Showing posts with label Tanzania. Show all posts
Showing posts with label Tanzania. Show all posts
Saturday, December 27, 2014
Monday, June 07, 2010
Undoing Business in East Africa
Despite all the self-congratulatory back slapping that greeted the release of the Doing Business in the East African Community 2010 report, the document makes for depressing reading. Though not a total solution or yardstick, the DB reports are increasingly used as a leading measure to gauge the attractiveness of a nation as a place to do business and as a measure of competitiveness. For reform-minded governments, how much their indicators improve matters more than their absolute ranking. On this score, for EAC countries and the region as a whole, it is a case of one step forward and two backwards.
Although Kenya, the region’s economic powerhouse, has instituted comprehensive licensing reforms that have led to annual private sector cost savings of $62 million, and the country is ranked 4th out of 183 nations for “ease of getting credit,” the fact that Kenya’s overall rank, measuring the ease of doing business in the country, dropped from 84 in 2009 to 95 is more significant.
Compared to 2008 when Kenya was cited as one of the world’s top ten reformers in that year’s DB Report, the country’s ranking has actually plummeted 23 places. Similarly Uganda’s overall ranking also fell from 106 in 2009 to 112 this year and Tanzania’s from 126 to 131. Burundi only marginally improved from 177 to 176.
The lone exception was Rwanda which leapt to an overall position of 67 in the 2010 rankings, up from 143 in 2009. The top reforming country in the world, the country’s efforts have paid off as it attracted some $1.1 billion in investment, 41% more than in the previous year and this in the midst of the global economic crisis which saw global FDI inflows slide by up to 44% the first quarter of 2009.
Though there is widespread expectation that integration will lower the cost of doing business, in 2009 EAC secretary general Juma Mwapachu described it as "unnecessarily too high" saying it undermined international competitiveness of the region, This is borne out by the report which observes that if each East African country were to adopt the region’s best practice the region would rank 12th rather than 116th. In other words, if the best of existing East African regulations and procedures were implemented across the board, the business environment in the region would be comparable to that in Thailand which in the first quarter of 2009 alone garnered more than $2 billion dollars in investment, according to the United Nations Conference on Trade and Developments World Investment Report 2009.
The fact that needed reforms are in place in some but not all EAC countries inevitably calls into question the effectiveness of the regional integration experiment. In fact, though regional integration has long been touted as necessary for economic development in sub-Saharan Africa, the fact is Africa remains one of the most protectionist areas in the world. With 14 landlocked countries, only 10 percent of African exports are intraregional, according to the World Trade Organization. In contrast, intraregional trade in Western Europe, is 68 percent and in Asia hovers around 40%.
Under the EAC, the five countries have officially formed a free trade area and a customs union. The common market protocol, the next step on the route to full economic integration, is set to go into effect in less than a month’s time. It will supposedly allow the free migration of businesses and people across borders as the bloc prepares to move to a common currency by 2015. However, according to the Director General, EAC customs and Trade Directorate, Mr. Peter Kiguta, despite the successful elimination of internal tariffs among Partner States and consequent growth of intra-regional trade, the ratio to total volume of trade in EAC is still a paltry 13%. “We produce what we don’t consume and we consume what we don’t produce,” as President Jakaya M. Kikwete of Tanzania said recently in Dar es Salaam at the World Economic Forum on Africa.
Mutual suspicion between partner states may be to blame for this state of affairs. According to Nation Media Group CEO, Linus Gitahi, “it is much easier for a Chinese company to get licensed to do business in any of the East Africa countries than it is for any local companies moving across the borders. Many in government have what President Yoweri Museveni calls the ‘pygmy syndrome’-the idea that you are bigger than me and by supporting you, you will get bigger and bully me.”
The EAC states may have made strides in improving literacy, fighting AIDS and improving infrastructure but when it comes to governance, the parochial nature of the region’s politics has limited gains. Little is done to curb rampant corruption. Comparing EAC country rankings in Transparency International’s Corruption Perception Index 2009 to those from the previous year reveals that the problem either worsened or stagnated in all EAC countries except Rwanda, which registered a significant improvement.
Violence, intimidation and disputed results continue to be a feature of elections. In Burundi, whose abysmal ranking in the DB 2010 Report is reflected in a report by the African Development Bank which says the country “investment, production and commerce in the country are hindered by the political and institutional environment,” opposition parties have recently demanded a repeat of communal elections, alleging massive fraud and poll-rigging. Just last week, their candidates announced their withdrawal from this month’s presidential election. Kenya’s decline has been blamed on the post-election violence and creation of a coalition government, which slowed decision-making at a time when over 70% of the countries in the world are actively reforming.
The Global Competitiveness Index identifies 3 stages of economic development, the first driven by primary factors, such as unskilled labor and natural resources, and the others marked by increases in efficiency and innovation. The EAC region is firmly rooted in the baby-stage. To be competitive, EAC states must, in addition to improving infrastructure and creating a healthy and literate workforce, focus on developing well-functioning public institutions and a stable macroeconomic framework.
Although Kenya, the region’s economic powerhouse, has instituted comprehensive licensing reforms that have led to annual private sector cost savings of $62 million, and the country is ranked 4th out of 183 nations for “ease of getting credit,” the fact that Kenya’s overall rank, measuring the ease of doing business in the country, dropped from 84 in 2009 to 95 is more significant.
Compared to 2008 when Kenya was cited as one of the world’s top ten reformers in that year’s DB Report, the country’s ranking has actually plummeted 23 places. Similarly Uganda’s overall ranking also fell from 106 in 2009 to 112 this year and Tanzania’s from 126 to 131. Burundi only marginally improved from 177 to 176.
The lone exception was Rwanda which leapt to an overall position of 67 in the 2010 rankings, up from 143 in 2009. The top reforming country in the world, the country’s efforts have paid off as it attracted some $1.1 billion in investment, 41% more than in the previous year and this in the midst of the global economic crisis which saw global FDI inflows slide by up to 44% the first quarter of 2009.
Though there is widespread expectation that integration will lower the cost of doing business, in 2009 EAC secretary general Juma Mwapachu described it as "unnecessarily too high" saying it undermined international competitiveness of the region, This is borne out by the report which observes that if each East African country were to adopt the region’s best practice the region would rank 12th rather than 116th. In other words, if the best of existing East African regulations and procedures were implemented across the board, the business environment in the region would be comparable to that in Thailand which in the first quarter of 2009 alone garnered more than $2 billion dollars in investment, according to the United Nations Conference on Trade and Developments World Investment Report 2009.
The fact that needed reforms are in place in some but not all EAC countries inevitably calls into question the effectiveness of the regional integration experiment. In fact, though regional integration has long been touted as necessary for economic development in sub-Saharan Africa, the fact is Africa remains one of the most protectionist areas in the world. With 14 landlocked countries, only 10 percent of African exports are intraregional, according to the World Trade Organization. In contrast, intraregional trade in Western Europe, is 68 percent and in Asia hovers around 40%.
Under the EAC, the five countries have officially formed a free trade area and a customs union. The common market protocol, the next step on the route to full economic integration, is set to go into effect in less than a month’s time. It will supposedly allow the free migration of businesses and people across borders as the bloc prepares to move to a common currency by 2015. However, according to the Director General, EAC customs and Trade Directorate, Mr. Peter Kiguta, despite the successful elimination of internal tariffs among Partner States and consequent growth of intra-regional trade, the ratio to total volume of trade in EAC is still a paltry 13%. “We produce what we don’t consume and we consume what we don’t produce,” as President Jakaya M. Kikwete of Tanzania said recently in Dar es Salaam at the World Economic Forum on Africa.
Mutual suspicion between partner states may be to blame for this state of affairs. According to Nation Media Group CEO, Linus Gitahi, “it is much easier for a Chinese company to get licensed to do business in any of the East Africa countries than it is for any local companies moving across the borders. Many in government have what President Yoweri Museveni calls the ‘pygmy syndrome’-the idea that you are bigger than me and by supporting you, you will get bigger and bully me.”
The EAC states may have made strides in improving literacy, fighting AIDS and improving infrastructure but when it comes to governance, the parochial nature of the region’s politics has limited gains. Little is done to curb rampant corruption. Comparing EAC country rankings in Transparency International’s Corruption Perception Index 2009 to those from the previous year reveals that the problem either worsened or stagnated in all EAC countries except Rwanda, which registered a significant improvement.
Violence, intimidation and disputed results continue to be a feature of elections. In Burundi, whose abysmal ranking in the DB 2010 Report is reflected in a report by the African Development Bank which says the country “investment, production and commerce in the country are hindered by the political and institutional environment,” opposition parties have recently demanded a repeat of communal elections, alleging massive fraud and poll-rigging. Just last week, their candidates announced their withdrawal from this month’s presidential election. Kenya’s decline has been blamed on the post-election violence and creation of a coalition government, which slowed decision-making at a time when over 70% of the countries in the world are actively reforming.
The Global Competitiveness Index identifies 3 stages of economic development, the first driven by primary factors, such as unskilled labor and natural resources, and the others marked by increases in efficiency and innovation. The EAC region is firmly rooted in the baby-stage. To be competitive, EAC states must, in addition to improving infrastructure and creating a healthy and literate workforce, focus on developing well-functioning public institutions and a stable macroeconomic framework.
Saturday, March 13, 2010
How Tanzanian Justice Fails to See the Wood for Trees
The East African Development Bank’s search for justice and self-preservation in the courtrooms of Tanzania has been as trivialised as it has been convoluted. Throughout the litigation, the courts have systematically focused on technicalities and blocked any attempt to interrogate the merits of the $61 million arbitral award that threatens the viability of the bank.
Between March 1990 and June 1992, the Bank provided a total of $2.2 million in loans to Blueline Enterprises Ltd, a Tanzanian transporter, for the purchase of to 10 heavy-duty trucks and other equipment. However, in November 1995, the Bank placed the company under receivership for non-payment. Following a successful arbitration process the Bank’s initial victory was overturned by the courts, which ordered new arbitration proceedings. The award, which some have termed “obscene,” stemmed from this latter process.
The EADB’s numerous attempts to have its day in court have been bogged down in legal minutiae. Not once has it had the opportunity to tell its side of the story. And as it stares bankruptcy in the face, what has been forgotten is that it was the Bank that actually lent money to Blueline, which with interest, would now amount to over $40 million. And since the Bank belongs to the governments of the EAC, it is their citizens who stand to lose this sum.
Below is a timeline of the case:
March 7, 1990: East African Development Bank advances a loan of approximately $1.86 million to Blueline Enterprises Ltd of Tanzania to purchase 10 heavy duty trucks and other equipment.
June 16, 1992: The EADB gives Blueline a supplemental loan of $340,000.
November 24, 1995: The Bank appoints Coopers and Lybrand (now PricewaterhouseCoopers) as Receiver and Manager of Blueline .
December 4, 1995: Blueline procures an injunction from the High Court restraining the Bank from permitting its Receiver and Manager to “take over and run” Blueline’s business.
February 14, 2001: The Bank and Blueline file a Compromise Order appointing Hon. Francis L. Nyalali (the former Chief Justice of Tanzania) Sole Arbitrator and A. T. H. Mwakyusa as his substitute.
September 30, 2002: Hon. Mr Nyalali finds in favour of Bank and dismisses Blueline’s claim on the basis that it lacked legal merit. Hon. Nyalali dies shortly thereafter and Blueline files a petition challenging the award.
July 30, 2003: Mr Justice Luanda sets aside Hon. Mr Nyalali’s award and orders the Arbitration proceedings to commence afresh before Mr Mwakyusa.
The bank appeals on the grounds that Mr Mwakyusa could only have been appointed if Mr Nyalali had not acted as arbitrator.
November 21, 2003: The Court of Appeal of Tanzania strikes out the appeal because the Bank has failed to obtain Leave to Appeal.
To rectify the error, the Bank files an Application in the High Court seeking an extension of time to file a new Notice of Appeal and an extension of time to seek Leave to Appeal to the Court of Appeal .
July 9, 2004: Mr Justice Mihayo of the High Court refuses to grant the extensions of time.
Following commencement of arbitration before Mr Mwakyusa, the Bank applies afresh to the High Court for the removal of Mr Mwakyusa as the Sole Arbitrator and for the Arbitration proceedings to be stayed pending determination of its petition.
May 11, 2004: The Bank’s Application is dismissed by the Hon. Justice Massati because it has not annexed the Loan Agreement containing the Arbitration clause to the Application.
The Bank files a Notice of its intention to appeal to the Court of Appeal as well as an Application for Leave to Appeal. Simultaneously the Bank files an application to prevent the Arbitration proceedings from continuing pending the determination of its Appeal. The Court of Appeal strikes out the latter application on the ground that the order of the High Court was not capable of execution, and therefore a stay order relating to it could not be issued.
The Bank subsequently appealed to the Arbitrator to remove himself, but he declined to do so.
In light of the dismissal of the application for a stay order, the Bank abandons its intended Appeal against M. Justice Massati’s decision and as a result, Mr Mwakyusa, commences the Arbitration proceedings.
August 31, 2005: Mr Mwakyusa delivers his award awarding Blueline $61,386,853 in relation to Blueline’s claims against the Bank. No award is made in respect of the Bank’s claim for the outstanding loan.
The Bank files a Petition and Application in the High Court seeking to set aside the award; a declaration that Arbitration proceedings have failed and consequently the dispute should be determined by a Court of law; and a stay of execution of the arbitral award pending the final determination of the Bank’s petition.
Mr Justice Shangwa sustains Blueline’s objections that the Bank has omitted to annex a certified copy of the arbitral award even though the original was, at that time, before the High Court, and particularly, before the judge handling the matter, having been sent there directly by the arbitrator.
The Bank files a further Application to the High Court for extension of time in order to file another Petition to set aside the Arbitral award. However on the day fixed for the hearing of the said Application, the Bank withdraws the application upon advice of Counsel that the time limit has not lapsed after all. This advice is based on a previous decision made by the Court of Appeal that implies that the petition, being a “suit,” could be filed up to six years from the date of the award.
Immediately thereafter, the bank files a new petition in the High Court.
Blueline raise a preliminary objection that the petition is time-barred and should be struck out, relying on a 2002 Court of Appeal decision that a petition to set aside an award is an “application” (and not a “suit”) and was therefore still subject to the 60 days limitation.
June 22, 2007: Justice Mandia delivers his ruling noting that there are two conflicting decisions of the Court of Appeal on the matter. He, however, decides to rely upon the earlier decision, that a petition is an “application” and declares it time-barred.
July 5, 2007: EADB files a Notice of Appeal against the ruling of the Court together with an application for Leave to Appeal.
April 11, 2008: The Bank’s application for leave to appeal Justice Mandia’s decision is struck out with costs.
December 17, 2007: EADB files an application seeking an order from the court for extending the limitation period on the grounds that there is reasonable cause for the court to exercise its discretion.
March 26, 2009: Justice Sheikh of the High Court dismisses the Bank’s application because EADB had previously filed and withdrawn a similar application for the same order (for extension of time) without seeking liberty to reinstitute it.
May 12, 2009:Justice Shangwa dismisses the Bank’s application to vacate the garnishee order by way of which Blueline sought execution of the arbitral award declaring that the Bank’s immunity from attachment of its assets did not extend to its cash.
September 22, 2009: Leave is granted to appeal against Justice Shangwa’s ruling. Subsequently, Blueline consents to the grant of leave by the High Court for the appeal against the decision of Justice Sheikh.
March 8, 2010: A three-judge panel dismisses the Bank’s appeal on the grounds that since Justice Mandia had dismissed the petition previously brought by the Bank, it was not open to the Bank to go back before the same Court with an application for enlargement of time.
March 11, 2010: The hearing on the appeal against the decision by Justice Shangwa relating to the Bank’s immunity is adjourned after one of the judges recuses himself.
Between March 1990 and June 1992, the Bank provided a total of $2.2 million in loans to Blueline Enterprises Ltd, a Tanzanian transporter, for the purchase of to 10 heavy-duty trucks and other equipment. However, in November 1995, the Bank placed the company under receivership for non-payment. Following a successful arbitration process the Bank’s initial victory was overturned by the courts, which ordered new arbitration proceedings. The award, which some have termed “obscene,” stemmed from this latter process.
The EADB’s numerous attempts to have its day in court have been bogged down in legal minutiae. Not once has it had the opportunity to tell its side of the story. And as it stares bankruptcy in the face, what has been forgotten is that it was the Bank that actually lent money to Blueline, which with interest, would now amount to over $40 million. And since the Bank belongs to the governments of the EAC, it is their citizens who stand to lose this sum.
Below is a timeline of the case:
March 7, 1990: East African Development Bank advances a loan of approximately $1.86 million to Blueline Enterprises Ltd of Tanzania to purchase 10 heavy duty trucks and other equipment.
June 16, 1992: The EADB gives Blueline a supplemental loan of $340,000.
November 24, 1995: The Bank appoints Coopers and Lybrand (now PricewaterhouseCoopers) as Receiver and Manager of Blueline .
December 4, 1995: Blueline procures an injunction from the High Court restraining the Bank from permitting its Receiver and Manager to “take over and run” Blueline’s business.
February 14, 2001: The Bank and Blueline file a Compromise Order appointing Hon. Francis L. Nyalali (the former Chief Justice of Tanzania) Sole Arbitrator and A. T. H. Mwakyusa as his substitute.
September 30, 2002: Hon. Mr Nyalali finds in favour of Bank and dismisses Blueline’s claim on the basis that it lacked legal merit. Hon. Nyalali dies shortly thereafter and Blueline files a petition challenging the award.
July 30, 2003: Mr Justice Luanda sets aside Hon. Mr Nyalali’s award and orders the Arbitration proceedings to commence afresh before Mr Mwakyusa.
The bank appeals on the grounds that Mr Mwakyusa could only have been appointed if Mr Nyalali had not acted as arbitrator.
November 21, 2003: The Court of Appeal of Tanzania strikes out the appeal because the Bank has failed to obtain Leave to Appeal.
To rectify the error, the Bank files an Application in the High Court seeking an extension of time to file a new Notice of Appeal and an extension of time to seek Leave to Appeal to the Court of Appeal .
July 9, 2004: Mr Justice Mihayo of the High Court refuses to grant the extensions of time.
Following commencement of arbitration before Mr Mwakyusa, the Bank applies afresh to the High Court for the removal of Mr Mwakyusa as the Sole Arbitrator and for the Arbitration proceedings to be stayed pending determination of its petition.
May 11, 2004: The Bank’s Application is dismissed by the Hon. Justice Massati because it has not annexed the Loan Agreement containing the Arbitration clause to the Application.
The Bank files a Notice of its intention to appeal to the Court of Appeal as well as an Application for Leave to Appeal. Simultaneously the Bank files an application to prevent the Arbitration proceedings from continuing pending the determination of its Appeal. The Court of Appeal strikes out the latter application on the ground that the order of the High Court was not capable of execution, and therefore a stay order relating to it could not be issued.
The Bank subsequently appealed to the Arbitrator to remove himself, but he declined to do so.
In light of the dismissal of the application for a stay order, the Bank abandons its intended Appeal against M. Justice Massati’s decision and as a result, Mr Mwakyusa, commences the Arbitration proceedings.
August 31, 2005: Mr Mwakyusa delivers his award awarding Blueline $61,386,853 in relation to Blueline’s claims against the Bank. No award is made in respect of the Bank’s claim for the outstanding loan.
The Bank files a Petition and Application in the High Court seeking to set aside the award; a declaration that Arbitration proceedings have failed and consequently the dispute should be determined by a Court of law; and a stay of execution of the arbitral award pending the final determination of the Bank’s petition.
Mr Justice Shangwa sustains Blueline’s objections that the Bank has omitted to annex a certified copy of the arbitral award even though the original was, at that time, before the High Court, and particularly, before the judge handling the matter, having been sent there directly by the arbitrator.
The Bank files a further Application to the High Court for extension of time in order to file another Petition to set aside the Arbitral award. However on the day fixed for the hearing of the said Application, the Bank withdraws the application upon advice of Counsel that the time limit has not lapsed after all. This advice is based on a previous decision made by the Court of Appeal that implies that the petition, being a “suit,” could be filed up to six years from the date of the award.
Immediately thereafter, the bank files a new petition in the High Court.
Blueline raise a preliminary objection that the petition is time-barred and should be struck out, relying on a 2002 Court of Appeal decision that a petition to set aside an award is an “application” (and not a “suit”) and was therefore still subject to the 60 days limitation.
June 22, 2007: Justice Mandia delivers his ruling noting that there are two conflicting decisions of the Court of Appeal on the matter. He, however, decides to rely upon the earlier decision, that a petition is an “application” and declares it time-barred.
July 5, 2007: EADB files a Notice of Appeal against the ruling of the Court together with an application for Leave to Appeal.
April 11, 2008: The Bank’s application for leave to appeal Justice Mandia’s decision is struck out with costs.
December 17, 2007: EADB files an application seeking an order from the court for extending the limitation period on the grounds that there is reasonable cause for the court to exercise its discretion.
March 26, 2009: Justice Sheikh of the High Court dismisses the Bank’s application because EADB had previously filed and withdrawn a similar application for the same order (for extension of time) without seeking liberty to reinstitute it.
May 12, 2009:Justice Shangwa dismisses the Bank’s application to vacate the garnishee order by way of which Blueline sought execution of the arbitral award declaring that the Bank’s immunity from attachment of its assets did not extend to its cash.
September 22, 2009: Leave is granted to appeal against Justice Shangwa’s ruling. Subsequently, Blueline consents to the grant of leave by the High Court for the appeal against the decision of Justice Sheikh.
March 8, 2010: A three-judge panel dismisses the Bank’s appeal on the grounds that since Justice Mandia had dismissed the petition previously brought by the Bank, it was not open to the Bank to go back before the same Court with an application for enlargement of time.
March 11, 2010: The hearing on the appeal against the decision by Justice Shangwa relating to the Bank’s immunity is adjourned after one of the judges recuses himself.
Banking on the EADB
As the East African Development Bank fights for its life in Tanzanian courts, its role as the East African Community’s Bank has come under fire. The Permanent Secretary at Kenya’s Ministry of East African Community blames a lack of vision by the leadership of the East African Development Bank for the failure to mobilize resources for cross-border infrastructure projects. Speaking to The East African, David Nalo stressed that the bank “needed to be reformed yesterday”, citing the example of the Athi River-Arusha road. The project took over ten years to kick off because each country was separately negotiating with donors to finance its chunk of tarmac. “The EADB should have repositioned itself to offer solutions as the Bank of the EAC to source the funds and execute the project,” the PS says.
The bank is appealing a $61 million arbitral award given against it to Tanzanian transporters, Blueline Enterprises Ltd. Its numerous attempts to have the award set aside have been dismissed on technicalities. According to lawyer Kibe Mungai, in 5 years of litigation, the case has never been heard on its merits.
Though its lawyers have warned that the institution may not have the resources to pay and may face the prospect of liquidation if all its appeals are unsuccessful, the bank is now seeking to reassure “all stakeholders” that its operations will continue. In a Press release, the bank declares that the EAC Partner States, who own over 80% of the bank as well as non-state shareholders “remain firmly committed to the EADB and will continue to support it.” This is despite the fact that the member states have already eschewed the idea of shelling out taxpayer cash to “pay a private businessman”.
The African Development Bank, which owns close to 7% of the EADB has declared that it is 100% behind the Bank. Though he would not be drawn out on the subject of a bailout, Bhargav Purohit, who represents the African Development Bank on the EADB’s Board of Directors, said the AfDB would support the EADB in its time of need. “We will be here to work with them as we have been for the last 40 years,” he declared.
PS Nalo believes East Africa must make a strategic choice between the proposed the East Africa Community Development Fund and restructuring the EADB to avoid “duplication.” Declaring that the EADB is potentially “an extremely useful instrument,” he advised the Bank’s management to start thinking about funding infrastructure projects such as a fibre optic cable from Mombasa to the DRC or a nuclear power plant, or mobilising equity and capital for renovating the railway system.
Purohit, though, observes that the Bank’s role is still defined by the 1980 Charter and any changes in its mandate would need to be reflected there. He believes that to properly perform its new role, the EADB would need to be restructured and adequately capitalized. He further adds that a strategic plan is currently being worked on by the Director-General and her team and it will include recommendations on the requisite level of capitalization.
Interestingly, in 2008, The EastAfrican reported that a $135 million recapitalisation package was yet to be realized and Nalo feels that partner states will remain unwilling to recapitalize it until it is restructured and shows readiness to delve into regional issues.
The bank has had a troubled history, having undergone at least three bouts of restructuring within the last two decades, mostly following losses. It was first restructured in 1993. Between 1994 and 1998, it had a good run, doubling its profits. This was followed by a period of deterioration which culminated in a $2.9 million loss in 2002, prompting another restructuring and the departure of 5 top managers. The latest facelift comes on the back of an $8 million loss in 2008 which led to the removal of its top brass including the Director-General.
One of the few remaining vestiges of the original East African Community, the Bank was created by Article 21 of the Treaty for East African Co-operation of 6 June 1967 and its Charter was set out in Annex VI of the Treaty. Its main purpose was to promote the equitable industrial development of the three member countries, Kenya Uganda and Tanzania. While the three countries contributed equally to its capital base, the bank was required to devote 38.75 per cent of its investments in each Tanzania and Uganda, against 22.5 per cent in Kenya.
However, under its statutes, it could only finance “viable” projects, most of which were in Kenya, especially during the 1971-73 period. This, and the absence of coordinated industrial planning in EAC, greatly limited the bank’s ability to effectively redistribute the benefits of the integration.
The EADB survived the dissolution of the EAC in 1977 largely because it did not rely on the EAC for funding. Headquartered in Kampala, Uganda, the bank was revitalized by a then rare show of unity when Kenya, Tanzania, and Uganda momentarily set aside their differences in an effort to bolster the bank's activities.
The Treaty Amending and Re-enacting the Charter of the East African Development Bank,which came into force on 23rd July 1980, rescued it from legal limbo. It provided that the EADB Charter would henceforth draw its legal validity from the 1980 agreement and not the 1967 Treaty which founded it. Under the new charter, in addition to promoting industrial development, the bank could also provide funding and technical assistance for agricultural, forestry, tourism, transportation, and infrastructure development projects. It had an authorised capital stock of US$ 1.08 billion though to date it’s actual paid-up capital remains at less than 10% of that figure.
In 1984 the International Monetary Fund agreed to provide further financial backing and by the late 1980s the African Development Bank and the Japanese government agreed to channel $56.4 million in credit through the EADB for regional projects. By 1990 the EADB had lent $28 million for 19 separate projects, but many of these and other loans were soon in arrears. Many of the bank's problems were blamed on currency devaluations and various technical financial adjustments. In 1993, the EADB agreed to a complete restructuring under the guidance of a new director general.
That same year, Kenya, Uganda and Tanzania took another crack at regional integration by forming the Permanent Tripartite Commission for East African Co-operation. The Treaty for the Establishment of the East African Community was signed in November 1999 and entered into force in July 2000. The EADB, along with other remnants of the 1967 Treaty, was declared an Autonomous Institution of the Community. The bank was charged with catalyzing regional integration through the provision of development finance.
The 2nd EAC Development Strategy which covered the years 2001-2005, recognized a gap in regional financing for regional projects, citing low savings and incomplete financial reforms. To plug this hole, the Strategy recommended establishing a Regional Development Fund with the EADB used as a transitional vehicle for raising funds for regional projects before the Fund is up and running.
While this seems to suggest that the Bank is of limited value, at least as far as EAC integration is concerned, a paper tabled at the July 2008 UN Conference on Trade and Development notes that given the important imperfections of private international capital markets, especially in the provision of long-term funding – such as is required for infrastructure – Regional Development Banks and Sub- Regional Development Banks such as the EADB need to play an ever increasing role in financing regional infrastructure.
Financing from Multilateral Development Banks such as the World Bank tends to come with strict conditionalities, give little regard to the views of developing countries, and are heavily influenced by the agendas of their shareholders’ domestic constituencies. RDBs and SRDBs on the other hand, can rely on informal peer pressure rather than imposing conditionality allowing for faster and more flexible disbursements of resources. There is also little danger of countries’ voices been drowned out in a bank they themselves own, or their being held hostage to foreign agendas.
RDBs and SRDBs can also help ameliorate the vagaries of international private finance by providing counter-cyclical finance when private flows dry up and developing innovative market instruments, such as GDP-linked bonds, that better spread risks and reduce the likelihood of costly and disruptive defaults and debt crises.
Therefore, while the EADB has financed numerous projects in different sectors within the region including education, agriculture, agro-processing, construction and real estate, health, transport and telecommunications,it needs to expand its portfolio to include financing regional integration efforts and especially the cross-border infrastructure. Just as the EAC is following the EU integration model, so the EADB should look carefully at the example set by its counterpart in Europe, the European Investment Bank.
The EIB was central to the process of European integration since the beginning. Indeed, just like the Treaty of East Africa Cooperation created the EADB, the 1957 Treaty of Rome that created the European Economic Community also created the EIB. The EIB, the most powerful instrument in the Treaty, was established in order to support the European integration process. It had a three-fold mandate: to ensure equitable development by channeling savings from the more developed parts of the Community to the less developed parts; to help modernize or replace “senile industries”; and to develop cross-border infrastructure by transforming Europe’s essentially national infrastructure into an integratedEuropean infrastructure.
To fulfill a similar role, the EADB needs to extend its portfolio to include financing of regional infrastructure projects. As the Deputy Governor Bank of Uganda, Dr. Louis Austin Kasekende notes, “the EADB… lends money to commercial enterprises to fund their capital investment and working capital. Most of these enterprises are in the private sector although a few are public enterprises and joint ventures.” In contrast, in its first ten years, the EIB lent almost exclusively to infrastructure and industry with the former accounting for nearly half (48%) of its total disbursements. In the SADC region, the Development Bank of South Africa also focuses primarily on its core mandate of infrastructure funding.
In some ways, though, the EADB is already set up to finance infrastructure. Such funding typically requires long-term loans. While the liberalization of financial markets and the rapid increase in the number of commercial banks in the financial system has largely improved availability of short-term as opposed to long-term credit, the latter accounts for well over 80% of the loans approved by the EADB in any given year. However, it needs to ramp up the scale of its lending. After a relatively modest start while it found its financial feet, the EIB now shells out more credit than the other multilateral banks put together. The EADB’s annual disbursement, on the other hand, is woefully small -in 2008 it was less that the amount Kenya’s Higher Education Loans Board advanced to the country’s students!
The EADB must also attend to its redistributive function just as the EIB funneled resources to the poorer sections of Europe. In fact, before joining the European Economic Community, Italy pressed for the creation of the EIB largely to help fund infrastructure in its Southern region. In contrast, between 1995 and 2006, the EADB’s approved investments were evenly split between Kenya, Uganda and Tanzania. The bank must revisit its roots and especially the requirement to ensure the fruits of integration are equitably distributed. Though Nalo is opposed to this, preferring policy incentives that encourage private sector investors to view the region as a single entity, he acknowledges that the EACDF does contemplate a mechanism of compensation for losses incurred due to the integration project and proposes that such mechanisms be included in a revised EADB Charter.
The bank is appealing a $61 million arbitral award given against it to Tanzanian transporters, Blueline Enterprises Ltd. Its numerous attempts to have the award set aside have been dismissed on technicalities. According to lawyer Kibe Mungai, in 5 years of litigation, the case has never been heard on its merits.
Though its lawyers have warned that the institution may not have the resources to pay and may face the prospect of liquidation if all its appeals are unsuccessful, the bank is now seeking to reassure “all stakeholders” that its operations will continue. In a Press release, the bank declares that the EAC Partner States, who own over 80% of the bank as well as non-state shareholders “remain firmly committed to the EADB and will continue to support it.” This is despite the fact that the member states have already eschewed the idea of shelling out taxpayer cash to “pay a private businessman”.
The African Development Bank, which owns close to 7% of the EADB has declared that it is 100% behind the Bank. Though he would not be drawn out on the subject of a bailout, Bhargav Purohit, who represents the African Development Bank on the EADB’s Board of Directors, said the AfDB would support the EADB in its time of need. “We will be here to work with them as we have been for the last 40 years,” he declared.
PS Nalo believes East Africa must make a strategic choice between the proposed the East Africa Community Development Fund and restructuring the EADB to avoid “duplication.” Declaring that the EADB is potentially “an extremely useful instrument,” he advised the Bank’s management to start thinking about funding infrastructure projects such as a fibre optic cable from Mombasa to the DRC or a nuclear power plant, or mobilising equity and capital for renovating the railway system.
Purohit, though, observes that the Bank’s role is still defined by the 1980 Charter and any changes in its mandate would need to be reflected there. He believes that to properly perform its new role, the EADB would need to be restructured and adequately capitalized. He further adds that a strategic plan is currently being worked on by the Director-General and her team and it will include recommendations on the requisite level of capitalization.
Interestingly, in 2008, The EastAfrican reported that a $135 million recapitalisation package was yet to be realized and Nalo feels that partner states will remain unwilling to recapitalize it until it is restructured and shows readiness to delve into regional issues.
The bank has had a troubled history, having undergone at least three bouts of restructuring within the last two decades, mostly following losses. It was first restructured in 1993. Between 1994 and 1998, it had a good run, doubling its profits. This was followed by a period of deterioration which culminated in a $2.9 million loss in 2002, prompting another restructuring and the departure of 5 top managers. The latest facelift comes on the back of an $8 million loss in 2008 which led to the removal of its top brass including the Director-General.
One of the few remaining vestiges of the original East African Community, the Bank was created by Article 21 of the Treaty for East African Co-operation of 6 June 1967 and its Charter was set out in Annex VI of the Treaty. Its main purpose was to promote the equitable industrial development of the three member countries, Kenya Uganda and Tanzania. While the three countries contributed equally to its capital base, the bank was required to devote 38.75 per cent of its investments in each Tanzania and Uganda, against 22.5 per cent in Kenya.
However, under its statutes, it could only finance “viable” projects, most of which were in Kenya, especially during the 1971-73 period. This, and the absence of coordinated industrial planning in EAC, greatly limited the bank’s ability to effectively redistribute the benefits of the integration.
The EADB survived the dissolution of the EAC in 1977 largely because it did not rely on the EAC for funding. Headquartered in Kampala, Uganda, the bank was revitalized by a then rare show of unity when Kenya, Tanzania, and Uganda momentarily set aside their differences in an effort to bolster the bank's activities.
The Treaty Amending and Re-enacting the Charter of the East African Development Bank,which came into force on 23rd July 1980, rescued it from legal limbo. It provided that the EADB Charter would henceforth draw its legal validity from the 1980 agreement and not the 1967 Treaty which founded it. Under the new charter, in addition to promoting industrial development, the bank could also provide funding and technical assistance for agricultural, forestry, tourism, transportation, and infrastructure development projects. It had an authorised capital stock of US$ 1.08 billion though to date it’s actual paid-up capital remains at less than 10% of that figure.
In 1984 the International Monetary Fund agreed to provide further financial backing and by the late 1980s the African Development Bank and the Japanese government agreed to channel $56.4 million in credit through the EADB for regional projects. By 1990 the EADB had lent $28 million for 19 separate projects, but many of these and other loans were soon in arrears. Many of the bank's problems were blamed on currency devaluations and various technical financial adjustments. In 1993, the EADB agreed to a complete restructuring under the guidance of a new director general.
That same year, Kenya, Uganda and Tanzania took another crack at regional integration by forming the Permanent Tripartite Commission for East African Co-operation. The Treaty for the Establishment of the East African Community was signed in November 1999 and entered into force in July 2000. The EADB, along with other remnants of the 1967 Treaty, was declared an Autonomous Institution of the Community. The bank was charged with catalyzing regional integration through the provision of development finance.
The 2nd EAC Development Strategy which covered the years 2001-2005, recognized a gap in regional financing for regional projects, citing low savings and incomplete financial reforms. To plug this hole, the Strategy recommended establishing a Regional Development Fund with the EADB used as a transitional vehicle for raising funds for regional projects before the Fund is up and running.
While this seems to suggest that the Bank is of limited value, at least as far as EAC integration is concerned, a paper tabled at the July 2008 UN Conference on Trade and Development notes that given the important imperfections of private international capital markets, especially in the provision of long-term funding – such as is required for infrastructure – Regional Development Banks and Sub- Regional Development Banks such as the EADB need to play an ever increasing role in financing regional infrastructure.
Financing from Multilateral Development Banks such as the World Bank tends to come with strict conditionalities, give little regard to the views of developing countries, and are heavily influenced by the agendas of their shareholders’ domestic constituencies. RDBs and SRDBs on the other hand, can rely on informal peer pressure rather than imposing conditionality allowing for faster and more flexible disbursements of resources. There is also little danger of countries’ voices been drowned out in a bank they themselves own, or their being held hostage to foreign agendas.
RDBs and SRDBs can also help ameliorate the vagaries of international private finance by providing counter-cyclical finance when private flows dry up and developing innovative market instruments, such as GDP-linked bonds, that better spread risks and reduce the likelihood of costly and disruptive defaults and debt crises.
Therefore, while the EADB has financed numerous projects in different sectors within the region including education, agriculture, agro-processing, construction and real estate, health, transport and telecommunications,it needs to expand its portfolio to include financing regional integration efforts and especially the cross-border infrastructure. Just as the EAC is following the EU integration model, so the EADB should look carefully at the example set by its counterpart in Europe, the European Investment Bank.
The EIB was central to the process of European integration since the beginning. Indeed, just like the Treaty of East Africa Cooperation created the EADB, the 1957 Treaty of Rome that created the European Economic Community also created the EIB. The EIB, the most powerful instrument in the Treaty, was established in order to support the European integration process. It had a three-fold mandate: to ensure equitable development by channeling savings from the more developed parts of the Community to the less developed parts; to help modernize or replace “senile industries”; and to develop cross-border infrastructure by transforming Europe’s essentially national infrastructure into an integratedEuropean infrastructure.
To fulfill a similar role, the EADB needs to extend its portfolio to include financing of regional infrastructure projects. As the Deputy Governor Bank of Uganda, Dr. Louis Austin Kasekende notes, “the EADB… lends money to commercial enterprises to fund their capital investment and working capital. Most of these enterprises are in the private sector although a few are public enterprises and joint ventures.” In contrast, in its first ten years, the EIB lent almost exclusively to infrastructure and industry with the former accounting for nearly half (48%) of its total disbursements. In the SADC region, the Development Bank of South Africa also focuses primarily on its core mandate of infrastructure funding.
In some ways, though, the EADB is already set up to finance infrastructure. Such funding typically requires long-term loans. While the liberalization of financial markets and the rapid increase in the number of commercial banks in the financial system has largely improved availability of short-term as opposed to long-term credit, the latter accounts for well over 80% of the loans approved by the EADB in any given year. However, it needs to ramp up the scale of its lending. After a relatively modest start while it found its financial feet, the EIB now shells out more credit than the other multilateral banks put together. The EADB’s annual disbursement, on the other hand, is woefully small -in 2008 it was less that the amount Kenya’s Higher Education Loans Board advanced to the country’s students!
The EADB must also attend to its redistributive function just as the EIB funneled resources to the poorer sections of Europe. In fact, before joining the European Economic Community, Italy pressed for the creation of the EIB largely to help fund infrastructure in its Southern region. In contrast, between 1995 and 2006, the EADB’s approved investments were evenly split between Kenya, Uganda and Tanzania. The bank must revisit its roots and especially the requirement to ensure the fruits of integration are equitably distributed. Though Nalo is opposed to this, preferring policy incentives that encourage private sector investors to view the region as a single entity, he acknowledges that the EACDF does contemplate a mechanism of compensation for losses incurred due to the integration project and proposes that such mechanisms be included in a revised EADB Charter.
Tuesday, March 02, 2010
The Ugly Canadian
Few issues have generated as much heat in recent African affairs as China’s foray onto the continent. Much has been made of the dragon’s insatiable hunger for the continent’s mineral wealth. The breadth of Chinese involvement has focused minds in the West and provoked much media hyperbole. However, at the same time, the Middle Kingdom’s great rival from North America has been active as well, though her activities seem not to attract as much attention. No, I’m not talking about the USA. Rather the other North American superpower – Canada.
Yes. Canada. Soft, unassuming Canada dominates mining and mineral exploration on the continent. According to the Ministry of Natural Resources Canada (NRC), only South Africa has more mining assets and investments. And while the Rainbow Nation’s interest is concentrated , is just ahead of Canada in the African mining industry. But with South Africa’s gold pot is to be found largely within its borders, by 2007, Canadian companies were active in 35 African countries and Africa represented 17% of the total $85.9 billion in cumulative Canadian mining assets. This year, the total value of Canadian mining assets in Africa is expected to surpass $21 billion compared to just $233 million in 1989.
The Canadian government has actively supported this expansion. Since the 1990s, under the influence of industry associations, the Canadian state has implemented a comprehensive strategy to support the expansion of investments and activities abroad. Fiscal measures designed to attract mining interests include tax deductions for expenditure incurred abroad and exemptions for profits repatriated to Canada. According to its 2007 annual report, Export Development Canada, the government’s export credit agency, has supported projects totalling $22 billion worth of exports and investments in Canadian companies in the extractive sector.
Endowed with both minerals and a long mining tradition, Canadians are not exactly lacking in expertise. As of 2001, the sector accounted for 4% of Canada’s Gross Domestic Product (GDP), with $64 billion in exports and $30 billion in capital expenditure, while employing a total of 400,000 people. The year before, in 2000, there were at least 2,200 Canadian companies related to the mining industry.
So why do they want our minerals? Could it be to power their manufacturing sector? With a modest 2% growth, Canada had been the exception to the trend of manufacturing job loss among developed countries over the last quarter century. But now they are playing catch-up. Between 2004 and 2008, as Canada’s mining investment in Africa has exploded, their manufacturing sector imploded, shedding over 300,000 jobs. Its share of total employment fell by close to one-third and when the U.S. Bureau of Labor Statistics released a comparison of average annual growth rates in manufacturing output over the 2000-2007 period in 16 different industrialized countries, Canada was right at the bottom with real output declining at an average rate of 0.3% per year. So, it is not like they have a voracious appetite for raw materials.
How about energy? Perhaps they need some of our oil and natural gas? Not a chance. Canada is a net exporter of oil, natural gas, coal, and electricity. In 2006, she produced 19.3 quadrillion British Thermal Units (Btu) of total energy, the fifth-largest amount in the world. Not only is she the largest producer of hydroelectricity in the world, she also ranks 3rd and 7th in global gas and oil production respectively. Even as Canadian companies are busy signing oil exploration and extraction contracts here, back home oil tycoons have invested more than CAD$30 billion in Alberta’s oil sands and estimates are for that investment to mushroom to CAD$125 billion in the next decade. So no, they don’t need our oil.
Why are they here then? The reasons is actually quite simple. For one, minerals are relatively easy to find in Africa. The continent hosts 30% of planet’s mineral reserves including 40% of Gold, 60% of cobalt, 90% of the worlds PGMs (Platinum Group of Metals) and proven oil reserves of over 117 billion barrels as at the end of 2007. In Canada, the easy-to-find stuff has already been found. Companies are now developing low-grade projects with marginal economics and investors have reached a stage where they assume that mines will not be delivered on time and on budget. A good example is British Columbia’s Galore Creek Project, a partnership between two Canadian mining entites, NovaGold and Teck Cominco, to develop what was supposed to be “one of the world’s largest undeveloped copper-gold deposits, with quality, long-life reserves and excellent geologic potential.” It was halted after costs more than doubled and the estimated long-term copper price raised questions about its economic feasibility. Interestingly, according to Mineweb , an internet-based international mining publication, Teck Cominco President and CEO Don Lindsay speculated that the mine might become more attractive if “problems develop with copper projects in the Congo.”
In some places in Africa, meanwhile, a company like First Quantum Minerals Ltd. can get its Lonshi mine up and running less than a year after a discovery is made and there are highly prospective regions like the Central African copperbelt that have had no serious exploration for decades, or ever. "You're looking at virgin ground that's almost untouched. It's finally being explored properly," says Jean Luc Roy, CEO of the copperbelt exploration company El Nino Ventures Inc. Robert Lavalliere, vice-president of investor relations at Anvil Mining Ltd., the leading copper producer in the DRC with three major projects, notes the productive potential of open pit mines there is “three, four, five times" that of the rest of the world. However, I hasten to add, this is not universally true of the continent. The experience of Tiomin Resources Inc. in Kenya will suffice to illustrate this.
That said, it is abundantly clear that Canadians are not here just for the minerals. They’re here for the money. And with sky high global prices for raw materials, you can bet there’s lots of it to be made. According to CorpWatch.org, 60 percent of all the world’s mining companies are based in Canada, generating $50 billion a year for Canadians. In fact, talk of a scramble for African minerals pitting the West and China is somewhat misleading. Much of it , no matter who mines it, eventually finds its way, via the global markets, to the booming economies of Asia. The scramble is for cash since the Chinese probably figure it would be cheaper (and safer) to mine the products themselves rather than wait for middle-men to deliver it.
As everyone (except the African people, of course) fights for his piece of the pie, moral standards are being thrown to the wind. Around the world, Canadians are generally regarded as a pleasant, soft spoken people. But being home to nearly two-thirds of the world’s mining and exploration companies, it is inevitable that there will be some rotten apples. Each year, a significant number of these are accused of environmental and human rights abuses, often in developing countries where the government is weak or corrupt. Their behaviour is so bad that in some places, according to the Toronto Star, the word "Canada" is so reviled that travelling Canadians mask their citizenship by wearing, of all things, American flags on their caps and backpacks. The Canadian government has struggled for a decade with how to hold mining firms accountable for their actions overseas. So far its attempts have proved inadequate.
It has disregarded repeated calls for an independent investigation into the 1996 Bulyanhulu gold mine incident. In 2001, eyewitness accounts, family testimony, photos and police videotape uncovered by the Lawyer's Environmental Action Team (LEAT) of Tanzania corroborated long-standing allegations that employees of the Canadian owned Kahama Mining Corporation, LTD (KMCL) in conjunction with the Tanzanian police, buried over fifty artisanal miners by bulldozing over the entrances to the shafts in which they worked at the Bulyanhulu gold mine in 1996.
In 2002 it ignored a United Nations report called on it to investigate the actions of seven Canadian companies accused of illegally exploiting resources from the Democratic Republic of the Congo. Two years later, 73 people were killed by the Congolese military, which used vehicles, supplies, pilots and drivers from a Canadian-Australian mining company to transport them to the site of the massacre. According to MiningWatch’s Jamie Kneen, Anvil Mining had been forced to shut down production at their Dikulushi Mine when a so-called “rebellion” took place in a nearby village; a rebellion of “10 to 12” villagers that had nothing to do with mining. Congolese Armed Forces (FARDC), of the DRC government, provided with trucks and logistics by Anvil, proceeded to seize the town and then went door-to-door “raping and pillaging.”
Yes. Canada. Soft, unassuming Canada dominates mining and mineral exploration on the continent. According to the Ministry of Natural Resources Canada (NRC), only South Africa has more mining assets and investments. And while the Rainbow Nation’s interest is concentrated , is just ahead of Canada in the African mining industry. But with South Africa’s gold pot is to be found largely within its borders, by 2007, Canadian companies were active in 35 African countries and Africa represented 17% of the total $85.9 billion in cumulative Canadian mining assets. This year, the total value of Canadian mining assets in Africa is expected to surpass $21 billion compared to just $233 million in 1989.
The Canadian government has actively supported this expansion. Since the 1990s, under the influence of industry associations, the Canadian state has implemented a comprehensive strategy to support the expansion of investments and activities abroad. Fiscal measures designed to attract mining interests include tax deductions for expenditure incurred abroad and exemptions for profits repatriated to Canada. According to its 2007 annual report, Export Development Canada, the government’s export credit agency, has supported projects totalling $22 billion worth of exports and investments in Canadian companies in the extractive sector.
Endowed with both minerals and a long mining tradition, Canadians are not exactly lacking in expertise. As of 2001, the sector accounted for 4% of Canada’s Gross Domestic Product (GDP), with $64 billion in exports and $30 billion in capital expenditure, while employing a total of 400,000 people. The year before, in 2000, there were at least 2,200 Canadian companies related to the mining industry.
So why do they want our minerals? Could it be to power their manufacturing sector? With a modest 2% growth, Canada had been the exception to the trend of manufacturing job loss among developed countries over the last quarter century. But now they are playing catch-up. Between 2004 and 2008, as Canada’s mining investment in Africa has exploded, their manufacturing sector imploded, shedding over 300,000 jobs. Its share of total employment fell by close to one-third and when the U.S. Bureau of Labor Statistics released a comparison of average annual growth rates in manufacturing output over the 2000-2007 period in 16 different industrialized countries, Canada was right at the bottom with real output declining at an average rate of 0.3% per year. So, it is not like they have a voracious appetite for raw materials.
How about energy? Perhaps they need some of our oil and natural gas? Not a chance. Canada is a net exporter of oil, natural gas, coal, and electricity. In 2006, she produced 19.3 quadrillion British Thermal Units (Btu) of total energy, the fifth-largest amount in the world. Not only is she the largest producer of hydroelectricity in the world, she also ranks 3rd and 7th in global gas and oil production respectively. Even as Canadian companies are busy signing oil exploration and extraction contracts here, back home oil tycoons have invested more than CAD$30 billion in Alberta’s oil sands and estimates are for that investment to mushroom to CAD$125 billion in the next decade. So no, they don’t need our oil.
Why are they here then? The reasons is actually quite simple. For one, minerals are relatively easy to find in Africa. The continent hosts 30% of planet’s mineral reserves including 40% of Gold, 60% of cobalt, 90% of the worlds PGMs (Platinum Group of Metals) and proven oil reserves of over 117 billion barrels as at the end of 2007. In Canada, the easy-to-find stuff has already been found. Companies are now developing low-grade projects with marginal economics and investors have reached a stage where they assume that mines will not be delivered on time and on budget. A good example is British Columbia’s Galore Creek Project, a partnership between two Canadian mining entites, NovaGold and Teck Cominco, to develop what was supposed to be “one of the world’s largest undeveloped copper-gold deposits, with quality, long-life reserves and excellent geologic potential.” It was halted after costs more than doubled and the estimated long-term copper price raised questions about its economic feasibility. Interestingly, according to Mineweb , an internet-based international mining publication, Teck Cominco President and CEO Don Lindsay speculated that the mine might become more attractive if “problems develop with copper projects in the Congo.”
In some places in Africa, meanwhile, a company like First Quantum Minerals Ltd. can get its Lonshi mine up and running less than a year after a discovery is made and there are highly prospective regions like the Central African copperbelt that have had no serious exploration for decades, or ever. "You're looking at virgin ground that's almost untouched. It's finally being explored properly," says Jean Luc Roy, CEO of the copperbelt exploration company El Nino Ventures Inc. Robert Lavalliere, vice-president of investor relations at Anvil Mining Ltd., the leading copper producer in the DRC with three major projects, notes the productive potential of open pit mines there is “three, four, five times" that of the rest of the world. However, I hasten to add, this is not universally true of the continent. The experience of Tiomin Resources Inc. in Kenya will suffice to illustrate this.
That said, it is abundantly clear that Canadians are not here just for the minerals. They’re here for the money. And with sky high global prices for raw materials, you can bet there’s lots of it to be made. According to CorpWatch.org, 60 percent of all the world’s mining companies are based in Canada, generating $50 billion a year for Canadians. In fact, talk of a scramble for African minerals pitting the West and China is somewhat misleading. Much of it , no matter who mines it, eventually finds its way, via the global markets, to the booming economies of Asia. The scramble is for cash since the Chinese probably figure it would be cheaper (and safer) to mine the products themselves rather than wait for middle-men to deliver it.
As everyone (except the African people, of course) fights for his piece of the pie, moral standards are being thrown to the wind. Around the world, Canadians are generally regarded as a pleasant, soft spoken people. But being home to nearly two-thirds of the world’s mining and exploration companies, it is inevitable that there will be some rotten apples. Each year, a significant number of these are accused of environmental and human rights abuses, often in developing countries where the government is weak or corrupt. Their behaviour is so bad that in some places, according to the Toronto Star, the word "Canada" is so reviled that travelling Canadians mask their citizenship by wearing, of all things, American flags on their caps and backpacks. The Canadian government has struggled for a decade with how to hold mining firms accountable for their actions overseas. So far its attempts have proved inadequate.
It has disregarded repeated calls for an independent investigation into the 1996 Bulyanhulu gold mine incident. In 2001, eyewitness accounts, family testimony, photos and police videotape uncovered by the Lawyer's Environmental Action Team (LEAT) of Tanzania corroborated long-standing allegations that employees of the Canadian owned Kahama Mining Corporation, LTD (KMCL) in conjunction with the Tanzanian police, buried over fifty artisanal miners by bulldozing over the entrances to the shafts in which they worked at the Bulyanhulu gold mine in 1996.
In 2002 it ignored a United Nations report called on it to investigate the actions of seven Canadian companies accused of illegally exploiting resources from the Democratic Republic of the Congo. Two years later, 73 people were killed by the Congolese military, which used vehicles, supplies, pilots and drivers from a Canadian-Australian mining company to transport them to the site of the massacre. According to MiningWatch’s Jamie Kneen, Anvil Mining had been forced to shut down production at their Dikulushi Mine when a so-called “rebellion” took place in a nearby village; a rebellion of “10 to 12” villagers that had nothing to do with mining. Congolese Armed Forces (FARDC), of the DRC government, provided with trucks and logistics by Anvil, proceeded to seize the town and then went door-to-door “raping and pillaging.”
As recent revelations from Uganda demonstrate, these companies are not above signing secret agreements or dumping toxic waste into rivers as they did in Tanzania. Denis Tougas, director of the L'Entraide missionnaire (L'EMI) in Montréal, notes that “it’s a safe bet that Canada’s image as a moderate country and disinterested development partner in Africa is now thoroughly outdated.”
Saturday, November 14, 2009
Argue, Don't Shout.
In the 1970s Julius Nyerere, then president, issued a thin booklet that he distributed to all his diplomats, titled, “Argue, Don’t Shout,” in which he tried to show how disputation is more effective than name-calling and shouting, even when someone is becoming an irritant. [Tanzanian] “leaders” – I know this word is misplaced — would do well to get a copy and go through it carefully.... Tanzanians have recently witnessed easily the most acrimonious exchanges — let’s not dignify them with the description “arguments” — in their history, all played out in full public view, because the press reported them, utterance after ugly utterance, with surprising accuracy.
Friday, September 11, 2009
Commuting Justice? Why We Need The Death Penalty
In what Prof. William A. Schabas of the Irish Centre for Human Rights described as “very likely the largest commutation of death sentences in modern history”, the President of Kenya in early August announced that all death row inmates would not be executed and that their sentences would be commuted to life imprisonment. This move elicited a rare cacophony of praise from both local and international commentators, organizations and governments. In his statement, Kibaki explained that he was acting to relieve the over 4000 inmates’ “mental anguish, suffering, psychological trauma, and anxiety”. Of course, nothing was said about the suffering that this, as well as other moves to abolish the death penalty, is likely to cause in the society as large.
While capital punishment has existed in almost all civilizations, across the world it is increasingly falling out of favour. According to the Kenya National Commission on Human Rights, Currently, more than half the world’s states have taken steps towards total or de facto abolition of the death penalty and apply life imprisonment for the most serious crimes. And less than half of the countries retaining the death penalty actually execute prisoners. In Africa, 11 countries, including Rwanda and South Africa have banned state sanctioned executions. And even those that haven’t are remarkably queasy about the whole affair. Tanzania has not executed anyone since 1994. Uganda, despite President Yoweri Museveni’s declaration that “we shall shoot anybody who kills a human being” has neither shot nor hanged anyone in a decade. In Kenya, while an average of 750 people are sentenced to death each year, none has been sent to the gallows since 1987.
Ever since it came to power, the Kibaki administration has sought to abolish the death penalty is spite of the overwhelming public support for it. In January 2003, two weeks into Kibaki’s first term, then Justice and Constitutional Affairs Minister, Kiraitu Murungi, revealed plans to abolish capital punishment in the country by the middle of the year. A month later his boss ordered the freeing of 28 prisoners on death row and commuted the sentences of 195 others. Presiding over their release, then Vice President, Moody Awori, announced his intention to introduce a Bill in Parliament to abolish the death penalty, prompting the then Commissioner of Prisons, Abraham Kamakil, to declare his longing “for the day Parliament will remove the death penalty from our Constitution.”The sentence was still in the books when, in June 2005, Kiraitu again declared that the government was “committed to abolishing the death penalty”. It is a position which enjoys considerable cross-party support. The ODM’s William Ruto, has called the death penalty a "vengeful" sentence that served no helpful purpose and party secretary Prof. Anyang’ Nyongo has declared that "the death penalty is not a deterrent and should be abolished." Despite this seeming consensus, in August 2007 Parliament defeated a Motion, moved by Kasipul-Kabondo MP, Mr Paddy Ahenda, seeking to do exactly that.
In its Position Paper on the Abolition of the Death Penalty, the KNCHR lists its objections to capital punishment: the death penalty is the ultimate violation of human rights. It is a violation of the fundamental right to life, which the Government has pledged to protect under the Constitution and other international human rights instruments that it has ratified. Similarly, the death penalty amounts to cruel, inhuman and degrading treatment, which contravenes provisions of section 74(1) of the Constitution, the Convention Against Torture and the International Covenant on Civil and Political Rights.
To support its position, the Commission advances several arguments. However, most of them dissolve when applied to other forms of punishment. For example, it declares that “the hallmark of a civilised society is arguably the acknowledgement of human worth and dignity at the core of which is the principle of the sanctity of life, which should be most protected under all circumstances.” The suggestion here is that those who favor the death penalty have a less than total regard for value of human life. Nothing could be further from the truth. More than 130 years ago, the eminent philosopher John Stuart Mill spoke eloquently on the issue before the English Parliament: "Does fining a criminal show want of respect for property or imprisoning him, for personal freedom? Just as unreasonable is it to think that to take the life of a man who has taken that of another is to show want of regard for human life. We show, on the contrary, most emphatically our regard for it, by the adoption of a rule that he who violates that right in another forfeits it for himself."
Arguing against “the retributive eye-for-an-eye delivery of justice”, the KNCHR avers that “The use of (the) death penalty only lowers the standards of government to the mentality of the murderer itself; it only demonstrates that the government is not different from the murderer. We do not punish rape with rape, or burn down the house of an arsonist. We should not, therefore, punish the murderer with death.” If this argument were to be taken to its logical conclusion, then all forms of sanction would be declared immoral as all involve the denial of some fundamental right (life, liberty and property) which some criminal has previously denied to his victims. Prison terms, fines and community service require that we curtail the enjoyment of fundamental freedoms. Surely, abolishing all forms of punishment would be unlikely to deliver a society safe from crime. Secondly, to state that we cannot demand an-eye-for-an-eye recompense is to put the criminal himself in the position of determining what can or cannot be done to him. Since we do not wish to be like thieves, then society cannot take for itself a thief's hard earned property through a system of fines. The very act of thieving would thus deprive society of resort to this kind of punishment and kidnapping would automatically outlaw jail sentences. The criminals would be the new legislators.
The KHCHR believes that the death penalty does not address the victim’s pain and the suffering endured by the victim’s family since “whoever was murdered has no way of knowing and appreciating the punishment meted upon the offender.” This is a curious position to take considering that in the aftermath of the 2008 post-election violence and in answer to call for a general amnesty, the very same Commission declared its firm belief that “accountability for those accused of committing serious human rights violations…is a fundamental aspect of victims' rights to justice.” So which is which? Does the KNCHR believe that the dead have no right to justice?
The KNCHR’s objections to the application of the death sentence are similarly flawed. Take, for example, the sophistic argument that “enforcement of the death penalty amounts to cruel, inhuman and degrading treatment and punishment of the condemned person... In a de facto abolitionist state like Kenya, a person always lives in anxiety with the reality of death hanging over his or her head from the moment of sentencing.” What the Commission is really saying is that it is the failure to carry out death sentences that results in the prisoners’ (to quote Kibaki) “mental anguish, suffering, psychological trauma, and anxiety.”
Dealing with a similar situation, the Uganda Supreme Court in January ordered that all death sentences be carried out within three years. However instead of recommending that we abandon the de facto moratorium on executions, the KNCHR prefers that death sentences are commuted to life imprisonment. Are they seriously asking us to believe that this a morally superior alternative? Amnesty International, in a report titled Prisons: Deaths due to torture and cruel, inhuman and degrading conditions, declared that “prison conditions in Kenya are worse than in other African countries.” And this is how Wikipedia describes the situation in Kamiti Maximum Prison:
There is still no reliable water supply, with over 200 prisoners hauling buckets of water around daily. The inmates working in the ‘industry’ section are paid only 10 cents (kenya shilling) per day, as per the outdated 1940s legislation which rules the organisation. Within the prison, condemned "G" block is famed for its particularly brutal lifestyle, characterised by predatory sodomy and mobile phone confidence tricksters. The prison was built for 1400 prisoners, and it now houses over 3600 in conditions of unbelievable squalor… The authorities have banned any supplemental food…and malnutrition and ulcers have become far more prevalent.
Imprisoning someone for life under such conditions is surely “cruel, inhuman and degrading treatment and punishment.” In fact, the Tanzanian Court of Appeal, when considering the constitutionality of capital punishment in the case Republic v Mbushuu, quoted Paul Sieghart’s 1983 article in The International Law of Human Rights: “As human rights can only attach to living beings, one might expect the right to life itself to be in some sense primary, since none of the other rights would have any value or utility without it. But the international instruments do not infact accord it any formal primacy. International human rights law assigns a higher value to the quality of living as a process than to the existence of life as a state….the law tends to regard acute or prolonged suffering (at all events in cases where it is inflicted by others, and so it is potentially avoidable) as a greater evil than death, which is ultimately unavoidable for everyone.” From the human rights perspective, therefore, life imprisonment under the conditions prevailing in our prisons is a worse, not better, alternative to capital punishment.
The KNCHR paper also raises objections around the fallibility of our criminal justice systems and the irreversibility of death. The fear here is that we are bound to execute a few innocents. Again these objections dissolve when applied to other forms of punishment. If we insisted on an absolute measure of guilt (as opposed to the "beyond reasonable doubt" standard), then we would have no criminal justice system. And all punishments are inherently irreversible anyway. You cannot give back the years and opportunities that are denied someone who is wrongfully jailed or fined.
Concerning the deterrent value of capital punishment, the paper states: “There has been no proven correlation between the death penalty and deterrence of crimes and countries that still maintain the death penalty in their statutes have not seen a downturn in crime. A survey conducted by the UN in 1998 and later updated in 2002 found no correlation between the
death penalty and homicide rates. According to the study, the hypothesis that capital punishment deters crime to a greater extent than does the application of the supposedly lesser punishment of life imprisonment is flawed. In Kenya, for instance, the fact that death sentences are handed down has not deterred commission of crimes for which such sentences are implemented. The key to deterrence is not to apply the death penalty but to increase the likelihood of detection of crime, arrest and conviction.”
However, even here the KNCHR fails to see the wood for the trees. The fact is one would not expect studies to show a deterrent effect if executions are not carried out. The results of study conducted by Hashem Dezhbakhsh and Paul H. Rubin of Emory University and Joanna M. Shepherd of Clemson University suggested that capital punishment when actually employed has a strong deterrent effect; each execution prevents, on average, 18 murders. Another study by H. Naci Mocan of the University of Colorado at Denver and R. Kaj Gittings of Cornell University looked at all death sentences handed out in the United States between 1977 and 1997 and matched that with state-level criminal activity in the relevant time frame. Their results show that each additional execution decreases homicides by about five. More worryingly, each additional commutation increases homicides by the same amount, while an additional removal from death row generates one additional murder.
While the Kenya situation obviously differs from that in the US, we all have to be concerned about the possibility that by commuting the more 4000 death sentences to life imprisonment, President Kibaki may well have signed the death warrants of up to 20,000 innocents. As Cass R. Sunstein and Adrian Vermeule state in their paper Is Capital Punishment Morally Required? The Relevance of Life-Life Tradeoffs: “If the current evidence is even roughly correct, then a refusal to impose capital punishment will effectively condemn numerous innocent people to death. States that choose life imprisonment, when they might choose capital punishment, are ensuring the deaths of a large number of innocent people.” Surely, the first obligation of every government is the protection of its citizens. As John McAdams of Marquette University’s Department of Political Science puts it, "If we execute murderers and there is in fact no deterrent effect, we have killed a bunch of murderers. If we fail to execute murderers, and doing so would in fact have deterred other murders, we have allowed the killing of a bunch of innocent victims. I would much rather risk the former. This, to me, is not a tough call."
Saturday, July 18, 2009
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