Why does democracy matter for natural resources management?
“Democracy is key for inclusive natural resources management,” says Yves Leterme, secretary-general of Stockholm-based intergovernmental organization International IDEA. “Look at the examples of the Democratic Republic of the Congo and Botswana. Both rank among the most natural resources-rich countries in Africa, but it is the level of democratic governance that makes the difference between the two in terms of human development.”
Indeed, Botswana is a success story. Having ranked among the poorest places on the continent just over five decades ago, the country has transformed into an upper-middle-income economy. Invited to assume International IDEA’s rotational chairmanship in 2014 and co-host this year’s Annual Democracy Forum in the capital Gaborone, the country was also presented with a unique opportunity to share its experiences with a multitude of other country representatives, civil society actors and global development professionals.
What are the lessons learned from the successes and failures of countries as different as Botswana, Norway or Chile? And how can they best partner up for the sound and equitable management of natural resources? Forum participants agreed that the challenge of managing natural resources is not a matter for governments alone. In line with the pillars of a well-functioning democracy, it requires partnerships with various stakeholders, including investors, civil society organizations and local community representatives.
So how can these stakeholders join forces to advance the objective of democratic natural resource management? Devex filtered five ways from a series of high-level interviews and forum panel discussions.
1. Polish rough diamonds: maximize the value of resources through knowledge sharing.
To sell a diamond, you need to know how to polish it first.
Several experts highlighted in Gaborone the need for intergovernmental platforms, such as International IDEA, to allow for national and continent-wide exchanges of knowledge and best practices on democracy, and Leterme described IDEA membership and chairmanship as an “important entry point” to the international community and an opportunity for Botswana to show off its good track record.
“It’s a win-win for the international community to show that it is possible on the African continent to organize a well-balanced democracy, with middle-income country GDP, with very strong investment in health and education services,” Leterme told Devex. “But it’s also good for Botswana to have entry points to IDEA’s very diverse membership — from Australia to Canada, from Chile to Japan.”
So what are the benefits for already highly developed countries, such as Norway?
When Einar Steensnæs, co-founder of the Oslo Center for Peace and Human Rights and a former minister of petroleum and energy in Norway, was invited to this forum, he was asked to share what worked and what did not work in Norway with regard to resources management. But he said he also went to Africa “to pick up some good ideas and ‘fresh winds’ from newcomers to the industrialized world, like Botswana.”
2. Implement a balanced, joined-up vision for sustainable development.
Governments need to provide a balanced vision for sustainable development and navigate the choppy waters caused by issues such as protection vs. extraction.
Botswana’s economy provides a very illustrative example of the need for governments to strike the right balance between diverging societal interests: while mining and tourism both rank amongst the biggest contributors to the country’s GDP, one depends on the protection of natural resources and biodiversity, while the other feeds on their extraction. In a democracy, governments and civil society can join forces to explore innovative ways of reconciling seemingly contradictory objectives under a common vision for sustainable development.
“As a country we have very strong conservation ideals. Seventeen percent of our land is set aside for national parks and we adopted a high-value, low-volume policy with regard to park tourism,” Felix Monggae, CEO of the Kalahari Conservation Society, told Devex. “We know that our packages are very expensive, but it is good for both conservation and the economy and for limiting development in protected areas.”
At a governmental consultation meeting that Devex attended on the sidelines of the Annual Democracy Forum, the Botswana government had set up a specific cross-ministries technical working group, open to civil society and private sector participation. This, we learned, was aimed at ensuring that sustainability is mainstreamed throughout the new National Development Plan beyond 2016, currently being elaborated.
But what about the balance to be struck between the interests of present and future generations? A visionary approach also implies thinking about society’s future, Mine Pabari, deputy regional director at the International Union for the Conservation of Nature, told Devex.
“While we speak of future generations, our actions are still centered on the current generation,” she said. “Biodiversity is a resource that we have not even begun to understand and we need to be able to protect it while we develop our understanding around it.”
This is not only true for biodiversity, but also for the strategic use of revenues from extractives industries according to Steensnæs.
“In Norway, we estimated that the needs for future pensions corresponded to roughly the same amount as the funds raised from the extractives industry,” the former Norwegian oil minister explained. “We therefore decided to rename our oil fund to ‘pension fund’ and thus were able to find a cross-party political consensus on the use of the revenues and to give a clear direction from the government side, which usually increases trust — notably from investors.”
Is there a common, universal “recipe” for success?
Lameck Nthekela, Botswana’s ambassador to Sweden, mentioned how his country’s culture is “one of inclusivity, a culture that embraces consultation,” and pointed out that Botswana is considered one of the world’s oldest democracies due to its tradition of “kgotla” or public debates at village level.
“When we discovered our minerals, we knew that the wealth would need to be distributed for the good of all Botswanans,” Nthekela added, explaining that a central fund was created for pooling revenues from the lucrative diamond mining industry, which were reinvested in hospital and school infrastructure.
So is the democratic management of natural resources dependent on a country’s culture?
“It is not a question of culture,” Steensnæs argued. “Human nature is the same globally – the same temptation everywhere to steal from the communities … even in Norway, which has had a democracy for 200 years, corruption can be a problem — so, you need checks and balances.”
It is a state’s responsibility, he said, to ensure that the right frameworks are in place to allow for the transparent, equitable and sustainable management of natural resources.
3. Build a strong ‘mast’ for sustainable investments.
While the importance of the private sector in the area of extractives is undeniable, working with the private sector does not always imply establishing formal partnerships. So should the government’s primary role be to ensure not only an enabling environment, but also a regulated environment?
“Production needs to adhere to certain standards and companies need to leave enough resources in the country before taking their money abroad. Once production has stopped, it should be clear how to clean up before leaving,” Steensnæs said.
But how do you incentivize the private sector to become more socially responsible? According to the Norwegian, the biggest threat to social responsibility is corruption.
“Sadly, corruption has been very much linked to the exploitation of natural resources — but you can avoid it by setting up the right institutional framework … and putting the right legislation and institutions in place to adequately monitor the cash coming in from natural resources,” he said.
Sixtus Mulenga, a mining geologist and member of the World Bank’s Extractives Industries Advisory Group, cited country participation in the Extractive Industries Transparency Initiative and similar initiatives as best practices on how to encourage cash flow transparency, as shown in his native Zambia — a country that has recently become EITI compliant.
4. Foster ’win-win’ PPPs for socially responsible extractives industries.
“Wealth is created by the private sector and governments govern. If governments start to run a business, then you are in trouble,” Mulenga said.
In Zambia, the loss of private investments caused by the nationalization of the country’s copper industry had apparently left scars on the sector’s international competitiveness — an experience in stark contrast both with the Botswanan and Norwegian model, where the state retained a 50 percent stake in the industry.
“When we discovered our oil resources in Norway in the early 1960s we had no expertise, so we invited companies from other countries to drill, but licensees had to agree to pay tax and provide training and capacity transfer to the Norwegian people,” Steensnæs said. As a result, in 1972 the country was able to found its own company, Statoil, and only in 2001 was it opened up to further private investment.
Keeping a governmental “foot in the door” provides countries with a direct source of income, but only as long as the door is not closed definitively on much-needed private investments and injections of expertise.
So are such lessons applicable in the African context too? Definitely yes, according to Nthekela, who referred to the Botswana government’s 50 percent stake in some of the country’s major diamond mining businesses. The buy-in from the state also provided reassurances to private sector investors.
“When I offer food to others that I do not eat myself, people will get suspicious,” he said.
5. Reduce investment risks through transparent and participatory management structures.
In Mulenga’s view, adopting a multi-stakeholder approach is good for business.
“Involving civil society and communities in decision-making helps minimize social and political risks, especially in the context of a long-term engagement in the extractives business,” he said. “The smart businesses are very good at being inclusive.”
The importance of buy-in from civil society and local communities had also been embraced by IUCN in its recently launched Fair Coasts initiative, which seeks to enhance the sustainability and inclusiveness of the liquid natural gas sector in Mozambique by establishing a multi-stakeholder platform.
“Working with the private sector was less challenging than working with other actors,” Pabari noted, explaining that private sector actors quickly recognized the platform as a valuable space to work together. It was also an opportunity to coordinate initiatives, avoid duplication and ultimately avoid being continuously attacked by civil society.
Creating a feeling of partnership to overcome mutual mistrust was critical, she said, adding that Mozambique’s model is both replicable and scalable. However, Pabari admitted that CSOs are “not always the easiest players to engage with,” as they often follow the funding streams meaning a continued risk that they lose commitment to the cause.
Pabari recommended donors look at possible longer-term CSO funding in order to bring about real change and pointed to the need for innovative ways of incentivizing community engagement.
“We initially struggled to find incentives and enabling conditions for communities to engage,” she said of IUCN’s community restoration projects for rivers, forests and wetlands, explaining that environmental benefits are long-term benefits and not seen as meeting immediate community needs. “We have integrated the use of microcredit schemes with communal environmental management planning practices — which proved to be very successful.”
An interesting change could be seen on democratic practices at local level, as community members had to convene and agree on common decisions around micro-funding and loan schemes.
“We are now looking into scaling up these initiatives,” Pabari noted.
Improved civil society engagement can also spring from CSOs own initiatives, and Monggae explained that Botswana’s acquired MIC status and reduced donor funding “obliged CSOs to become innovative in terms of the partners we are working with.”
His organization KCS, for example, began to work as an implementing partner for the government, a collaboration that provided quick and visible results on the ground and boosted the government’s accountability towards its donors. That pragmatic approach is necessary, Monggae emphasized, while retaining independence towards both the government and funders.
“We now also advise the government on what kind of principles should be kept up when accepting funding or investments from outside, to protect as far as possible our own natural resources,” he said.
Strong democratic tailwinds, a stable mast, a fairly elected and farsighted skipper, and a well-trained crew whose members are pulling together? Applied to any resource-rich democracy, these are the qualities that will steady the ship as it sails towards its bounty of natural resources and their sound and equitable management.
#DemocracyMatters is a three-week series exploring the intersection of democracy, development and natural resources management in partnership with International IDEA, the Institute for Democracy and Electoral Assistance.
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