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Continuing Colonialism: World Bank Funds Mining in Africa

By Cyril Mychalejko

27 March, 2011

The private finance sector arm of the World Bank Group announced last month that it would invest $300 million to promote mining in Africa.

“Mining is a critically important yet challenging sector and [the International Finance Corporation] IFC has a role to play in supporting responsible companies that will bring jobs, related infrastructure and government revenues to Africa,” said Andrew Gunther, IFC's Senior Manager of Infrastructure and Natural Resources in Africa and Latin America.

Dr. Aaron Tesfaye, a professor of International Political Economy and African Politics at William Paterson University, said he is not surprised by the announcement because of the economic and security implications mining and strategic metals have for industrialized nations.

"Much has been written about China's voracious appetite for Africa's mineral resources as it attempts to become a global industrial power. I think the World Bank's investment is a precursor of larger investments on projects, as big and emerging powers engage in the new scramble for Africa," said Tesfaye.

While the IFC claims to promote poverty reduction through sustainable development in developing countries, it has been criticized because the mining projects it has funded have a track record of causing human rights abuses and massive environmental damage.

"This is bad news for Africans, at least those who aren't members of the business and political elite," said Jamie Kneen, Communications Coordinator for MiningWatch Canada .

According to a 2006 report published by a group of NGO's that include EARTHWORKS and Oxfam International , "Mining does not have a good record of contributing to sustainable development or poverty reduction. The World Bank's own research has indicated that mineral extraction is neither necessary nor sufficient for sustained economic growth, and that it has not helped developing nations escape from poverty."

Kneen also voiced concerns over human rights, labor rights and environmental sustainability. Sakura Saunders, an anti-mining activist and editor of ProtestBarrick.net , also pointed out the mining industry's horrendous history.

"The extractive industry is not only correlated with high rates of militarism and corruption, but it is also an industry that is inextricably linked to externalized environmental and social costs," said Saunders. "Additionally, these industries traditionally provide very little revenues in terms of royalties and taxes to their host countries."

The EARTHWORKS and Oxfam report, which focused on gold mining, also pointed out that, "These vast industrial operations often irreversibly alter landscapes, displace communities, contaminate drinking water, harm workers, and destroy pristine ecosystems or farm lands."

In January 2006, the IFC awarded Newmont Mining Corporation a loan of $125 million to develop an open-pit gold mine in Ghana. According to the IFC, Newmont's Ahafo gold mine served as a model for "responsible mining and community development." The IFC-Newmont development model ended up displacing over 10,000 people, many of whom were subsistence farmers, while in October 2009 the company was responsible for a cyanide spill which poisoned local water supplies and killed scores of fish. As a result it was ordered to pay $5 million in "compensation". EARTHWORKS, which has been working with local communities against the project through its No Dirty Gold campaign, also noted that: "Security forces associated with the mine have also been implicated in human rights abuses...have beaten and arrested protesters who were demonstrating over unfair Newmont practices. On one occasion protesting workers were shot. Some residents who were displaced have been assaulted by security forces for allegedly trespassing on company property."

Saunders' criticism of paltry royalties and taxes provided to host countries is also supported by a report released in 2009 by the Tax Justice Network for Africa, ActionAid, Southern Africa Resource Watch, Third World Network Africa and Christian Aid, titled "Breaking the Curse: How Transparent Taxation and Fair Taxes can Turn Africa's Mineral Wealth into Development."

The report stated, "Mining companies operating in Africa are granted too many tax subsidies and concessions [and] there is a high incidence of tax avoidance by mining companies conditioned by such measures as secret mining contracts, corporate mergers and acquisitions, and various 'creative' accounting mechanisms."

The report also blamed the World Bank for pushing mining reforms on the continent during the early 1990's that called for deregulation and tax subsidies to attract foreign investment, policies that either created or reinforced these corrupt and harmful conditions plaguing communities across Africa. The report calls for reforms that include more transparency from the mining industry and the creation of a new accounting system and oversight board.

But MiningWatch's Kneen questions whether such policies are attainable, or even advantageous. "Whether a reasonable tax structure could even be implemented in the face of pressure from the industry and the [World] Bank, it's not clear how that money would be used for social investment, compensation, and environmental protection and rehabilitation in the absence of competent agencies to do this. It seems obvious that the independent institutional and governance capacity cannot be created once the extraction is underway – technical capacity can be created but it cannot escape corruption or the more insidious regulatory capture that afflicts even developed countries like Canada."

What all of this amounts to is the continuation of colonialism's brutal legacy through a corporate neocolonialism carried out by transnational mining companies with the aid of international financial institutions working at the behest of developed nations.

"In the division of labor in the international economy, Africa has been relegated to a plantation economy. The primary reason still is the intrusion and present consequences of colonialism resulting in lop-sided development," said William Paterson's Tesfaye. "Today this is evidenced by a highly developed mineral extracting/commodity producing sector for export and a large peasant based rural subsistence economy. It is true of course, that Africans employed in the mineral extraction sector do earn better wages. But neither this minuscule industrial labor force nor the gelatinous and peripheral African bourgeoisie have been able to connect with the larger African population to determine the trajectory of the state and its economy. Thus the colonial model is not a way out for Africa."

Kneen offered a similar analysis. He said, "The colonial underdevelopment of Africa, transformed into a post-independence model of corporate exploitation – for the most part no longer directly run by rich countries – has deprived Africans of not only the capital and resources they need to undertake their own development (fertile land, timber, fish, fresh water), but the democratic and participatory processes by which this could be done."

The underdevelopment of Africa – democratic, social and economic – is not an accident, but rather a strategy to maintain domination over a region rich in resources and cheap labor.

This helps explain why, as Kneen points out, "Investors, governments, and the multilateral institutions don't just tolerate corruption and repression, they eagerly support it."

Cyril Mychalejko is an editor at www.UpsideDownWorld.org , a website on activism and politics in Latin America .




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