who want to address the damage from oil and mining industries, and the corruption that goes with them, is ‘put your own house in order. There has been a tendency to lecture African rulers (but) the problems are in the world financial system…
“That financial secrecy is available is not Africa’s fault. Address the part that sits within the global system, which can be regulated from Western capitals.”
UNCTAD’s Mr Akiwumi weighs in saying Africa needs to strengthen its institutions.
“Also, many African countries do not have the capacity to monitor the large multinational firms operating in the extractive sector. Therefore, there is a clear need to collect more and better data, build strong institutions and enforce regulatory tax measures.
“… multinational companies need to step up, and African countries need to actively participate in the global tax review regimes such as the Global Forum on Transparency and Exchange of Information for Tax Purposes, the Inclusive Framework on Base Erosion and Profit Shifting the United Nations Committee of Experts on International Cooperation in Tax Matters or the United Nations, the World Bank, International Monetary Fund and OECD-managed Platform for Collaboration on Tax.”
He also agrees that greater internal value addition will go a long way towards quelling rising anger over foreign control of resources and looting of wealth.
“My message is that Africans should not let anybody plunder Africa’s resources anymore. The time has come for Africa to say no and to make sure that their resources benefit the continent and its people. I believe this is possible. I believe that it has to be done now.”