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Creating Opportunities for Peace Through Regional Trade in the African Great Lakes Region

September 10, 2007 // 10:00am12:00pm
Event Co-sponsors: 
Project on Leadership and Building State Capacity
Africa Program
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The countries of Africa's Great Lakes region are blessed with abundant natural resources. But instead of bringing prosperity to the region's people, trade in minerals, metals, and timber products has fueled devastating conflicts and contributed to the area's widespread poverty. Despite an extensive understanding of the governance problems that surround this "resource curse," it persists in much of the Great Lakes region—typically defined as including the Democratic Republic of the Congo (DRC), Uganda, Rwanda, Burundi, Kenya, Tanzania, and Zambia. Extreme shortages of power, limited and poorly maintained infrastructure, widespread poverty, ineffective regulation of trade, and corruption in many areas of government and business all hamper efforts to make trade more equitable, sustainable, and profitable for the people of the Great Lakes region.

Despite these serious challenges, prospects for stability and prosperity in the Great Lakes are as high now as they have been in recent memory, and there is reason for cautious optimism, said Nick Bates, a senior political analyst in the East and Central Africa Unit of the UK's Department for International Development (DFID), at an event sponsored by the Woodrow Wilson Center's Environmental Change and Security Program (ECSP) and Africa Program on September 10, 2007. Despite the recent reignition of violence in North Kivu in eastern DRC, the Great Lakes region as a whole is enjoying relative peace. There are other promising developments in the region. The DRC recently held national elections that were generally considered to be free and fair. Civil society groups, which often serve as watchdogs and checks on corrupt trade and governance, are becoming stronger and more vocal. There is a strong regional and international market for the minerals and forest products extracted from the Great Lakes countries—and demand is likely to remain high as China and India's hunger for these raw materials grows. The challenge now is for this lucrative trade to directly benefit the majority of the people living in the Great Lakes countries, rather than the corrupt few who have typically exploited these resources.

Bates believes the relatively favorable political and economic circumstances in the region present international institutions, nongovernmental organizations (NGOs), donor governments, and Great Lakes governments with a critical opportunity to try to ensure that natural resources trade contributes more strongly to poverty alleviation. To this end, DFID, the U.S. Agency for International Development (USAID), and the Common Market for Eastern and Southern Africa (COMESA) commissioned research from four NGOs (Forests Monitor, the Initiative for Central Africa [INICA], Pact, and the Pole Institute) on the details of regional trade patterns and how this trade could be utilized to promote poverty reduction and peace. "I'm always slightly worried about the expression ‘the true nature' of it because finding the truth about this activity is very difficult and highly political and sensitive," said Bates. "But it is what we tried to do—getting four different research bodies to look at it from different angles and understand the nature of it."

The forthcoming report, Trading for Peace: Achieving security and poverty reduction through trade in natural resources in the Great Lakes area, is a synthesis of the four NGOs' research, focusing particularly on trade out of eastern DRC and Katanga through the Great Lakes and East Africa. The report, emphasized Bates, is intended to lead to specific, concrete actions by donor governments, Great Lakes governments, international organizations, and NGOs. "At the end of the day, it's all fine and dandy getting some research done, but unless it's usable—and used—it doesn't serve anyone's purpose," he said. To this end, the draft report was presented at a September 2007 meeting of COMESA members in Lusaka, Zambia to brainstorm targeted actions and policy interventions.

Trade's Critical Role in DRC

Even during times of conflict and instability, trade plays a crucial role in the DRC, providing millions of people with livelihoods and generating significant revenue for the government. The DRC possesses a relatively open and resilient economy, importing as well as exporting goods. However, the DRC's exports are almost entirely unprocessed, which is an immediate potential area of intervention, said Bates. One of the primary reasons why the DRC exports few processed commodities is a scarcity of power. There are no industrial mines in eastern DRC because there is not enough power to run them, and the DRC is even further from having enough energy to run processing plants. The extraction of unprocessed minerals is profitable, of course, but it would be far more lucrative for the DRC's citizens and government if the country were equipped with facilities that could process these raw materials.

Another reason why trade is so critical in the DRC is the very limited demand within the country for its natural resources—for tin, cassiterite, or diamonds, for instance. Unless these resources are traded, they are of little benefit to the DRC's people or government. Additionally, perennial conflict and bad governance in the DRC have weakened the agricultural sector, encouraging people to depend instead on activities with quicker returns, such as mining. Fertile agricultural land in the DRC lies fallow because people are not confident that they will be able to remain in the same place for four months to harvest the crops they plant.

Inaccurate Data, Poor Infrastructure, Ineffective Regulation

The data available on trade in the DRC—from internal organizations, such as the customs bureau, as well as international organizations—are scant and unreliable. "One of the reasons why it is weak is because those who are trying to exploit the natural resources and trade them find that having weak data enables the fraud to happen that much more easily. So there's an incentive to keep the data weak," said Bates. The actual value of the DRC's exports and imports is likely to be at least three times their official reported value. For instance, the DRC officially exports a total of 117,300 tons of copper each year, but recorded imports of DRC copper to Zambia alone are 223,000 tons. More than 60 percent of exports out of the DRC are unrecorded, which is a considerable problem because the government does not benefit from this trade. If this figure were reduced, it would mean an immediate and significant increase in government revenue.

Trade is often deliberately corrupt: Traders and government officials frequently cooperate so they each receive their desired cut of the value of the traded goods. This corruption is aided by the fact that the economy is extremely informal, with weak legitimate banking and financial systems. In addition, the DRC's poor infrastructure creates bottlenecks—disproportionately disadvantaging small-scale traders—and "generally enhances the opportunities for fraud. It means that getting your product smoothly down the market chain becomes that much more difficult," said Bates. The unreliable flow of information between rural and urban areas also penalizes small traders and farmers, who are often forced to sell their goods for far less than the market price—although this situation is beginning to be ameliorated by the use of mobile phones. "It's not the way that aid works, but if we could just shower mobile phones and some money to use them, it would be enormously empowering, particularly for the small traders," commented Bates.

Heavy taxes and charges—legitimate as well as illegal—impede the regular flow of trade, and can make it easier to trade illegally than legally in the DRC. Inconsistencies between customary local law and official regulations further complicate trade. Additionally, a multitude of overlapping state agencies apply up to 24 different official charges on a single mineral, such as cassiterite. Counterintuitively, the DRC's problem is too much regulation, not too little, said Bates. He believes taxes and regulations on trade need to be simplified and streamlined.

Strengthening Civil Society

A provision in the DRC's constitution offers a significant opportunity to help regional trade contribute more directly to poverty alleviation. The provision states that 40 percent of revenue accrued within a province should remain within that province, rather than being sent to the central government in Kinshasa. This provision establishes a strong incentive for provincial administrations to tax trade in an open, transparent manner and "creates a real opportunity for civil society and the provincial parliaments to challenge the provincial government to see how that money is being spent, and whether it is being spent in the delivery of services within the province," said Bates. Unfortunately, the DRC's government has not yet turned this constitutional provision into legislation. But Bates believes that empowered civil society groups—including farmers' unions and traders' associations—could effectively advocate for turning this provision into law.

Strategic Goals

The report's topic, structure, and stakeholders were planned deliberately and strategically, explained Jay Singh, who was until recently the senior conflict, democracy, and governance adviser at USAID's Regional Mission in Nairobi, and is now a conflict and natural resource management specialist with ARD, Inc. USAID and DFID were determined that this process be state-led, not donor-led, so collaboration with COMESA was critical, as was finding a non-threatening issue that appealed to the Great Lakes governments that were involved. The report's attempt to integrate the many existing bilateral trade strategies into a single comprehensive regional strategy posed further challenges. "Most diplomatic efforts and missions are bilateral in focus, so doing a regional program becomes very tricky, because you've got bilateral missions who have their own priorities and their own relationships with different governments…That was our biggest challenge: reconciling a regional approach versus a bilateral approach," said Singh. Bates echoed the importance of developing a regional strategy, despite the associated challenges. "We do tend to silo our work, and look [at issues such as trade] on a country basis. I think looking at this issue from a regional perspective…will enrich it, and, if you like, open up potential entry points for us that we're really keen to examine," he said.

USAID's involvement in this project is part of the agency's growing interest in the relationship between extractive industries and stability, said Ruth Buckley, a senior strategic planning and evaluation adviser in USAID's Africa Bureau. "USAID is increasingly interested in the development problem posed by extractive industries—in turning the vicious cycle of opaque, corrupt extraction that feeds conflict and instability into a virtuous, transparent cycle where good governance supports…poverty eradication," she said. USAID identified extractive industries as an important cross-cutting theme in 2005, and it is also a key issue in Department of State's Foreign Assistance Framework. The U.S. government has been working on implementing the Kimberley Process for diamonds, helping artisanal miners in Tanzania and Madagascar, and aiding timber transparency in Liberia.

Most research on natural resource trade has recommended punitive measures to stop human rights abuses—and Bates praised organizations such as Global Witness and Human Rights Watch that have engaged in this work. In contrast, however, USAID, DFID, and COMESA wanted to focus on the opportunities that more equitable trade offers for reducing poverty and building stability. "We are very, very conscious—and the researchers were—that looking at the positives in a pretty negative scenario is controversial—is to some extent confrontational. But what I would ask is that when the report is available, have a look at the evidence base from which we've tried to draw these conclusions," said Bates. "We should take that opportunity to try to reduce poverty and increase regional stabilization through trade and growth."

Drafted by Rachel Weisshaar.

 
Event Speakers List: 
  • Senior Political Analyst, East and Central Africa Unit, UK Department for International Development
  • Senior Strategic Planning and Evaluation Adviser, Africa Bureau, U.S. Agency for International Development
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