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Jubilee Statements

Monitoring the impacts of government and corporate behaviour in communities overseas.

Boom

Release Date: 19-Sep-2008

As a part-time fundraising coordinator for an aid and development agency in Sydney, I’m constantly confronted by disturbing images of African children living in abject poverty. Sometimes the impossible plight facing these people seems far too much for an inexperienced and occasionally apathetic student to grasp. In many ways Africa’s political, economic and social situation seems hopeless.

Since 1960, over $625 billion of international aid has quite literally been thrown at Africa with little effect or benefit for the people. According to the United Nations human development scale which accounts for education, health and economic well-being, 34 African nations are among the world’s 40 lowest. Foreign aid has not managed to successfully counter the plethora of challenges, which sees many of these nations debilitated by debt, corruption, oppression and a deep-seeded colonial aftertaste, which continues to linger.

The African people have not been able to overcome poor governance and a systemically unjust global economic system. These firmly ingrained issues have only been exasperated by what I consider to be “well intentioned” but poorly practised debt forgiveness policies of the G8. The one size fits all approach to debt relief that the World Bank and International Monetary Fund (IMF) have practised with the HIPC (Heavily Indebted Poor Countries Initiative) and MDRI (Multilateral Debt Relief Initiative) initiatives have often done far more harm than good. Approximately 90% of external debt of heavily indebted poor countries comes from the loans granted by institutions such as the World Bank and the IMF.

Perhaps a resource boom is a viable alternative to these ill practised debt-forgiveness policies but I’m yet to be convinced. Economic prosperity is rapidly becoming a possibility for parts of Africa as a renewed vigor for trade with Africa now extends worldwide. Sub-Saharan economies are growing annually by an average of 6% (7% in 2008), which more than doubles the growth rate of the US.

The Australian resource boom in particular, is presenting a fast tracked but potentially hazardous solution to Africa’s debilitating state of indebtedness. As recently stated in the Sydney Morning Herald: “The resources boom has pushed Africa into second place as the destination with the second highest growth for Australian trade and investment behind Asia.” This puts Australian business in a unique position on the world stage to be a good corporate citizen, which practises strong environmental safeguarding procedures and some serious political risk assessments.

This is of vital importance as the areas in which Australian business operates in Africa have been assessed as quite risky areas. Australia’s Export Credit Agency, EFIC, exists to promote Australian business in high-risk areas around the world and this period of renewed interest in Africa will be a test for the department as well as for Australian business. In 2007 EFIC granted an A rating (A meaning High environmental and social risks) to several Australian mining exploits in Zambia and Kenya. This period of high-risk business ventures, particularly mining, needs to be assessed carefully otherwise Australian business walks a risky line in perpetuating the ecological debts that Africa has had to endure as evidenced via the much publicised resource exploitation in the continent’s history.

Ecological debt essentially refers to the exploitation of natural resources which in turn keeps a continent such as Africa from breaking the cycle of poverty and conflict and then foreign aid becomes necessary. As previously mentioned, this has failed to prevent an adequate solution to the “trap”.

This resource curse has plagued African nations consistently. High-risk projects have either had insufficient economic returns or they were not in line with the true development needs of the local communities. These countries resource richness has led to their serious downfall. Debt mounts until it becomes unsustainable. With the added dimension of Malaria and HIV/AIDS, the economic and human effects are catastrophic.

These cautionary examples aim to show how crucial it is that Australian businesses conduct themselves in a way, which does not perpetuate the poverty in these countries. Other factors such as the constantly rising prices of food and fuel in Africa coupled with climate change, HIV/AIDS and other “dark horse” possibilities that are yet to rear their ugly head, all need to be considered and accounted for.

As the Department of Foreign Affairs and Trade High Commissioner to South Africa, Philip Green, stated recently: "The way that [Africa] manages its resource endowment in this phase in its history will be one of the key determinants of its success in generating economic growth and rolling back poverty."

I would think that Australia, with its newly acquired interest in the areas has more than a stake in the management of Africa’s resource endowment. The issue of debt in Africa is vastly complex and it will take more than this boom to alleviate wide scale poverty. Largely ineffective aid and debt relief policies with endless conditionalities are just a couple of things in the inadequate mix. If Australia assumes the role of a “force for good” in this scenario then we may see a period of lasting solutions for African nations.