DEMOCRATIZATION and RESOURCE EXTRACTION IN AFRICA

Mansions and Mining

On February 3, 2017, just two weeks into the new U.S. Administration, the Senate joined the House (in H.J. Res. 41) to revoke Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The Dodd-Frank Act was a very large piece of legislation passed after the “Great Recession” that occurred in the U.S. beginning in 2009.  This provision of the Act mandated greater transparency in publicizing payments by prominent U.S. companies to foreign governments for resource extraction activities on their lands–namely oil, gas, and mining. Why do we care how much U.S. companies pay for the right to take out oil or gold or tungsten in another country?  Isn’t that their business?  The issue sounds obscure, technical, and minor.  It is anything but that, for the citizens of many African countries.

The Washington Post on the same day published a story entitled “The Real Dictators of Potomac, Maryland” (a title playing on the TV reality show “The Real Housewives of Potomac”).   This article detailed how unscrupulous leaders in African countries have stolen wealth from their own people for decades.  Some of it they used to build mansions around the world, including in the Washington suburbs.  One of them is the President of Equatorial Guinea who has ruled for 37 years and has a mansion in Potomac, Maryland.  A friend of his is the President of Gabon, a neighboring small country cursed with the same vast oil money, similarly taken from its citizens by a long-ruling leader.  Brutal human rights abuses are a feature of the rules in both of these nations.  Their citizens are suffering and dying from extreme poverty, while a few ruling families live in great luxury on payments received from foreign resource-extraction corporations.  These regimes are used to maintaining power by severe violations of the human rights of their own citizens.  Mansions and bank accounts in this country are a small symbol of this situation.

This is where the Dodd-Frank law comes in.  Congress repealed Section 1504 of the Dodd-Frank law, and on February 14th,   President Trump signed that repeal into law.  By abolishing this section, our government has ended an effort toward simple transparency on who exactly is getting how much resource money in these countries of origin.  Whom are companies paying, and how much, for the wealth under the surface of these foreign lands?  ExxonMobil has been the leading corporation in oil extraction in Equatorial Guinea for many years.  It actually has paid millions into the U.S. bank account of its president, rather than into the treasury of the nation.  From the beginning, ExxonMobil did not like this provision (among others) of the Dodd-Frank law, and the American Petroleum Institute (representing many oil companies) lobbied against Section 1504 when it was first proposed.   It is remarkable that this small provision of Dodd-Frank is among the very first actions to be taken under the new Administration and its allies in Congress.

The trouble is that this action has helped condemn the ordinary people of other countries to continued brutal poverty, even though they live in homelands rich with natural resources.  In Africa, these are countries such as Equatorial Guinea, Gabon, Democratic Republic of Congo, Nigeria, Angola, and others.  The combined population of these countries is in the hundreds of millions.  Their wealth is stolen by dictators and other government officials in collaboration with American corporations, which prefer to pay in an undocumented way for access to enormous riches.  For corporations, it is much cheaper and more efficient to cooperate quietly with corrupt regimes.  If the ordinary people were to find out how much money went to the regimes rather than to the citizens, they would be very upset.  So transparency would displease those rulers, cause bureaucratic obstacles, spark political turmoil in those resource-rich countries, disrupt production, and in the end the corporations would probably wind up paying considerably more for the right to extract the valuable products.   Actually the populations of those countries might demand a fair price, and measures to ensure benefit to the true owners of the land!  This would cut sharply into profits.  It would also anger U.S. consumers, who would pay somewhat more at the retail level for gas, oil, plastic, jewelry, and electronics.

The corporations prefer to argue that if the U.S. does not turn a blind eye to these methods, other companies from unscrupulous nations (perhaps China?) will simply come in and pay the cost of bribes to corrupt rulers, and take the profits from the resources.  In effect, the argument is, “If we don’t do it, someone else will!”  And if that is true, these “burdensome regulations on business” put the U.S. corporations at a disadvantage.

In the short term, this is likely accurate.  However, in the long term, it is not even true that the U.S. economy will benefit by secretly paying off unjust rulers, if one believes that justice triumphs and will be rewarded.  In the long term, it matters when the U.S. has allied itself with corruption and injustice.  It even has costly consequences for the U.S. as well, in the areas of its own peace, security, stability, and economic prosperity.  From the perspective of Catholic Social Teaching, the truth is that the resources of the earth do not belong to just a few in any country, but were provided by God for the good of all peoples.

President Trump has promised to gut much of Dodd-Frank besides Section 1504.  But the removal of this one small effort toward transparency prevents the poor from even knowing how much they have been cheated of, when the resource wealth that really belongs to them is stolen by the collusion of corporations, their own governments, and ours.

                                                                                                                        Stephen Price

What can I do? 

This action on Dodd-Frank is a “done deal” and cannot be changed in the short term.  The Publish What You Pay coalition and Oxfam America are active in transparency issues, and welcome new advocates.  There are other provisions of Dodd-Frank that are also significant for Africa and may also be repealed; future blog posts will look at them.

For more information on this issue:

 Africa Faith and Justice Network:    http://afjn.org/?s=Dodd-Frank+1504

Publish What You Pay coalition :  http://www.publishwhatyoupay.org/pwyp-news/us-congress-votes-for-corruption/

 Oxfam America:   https://firstperson.oxfamamerica.org/2017/02/senate-shamefully-guts-bipartisan-anti-corruption-rule/

https://www.washingtonpost.com/news/worldviews/wp/2017/02/03/the-real-dictators-of-potomac-maryland/?utm_term=.a04a83ba432c

https://www.bloomberg.com/view/articles/2017-02-15/dodd-frank-repeal-also-targets-corruption-fighting-measure

https://www.theguardian.com/global-development/2015/jul/22/dodd-frank-act-section-1504-natural-resources-extractive-industries-oil-api-sec

Photo. Thenigeria.com
Photo. Thenigeria.com

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