Tag Archives: 2010 China Mining Congress

Five Principles For China’s Miners In Africa To Live By

Ngozi Okonjo-IwealaNgozi Okonjo-Iweala (left) is not only a managing director of the World Bank but also a former Nigerian finance and foreign minister. Thus she brings a singularly well positioned perspective to the controversial question of Chinese investment in Africa, and particularly investment in the extraction of the continent’s natural resources.

Speaking to a mining industry conference in Tianjin, she outlined five principles to create what she described as a mutually beneficial and lasting marriage between Africa’s investment needs and resources and China’s interest and demand. (Full text of speech.)

More than 1,5000 Chinese firms are now estimated to have set up shop in Africa. Given the contentious nature of some of their operations, including those from Algeria to Zambia that have caused a local backlash that has on occasion turned violent, Okonjo-Iweala laid out a set of recommendations that bluntly address the most frequently leveled criticisms of Chinese companies operating in Africa.

1. Make investments consistent with national development priorities.

Above all, this means to create jobs locally. The only labor brought in from outside must be those people whose skills are clearly missing in a country.

2. Practice transparency.

In the event of problems with the population or government, you want recourse to adequate legal support to resolve the issue. That can’t and won’t happen if transactions are mired in secrecy. You need to let the people know the scope and broad terms of your engagement. If the public doesn’t know what you do, they will turn against you as they do not see the benefits of the investment or when accidents happen.

3. Support the development of a value chain.

Mining companies should not just come in to extract natural resources in a raw form and ship them away. This is colonial history. Today, they should establish some degree of processing adding value to the raw materials. This creates employment, develops skills, and leads to more buy-in from the local people.

4. Pay what is due and do what is right.

Investors must pay taxes and avoid falling into well known tax evasion techniques such as transfer pricing or bribes to a few high level officials. Bribe paying is not only abhorrent but is counterproductive in the longer term. Many developing countries need tax revenue to invest in their people – a move which will lead to easier investment for you, but for that to happen, you must pay your proper taxes and royalties.

5. Engage with local communities and communicate your values.

Ensuring workers and community safety is an important part of this agenda. Mining companies must operate with the highest safety and environmental standards. It is your company’s reputation at risk if you ignore these standards. You must adhere to them and seek to establish them.

These amount to a decent set of best practices for any foreign direct investor anywhere. When it comes to Chinese investors in Africa, though Okonjo-Iweala didn’t explicitly say so, we suspect that her five principles are now mostly honored in the breach — which, of course, would be precisely the point of stating them.

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