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Special Reports

The Anatomy of the Resource Curse: Predatory Investment in Africa’s Extractive Industries

With more than 20 countries possessing bountiful oil and mineral deposits, Africa is home to more resource-rich states than any other region in the world. Yet, living conditions for most citizens remain dismal as a result of inequitable distribution of resource revenues. Sub-Saharan Africa’s top five petroleum producers rank among the bottom third in the world in terms of child mortality. The continent’s two largest producers—Angola and Nigeria—rank among the bottom ten countries in this category.

Natural resource wealth is also strongly associated with undemocratic and illegitimate governance. Roughly 70 percent of the world’s resource-rich states are categorized as autocracies. This pattern is not a coincidence. The steady flow of natural resource revenues funds the patronage and security structures these governments rely on to remain in power without popular support. Nearly without exception, Africa’s resource-rich states also exhibit high levels of public sector corruption. States heavily reliant on the export of oil and minerals, moreover, face a greater risk of civil conflict than their resource-poor counterparts.

These patterns need not be the norm. If accountably governed, natural resource wealth could be a boon to a society, enabling valuable investments in infrastructure, human capital, social services, and other public goods. With their technical expertise and financial resources, international corporations can be a vital component in the resource management equation in Africa by helping a country get its resources to the market and recovering a higher return for the public than would otherwise be the case. Yet, too often, such collaborations are not at all beneficial. Unscrupulous investors eager to turn a quick profit have found Africa’s resource-rich governments to be attractive targets. These investors’ readiness to engage in business transactions that are illegal, morally questionable, or otherwise exploitative becomes a comparative advantage relative to more reputable firms. These entrepreneurs thrive in environments where governments are financially desperate or diplomatically isolated, oversight institutions are weak, and civil society is stifled. These predatory corporations are not merely bystanders conducting business as usual in an unsavory environment. They often proactively empower unaccountable leaders and frequently benefit directly from conflict and political crises. The potential return for these investors is enormous, compared to the marginal downside of a deal that falls through. With the right connections and willingness to operate amid relative chaos, these companies can make a fortune from resource-rich fragile states.

This report examines these linkages by tracking the practices of one group of investors that has been particularly active on the continent since the early 2000s: a Hong Kong-based consortium known as the 88 Queensway Group. Cultivating relationships with high-level government officials in politically isolated resource-rich states through infusions of cash, promises of billions of dollars in infrastructural development, and support for the security sector, Queensway has been able to gain access to major oil and mining concessions across Africa. Starting in Angola in 2003, Queensway has been engaged in the extractive industries in at least nine African countries, including Guinea, Madagascar, Tanzania, and Zimbabwe.

Click here to read the full ACSS report.

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