Unit 3, Lecture 2 - The impact of development: extractive industries
Extractavism – large-scale withdrawal of natural resources often trough mining but can refer to large scale agriculture, commercial farms, forests, plantation growing and fishing (large scale export and the profits go to large multinational companies)
Africa loses tons of money (financial outflow to Global North) + communities lose access to resources (land, water, etc.)
The extractive industry accounts for 75% of all exports in Africa. The value-added component of manufacturing only accounts for 14% of all exports. Extractive is a marginal employer in Africa as a whole because it is capital intensive and very skill intensive. Oil industry is mostly expats in labor + also find subcontracting arrangements based on expat personnel.
A scramble for Africa’s commodities (oil and minerals) took place in the 1990s by the US and other western countries (the continent’s traditional trade and investment partners), but also China, India and other industrializing countries in the Global South. For the most part, African labor has largely been excluded from the benefits of growth. This new scramble is characterized by the inflow of capital-intensive investment for the exploitation and extraction of African natural resources and also appears to be diminishing the prospects of employment for African labor.
By the late 90s and early 00s African began to attract more global investment than at any time since the 1960s – increase demand for continent’s resources (oil, gas, minerals). This was also driven by the appearance of China as a world economic actor. Africa remains overwhelmingly a supplier of raw materials. Shifts in the patterns of global production and demand (to China, India) involve changes in the composition of the continent’s patterns of export and production.
“the new scramble” is a product of:
- rapidly rising status of China, India and other Southern countries as economic powers → leading to competition with established West (US, EU and the OECD)
- intensified struggle for global control of key resources between state agencies, international actors and MNCs
The EU and the US are currently competing for more favorable access to African markets for their subsidized products. The EU has attempted to renegotiate its relations with Africa, the Caribbean and the Pacific through Economic Partnership Agreements (EPAs). The US has countered with the formulation of the African Growth and Opportunity Act of 2000, which provides for preferential access to its market. US trade continues to revolve around the import of oil, minerals and natural resources in exchange for the export of high tech goods and machinery. Currently, Africa’s most important trading partners are the US, France and China.
Oil production in Africa is highly capital intensive and dependent on expatriate skilled labor. Overall levels of local employment appear low. Labor activism constitutes a significant disincentive to companies to make investments on-shore. The large proportion of oil production in Africa takes place offshore. This is hugely advantageous to both the oil majors and ‘petro-elites’ as it provides insulation from community, labor, and environmental and human rights activism. The corporate-government nexus, which empowers patrimonial, state elites to deny redistribution of the centrally controlled oil revenues to the mass of the population.
Mining was at the heart of the original imperial thrust for Africa. Benefits of mining overwhelmingly flowed abroad under colonialism and post-independence governments adopted a strongly nationalistic approach to the management of mineral resources entailing the formation of national mining companies and the nationalization of many mining operations. From the late 1980s onward at least 35 countries liberalized their mining codes – production increased heavily. The contribution of the mining industry to employment general is marginal. The World Bank proposed, “enlightened partnership” via PPPs (between mining companies and the state). These partnerships have promoted foreign investment it is private capital that has really benefited – from greater support to ease industry access to mining deposits, financial mobility and the capacity to produce at profit. There have been neither significant direct benefits to state revenues nor many indirect development outcomes in the form of increased employment.