[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
IS THERE AN AFRICAN RESOURCE CURSE?
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON AFRICA, GLOBAL HEALTH,
GLOBAL HUMAN RIGHTS, AND
INTERNATIONAL ORGANIZATIONS
OF THE
COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
JULY 18, 2013
__________
Serial No. 113-91
__________
Printed for the use of the Committee on Foreign Affairs
Available via the World Wide Web: http://www.foreignaffairs.house.gov/
or
http://www.gpo.gov/fdsys/
______
U.S. GOVERNMENT PRINTING OFFICE
81-978 WASHINGTON : 2014
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC
20402-0001
COMMITTEE ON FOREIGN AFFAIRS
EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida ENI F.H. FALEOMAVAEGA, American
DANA ROHRABACHER, California Samoa
STEVE CHABOT, Ohio BRAD SHERMAN, California
JOE WILSON, South Carolina GREGORY W. MEEKS, New York
MICHAEL T. McCAUL, Texas ALBIO SIRES, New Jersey
TED POE, Texas GERALD E. CONNOLLY, Virginia
MATT SALMON, Arizona THEODORE E. DEUTCH, Florida
TOM MARINO, Pennsylvania BRIAN HIGGINS, New York
JEFF DUNCAN, South Carolina KAREN BASS, California
ADAM KINZINGER, Illinois WILLIAM KEATING, Massachusetts
MO BROOKS, Alabama DAVID CICILLINE, Rhode Island
TOM COTTON, Arkansas ALAN GRAYSON, Florida
PAUL COOK, California JUAN VARGAS, California
GEORGE HOLDING, North Carolina BRADLEY S. SCHNEIDER, Illinois
RANDY K. WEBER SR., Texas JOSEPH P. KENNEDY III,
SCOTT PERRY, Pennsylvania Massachusetts
STEVE STOCKMAN, Texas AMI BERA, California
RON DeSANTIS, Florida ALAN S. LOWENTHAL, California
TREY RADEL, Florida GRACE MENG, New York
DOUG COLLINS, Georgia LOIS FRANKEL, Florida
MARK MEADOWS, North Carolina TULSI GABBARD, Hawaii
TED S. YOHO, Florida JOAQUIN CASTRO, Texas
LUKE MESSER, Indiana
Amy Porter, Chief of Staff Thomas Sheehy, Staff Director
Jason Steinbaum, Democratic Staff Director
------
Subcommittee on Africa, Global Health, Global Human Rights, and
International Organizations
CHRISTOPHER H. SMITH, New Jersey, Chairman
TOM MARINO, Pennsylvania KAREN BASS, California
RANDY K. WEBER SR., Texas DAVID CICILLINE, Rhode Island
STEVE STOCKMAN, Texas AMI BERA, California
MARK MEADOWS, North Carolina
C O N T E N T S
----------
Page
WITNESSES
Ms. Corinna Gilfillan, director, Global Witness, USA............. 7
Mr. Mohammed Amin Adam, executive director, Africa Centre for
Energy Policy.................................................. 22
Mr. Anquan Boldin, Ambassador, Oxfam America..................... 34
Mr. Tutu Alicante, executive director, EG Justice................ 38
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Ms. Corinna Gilfillan: Prepared statement........................ 9
Mr. Mohammed Amin Adam: Prepared statement....................... 24
Mr. Anquan Boldin: Prepared statement............................ 36
Mr. Tutu Alicante: Prepared statement............................ 40
APPENDIX
Hearing notice................................................... 74
Hearing minutes.................................................. 75
IS THERE AN AFRICAN RESOURCE CURSE?
----------
THURSDAY, JULY 18, 2013
House of Representatives,
Subcommittee on Africa, Global Health,
Global Human Rights, and International Organizations,
Committee on Foreign Affairs,
Washington, DC.
The subcommittee met, pursuant to notice, at 2 o'clock
p.m., in room 2167 Rayburn House Office Building, Hon.
Christopher H. Smith (chairman of the subcommittee) presiding.
Mr. Smith. Good afternoon, everybody. Today's hearing
probes the question of whether or not there is an African
resource curse. The resource curse refers to the paradox in
which countries and regions with an abundance of natural
resources, specifically non-renewable resources like minerals
and fuels, tend to have less economic growth and worse
development outcomes than countries with fewer natural
resources. This is believed to happen for many reasons,
including a decline in the competitiveness of other economic
sectors, the volatility of revenues from the natural resource
sector due to global commodity market swings; government
mismanagement of resources; or weak, ineffectual, unstable or
corrupt institutions.
Africa has abundant natural resources, from critical and
desirable agricultural products, such as gum arabic, to
strategic minerals, such as cobalt, titanium, and coltan, to
energy resources, such as petroleum and natural gas. However,
under the so-called African resource curse, African citizens
don't benefit from these resources to the extent that would be
expected. Education, health care, and other services too often
are not provided to citizens by their governments who profit
from African resources but, rather, are too often paid for by
donors.
Throughout history, African resources have often led to
negative outcomes for African people such as slavery,
colonization, predatory governments, and vicious rebel group
activity. The ivory trade opened Africa to trans-Saharan trade
to the Middle East and beyond, but it also opened Africa up to
the earliest days of international slavery. African gold and
other natural wealth made the continent and personalities in it
famous and admired, but also led to the even more expansive
trans-Atlantic slave trade.
Ivory hunters wiped out the elephant population in various
locations in Africa and in recent years included the Lord's
Resistance Army and its murderous reign of terror in the Great
Lakes region. Minerals that power modern society also fund the
chaos brought by militias, such as M23 and the numerous other
militias now terrorizing the eastern portion of the Democratic
Republic of the Congo. So-called blood diamonds earlier funded
predatory rebels in Liberia and Sierra Leone.
What should be a blessing, abundant natural resources, has
all-too-often been a curse. It has been argued, for example,
that one can correlate the rise and fall in the price of
petroleum with the rise and fall of the implementation of human
rights in major oil-producing countries. Protection of human
rights throughout resource-cursed countries is dismal or
completely lacking. Most resource-cursed countries are ruled by
either authoritarian or other types of highly repressive
regimes. These regimes are kept in power by an elite group,
such as those comprised of high-ranking politicians and
military leaders. As long as the existing government keeps
these few people happy, they can rule without fear of
consequences. This system is set up so that those most in need
of protection are left to fend for themselves.
Equatorial Guinea is an example of how the resource curse
works. It is a small country with a population of slightly more
than \1/2\ million people but a Gross Domestic Product that has
increased more than 125 times, not 125 percent, 125 times,
since oil production began in the mid-1990s. On paper, the
wealth per capita in Equatorial Guinea is as high as almost any
wealthy country in Africa, if not higher. Yet, if you visit the
country and move beyond the gleaming new hotels and resorts,
you will find numerous people who are forced to survive on $1 a
day or less.
Corruption in Equatorial Guinea is rampant. President
Obiang owns two luxury homes in the Washington, DC, area, and
his sons own two homes and numerous luxury cars in California.
In fact, it is estimated that the President's son spent more on
houses and cars alone between 2004 and 2006 than the entire
government spent on education in the year of 2005.
Facts involving Equatorial Guinea's Government's siphoning
of natural resource profits were revealed in a 2004 U.S. Senate
investigation of Riggs Bank, which could no longer continue
operations due to financial improprieties, partly involving
questionable funds from Equatorial Guinea. The Obiang family
dominates private business in the country so commerce there
benefits them first and foremost, rather than provide a means
of economic opportunity more broadly.
In order to counteract corrupt practices from profits from
natural resources and to ensure they are not diverted or
otherwise abused, various international agreements, as we all
know, have been created. The Extractive Industries Transparency
Initiative, or EITI, was created and announced at the 2002
World Summit for Sustainable Development in Johannesburg to
provide a multi-stakeholder system that would require
disclosure of profits from natural resource extraction. Thus
far, 34 countries have produced EITI reports, covering $1.02
billion in total government revenue. Four African countries
have been officially suspended from the process for
noncompliance: The Central African Republic, the Democratic
Republic of the Congo, Madagascar, and Sierra Leone.
Similarly, the Kimberly Process Certification Scheme,
established in 2009 by the U.N. General Assembly Resolution 55/
56, is designed to prevent conflict diamonds from entering the
mainstream rough diamond markets. Global Witness, which present
testimony today, pulled out of the scheme 2 years ago, but
there are those within the organization that reportedly still
believe it provides at least a basis for addressing the problem
of blood diamonds.
Neither African governments nor the international community
are helpless to effectively address the misuse of African
natural resources. Working together, we can ensure that
corruption is minimized, if not eliminated altogether.
Protection of wildlife and other natural resources must be
achieved. The days of corrupt governments shirking their
responsibilities so that a select few can benefit from their
country's blessings must be ended.
Earlier today in Congress, we honored the life, legacy, and
values of former South African President Nelson Mandela on his
95th birthday. During one of his visits to Congress, he told
Members that to deny a person's human rights is to deny their
humanity. We must do all we can, not only to ensure that
African natural resources benefit the people of African
countries economically, but also to guarantee that the human
rights of African people are more fully respected by those who
wield power through government authority or by the barrel of a
gun.
Thank you very much, to my colleagues, for being here. And
I would like to yield to Karen Bass, the ranking member, for
any opening comments she might have.
Ms. Bass. As always, thank you, Mr. Chair, for convening
this meeting on African resources and what will be done to
ensure that a continent with immense resource wealth is able to
leverage those resources to promote broad and sustained
development.
I also want to thank today's witnesses for making
yourselves available to brief this committee and the work all
of you do to expose the challenges on this and other relevant
topics. I also want to give a special greeting and thanks to
Mr. Boldin for lending your star power to this issue. Mr.
Boldin, I know that you will mention in your statement that in
consultation with Oxfam, I have also written a letter that is
cosigned by Members of Congress that calls on ECOWAS to develop
a regional mining code that will apply to all 15 member nations
and that will protect the basic rights of local communities.
I have often shared my strong interest in this committee
focusing on Africa and the growth opportunities that exist
throughout the continent. Mr. Obama recently returned from
Senegal, South Africa, and Tanzania. And his message was clear.
Our language, our perception of Africa must change. Business,
trade, and investment are the conversations we need to have
with African nations. I have to tell you that I was a little
disappointed in the coverage of his trip because oftentimes the
news covered Africa and the fact that he was on the continent
almost as a backdrop and focused on other issues of the day
that were important to our country but really didn't spend a
lot of time covering the nations that he was visiting.
I am pleased that today's panel is prepared to discuss a
set of issues that present extraordinary opportunity and at the
same time illustrates the deep challenges that face African
nations. The question before us is, how can African nations
benefit from their natural resource wealth and take that wealth
to expand and accelerate development that will ultimately lift
millions out of poverty?
As I often mention, Africa is not the next economic
frontier, but the emerging market of today. We have seen strong
double-digit and near double-digit growth in places like
Angola, Nigeria, Mozambique, and Rwanda.
I visited several African nations over the last year that
share with us their strong desire not to engage our Government
in more of the same forms of aid but to shift our discussion to
topics of trade dealing in arrangements that provide and
promote private sector engagement, economic growth, and job
creation.
What is remarkable about this is that our nation has the
comparative advantage to play a key role in the continent's
economic emergence, but we have yet to fully act. These trade
and business gains cannot be fully realized, however, until we
address some of the well-known barriers, including and
specifically around natural resources, extractive industries,
and the laws and regulatory environments needed to ensure
billions of the world poor benefit from their country's natural
resources. Countries like Ghana, Sierra Leone, and Liberia are
poised to reap benefits from new discoveries of oil, but many
wonder if they will.
In my travels, I have grown deeply concerned with contracts
from multinational companies, particularly those from more
developed nations where resource extraction doesn't necessarily
do much for the majority of the people. I would like to learn
more about those contracts. I had an experience of being in the
DRC and just leaving from the airport and going to the Embassy
and seeing such unbelievable poverty and knowing that the
resources in the DRC are some of the greatest on the planet and
what companies are doing business that is extracting those
resources. And I am particularly interested if any of them are
our companies or companies from the United States. I know that
some of the issues are that some of the African countries might
negotiate poor terms with the extractive companies. They don't
necessarily collect resource revenues effectively. And then
when they do, where those resources go, of course, is a
question.
So I am pleased that there are a number of programs and
initiatives, including Dodd-Frank, that have been created to
address and bring greater accountability and transparency
across the African continent and the world. These include the
extractive industries, transparency initiative, a voluntary
multi-stakeholder program that promotes revenue transparency,
and accountability associated with the extractive industries,
the open government partnership, a multilateral initiative to
promote more effective responses to governance by improving
public services, increasing public integrity, managing public
resources, creating safer communities, and increasing corporate
accountability.
Now, I have also heard that some of the provisions that
were put into Dodd-Frank actually have some unintended
consequences when it comes to the extractive industries. And I
am not sure if we will learn about those today, but hopefully
some of our witnesses might be able to reference that.
Now, I believe these programs are making a real difference.
And I will be interested to also hear from our witnesses if the
programs are effective. I am also interested to know how the
2013 resource governance index ensures resource wealth benefits
to those countries and people who greatly depend on proper
management of those resources.
I want to thank you. And I look forward to the testimony
from our witnesses today.
Mr. Smith. Yes. Thank you so very much.
Mr. Meadows?
Mr. Meadows. Thank you, Mr. Chairman. And thank you for
being here. And on a personal note, as an avid Florida State
fan, I have cheered for you for many years with each reception.
And it is those wonderful hands that today I cheer for you even
louder because of what you are doing here today and this
important work. And I just want to say thank you on behalf of
many here in Congress for highlighting this particular issue.
You know, we have known for a long time that Africa has
just a great potential with natural resources, you know, a
number of natural resources that not only could serve as an
engine for economic development but possibly move the entire
continent to a new era of prosperity. Unfortunately, that
hasn't happened. We have seen, as the chairman and the ranking
member have testified already and shared, that those challenges
from around the world just really create areas of great
concern. Some of those challenges are gone. Many of them still
remain. And some of those challenges now are new. They are
evolving each day as we start to look at it.
You know, today too much of Africa is really ruled by
repressive and oppressive regimes that take those natural
resources as an asset to leverage power and to stay in power
and truly not to improve the lives of the people within their
own country. That is deplorable. Human rights violations, as we
have heard testimony a number of times before this committee,
the human rights violations continue to happen over and over
again. And this leverage, this tool that continues to get used
really needs to be one that we hold those that are using them
as a weapon, hold them accountable.
The chairman and the ranking member have really on a
bipartisan really worked very well together to make sure not
only that it is highlighted, that we in Congress make sure that
we do what is possible from a legislative standpoint to
address. And so I look forward to hearing that.
I hope that we look to an Africa that is truly transformed
one day because some of the testimony that we hear today
affects the lives of the people in many countries throughout
that wonderful continent.
I am going to apologize beforehand. Because of votes and
everything, I have got two hearings. And so I will be bouncing
back and forth. But I just want to say thank you for coming.
Thank you for your interest. And I thank the chairman and
ranking member. And I yield back.
Mr. Smith. Mr. Meadows, thank you very much for your
leadership and for your participation in a very meaningful way
in every hearing and markup we have had.
I would like to now welcome our very distinguished panel of
witnesses, beginning with Corinna Gilfillan, who is the head of
the U.S. office for Global Witness and has worked for more than
10 years to strengthen governance over natural resources. She
led Global Witness' campaign to combat conflict diamonds and
since 2004 has directed Global Witness' U.S. office right here
in DC. She currently serves on the international board of the
Extractive Industries Transparency Initiative and has been an
adjunct instructor at Princeton University's Woodrow Wilson
School of Public and International Affairs. She also previously
worked for the U.N. Environmental Program in Paris and was
Director of Friends of the Earth U.S.'s Ozone Protection
Program.
We will then hear from Mohammed Amin Adam, who is the
executive director of the Africa Centre for Energy Policy.
Before joining ACEP, he was coordinator of Ibis' Extraction
Industries Program in Africa. He has also worked as an oil
coordinator to Publish What You Pay for Ghana. Mr. Adam also
served in various positions in the public sector in Ghana,
including in the Energy Ministry and as mayor of Ghana's third
largest city. He is also a member of the consortium that worked
on Ghana's first EITI report on oil and gas. He also
participated in designing meetings for two global governance
initiatives: The Open Governance Partnership and Open
Contracting.
Then we will hear from Anquan Boldin. I would just point
out that I had and Greg had the privilege of meeting with
Anquan on June 24th and had a very good meeting. He gave us an
update of his work in this area. And while Greg and I have been
talking about doing a hearing like this sometime in the future,
it crystallized at that meeting that sooner would be better
than later. And, as a matter of fact, we asked what his
availability was with training coming up, so that is why it is
being done and was put together rather quickly.
Anquan Boldin is a professional football player, as we all
know, with the San Francisco 49ers but is here today in his
capacity as an Ambassador of Oxfam. He has worked tirelessly to
give back, both in the United States and in Africa. And in
connection with this work, he founded the Anquan Boldin Q81
Foundation to bring hope to underprivileged children. In March
2012, in response to a severe drought in Ethiopia, he traveled
with a friend and former teammate, Larry Fitzgerald, to
Ethiopia to visit Oxfam programs and to bring attention to the
need in that region. Together he and Mr. Fitzgerald visited
people in communities working hard to rebuild and carry the
story for the people they met back home, appearing on many
prominent news outlets and again before the U.S. Congress to
speak to each and every one of us.
We will then hear from Mr. Tutu Alicante, who is from
Equatorial Guinea and is a founder and executive director of EG
Justice. His organization is dedicated to promoting human
rights to rule of law, transparency, and civic participation in
his homeland. Before founding EG Justice, he worked as a legal
consultant with international NGOs promoting legal
accountability and transparency in the extractive industry. In
2007, he received a fellowship from Echoing Green to establish
EG Justice. Prior to that, he worked as an employment attorney
with the Southern Migrant Legal Services, where he represented
migrant farm workers.
So, Corinna, if we could begin with you? And, again, I want
to thank our distinguished witnesses for sharing their
expertise and their time with our subcommittee today.
Ms. Gilfillan. Thank you.
STATEMENT OF MS. CORINNA GILFILLAN, DIRECTOR, GLOBAL WITNESS,
USA
Ms. Gilfillan. Good afternoon, Chairman Smith, Ranking
Member Bass, and members of the subcommittee. Thank you very
much for holding this hearing today to focus on the resource
curse in Africa.
I work for Global Witness, which is an international
advocacy organization working to break the links between
natural resources, conflict, and corruption.
The African continent is rich in oil, gas, and other
minerals. In 2010, the value of exports of oil and minerals
from Africa was worth $333 billion, about 6 times the value of
exported agricultural products and nearly 7 times the value of
international aid. Such resource wealth has the potential to
lift many of Africa's poorest out of poverty. Yet, often we see
the opposite. African resource-rich countries mired in poverty
because of public revenues earned from selling these resources
are being squandered through corruption and lack of government
accountability.
An example of this is in the Democratic Republic of the
Congo, one of the richest countries in natural resources, that
is at the bottom of the human development index. Congo lost at
least $1.36 billion from the underpriced sales of copper and
cobalt mining assets between 2010 and 2012. In secret deals
involving companies registered in British overseas territories
that could keep their ownership secret, this is almost twice
the country's annual spending on health and education combined.
In Guinea, there are corruption concerns related to the
company BSGR's acquisition of flocks 1 and 2 of the massive
Simandou iron ore concession. A series of secret contracts seen
by Global Witness spells out how BSGR promised Mamadie Toure,
one of the four wives of then Guinean dictator Lansana Conte,
millions of dollars in shares in Simandou in return for help in
acquiring the licenses. BSGR paid nothing for its rights in
Simandou and sold 51 percent of its stakes to Vale in 2010 for
$2.5 billion. To put this deal into context, the Guinean
Government's entire annual budget in 2010 amounted to just $1.2
billion.
Natural resources are also funding conflict in Africa. For
the last 15 years, armed groups and members of the National
Army have used profits from the trade in certain minerals to
finance themselves and their operations in eastern DRC, fueling
of war that has cost over 5.4 million lives. The metals mined
in eastern Congo enter global markets and make their way into
products we use every day, such as mobile phones, cars,
airplanes, and jewelry.
In Zimbabwe, the ruling ZANU-PF elite is using Zimbabwe's
diamond wealth as a source of off-budget financing for partisan
security forces with a track record of committing human rights
violations against Zimbabwe's civilian population.
Increasing transparency in the extractive sector is crucial
to combat the resource curse. It deters corruption, creating an
enabling environment for better resource governance and giving
citizens information to hold their governments to account.
The encouraging news is that there is a rising tide of
transparency. The U.S. Government has exhibited strong
leadership by passing sections 1502 and 1504 of Dodd-Frank.
Section 1502, the conflict minerals provision, aims to cut off
financing to abusive armed groups involved in the minerals
trade in eastern Congo. Section 1504 requires extractive
companies to publicly disclose payments to governments on a
country and project level. U.S. leadership has catalyzed global
action. The European Union and other countries are now
following suit.
Increased transparency through initiatives like the
Extraction Industry Transparency Initiative will also empower
citizens in African resource-rich countries to demand
government accountability for responsible resource use. The
Africa Progress Panel, led by Kofi Annan, recently issued a
ground-breaking report entitled, ``Equity in Extractives,''
which calls on governments to promote greater transparency of
the extractive sector and tackle hidden company ownership.
We very much appreciate the work of the subcommittee in
addressing corruption and human rights issues in Africa and
today would like to make the following policy proposals for
consideration: First, effectively implement and enforce
sections 1502 and 1504 of Dodd-Frank; second, make the
transparent and responsible management of natural resources an
integral part of U.S. foreign policy objectives and mainstream
resource governance as a core part of U.S. assistance to
resource-rich countries. A key part of this should involve
protecting human rights and actively supporting civil society
in its efforts to hold governments to account over management
of resource revenues. Third, tackle hidden company ownership in
the U.S. to prevent American companies from being misused to
move corrupt and other dirty money into the U.S. financial
system.
In conclusion, the U.S. Government has an important role to
play in helping address the resource curse in Africa. Better
governance of natural resources will contribute to stability
and economic development in African countries, help protect
U.S. national energy security interests, and promote a more
stable operating environment for American companies and
investors.
Thank you.
[The prepared statement of Ms. Gilfillan follows:]
----------
Mr. Smith. Thank you so very much.
Mr. Adam?
STATEMENT OF MR. MOHAMMED AMIN ADAM, EXECUTIVE DIRECTOR, AFRICA
CENTRE FOR ENERGY POLICY
Mr. Adam. Mr. Chairman, ranking member of the committee,
thank you most sincerely for inviting me to a hearing of the
subcommittee addressing the question, ``Is There an African
Resource Curse?''; and, in particular, to give a testimony to
this subject. As you know, the subject of resource curse in
Africa is very broad, and I would like with your permission to
focus my testimony on Ghana's management of her natural
resources.
As a petroleum economist and an activist, I read by the
day--allow me to read--that Africa's natural resources are
being plundered, but Ghana is trying recently to take a
departure from this path.
At the height of the global financial and economic crisis
in 2007, Ghana discovered oil and gas in commercial quantities
estimated at 1.8 billion barrels of reserves. Oil has now
become the second largest export commodity of Ghana following
gold but overtaking cocoa. By the end of 2012, more than 50
million barrels of crude oil were produced from what we call
the Jubilee Fields, which commenced production in late 2010.
The positive impact of oil is already being felt in the
budget. The Government of Ghana received $541 million last
year. Significant efforts have been made, as I said, to avoid
the case of oil burden on our ever-improving democratic regime,
which many people consider a new paradigm of countries in
Africa determined to break away from the resource case.
Once called the Gold Coast, Ghana has been a major producer
of gold, which is now in the largest export commodity of the
country. This year, 2012, marked Ghana's highest earning from
mining in its history with export revenues of $5.7 billion. But
in spite of these developments, the cost of mining to the
country has been too high. Destruction to the environment,
human rights abuses, displacement of communities, and low
compensation paid to affected communities while mineral
revenues have not translated to tangible development outcomes.
In its attempt to avoid the mistakes of the mining industry
and those of oil-producing countries which got entangled in the
case of resource world, the Government of Ghana embarked on
far-reaching policy and legislative development, both on public
consultations and greater openness. This includes the Petroleum
Revenue Management Act and the Petroleum Commission Act.
Some of the most important provisions in these laws are a
requirement that oil receipts, production lifting, and sales
prices, and expenditure from oil must be published quarterly
and annually and the establishment of the Public Interest and
Accountability Committee to provide independent assessment of
how oil revenues are being used. Ghana is an EITI-compliant
country and has already issued a reconciliation report on oil 2
years into production.
While these good efforts are commendable, good laws only
provide a framework for managing the resources. Indeed, the
resource case is a manifestation of poor implementation of
regulations. And Ghana is one of the countries that is unable
to implement its good laws.
Abuse of regulations through regulatory capture and weak
accountability institutions capable of checking rent-seeking
behavior and vested interest, these problems are compounded by
impunity and political patronage, which have often undermined
the government's ability to act.
Ghana is, therefore, unlikely to escape the resource curse
with oil unless a number of issues are addressed. One, Ghana's
accountability institutions and regulators are still weak and
are not resourced to work independently. The Public Interest
and Accountability Committee and the new Petroleum Commission,
two institutions responsible for oil revenue monitoring and oil
regulations, have not been provided with a budget since they
were established.
Two, for both oil and minerals, there is no open tendering
or bidding process for acquiring prospecting or exploration
rights. There is also no mandatory contract disclosure, and
contracts are published at the discretion of the Minister of
Energy or Natural Resources. Oil and mining deals are kept
confidential, and the system provides opportunities for hidden
benefits to companies as well as avenues for tax evasion.
Further, beneficial owners are not disclosed, which promotes
rent-seeking behavior.
Three, Ghana is losing revenues through tax avoidance and
transfer pricing and has been 1970 and 2008 lost $4.9 billion
through illicit financial flows, including lost revenues from
resource taxes.
Four, also, the country is not deriving value from money
from the infrastructure projects funded with oil and gas
revenues as most of the projects have been delayed, operating
under costly extensions, and leading to cost overruns.
Mr. Chairman, Ghana has shown the way, in spite of these
challenges, and is fully determined to change course and escape
the resource case, but important challenges still remain which
need to be looked at. The United States can support Ghana and
other African countries to address these challenges.
The need to implement the extractive industry payment
disclosure provisions in the Dodd-Frank Wall Street Reform and
Consumer Protection Act is long overdue. The U.S. support for
the implementation of an Economic Community of West African
States Directive on Mining that includes transparency
safeguards but also protection of free, prior, and informed
consent for communities impacted negatively by these projects
is also important.
Finally, the U.S. should also support the building of
strong institutions, including negotiation capacity and
technical support, to help establish the geological data that
enhances the value of these natural resources. If the U.S. is
forthcoming with this support, I believe that Ghana and many
other African countries would change a course and, therefore,
would be ready to manage these resources efficiently and in the
interest of their people.
I thank you very much for the opportunity.
[The prepared statement of Mr. Adam follows:]
----------
Mr. Smith. Mr. Adam, thank you very much for your
testimony.
I would like now, Mr. Boldin, if you would proceed.
STATEMENT OF MR. ANQUAN BOLDIN, AMBASSADOR, OXFAM AMERICA
Mr. Boldin. Mr. Chairman, it is an honor to be here today.
Thank you for your personal invite for me to testify. On behalf
of myself and Oxfam America, I want to say thank you and the
ranking member for holding this important hearing on natural
resources in Africa. The issues you are discussing today are
critically important to Africa's future. There are experts here
today who will talk about how natural resource wealth in Africa
can be seen as both a blessing and a curse. I would like to
share what I learned about how this resource wealth plays out
in communities where these resources are extracted.
During my visits to Africa, I promised the people I met
that I would do everything I can to bring their stories back to
the U.S., to the leaders who cam make improvements. This is why
I am here today. I believe you have the power to really help
people in Africa, and specifically Senegal.
Earlier this year, I traveled to the Village of Sabodala in
eastern Senegal. I met many warm and wonderful people there.
They opened their community to me and shared their experiences
with me; my wife, Dionne; and my friends Roddy White and Larry
Fitzgerald.
Sadly, the community of Sabodala and many others like it
throughout West Africa has been directly and severely impacted
by large scale gold-mining operations. Just a few years ago,
the people of Sabodala farmed their land sustainably and rarely
worried about whether they would have enough food to feed their
families. In their spare time, many community members mined for
small quantities of gold, just as they have for countless
generations. They use it to supplement their farming income.
And neither they nor the generations before them were ever
dependent on the gold they would find in the ground for their
livelihood.
All that changed a few years ago. When the land they farmed
was sold right out from up under them to a large mining
company, the community, which had been farming the same land
for generations, suddenly had nothing. They were given a
choice: Accept new land high up on a hillside miles away from
their homes or take a small one-time cash buyout that could not
sustain their families the way the farm had for so many years.
Every day, communities in Africa are losing their land and
seeing little or no benefit from the enormous mining operations
that are pushing them aside and moving into their backyards. No
percentage of the revenue from the mine in Sabodala, which is
bigger than several football stadiums and brings in untold
revenues, ever makes its way back to the community.
They pull rocks from the road, sometimes miles away from
where they live. They break them in bowls with metal poles.
They grind the rock into fine dirt. They sift the dirt to find
gold dust. Then they use mercury to extract the gold by hand.
It is a grueling, dangerous process, and it is absolutely no
way to make a living.
I told the people of Sabodala that I would bring their
stories back to the U.S. I believe the U.S. Congress should
call on Senegal's President, Macky Sall, to take action to
improve the conditions of mining-affected communities in
eastern Senegal. President Sall should ensure that mining
companies respect human rights, that mining revenue is managed
in a transparent way, and that communities receive an adequate
compensation and have a meaningful voice in decision-making
about where mining takes place.
The good news is that the countries of West Africa,
including Senegal, are considering adopting a regional mining
code that would apply to 15 countries in the region. I believe
that adoption of this code would help strengthen protections
for the human rights of people in mining-affected communities
like Kedougou. I call on the Congress to support this and other
measures to strengthen human rights protections for communities
impacted by the oil and mining industries in Africa.
One thing, one important thing, I respectfully request you
all do right now is to sign onto Congresswoman Bass' letter in
support of the regional mining code. This letter can have a big
impact in West African countries as they consider adoption of
the code.
As a professional athlete, I believe strongly in fair play.
I believe that Congress can play an important role in helping
ensure fair play for Africans and that the money produced by
the gold, oil, and other resources that come out of Africa's
ground are used to help all Africans prosper. I hope that you
will join me in taking action to ensure that this happens.
Thank you, Mr. Chairman and the members of the committee,
for your attention to this issue.
[The prepared statement of Mr. Boldin follows:]
----------
Mr. Smith. Mr. Boldin, thank you very much for your
testimony and you and your wife for the visit that we did have,
which I think was very, very meaningful to me and I know to
Greg and the rest of my staff. So thank you again for your very
concrete recommendations and for doing what you said you would
do, bring back to the Congress and to the American people what
exactly is going on in Senegal and in other places in West
Africa.
Mr. Alicante?
STATEMENT OF MR. TUTU ALICANTE, EXECUTIVE DIRECTOR, EG JUSTICE
Mr. Alicante. Chairman Smith, Ranking Member Bass, and
distinguished members of this committee, thank you for this
opportunity.
In 1993, the military arrived in my village in Equatorial
Guinea to suppress an uprising. They arrested and tortured all
the young men in sight, publicly executed two of them. They
burned down my family's house. That evening I asked my father
what we could do. His response to me was that it was nothing we
can do. His words of defeat reflect the environment of gross
human rights violations, absolute impunity in which I grew up.
Five months later I came to the United States. I became a
lawyer and have since worked for human rights and transparency
in Equatorial Guinea.
Imagine a tiny country of 700,000 people suddenly
flourished with oil money, where the wealth per person is on
par with that of Italy. Now imagine a place where nearly two-
thirds of the population lives in extreme poverty. Infant and
child mortality are on par with ravaged Democratic Republic of
the Congo. Impossible as this sounds, these two scenarios
describe the same country: Equatorial Guinea. It is a textbook
case for the resource curse.
Oil production in Equatorial Guinea began 20 years ago.
Today Equatorial Guinea has the highest GDP per capita in
Africa. However, despite this enormous wealth, the majority of
citizens are mired in poverty without access to water or
sanitation. The country is richer than Poland but has a child
death rate 20 times higher. It boasts the largest gap between
income and human development. It ranks among the lowest for
primary school enrollment.
The Obiang regime, in power since 1979, has a long record
of human rights violations, including arbitrary arrest and
torture. Freedom House ranks it among the worst of the worst.
Corruption is endemic.
Equatorial Guinea is among the least transparent countries
in the world. Contracts for oil exploration and production were
and continue to be negotiated in secret without an opportunity
for national debate or informed consent. President Obiang has
stated that oil revenues are secret, a state secret. He uses
oil to monopolize economic, political, and military power. Oil
revenues finance luxury purchases for the ruling family.
According to the U.S. Department of Justice, between 2001 and
2010, President Obiang's son allegedly spent more than $300
million on mansions, sports cars, and luxury items, far
exceeding the amount that the country spends per year on health
and education combined. He allegedly uses numerous anonymous
shell companies set up in the U.S. to secretly move a sizeable
portion of that money into the U.S. The DOJ has concluded that
the money was acquired through corrupt means and has moved to
seize some of those assets.
Four American oil companies, ExxonMobil, Hess, Marathon,
and Noble Energy, dominate the oil industry in Equatorial
Guinea. Therefore, the United States has an opportunity to help
reverse the resource curse in Equatorial Guinea.
Section 1504 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, which requires oil, gas, and mining
companies to publish the payments they make to governments for
natural resources, aims to provide citizens of countries like
Equatorial Guinea with much needed information to hold
governments accountable for the use of natural resource
revenues. Disappointingly, some American companies, like
ExxonMobil, are supporting the lawsuit aimed to undermine 1504,
suggesting that they prefer secrecy to transparency.
I respectfully ask this committee to take specific steps
that would lead to improved governance in Equatorial Guinea,
including first urging the SEC to issue strong rules in support
of the Dodd-Frank 1504; second, supporting the Incorporation
Transparency and Law Enforcement Assistance Act that
Congresswoman Maloney plans to introduce, hopefully tomorrow,
to put an end to the anonymous shell companies so often used by
corrupt government officials to move and hide illicit money;
press the Government of Equatorial Guinea to respect civil
society organizations and political opposition parties; expand
the Magnitsky Act to cover kleptocrats and human rights
violators globally; implement Presidential Proclamation No.
7750 to deny U.S. visas to members of the Government of
Equatorial Guinea.
I look forward to the day that all Equatorial Guineans can
fully and equitably benefit from our natural resources of our
country. I thank the U.S. Government for working hard to bring
that closer. And I thank you for holding this important
hearing. Thank you.
[The prepared statement of Mr. Alicante follows:]
----------
Mr. Smith. Thank you so very much for your testimony. Thank
you for your perseverance, obviously under very, very difficult
and dire circumstances, and for being here to encourage us,
give us a blueprint, as you all have done.
Let me just ask. Three of you have mentioned section 1504
of the Dodd-Frank bill. To effectively implement it was
mentioned, the need to implement, apparently the failure to do
so. And I am sure there are some reasons why they have not
gotten around to doing it, including court challenges. But if
you, any of you, would like to expand upon what you construe to
be the holdup as to why that very important provision has not
been implemented?
Ms. Gilfillan. Thank you, Chairman Smith. I am happy to
start answering that question. I know others on the panel can
as well.
The SEC actually issued rules, final rules, for section
1504 in August 2012. And they were very strong rules. They met
the full intent of what Congress intended. Unfortunately, there
was a lawsuit that was then filed by the American Petroleum
Institute challenging section 1504. And that was done in the
fall. And so right now, there is a court battle on that issue.
And the court recently took a decision. The DC District Court
recently took a decision that would require the SEC to go back
and re-look at the rules.
But one of the things that I would want to really put into
context with this is that as this is happening in court, the
European Union recently adopted transparency and an accounting
directive that is very complementary to Dodd-Frank. And so with
the combination of the U.S. and the EU now requiring mandatory
disclosure, that covers 70 percent of extractive companies
globally that are going to have to be more transparent. And
that includes Chinese companies, Russian companies, American
companies, and European companies.
So I think there is overall a rising tide of transparency.
I think the court battle is hopefully a temporary one, that the
law remains the law of the land, and the SEC we hope will move
forward with finalizing the rule based on in the next step of
the process.
Mr. Smith. Do you have a sense when this might be
concluded?
Ms. Gilfillan. No, I do not, but I know that the SEC came
out with a strong rule and I think very strongly defended why
they made provisions in the rule. And so we are hoping that
they will move forward quickly with issuing a rule.
I think that we are going to see the fact that Europe--
Canada also wants to disclose. They have announced their
commitment recently. Switzerland is thinking about it. Because
there is all of this global momentum, I think that the pressure
is really on the U.S. to keep on moving forward and not
backwards.
Mr. Smith. Mr. Adam?
Mr. Adam. Yes. Mr. Chairman, thank you for this question.
I think that the leadership the United States of America
showed the world in passing these provisions in the Dodd-Frank
Reform Act is commendable. And I believe this was what
influenced the European Union to recently pass a similar law.
The United Kingdom and France have indicated that they want
to fast track the mainstreaming of the EU law into their
national laws and to begin implementation of the law. And I am
just wondering if the EU was just taking a cue from the
leadership provided by the U.S., why the U.S. was lax as far as
pushing the implementation of these provisions.
And so I want to encourage you and through you the SEC to
also fast track the process. If they have to bring up new
rules, they should do it as a matter of agency because African
citizens, you know, citizens of African countries, cannot wait
any longer while corporate corruption with the connivers of our
governments are plundering the resources God has blessed us
with.
Thank you.
Mr. Smith. You know, unfortunately, our courts move so
slowly. We just had, from my point of view, a setback,
unrelated to today's discussion. Back in the beginnings of the
PEPFAR program, I wrote a provision into the bill to preclude
funding to those groups that were not overtly against sex
trafficking and prostitution. And a very workable way of
dealing with women who are in brothels was worked out by USAID.
And, despite that, it took 10 years for that provision to make
its way to the U.S. Supreme Court. I was there during the oral
arguments at the U.S. Supreme Court earlier. Unfortunately,
they ruled against the provision that I offered 10 years to the
original President's Emergency Plan for Aids Relief, which was
a true setback, because I lead in this Congress on combatting
sex trafficking.
And even during the oral stage, Justice Roberts asked a
question. And I am only saying this because fast tracking is
something that once it gets into our courts, the chances are
slim and none. Hopefully here it will at least be slim. And
that is that Justice Roberts asked the question--and, again,
this is unrelated but just to give it further insight as to why
your frustration, which is shared by those of us on this side
of the dais as well--and he asked a very good question. He said
if an organization was doing wonderful work on clean water in
South Africa during the years of apartheid and another group
was totally against apartheid, one group, an NGO, was for it
and we made a choice to go with the group that was anti-
apartheid, would that be constitutionally suspect or could it
be allowed? And the lawyer for the other side had no good
answer. And, yet, they have ruled against our provision. But it
took 10 years, the point I am trying to make.
Mr. Boldin, if I could ask you with regards to meeting with
the farmers who were displaced, you mentioned that they were
offered a cash buyout. Did they give you any indication how
poor, how inferior, how inadequte that buyout was? How little
money was it?
Mr. Boldin. I think if I can remember, I think it was about
$10,000, which we all know isn't enough money to sustain----
Mr. Smith. For a farm?
Mr. Boldin. Yes. And, like I said, they were living off of
their land. So that obviously is not enough money to sustain
them. And, I mean, just from my experience, I mean, I think it
obviously is unfair, but it is inhumane for people to be
treated that way, to be literally living on top of a gold mine
and have your land taken from you. And then the people that
have taken your land from you come in and make millions,
billions of dollars off of your land. So, I mean, we all know
$10,000 isn't fairly enough, you know, to be compensated for.
Mr. Smith. And it is your land, and it has the gold.
Mr. Boldin. Exactly.
Mr. Smith. It has to be a double insult.
Let me ask you, if I could, with regards to, what are those
people doing now? You know, how displaced are they? Are they in
abject poverty as a direct result of this? And did the
government give any indication of trying to provide some kind
of recompense tool?
Mr. Boldin. Unfortunately, we didn't have a chance to speak
with government officials. You know, we talk to the local
officials. And yes, they are in poverty, which is the reason
why a lot of the locals are trying to take to mining to even
put a meal on the table.
And, like I described in my letter, you know, I had an
opportunity to go through the entire process of trying to find
gold. And, trust me, it is not fun. But this is what they are
reduced to on a daily basis just to try to survive.
Mr. Smith. Mr. Alicante, you mentioned in your testimony
and you list how the President's family and friends have so
egregiously benefitted from, you know, the wealth. The son of
the President of Equatorial Guinea has allegedly used several
anonymous U.S. shell companies to launder more than $100
million of corrupt funds into the United States to finance a
number of luxury purchases. DOJ we are told is investigating
that. Do you have any insight as to how well the
investigations, not just on his case but some of these other
cases, are proceeding by the U.S. Department of Justice?
Mr. Alicante. Thank you, Chairman, for that question.
Yes. We are in touch with some of the investigators in the
Department of Justice. Our sense is right now the case, the
judges in both cases--in the U.S., there are two cases, one in
California, one in Washington, DC, the judges in both cases
have required the DOJ to file additional documents proving
probable cause and showing a direct link to Mr. Teodoro Nguema
Obiang Mangue.
In response to your earlier question, Mr. Chairman, about
the holdup on 1504 and connected to this question, I think part
of what we are hoping that you would do here is help create an
environment in which transparency becomes an essential part,
the quintessential part, of U.S. policy with countries like
Equatorial Guinea.
I mentioned in my remarks I alluded to the Incorporation
Transparency and Law Enforcement Assistance Act, which
Congresswoman Maloney will introduce. I think that the section
1504, the Foreign Corrupt Practices Act, and several different
tools are what need to become part of how U.S. engages with
countries or governments, like the ones in Senegal, Equatorial
Guinea, Ghana, and others.
Mr. Smith. Thank you for that. You mentioned in your
testimony that the 2013 Africa Progress Report by Kofi Annan
showed that Equatorial Guinea is richer than Poland but has a
child death rate nearly 20 times higher. And I know some years
back, the government and USAID had entered into an agreement
and some $20 million was spent on social programs. And I am
wondering if you could shed some insight onto that; and it has
failed. It didn't proceed and go forward, you know, with all of
that wealth, the fact that children are dying or having high
morbidity rates is just appalling. Maybe you could just
elaborate on that a little bit.
Mr. Alicante. Indeed, that is the situation, Mr. Chairman,
in which there is a vast amount of money coming from oil in
Equatorial Guinea. And those of us from that country cannot
understand why our nieces and nephews continue to suffer,
despite this amount of money. My sense of the different
programs is that those the government has claimed to have
instituted have not gone anywhere. The government now has an
economic plan, Horizon 2020, which is not even funded. The
project that they have with USAID has not gone anywhere. So we
don't know what the government is doing in terms of social
development inside the country.
Mr. Smith. Let me just ask you--and others might want to
say something on this as well. We haven't mentioned China. And
China certainly has been ripping off Africa. I mean, it is no
excuse for the foreign multinationals, including those of the
United States, that take advantage and fleece governments and
the people by extension. But we know China.
And I remember Greg and I were actually in the DR Congo on
one trip en route to Goma. And we heard story after story of
roads being built in such a way to ensure that the Chinese
Government was able to again extract minerals and things that
they wanted. And the cost of that was the road. And whatever
they found on the right and on the left somehow went into their
pocket. And it is a huge problem. We know that Africa is
looking for investment. And roads and infrastructure are at the
top of the list, but the Chinese come in. And in exchange for
that work, they end up in a very bad bargain in my opinion
because we heard about--a number of them in DR Congo get these
very, very precious minerals and metals at below bargain
basement prices. If you wanted to speak to that?
And, secondly, I would like to ask if you could--Corinna,
you had numbers, actual numbers, for the DR Congo, $1.36
billion from the underpriced sales of cobalt and copper mining
between 2010 and 2012. One-point-thirty-six billion dollars was
paid. Is there any estimate as to what the real market price
would have been? You know, how far below the real cost is that?
So if you could speak to the China issue, anyone who would like
to, and then to that?
Ms. Gilfillan. Thank you, Chairman Smith.
On the issue of China, just a few things on that. Global
Witness has definitely looked at Chinese investment in the
extractive sector in China because it has grown so much. We
looked, for example, in the Democratic Republic of the Congo at
a resource for instructor agreement there and looked into how
there was nearly $24 million of a Chinese Government's senior
bonus payment that were not answered as far as regarding that
payment. And so what we are finding is that though China is
investing in the region, China is also vulnerable to these
issues of corruption and conflict. And so any kind of
corruption or conflict in these resource-rich countries can
adversely affect China and their investment. And so one of the
things that we are looking at, for example, is to try to engage
with the Chinese Government to raise their awareness about
transparency and how transparency can actually help in their
own operations.
I was actually just in Shanghai in May to basically talk
with some of the policymakers in Shanghai about the work that
we are doing on transparency.
The other thing is that I think we are going to bring in
some Chinese companies to be more transparent through
implementation of the Dodd-Frank Act. You will have big Chinese
companies like Sinopec and PetroChina that will have to
disclose. So we will be bringing in Chinese companies that way.
The Extractive Industries Transparency Initiative actually
does have Chinese companies already disclosing in EITI. And you
have that in countries like Mongolia and Nigeria. So at least
you are bringing in Chinese companies and to an extent the
Chinese Government and raising awareness about the importance
of transparency and how that could adversely affect them.
On the issue of the DRC and the selling of the secret
mining assets, those assets, as I understand it, were sold at
1/16th of the value. So that was a huge--I mean, just
tragically what a loss to Congo to have their valuable mining
assets sold at 1/16th of the commercial market value. So that
is just an example of what happens when you have these secret
mining deals. You have these deals done in secret. And you are
basically allowing these companies, sometimes companies you
don't even know who owns the companies, enter into deals with
government elites, essentially robbing the country of billions
of dollars. And so that is why we are calling for transparency,
not just of revenues but transparency across the value chain.
So you have transparency of bidding processes, transparency of
contracts. We are hearing about how in Ghana, contracts aren't
made public. We are talking about transparency around who owns
companies. Those are the kinds of transparency that we need
that will hopefully prevent some of these really bad and
harmful deals from happening. And we are hoping very much that
the U.S. can help support more transparency in its foreign
policy and through actively supporting the EITI and moving
forward with Dodd-Frank.
Mr. Smith. Yes, Mr. Adam?
Mr. Adam. Yes. I want to touch on the China question.
China's relationship with Ghana's natural resources is at three
levels. First of all, the Government of Ghana signed an
agreement with the China Development Bank for a loan facility
of $3 billion. And that is the highest loan facility Ghana has
ever constructed.
But the difficulty with this loan is that it is
collateralized against future oil revenues. And, therefore,
when the loans are not used efficiently to develop the country,
future oil revenues, and future development for that matter,
are compromised. But the difficulty around this loan also is
that a Chinese company, Bolsa, China Bolsa, has acquired a
mining concession, what we call Awaso mines, to exploit
bauxite. And two projects that are to be funded from the loan
contracted from China are to benefit China, rather than Ghana
because one of these projects is a real line which is to be
constructed to the bauxite mine, which is now owned by a
Chinese company, to enable them to exploit and transport
bauxite.
The second project is the expansion of the port where the
bauxite will be shipped out. And both projects are funded from
a loan contracted from the China Development Bank, which Ghana
will have to pay with future oil revenues and which others said
earlier will compromise future development.
The second level of China's relationship with our natural
resources has to do with small-scale mining. Our country's law
does not allow foreigners to partake in small-scale mining, but
a small-scale mining sector in Ghana lately has been dominated
by Chinese workers. And we have recorded a series of human
rights abuses, destruction of the environment, which led to the
Government of Ghana setting up a task force of security
agencies to arrest----
Mr. Smith. What kind of human rights abuses, if you could
just elaborate on that? What kind of human rights abuses?
Mr. Adam. Human rights abuses in the sense that the
communities who are living near the exploitation of these
resources, you know, their water has been polluted. Their
farmlands are being mined. And they are not able to prevent the
Chinese workers from mining on their farmlands, you know. And
in some cases when they have complained, Chinese mine workers
have used weapons against them. And we have actually recorded
some deaths in those areas.
So this angered the Government of Ghana. That led to the
setting up of a task force of security agencies. And 501
Chinese workers have been arrested by the Government of Ghana,
most of whom have been deported. But this has also brought
about a diplomatic row between the Chinese Government and Ghana
for which reason requirements for visas from China has been
made more stringent. Some Ghanian traders go to China to bring
in goods. And, therefore, because of the difficulties Ghana has
faced, as a result of which Chinese mine workers are being
deported, they have made stringent the requirements for
acquiring visas to Ghana.
There are some discussions between the two governments, but
the indication I get is that the Chinese are able to find their
way out. And this is why transparency is so important. But
beyond transparency, the need to support civil society, the
citizens who will bring pressure to bear on the government so
that their government is able to contract loans, that would
serve the interests of the country other than the lenders. And
when I say this, it is not just the Awaso mine. Ghana is
compelled to sell this oil to China alone. And, therefore, as
part of the loan agreement, it is an optical agreement for oil.
We cannot sell our oil to any other country of our choice
except China. And so this is how they tie your hands, through
loans like this. And if the citizenry are not given the support
in the capacity to voice our consents, to put pressure to bear
on the government to contract, you know, good loans, the
country will suffer eventually.
Mr. Smith. Just one small question. How long, in effect,
will be this requirement of selling all of the oil to China?
Mr. Adam. Yes, until we are able to repay the loan. And
that is supposed to take a period of 10 to 15 years.
Mr. Smith. Wow. Okay. Would anybody else like--yes?
Mr. Alicante. Mr. Chairman, if I may, I would like to
reiterate the points that Mr. Adam has made about the
importance of civil society because Equatorial Guinea is one of
those cases in which transparency alone is not enough.
Equatorial Guinea does not have an independent press.
Equatorial Guinea has a congress, a Parliament, that is 99
percent the ruling party--Equatorial Guinea does not have an
independent judiciary. Equatorial Guinea does not have a
vibrant civil society. So the point that my colleague makes
about supporting civil society, about building the
infrastructure for good governance is critical before it is
1504 and EITI and other transparency mechanisms can be fully
realized in a place like Equatorial Guinea.
China is not invested in the oil industry in Equatorial
Guinea. China is invested in the construction industry in
Equatorial Guinea. But one point I make to people in the United
States is that there is a certain reputational value that comes
with operating with the United States. President Obiang and his
government know that, but there is a reason why President
Obiang spends millions of dollars in lobbying here in
Washington, DC. They know that it is important to keep their
businesses with the United States. And that for me is a
leverage point. That to me is why Congress can actually help
address the resource curse in a place like Equatorial Guinea,
despite the threat of China.
Mr. Smith. Ms. Bass?
Ms. Bass. Well, I have to tell you that some of the
testimony today is a little discouraging, I guess, especially
from a country like Ghana, which I want to ask you some
question about. But, you know, I just refuse to view this as
Africa's curse because to me, if you say that, then you are
almost saying that there is nothing that can be done about it.
Any other time we would look at the unbelievable natural
resources as a blessing. And I think that it is important to
have that frame of mind because policy can change. These
situations can change. So, anyway, that is my little editorial
statement, but did you want to say something?
Mr. Alicante. Sure. Congresswoman Bass, certainly.
Resources in Equatorial Guinea, the oil itself, the gas itself,
we consider those a blessing. Our problem, again, is the
governance----
Ms. Bass. Right.
Mr. Alicante [continuing]. The lack of an accountable
government, the a lack of a transparent--we have one of the
most closed societies in Equatorial Guinea. And that is what
turns oil itself into a curse.
Ms. Bass. Sure.
Mr. Alicante. So I agree with you.
Ms. Bass. Absolutely. And, you know, one issue I want to
take up in general with all of the panelists because, you know,
I am sitting here in Washington, DC. I want to know about U.S.
corporate involvement and U.S. practices. And you do make some
mentions, especially in your recommendations.
You said a few minutes ago, I think, that education,
working with the Chinese--and I guess I am curious as to why
you think that educating the Chinese about transparency--I
mean, I think they would know, right, why the--go ahead.
Ms. Gilfillan. Well, actually, for Global Witness, we do
investigations into what governments are doing and companies
are doing as far as the trade in natural resources. And so we
are not just educating the Chinese Government. We are actually
doing investigations, basically looking at Chinese investment
in Africa and how that affects Africa. That is why we did look
at the resource for infrastructure deals that China did, for
example, in the Congo. And we found a lot of problems with that
with the bill at the----
Ms. Bass. Would they be receptive to the investigations,
even----
Ms. Gilfillan. Well, we are kind of having a dialogue with
them, but it is not necessarily translating into any huge
policy change yet. I think what we are also advocating, though,
is for regulations. And that is why Dodd-Frank is so effective,
because it will bring in Chinese companies. Any Chinese company
registered with the SEC will have no choice but to comply with
Dodd-Frank, the same with the EITI. Any Chinese company
operating in a country that is part of the EITI, that Chinese
company will have to participate in EITI. It will have to
disclose information.
So at Global Witness, we are approaching a lot of different
tools. We are doing investigations to expose the problems,
whether it is the Chinese companies or Chinese Government. We
are doing policy measures that will bring in the Chinese. And
we are also doing dialogue with the Chinese Government, like we
do with all governments and with companies.
Ms. Bass. Thank you.
Ms. Gilfillan. As far as company involvement, I think that
that is a very crucial question. And I also want to respond to
your question or your comment about how this isn't all, we have
to look at these resources as a blessing. And I think one of
the things that I wanted to get across in the testimony was
that there are some good things going on. We are kind of----
Ms. Bass. Those definitely are a----
Ms. Gilfillan. There is a lot of momentum on transparency.
And we are beginning to see through the EITI and through other
mechanisms where citizens are starting to use this data and go
to governments and say, ``Wait a minute. What is going on with
our resources?'' And, for example, with EITI, if you talk about
Nigeria and even Liberia because of EITI, they are actually
looking at what are the companies say they pay to the
government? What is the government saying that they are
receiving? And they are finding missing money. For example, in
Nigeria, they found about $800 million that was going missing.
And they were able to rectify that through the EITI. So and we
are seeing----
Ms. Bass. They found the money and people were arrested or
what?
Ms. Gilfillan. I am sorry?
Ms. Bass. They found you said $800 million.
Ms. Gilfillan. Well, in that case, sometimes it was an
issue of collection, not even keeping track of what companies
should be paying. So it is even things like that, you know,
basic things like that, where you can find some problems in the
system.
And then we are seeing that civil society groups are
starting to engage with governments. For example, in Tanzania,
I know that there were civil society groups and parliamentary
review that found problems with the collection of taxes and
royalties. And through those efforts, they found loopholes. And
they have done a law. They have done some efforts to close a
loophole, the loophole.
So I think as more of this data comes out, we are seeing
citizens using that. Parliaments use that as well. So I think
there is some reason to be optimistic in that we have got this
data coming out. I think what is really important is that the
transparency tie needs to move forward. And we cannot just
focus on revenues, but we need to focus across the value chain.
We need to look at allocation of licenses, contracts, making
that all public.
The United States Government has such an important role to
play. And we would like to see the U.S. Government make natural
resource requirements, transparency requirements, an integral
part of its assistance, so to say to resource countries, ``We
will give you aid, but we would like to see some progress on
transparency.''
As far as companies, it is very important for companies to
be more transparent about their operations. And we are seeing
some companies do that. For example, Newmont, a huge mining
company that operates in Africa, they actually realize----
Ms. Bass. That is a U.S. company?
Ms. Gilfillan. Yes, a U.S. company. Sorry. Yes.
Ms. Bass. Where?
Ms. Gilfillan. Sorry?
Ms. Bass. Where? From where?
Ms. Gilfillan. I think it is based in Colorado. Yes. So
they realized in the 1990s, for example--I think it was one
country was Indonesia. They were realizing that. They were
paying their taxes to the government. And they realized that
communities weren't--they didn't know how much Newmont Mining
was paying to the government. And so there was a lot of
concern. And so Newmont thought, ``Well, maybe we need to
publish the taxes, et cetera, that we are paying to the
government. Otherwise, this helps to build trust with the
communities. Otherwise, if we don't publish that information,
then communities, rightfully so, are going to be like `Wait a
minute. These are our resources. Where is the money going when
you are here in our communities? Where is the money going?' ''
So that is why Newmont Mining is now publishing the payments
that it is making.
I think another really important aspect of this, though, is
not just on the transparency of whether it is the contracts or
the revenues but also on the human rights side of things. What
are the impacts on mining, for example, in mining to
communities? And I know that Oxfam, you know, is working a lot
on free prior informed consent. So that is really having
meaningful dialogue with communities and giving them the
opportunity to be able to decide, you know, whether they want
extractive and how it should be done. So I think that that is
another thing, but it is a positive movement. Some mining
companies are starting to embrace that principle.
So I think we are seeing some positive movement by some
companies. I think other companies, like the oil companies, the
big, you know, oil companies, Shell, BP, Exxon, Chevron, are
kind of putting their heads in the sand. And they are not
wanting to be transparent, at least not with Dodd-Frank. But
they are actually already signed up to transparency to an
extent because they support the Extractive Industries
Transparency Initiative. So there is kind of a disconnect with
the position, but I think that the tie globally is for
transparency. And all of these companies are going to have to
be transparent under Dodd-Frank and through EITI.
Ms. Bass. Thank you. Thank you.
Mr. Adam, you had mentioned when you were talking about
Ghana and you describe Ghana positively in the sense that, you
know, there are movements toward transparency and things are
getting better. But one of the things you pointed out that I
wanted to ask you if you would talk a little bit more about was
it sounded like a capacity issue, as opposed to a political
will issue. And I think you talked about Ghana was unable to
implement accountability measures and wanted to know if you
could speak a little more about that. What is holding it back?
Is there a way the U.S. can be supportive?
Mr. Adam. First of all, let me say two things about U.S.
corporate involvement in Ghana. We have three companies,
Newmont and Anadarko and Kosmos, but I want to talk about
Kosmos in particular. Kosmos' involvement in Ghana has been
positive and negative somehow.
Ms. Bass. What does Kosmos do?
Mr. Adam. Kosmos Energy is an oil company from Texas area,
yes. Okay.
Ms. Bass. Go ahead.
Mr. Adam. So the first issue is Kosmos once spewed toxic
mud in Ghana's waters. Our laws provides for polluter pay
principle. That is, the polluter will have to be responsible
for the pollution. But our Government didn't have the capacity
to establish the extent of pollution. And so that led to
difficulties between Kosmos and the Government of Ghana. Even
though Kosmos eventually paid about 15 million U.S. dollars as
compensation, it exposed the weaknesses of our country as far
as environmental management is concerned.
But the other side, which I think is positive, is that our
Government used to argue against contract disclosure on the
excuse that it would compromise commercially sensitive
information. And that will put the government in the light of
our latent contracts, but because Kosmos had to list on one of
the U.S. stock exchanges as a requirement, they have to
disclose their contracts. And so we went back to our Government
and said, ``The reason for which you were holding the contract
is no longer valid'' because Kosmos by listing under a U.S.
stock exchange has disclosed the contract. And that then
compelled our Government to disclose the contract and six other
contracts. And this is what I think is very positive, the fact
that----
Ms. Bass. Because they were listed on the stock exchange?
Mr. Adam. New York, yes, New York Stock Exchange.
Ms. Bass. Could you explain that again?
Mr. Adam. Yes.
Ms. Bass. They listed the contract and then Ghana was able
to expose what was in the contract?
Mr. Adam. Yes. They listed under U.S. Stock----
Ms. Bass. Right.
Mr. Adam [continuing]. New York Stock Exchange.
Ms. Bass. Right.
Mr. Adam. And that required them to disclose all
information----
Ms. Bass. Oh, I see.
Mr. Adam [continuing]. Relating to their operation,
including the petroleum contracts. So our Government didn't
have the moral justification for holding the contracts
confidential any longer.
Ms. Bass. Right.
Mr. Adam. And this I think was very positive. The fact that
Kosmos listed on the New York Stock Exchange that compelled our
Government eventually to disclose the contract and six other
contracts, which we think is very positive.
But, coming to your question, the issue in Ghana is both
our political will but also a capacity issue. We are relatively
doing better within our region in terms of capacity. And,
therefore, our governance structure seems to be working, even
though there are challenges, including budgetary challenges,
sometimes political interference. I think that our democracy is
quite strong. And the citizenry is also quite awake. Civil
society is very active.
Apart from that, our citizens are mighty strong when it
comes to voicing our concerns. And our Government has been open
as far as providing the space for dialogue with citizens. So
these are some of the measures that have pushed Ghana forward
in terms of how we manage our resources and the governance
around our resources.
But, as I said, there are risks involved. And some of the
risks are associated with the fact that we haven't developed
some of our petroleum-related legislation to the level that
would support openness. So far we do not have provision on open
and competent bidding process for oil concession in our law
because the industry is also new in Ghana. We are into 2 years
of production.
We also do not have mandatory disclosure. The disclosures
we have had so far were at the discretion of the minister. And
so if you have a different minister who has a different policy,
it means that contracts will not be disclosed any longer.
And the issue we are worried about is the budget that the
new institutions we are establishing to protect the integrity
of our oil resources is not given. The Petroleum Commission is
the regulator, supposed to be an independent regulator. The
Public Interest and Accountability Committee is supposed to
conduct independent assessment of how the oil revenues are
used, but they are not given resources to work. And that is
problematic. If you create any institutions by law and you are
not providing resources for them to execute the mandate, then
if you had those institutions, they are better for you. And
that is the risk that we are going into.
Compared to Nigeria, where the vested interest is too
entrenched and where the elite class has already been built, we
have yet to see the building of certain elite class because the
industry is still new, but if it has happened in Nigeria, it
could happen in Ghana. The potential for oil to also----
Ms. Bass. Right.
Mr. Adam [continuing]. Weaken our institutions is also
high. And so we want to support citizenry, the civil society,
so that we are empowered beyond where we are to hold our
Government and other companies operating in Ghana accountable.
Ms. Bass. And, you know, the U.S. supporting civil society
is clear. Are there ways that you think the U.S. could be
supportive in terms of building the other ways, building the
accountability structure?
Mr. Adam. Yes. The U.S. can support it in many ways, first
of all, providing technical support to the institutions in
Ghana working in the natural resources sector. For instance,
our revenue authorities need capacity to be able to conduct
petroleum auditing.
Ms. Bass. Do we do that? We need to do it or we need to do
more of it?
Mr. Adam. At the moment, no.
Ms. Bass. What did you say?
Mr. Adam. No.
Ms. Bass. We don't do it?
Mr. Adam. Yes. You have to do that. You have to support us.
Ms. Bass. Did anyone else want to comment about the general
questions?
Mr. Alicante. Definitely the question of U.S. oil
companies' involvement in Equatorial Guinea, as I mentioned
during my remarks, the major companies are American companies.
American companies arrived to Equatorial Guinea in a time where
there was no law. There was no legal regime regulating the
activities of oil companies or anything that was going to
affect the industry as a whole.
They had an opportunity to help set the environment for
fair play that Mr. Boldin referred to. That did not happen. And
right now what we are seeing is that many of these companies
are the ones that are siding with the American Petroleum
Institute to ensure the 1504 does not become the law of the
land, sending a clear message that they prefer to operate in
that type of secret environment.
In a situation like Equatorial Guinea, I think critically
one thing that is missing is political will from the
government, which is why I think, as Mr. Adam talked about,
support for civil society is supposed to create independent
institutions that can hold governments accountable. Support to
create free press is critical for countries, resource-rich
countries, in Africa in order to help reverse the resource
curse.
Ms. Bass. So what kind of support do we provide for civil
society in Equatorial Guinea? Do you know?
Mr. Alicante. Right now, very minimal. It is partly because
of the challenges of the government that we are dealing with.
Ms. Bass. Right. I mean, to me--and it is interesting. The
chair spoke that earlier today we acknowledged President
Mandela's 95th birthday. And a lot of the presentations talked
about the history of the anti-apartheid movement in the United
States. You know, it is one thing for us to talk about how
people in other countries should hold their governments
accountable, but I think if we have U.S. businesses behaving in
this way, then we need to look at their level of
accountability. And there is a long history here in our country
of holding our businesses accountable. And I think it is
important that we look at what is happening in Equatorial
Guinea and look at ways that we might be able to be supportive.
Dodd-Frank is great, but there are other things as well.
Mr. Alicante. Indeed. I mean, I think I can point to at the
very least two critical things that the U.S. can do. Certainly
ensuring that government, of people in government, in
Equatorial Guinea do not travel to the United States I think is
critical, you know----
Ms. Bass. Don't travel to the United States what?
Mr. Alicante. Denying visas to members of the EG
Government, the Equatorial Guinea Government, whether it is
through Presidential Proclamation 7750 or whether it is by
finding a way to expand the Magnitsky Act, which I referred to,
I think that is critical. But, besides that, I mean, I think
definitely supporting with funding organizations based in the
country I think is critical. My understanding is that U.S.
State Department has a number of programs where there is
cultural visitation, cultural ambassadorships, and different
programs. They allow for members of civil society in places
like Equatorial Guinea where the government makes it impossible
for civil society to operate to come to other countries or go
to other countries in Africa and network with people working on
some of these critical issues.
So there are a number of ways which are brought to the
attention of people in the African Bureau and DRL, the
Department of Democracy, Human Rights, and Labor, which we are
hoping begin to find ways to support civil society underground.
Ms. Bass. You know, Botswana is often held up as a country
that has been a great steward of their natural resources; in
particular, the diamonds. I don't know if anybody on the panel
is prepared to comment about that, but I did want to kind of
shift to ask what do you as members of the panel think are good
examples on the continent where people have been good stewards?
Mr. Adam?
Mr. Adam. Yes. I think that Botswana is a good example,
indeed, but this is as a result of two factors: One, because of
the provisions in their law that promotes transparency; and,
secondly, because of their investment policy, they are able to
invest the revenues that are coming from their natural
resources in areas that promote the highest return. Education
is one of the priorities in Botswana. And so through education,
you are building even a more critical citizenry that will
continue to demand accountability of you. And that compels you
to be more transparent and more accountable. That has been the
secret behind Botswana. And Ghana, as I said earlier, is
following this path by making laws that promote transparency
and accountability, but the difficulty in Ghana is whether we
are able to implement some of the regulations and the rules
that we are developing.
Ms. Bass. Oh, go ahead. I am sorry.
Ms. Gilfillan. Yes. I was just going to agree with the
example of Botswana, although I think that it could still be
stronger transparency measures. One thing on the issue of
holding companies to account, I think that is a really
important issue. And I just wanted to follow up on that because
I know for Global Witness, we do a lot of work, as I mentioned
before, looking at companies that could be complicit in
corruption.
And in the United States, the Foreign Corrupt Practices Act
is very much an important law for holding companies to account
for bribery. And that is one of the things that we are looking
for as far as the U.S. Government really being proactive as far
as investigating some of these major corruption cases, some of
the ones that I have outlined today, actually, the one in
Guinea, which I understand the U.S. Government is
investigating.
There is a case in Nigeria as well about Shell giving
payments to the Nigerian Government that then went to a company
called Malibu Oil and Gas that we found out was controlled by
the Abacha-era oil minister, Dan Etete. And so there are some
real corruption concerns related to that case. It is a very
active case or controversial issue in Nigeria. And that is an
example of where we think the U.S. should be investigating more
and looking for issues of corruption.
I think Tutu Alicante had mentioned the case of Riggs--I
forgot the bank's name now. It has been a while, been around
for a while. It used to be a big institution in DC. But for
Riggs Bank and how that was followed up on, there wasn't
really--a full FCPA investigation of the Riggs Bank did go down
related to some issues around that. But I just think that the
FCPA is encouraging that the administration has been
prosecuting a lot of companies where it is merited, but we do
think that there could be more done, especially in these
extractive cases where you have just huge amounts of money that
are involved and potentially serious corruption issues. So I
think that is a very important way to hold companies to
account. I just wanted to follow up on that, on your point.
Ms. Bass. Does anybody want to comment on the role of the
African Union? I mean, I can imagine what its potential is, but
what about what it is doing now?
Mr. Adam. Yes. The African Union is concerned about how
natural resources have been managed so far. And they now see
natural resources as one of the important growths that could
transform African economies. And so they have developed and
published what we called African Mind and Vision, which defines
the framework for exploiting Africa's natural resources. And
the vision has a very strong transparency component but also
very strong investment policies on how revenues from natural
resources can be invested to support the growth of Africa's
economies.
The African Mind and Vision has been endorsed by African
heads of state, but as an institution, we all recognize the
weaknesses of that institution. And whether they can be able to
push the mind and vision, as excellent as it is, into the laws
of member countries is another issue. The fact is that some
countries in Africa are doing well in governance, others are
not. And the African Union doesn't have that leverage to be
able to carry everybody along. And this is why in my testimony
I was also calling for the strengthening of the regional level
initiative, the African Union, the ECOWAS so that they are able
to justify why their member states must adopt good practices
and good governance practices in the management of the natural
resources.
Mr. Alicante. Mr. Adam has addressed the points that we
were going to raise. I think to say the African Union has faced
its challenges, you know, is really to state the obvious. The
fact that President Obiang was the chair of the African Union a
couple of years ago sends a clear message of what one should
expect of the African Union. Nevertheless, the fact that the
U.S. has an Ambassador and has a presence in the African Union
to me represents yet another opportunity, where Members of this
Congress can actually pose the African Union to do certain
things, to stand by the principles of transparency by the
principles of democracy and human rights.
Mr. Smith. Mr. Marino?
Mr. Marino. Thank you, Chairman.
And I want to thank the witnesses for being here. Like my
colleagues, I am very concerned about--and I will use the term
loosely--investments being made in Africa around the various
countries within Africa, particularly by China, which plans to
spend over $23 billion in Nigeria to build oil refineries;
Iran, at least 6 countries they are talking about building oil
refineries; and Egypt as well. And it is disconcerting given
the fact that we are talking about China, a Communist country,
and Iran, a radical dictatorship, are having such a footprint
on the continent of Africa. And I think there have to be some
answers. This has to be done globally, I think. The free market
and banking industry is saying, you know, ``What is happening
with this money?''
I have been to Ghana. I have been to Liberia. I know Ghana
is in a little better shape than Liberia. But we are talking
about billions and billions of dollars in investments by these
countries, Communist countries, and terrorist-backed countries.
And still the United States is still pumping about $5 billion
to $6 billion a year into countries in and around Africa for
humanitarian purposes. And I guess I am making a statement more
so than asking a question as to what are the terms of these
loans.
I understand first billionaire, on the continent, Dangote,
is worth $20 billion now, just accumulated about $12 billion
over the last couple of years, securing a $4\1/2\-billion loan
from overseas banks to build an oil refinery. I hope that is a
good thing for the continent and the countries because of jobs
and money coming into them, but we need to keep a close watch
on what is taking place there given the fact that we are
dumping almost $6 billion a year for humanitarian needs. If
anyone wants to respond to my thoughts on this, I would be glad
to hear it. Please?
Ms. Gilfillan. Thank you, Representative Marino.
We completely agree with you on the point of the fact that
the United States is giving aid to these countries. We are not
opposed to the aid, but I think one of the questions that is
concerning is that if you are giving aid to a country that is
rich in natural resources but those resources and their
revenues are being squandered, then you are subsidizing
corruption essentially.
And so, you know, I think that is why we are very, very
much focused on, one, the issue of transparency, transparency
around deals, the terms of the deals, who is benefitting from
the deals, because, at least if you bring that out into the
open, that is a very powerful way of deterring corruption and
giving citizens, Parliaments, and others the ability to
challenge that or to say, ``What is going on here?'' And so
that is transparency all across the value chain. That is
transparency when you are having bidding, biddings for these
rights. Oftentimes the bids are secretive. There is not
transparency around the bidding processes. And that just fuels
corruption and allows the kind of deals that you are
potentially talking about. So I think that is one really
important thing that we can do to try and stop those kinds of
harmful deals from happening.
The other thing is as far as U.S. assistance to resource-
rich countries, I think that we do need to look at the
assistance that we are giving and whether we want to tie
certain conditions or requirements. If we are giving assistance
to a resource-rich country, where there is a lot of corruption
and mismanagement, do we to have some benchmarks for that
country to have to meet, requiring greater transparency, open
that kind of thing----
Mr. Marino. Let me stop you there because, you know, as a
prosecutor for 18 years--now, I am not accusing anyone of
corruption at this point because I don't have facts indicating
that. I could make a supposition of some type, but I have
always followed the money, whether that is in organized crime
or drug dealing or selling arms illegally to countries that we
shouldn't, that an individual shouldn't. But I am concerned
because being on Foreign Affairs and on the NATO Parliamentary
Assembly, I see a great deal that is taking place that the
United States alone cannot have an impact on.
This is an international crisis, I think. And I have
studied for the longest time China and the Soviet Union. And we
used to think at one time foolishly that China wanted to take
the world over militarily. Well, they don't have to do that
anymore. They can do it financially and economically. China's
investments around the world are staggering. Who is investing
in Afghanistan? Other than the U.S. being there and some
allies, China is dumping tons of money into Afghanistan, not
for tomorrow, not for next year, but 5 or 10 years from now,
because they know, China knows, the natural resources that are
valuable natural resources that only Afghanistan has. And China
is going to get its arms around that. I think it is doing the
same thing in Africa.
And there is a parallel here that is I think a paradox
because at this point, I have seen how poor the conditions are.
Liberia, for example, has one of the highest infant mortality
rates in the world. But when a country comes in and starts
dumping money and eventually figures, ``Well, we will build a
hospital here. We will build a school there,'' I do not blame
the people of those countries wanting that. But there is an
ulterior motive.
And internationally this is going to have to be handled.
Internationally the United Nations should be looking into these
matters as well, but, you know, we know we are not going to get
very much service from the United Nations in situations like
this.
So I am in a quandary here. I mean, we could simply say it
would be foolish for us to say the U.S. is going to stop all
humanitarian aid to countries in the continent of Africa. I
don't know if China or Iran or Egypt would step in and continue
aid, humanitarian aid, with their resources. I kind of guess
that that may not happen.
So simply just pulling money out and stopping aid is not
the answer. And the United States is going to need input from
other democratic countries as well on how we--it is none of our
business to a certain extent on what is being done with the
funds and the profits, but I think from a humanitarian
standpoint, we have to at least, someone has to, show the rest
of the world what is happening with these profits and who is
walking away with it.
That said, I have no questions. If any of the other
gentlemen would like to comment on my statement? Please?
Mr. Adam. I will start. Mr. Chairman, one of the factors
that increased China's entry into resource-rich countries is
because for those resource-rich countries, they have come to
realize that increased resource world increases their leverage,
increases their strength, they become more creditworthy. And,
therefore, they can go and pledge their oil, minerals for loans
from China, as opposed to the international development,
financial organizations like the World Bank, IMF, and some
other private banks, but through the equitable principals who
will demand certain governance requirements as a condition for
granting them the loan. This I believe is what has pushed some
of them to go into China.
And so if the U.S. will withdraw their support on
humanitarian grounds, citizens are going to suffer for the
mistakes of their governments. And I think that one of the ways
to go about it is to support increased democratization in these
countries. When citizens are given greater democracy and
greater participation, when reforms about governments are
pursued in those countries, citizens can hold their governments
to account and then influence who their governments go into a
relationship or a contract with.
Mr. Marino. I understand what you are saying there, but we
certainly don't want a situation. We don't want a continued
drawn-out civil war, like we have seen in Liberia. We certainly
don't want any civil war. But, once again, I am perplexed on
the way we go about this unless democratic countries around the
world coalesce and come up with some type of plan to address
these issues and to call countries like China and Iran out on
what they are doing and let the rest of the world know, are
these legitimate transactions? What is happening with the funds
that are being generated there? Please go ahead.
Ms. Gilfillan. Can I just respond? And I agree
wholeheartedly with what Mr. Adam said. And I think for
humanitarian aid, that is very crucial to Africa.
But one thing on where this money goes, I think another
effective policy tool is really combatting the illicit flows
that are going out of Africa. And you had mentioned your
background. And I think that that is a very interesting tool
for the United States to use, is that you have all of this
corrupt money that is exiting Africa and going out into the
U.S. financial system. In fact, there are estimates from the
Global Financial Integrity that you have $1.4 trillion in
illicit financial flows going out of Africa.
And what we are finding through our investigations and what
we have heard about Equatorial Guinea and other places is when
you have these corrupt deals, then these government elites
basically take the money and siphon it off and put it offshore
in the United States and other places.
So I think in answer to your question, one really important
policy tool is for the United States to do everything it can to
prevent corrupt and illicit money from entering into the U.S.
and there are several ways we could do it. One is through our
anti-money laundering laws. We can enforce those much more
effectively.
Another thing we can do is require transparency around who
ultimately owns companies here in the United States because I
think corrupt money can come into the United States and other
places through anonymous shell companies. So those kinds of
reforms could really make a difference and address one of the
issues you are talking about, which is where does all of this
money go. If we make it difficult for it to go to the United
States, then maybe it has more of a chance of actually staying
in Africa and contributing to development there.
Mr. Marino. I agree with you to a certain extent, but don't
forget when we look at trade, just simply trade, from here in
the United States around the world, 95 percent of our trade,
the people who are going to buy our products live outside the
United States. So it is going to be difficult for the United
States, which we should be following the money in the United
States to see if it is laundered, but that is not going to
solve the problem. They are just going to go to another
country. They are going to make investments back in China. Who
knows what is going to happen in Iran? They are financially in
a bad position now. But I just don't think the United States is
going to have that much of an impact on following money that is
invested from these types of countries here in the United
States.
So, with that, I yield back the time that I do not have
left.
Mr. Smith. Thank you very much, Mr. Marino. You know, this
committee is blessed with very effective and very credentialed
members. It is worth noting that when it comes to prosecutions,
we do have a former U.S. Attorney in Mr. Marino. And he has
been a very effective member of this committee. And I am
grateful for his leadership.
I do have just a few final questions before we conclude.
Mr. Boldin, you mentioned in your testimony the need for a
regional mining code. And I wonder if you might want to expand
upon that a bit or anyone else on this distinguished panel,
which would apply to 15 countries in the region. It is
suggested that it would be a value-added. It would give a much
more useful tool to this whole effort to promote transparency
and accountability. If you would like to expand upon that or
any of the other members of the panel?
Mr. Boldin. Yes. I think just adopting the regional mining
code not only promotes transparency, but it also puts everybody
on a level playing field. You know, as for me, you know, Mr.
Marino said, you know, that we are dumping foreign aid into
these countries and it is not our business. But, to be honest
with you, if we are dumping that kind of money into a country,
I think it is our business to make everybody accountable on the
money that is being spent in those countries. I think the U.S.
does a great job outside of this country as far as helping
others, but I also think that we have to spend responsibly as
well in other countries and make other countries accountable
for the money that we are dumping into their countries.
Mr. Smith. Thank you.
Anyone else? Mr. Adam?
Mr. Adam. Mr. Chairman, one of the important safeguards in
the African ECOWAS mandate and directive is the protection of
communities affected by the exploitation of these resources.
When the companies and government want to exploit their
resource, they do not seek the consent of the communities.
There are some countries, like Ghana, that have laws which
empower the government to compulsorily acquire the land and
farmlands belonging to the people. What they do is to pay
compensation, which in most cases is very low because they are
determined by government agencies, as opposed to market rates.
And so communities are disadvantaged. They are paid one of
compensation, but they will have to suffer for the rest of
their lives. And, therefore, the ECOWAS mandate and directive
seeks to protect the rights of communities by requiring
government and companies to seek their consent before even a
development of a filled or a minor area is done.
And this, I think communities are looking up to the
implementation of the directive. What some countries have done
is just discuss it, the directive, but they do not mainstream
it into their laws. And when you discuss the directive, that
doesn't necessarily make it a law. Even though the original
intention of the drafting of that mining code is for African,
West African, countries to mainstream the directive into their
laws, they don't do that. And so if they are supported to
enforce these directives in ensuring that the member states
appreciate the value of the code, I think that communities
would be protected. And, therefore, human rights abuses would
be limited and communities eventually will also benefit.
And this brings to mind the issue of project by project
reporting because these communities are suffering. And, yet,
they don't even know how much revenue the state is collecting
in respect of the exploitation of the area. And so when we have
project by project reporting, that will further empower
communities to demand of their government how much they are
receiving from projects in their areas and also to constitute
the basis for demanding what is due them as far as promoting
their own circumstances is concerned.
Mr. Smith. Ms. Gilfillan, you made a statement, part of
your second recommendation was to make the transparent and
responsible management of natural resources an integral part of
U.S. foreign policy objectives. And then you give very specific
examples on page 12 of your testimony. My question is, is the
Obama administration doing that right now in July or is this a
hope that you have that they will do it? And has any other
previous administration been responsive in that regard?
Ms. Gilfillan. In the past, we have very much focused on
looking at the U.S. aid to resource-rich countries, more
focused on, for example, the World Bank and how the World Bank
is actually looking at natural resource governance and lending
to resource-rich countries. But in relation to some of the U.S.
assistance, right now I don't believe that they are doing that.
In particular, I would like to point out some of the programs
that the U.S. has. For example, the U.S. Energy Governance and
Capacity Initiative, which is an initiative led by the State
Department that is focusing on helping increase capacity of
governments, particularly emerging countries with emerging oil/
gas sectors. And these kinds of initiatives are very important,
you know, to help promote governance in the sectors in Africa
and elsewhere. But we would like to see more of this type
assistance be explicitly linked to transparency commitments and
progress made in achieving them.
If the U.S. is going to be providing assistance, then I
think that assistance will be more effective if there are
benchmarks for a country to demonstrate that it is making
progress. So I think we would like to see more efforts. By
that, I think the U.S. can also exert its influence through the
World Bank, through the IMF, to try and make sure that those
institutions are looking at natural resource governance and
trying to integrate those in its lending programs in resource-
rich countries.
Interestingly enough, the IMF has done that, for example,
in the Congo, where they did withhold part of a loan because of
concerns around corruption in the sector, in the extractive
sector, in DRC. So there are examples of where that has been
done, but we generally would like to see it done in a more
consistent manner.
Mr. Smith. Finally? And then if you have any closing
statements you would like to make? As we all know, section 1502
mandates that the SEC issue regulations requiring publicly
traded companies to disclose the origins of illicit conflict
materials. And 1504 requires resource extraction issues to
disclose payments made to foreign governments.
Now, the SEC obviously promulgated regulations. They are
enjoined in court. We don't have any idea--at least I don't,
and perhaps you do--as to when that court case may be
ultimately resolved one way or the other. In your view, any of
you, was Dodd-Frank drafted properly if it falls? Do we have a
fallback that you would recommend? You know, it is not too soon
to be thinking. You know, the idea is transparency and
accountability. What do we do if the court were to find this to
be unconstitutional?
Part of the lawsuit that has been brought by the National
Association of Manufacturers, they point out that the SEC
requirements are extremely burdensome when it comes to tracing
minerals back to the smelter or refinery. It seems to me, you
know, we have got to be realists about, you know, the perfect
sometimes is the enemy of the good. Is there a way of making
sure that we know where these materials are coming from, these
minerals, that could gain constitutional muster?
Ms. Gilfillan. As far as your first question about were
sections 1502 and 1504 done properly, I think that there were
many years of deliberations in Congress where the issues of
extractive industry transparency and conflict minerals have
come up, both in hearings, both on the House and the Senate
sides. I know that for Global Witness, we have worked on this
issue since the late 1990s. And I have certainly been in
Washington since 2004 working with Members of Congress in both
the House and the Senate on both of these issues: On conflict
minerals, on extractive industry transparency. So there were
hearings done in both issues.
There was legislation introduced. It was bipartisan and
particularly Senator Lugar and Senator Brownback along with
Senator Cardin. And Senator Feingold, actually, is no longer
there, along with Lugar. But, anyway, they were some of the
champions of these pieces of legislation in the Senate side.
And so it was a bipartisan effort. There was a lot of
deliberation. There was legislation out there before that was
then put into Dodd-Frank. So we do believe that there was a lot
of careful thought given to this.
We are seeing it really enforced now with all of the other
countries like the European Union that basically has adopted a
similar provision. And we saw the Africa Progress Panel report
that just came out this spring that pretty much embraced the
whole idea of mandatory reporting that is in Dodd-Frank.
As far as what is our backup, just on the section 1502
case, that there has been no decision on that. Oral arguments
were heard about a couple of weeks ago, but there is no
decision on that. So we don't know where that is.
But I think the reality for section 1504 is that the rest
of the world is moving toward transparency. So Europe has
adopted it, as I said. Canada has announced they are adopting
it. I think other countries are going to be moving forward as
well. The G-8 just made a commitment to doing it as well. So I
think that it really is here. And I think that we are hopeful
that the SEC will be able to move forward with finalizing the
rules and having implementation as soon as possible. We
certainly believe that the SEC did the rule and did it in a way
that was consistent with the congressional intent in the
statute.
Just on section 1502 on the conflict minerals provision,
there has been a lot of progress since that provision came into
effect. We have never seen so much attention focused on the
Congo and trying to stop conflict minerals. Since Dodd-Frank,
we have seen so much action from companies, from the Congolese
Government, from other actors in the Congo. For example, the
DRC Government now has a law requiring all companies in the
trading in the mining sector, to carry out due diligence to
avoid sourcing conflict minerals. That is the biggest that we
have seen. That is a huge development. And before Dodd-Frank,
we really didn't see much meaningful progress by the Congolese
Government. So I think that that is huge.
Another thing that is very important is that all of the
private sector is really galvanized and working to comply. Now,
obviously there are challenges with knowing your supply chain,
but we have got major companies, like AMD, H.P., G.E., that are
actively involved in developing these joint industry
initiatives that are now going on to be able to trade supply
chains.
So I think it is very, very positive what is going on on
the ground. We certainly work with, for example, the Conference
of Catholic Bishops in the Congo, who has testified here in
Congress. And they continue to believe that Dodd-Frank is
incredibly important to break the links between minerals in
conflict. It will enable people in the Congo. Because of the
conflict in the mining areas, lots of people have not been able
to pursue other livelihoods, like agriculture, for example.
And so the Catholic bishops believe there that if you have
Dodd-Frank if you kind of break this link between minerals in
conflict, you will be able to have people going back into other
livelihoods because the mining sector is not particularly a
great livelihood for people. It is slave-like conditions. It is
very, very horrible working conditions.
So I think we are in that transitional period where we are
moving forward with the implementation. But we have seen demote
militarization of mining areas. We have seen a lot of progress
and a lot of important impact. So I would just want to, you
know, make that clear that that is what we are finding. And we
are very much hoping that the U.S. will move forward.
And Europe also is now considering a similar type of
provision. So that is encouraging, too.
Mr. Smith. Thank you.
Would anyone else like to make a final comment before we
conclude?
Mr. Alicante. Sure. Not much to add to what Corinna had to
say about Dodd-Frank 1504, only to say that, as I mentioned
earlier, the rate of importance of creating a whole environment
in which transparency is valued and is protected in the United
States, which in my mind means also ensuring that anti-money
laundering laws are taken seriously, ensuring that
incorporation transparency to avoid illicit money coming into
the United States to shell companies is taken seriously,
ensuring that the EITI, for instance, Equatorial Guinea is in
the process of reapplying, so ensuring that Equatorial Guinea
is only considered after certain key benchmarks have met in the
country and also balancing all of these efforts in transparency
with efforts to promote human rights, to promote good
governance in these resource-rich countries.
And, again, Mr. Chairman, I want to thank you very much for
these wonderful opportunities to speak on this issue.
Mr. Smith. Thank you, Mr. Alicante.
Mr. Adam. Yes.
Mr. Smith. Mr. Adam?
Mr. Adam. Mr. Chairman, I also want to thank you very much
and to reiterate that Ghana has shown the way, the willingness
to govern the management of these resources transparently and
also to invest the revenues from oil and other minerals
efficiently. But Ghana still needs support in terms of
institutional building.
There are other countries that are emerging: Liberia,
Sierra Leone, Guinea, if Ghana is successful. I believe that it
will have a spillover effect on these countries so that we can
enhance improved governance of natural resources in the area.
Finally, some of the contracts which we describe as bad
deals are producing oil, which is consumed by many important
countries, including the U.S. I understand in the U.S., the oil
you consume, about 12 percent of that is from some African or
West African countries. And if some of the oil you consume is
coming from badly negotiated contracts, contracts that are
tainted with corruption, I think that the U.S. will be
promoting corruption if you continue to consume that oil. And,
therefore, as part of your bilateral relationship with
countries where you are getting your oil from, you will play a
very important role if you help them to improve on the
governance around the contracts so that you will be consuming
clean oil. And then we will be setting an example why other
countries around the world should consume clean oil as well. I
want to thank you once again for the opportunity.
Mr. Smith. Yes?
Mr. Boldin. I would just like to say thank you on behalf of
myself and Oxfam for lending your ear, for allowing us to make
our voice heard today. So thank you.
Mr. Smith. Thank you, Mr. Boldin. Thank you.
Ms. Gilfillan. Sorry. I had forgotten I really wanted to
also thank you, Chairman Smith. And thank you for your
longstanding leadership on this issue, on transparency of
extractive industries. I know that you and your staff have
really been committed to this issue. And I think that that is
very important. So I want to thank you for all your leadership.
And we look forward to working with you more on these issues.
Mr. Smith. I want to thank each and every one of you. You
have provided extraordinary insight and recommendations that
are very specific. This is an activist subcommittee. So I can
assure you we will follow up with what you have conveyed today
as well as previously, but I think today now, you know, we are
at a turning point in many ways on this whole issue. Good has
been accomplished. As you said, the Europeans are now taking up
this cause very robustly.
And I especially, Anquan, want to thank you because the
meeting we had just a few weeks ago, you know, we were going to
do this at some point, but you just brought it all to a head
and said, you know, let's go ahead and bring this information
forward to hold all of us accountable. That includes the
executive branch as well as the legislative branch. We don't
have much influence on the judicial branch, but let's hope they
get their act together and rule soon and hopefully favorably.
So thank you again for your leadership. And I am sure the
people back in Senegal have to be much pleased by your keeping
your promise to keep their interests ever in front of the minds
of Americans. Thank you all.
And the hearing is adjourned.
[Whereupon, at 4:41 p.m., the subcommittee was adjourned.]
A P P E N D I X
----------
Material Submitted for the Hearing RecordNotice deg.
\\ts\