Lebogang Motlana, Head of Regional Service Centre for Africa, on corruption riskJul 30, 2015
Ladies and gentlemen,
On behalf of UNDP, I would like to welcome all of you to this validation workshop which will improve strategies for identifying and mitigating corruption risk within the different phases of Extractive negotiations and deals in most part of our continent.
We have been talking about the potential of extractives in transforming the economic trajectory of Africa, the potential to help hundreds of millions of poor people, and the role of improved governance within the extractive value chain in achieving these aims for a long time now.
For Africa, the “extractive industries” have remained a major source of revenue for many countries with natural resources. Africa is a resource-rich continent and the only continent in the world with regular and constant discovery of new oil fields in the past decade.
The continent is endowed with enormous quantities of natural resources which include both renewable and non-renewable resources. However, despite these resources Africa has continued to remain poor, and more underdeveloped than other continents in the world, prompting others to say the Continent is suffering from resource curse.
Research studies in Africa show that there is less improvement in peoples’ lives when they live in countries with resources when compared to people living in comparable countries which don’t have resources. At the time when we are witnessing an upsurge in resource endowments on the continent, most African countries continue to depend largely on foreign aid and loans to survive.
Ladies and gentlemen,
Beyond weak democratic governance system, the prime cause for this regressive state in the use of extractive resources in Africa has been widely attributed to lack of transparency and accountability in the management of natural resources.
The case of iron ore mining concessions in Guinea illustrates the problem. While the ore from one of the mines is estimated to be able to generate revenues of up to $140 billion over the next twenty years, a concession was granted in 2008 by the government at the time to a multinational company for only $165 million.
A new government terminated this concession for reasons which included allegations of corruption, after it was discovered that half of the rights to the concession had been sold to another multinational for $2.5 billion. The disparity in the values illustrates the potential losses of financial flows from unequal contracts engineered by corruption in the extractive sectors in general.
As indicated by the High Level Panel Report on Illicit Financial flows from Africa, money acquired through bribery and abuse of office by public officials accounted for around 5 percent of IFFs globally. With close to 50Billion US Dollars estimated to be leaving the continent illicitly per year, corruption in the Extractive and Natural Resource sector (including tax evasion that occurs through corrupt practices) has emerged as the second largest source of leakages after transfer pricing.
For UNDP, this is not simply a technical matter which requires concrete reforms in taxation and enforcement capacities, although these are important. UNDP takes a more holistic view in which capacity development, governance reforms, anti-corruption measures and advocacy for more transparency in the Extractive value chains are all needed in parallel.
The Practitioner’s guide for Corruption Risk Mitigation in Extractive industries is UNDP’s attempt to provide a normative framework for academics and researchers in the field and a practical tool for governments, private sector and civil society actors that are serious about combatting corruption in the extractive sector. Our hope is that this guide will become a simple tool accessible by local communities and national partners as they get into negotiations around their resources.
This is why your presence here today is critical. We would expect you to put on you thinking hats and give this guide the level of positive scrutiny that you will expect of such a tool because as practitioners, this guide is and should become your tool. You must not leave Addis until you are satisfied with the improvement you would have brought to the document.
Once again, I would like to thank you all for making the trip to Addis for this important exercise and welcome all of you to this meeting. I am looking forward to a fruitful discussion and dialogue to identify and suggested actions to improve the practitioners guide.