Emerging powers such as China are shifting global trade relationships. For example, trade between Africa and China has grown from 10 to 20 percent annually in recent years. Most of China’s imports from Africa have been natural resources. These exports have increased by about 46% from 38 billion dollars to 46 billion dollars over the last 10 years.
But despite this growth, there have been complaints of unfair trade contracts. In 1998, the Zambian government sold 85 percent shares in the country’s copper mines to Chinese companies. They ended up making considerably more than they should have made from the deal. There have also been reports of unfair contracts between the government and Chinese companies involved in diamond mining in Zimbabwe.
Then there are the issues of market deregulation and corporate social responsibility. Countries have fully or partially introduced deregulation of their extractive industries, particularly oil and gas, and mining, to allow increased private sector participation in the natural resource industry. Countries that cannot deregulate end up adopting innovative joint venture options. This is believed to have led to improved efficiency, competition and comparative transparency in the sector because of the involvement of multiple companies.
Although deregulation has opened the doors to more competition, and stiff tariffs have been reduced, the effects are not all positive. Reduced influence of government in areas with natural resources has posed challenges to communities in which companies operate. When governments cannot monitor and enforce regulatory standards, serious socio-economic challenges have directly affected these communities. Constant oil spills in the petroleum sector, for example, have led to conflict between Shell and the people of the Niger Delta in Nigeria.
Corruption and accountability are other aspects of natural resource governance. These thrive where state institutions are weak. In many African countries, there have been reports of warlords trading with international actors illegally. In other cases, state actors trade illegally, such as in the Democratic Republic of Congo and in Liberia and Sierra Leone. Illegal diamond mining in Sierra Leone has led to forged documents to back this trade.
Corruption and embezzlement of extractive proceeds have come to light in many resource-rich countries in the developing world. To combat this, much attention has been placed on the extractive industry transparency initiative (EITI) as a global standard for the good governance of oil, gas and mineral resources. It is seen as a scheme that would help in achieving transparency in rich mineral developing countries. While the EITI has increased accountability in the extractive sector, it has also been riddled with some challenges. Although the EITI tracks income from extractive industries it does not focus on spending, missing out on tracking illicit financial flows and expenditure-level corruption. Also, the framework does not have sanctioning powers.
Finally, the link between natural resources and armed conflict has been contested in some quarters although there is evidence to support the correlation, particularly in developing countries. But natural resources are really never the causes of conflict. However, they are linked to conflict when we have increased economic marginalization, political exclusion and struggles for economic control of these resources.
It is often thought that natural resources contribute to conflict in three major ways. First, allocating wealth derived from natural resources often lead to conflict with groups looking to control more of this wealth. Secondly, communities, which need scarce resources for livelihood may differ over the allocation of such resources to one community at the expense of another. Conflict may arise when governments depend on tax revenues from natural resources but are disconnected from the realities of citizens in these regions.