Eritrea 2014 Mining Conference: Insights on Economic Growth and National Development

Today the 2014 Asmara Mining Conference opens its doors to welcome individuals, companies, and prospective partners from around the world. With the event generating great excitement and expectation, it is important to consider Eritrea’s recent economic developments, as well as the role of natural resources within the country’s greater national development pursuits.

Without question, Africa is the world’s poorest continent; African nations have consistently ranked lowest amongst nations of the world in terms of various socio-economic or development measures (for example, consider: the UN’s HDI[i] and scholarly works by Hernandez-Cata, Schwab and Lopez-Claros 2004[ii]; Logie and Benatar 1997[iii]; and Sachs, McArthur, Schmidt-Traub, Kruk, Bahadur, Faye, and McCord 2004[iv]). These failures can be attributed to a wide-range of causes including historical factors, socio-political dynamics, ethnic based rivalries, internal mismanagement, and debilitating external meddling.

Over the decades, the international community, economists, and development professionals have proffered a plethora of possible solutions, with many ending up as abject failures. Notably, recent times have seen natural resources re-arise as a potential magic pill[v]. With the African continent possessing an abundance of various natural reserves, it is believed that these resources, if managed appropriately within a responsible, inclusive, well-planned and conducted development programme, can help establish a strong platform for sustainable development. The increasing significance of resources to the international community is also exhibited by Chinese[vi], Indian[vii], and US[viii] interest within the continent.

For the Horn of Africa (HoA) region, the subject of natural resources has also assumed high importance, especially as the region continues to seek stability, progress, and general development. Oil has attracted interest in Somalia[ix] and Somaliland[x], while it has long been a significant issue (amongst numerous others) in tensions between Sudan and South Sudan[xi]. Recent years have witnessed water (specifically the Nile River) gain prominence in the HoA[xii], as friction between Egypt and Ethiopia can attest[xiii]. Not to be overlooked, Eritrea has also received consistent attention, being noted as “…likely sitting on massive oil and gas reserves…” and possessing all “…the geological features of a major hydrocarbon bonanza…”[xiv] Further, Eritrea’s nascent mining industry[xv] has been touted as a potential regional and global powerhouse[xvi]. With much more known about the developmental policies (and outcomes) of its regional and continental neighbors, Eritrea’s less recognized approaches merit closer scrutiny. Accordingly, this short piece provides an initial, and hopefully enlightening, glance, particularly considering Eritrea’s approach to resources. Further, I provide a variety of links at the conclusion so that one can get a better picture of mining, energy, natural resources, and development within Eritrea.

Dating back to its initial days of independence, Eritrea has been raptly aware of the need for a holistic, multi-level approach towards development, while being alert to the pitfalls of the resource curse[xvii]. Quite early on, Eritrea outlined that its ambitious development programme would focus on the: rehabilitation and construction of infrastructure; raising agricultural productivity; promotion of private investment; investment in education, health and nutrition; promotion of exports; protection of the environment; and mobilization of communities for development.[xviii] The stagnation – if not outright regression – of many African countries with great natural endowments (consider: Mobutu Sese Seko in the former Zaire[xix]; and the unfortunate outcomes of the oil industry in Nigeria[xx]) serve as clear, sobering lessons for any developing nation with natural resources.

For Eritrea, this has meant that its own approach has been cautious, pragmatic, and one where the nation’s resources are categorized as only one variable within the larger equation towards holistic development (rather than simply an outright solution). Eritrea’s former Ambassador to the UN, Araya Desta, specified aspects of the Eritrean approach (championing sustainability, equality, and environmental friendliness) in a statement to the UN Security Council’s Thematic Open Debate on Conflict Prevention and Natural Resources (June 19, 2013). Desta noted that “[t]he cardinal principle of Eritrea’s mining policy [is that]…all mineral resources are a public property, and that the conservation and development of these resources must be ensured for Eritrea’s present and future generations.”[xxi] Further, Eritrea’s 2012 National Development Strategy spells out that Eritrea “…is aware that [its resources] are non-renewable…and they have the potential of being curses rather than blessings for societies. Focus on the mining sector often leads to ignoring more vital and sustainable sectors.” Finally, the former Director General of the Dept. of Mines in the Eritrean Ministry of Energy and Mines, Alem Kibreab, has pointed out that “…the mining sector must be developed slowly and carefully to prevent…the resources curse.”[xxii].

Notably, last week, Eritrea proudly shared the lessons of its United Nations Millennium Development Goals success, illustrating a commitment to health, education, gender equality, and poverty reduction. It is within this developmental context that Eritrea’s natural resources may prove useful, not only to accrue foreign capital and strengthen the economy, but to promote continued development. After several years of trouble due to war with and a continued illegal military occupation by Ethiopia[i], Eritrea’s economy grew by 8.7% in 2011 and approximately 5.5% in 2012, improving considerably in 2013 and expected to grow by 6.5% in 2014.[ii] With appropriate utilization of resources within the larger national development strategy, Eritrea’s mining sector could play a beneficial role moving forward.

While examples of the dangers of the resource curse and mismanagement are readily found across the developing world (and noted above), Eritrea’s leadership has long-reiterated that its resources will be utilized for the benefit of current and future generations. In addition, Eritrea will remain committed to providing a comprehensive “…environment for growth…” based on enhancing human capital and infrastructure, with the ultimate aim of improving the quality of life for the people.”[iii] In regard to fears of resource mismanagement, the African Development Bank Group has noted Eritrea’s “…relatively low levels of corruption.”[iv] Additionally, former US Congressman and law professor, Tom Campbell, has described Eritrea’s “…reputation for honesty and low levels of corruption” as being one reason (in addition to others) that he has remained amongst most high-profile proponents of Eritrea’s investment potential.[v] Finally, the Pool Nielson EU Commissioner for Development and Humanitarian Aid mentions that Eritrea’s “corrupt free culture” remains its biggest asset.[vi]

Overall, Eritrea has achieved several tangible developmental outcomes, especially within the socio-economic, health, and educational sectors. Yet, as it continues to work towards sustainable development, several challenges remain. Food security and poverty are areas the country continues to focus on, while the prolonged illegal occupation of Eritrean land by Ethiopia[vii] represents an unnecessary and harmful distraction from broader development goals. Moving forward, the international community should remain constructively involved in and supportive of Eritrea’s developmental efforts, while also promoting the respect of its sovereignty and territorial integrity. Last, Eritrea should continue to utilize its natural resources as one component of a broader development strategy, and not as a simple panacea or remedy.

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Collection of useful reads:

Daniel T. Cook ponders whether Eritrea is “Africa’s Hidden Gem” http://bit.ly/17sNlMW and offers useful insights regarding mining and investment in Eritrea.

Eritrea – recent foreign investment patterns http://natna.wordpress.com/2013/12/03/eritrea-more-investors-enter-eritreas-mining-friendly-environment/

Eritrea – economic insight: http://www.myth2014.com/2014/05/14/challenging-african-dogma-eritreas-path-to-economic-independence/

Exploiting resources vs sustainable land management (the UN): http://bit.ly/17t0yW1

Insights from foreign businessmen and international diplomats:

South Africa Amb. Iqbal Jhazbhay: A) http://bit.ly/1834M58 B) http://bit.ly/1aDahDL

Global Mining and Metals Expert Dr Tim Williams: http://bit.ly/1cStCsv

Geologist and Africa Exploration Professional Alasdair Smith: A) http://bit.ly/17Shaa0 B) http://bit.ly/1bn89B8

Sundridge Gold: http://bit.ly/1gHbnGY

Geologist and Exploration Professional Dan Hamer: http://bit.ly/1ckVZue

Abraham Hadgu: Alternative Energy: http://bit.ly/1aRNQ3K

UNDP (On Resources and Sustainable Development): http://bit.ly/HSzJzk

Electricity and Renewable Resources (incl. solar) – AfricaBusiness.com: http://bit.ly/1dPtGa3

Solar Power opportunities and current status: http://bit.ly/1c3tIs3

Eritrea Ministry of Energy and Mines Outline: http://bit.ly/1dn15Y2

“The Ministry Industry of Eritrea” – Newman, H. and T. Yager. 2011. US Geological Survey. Available at minerals.usgs.gov

Mining 101 (2004, interesting): http://bit.ly/1bnbHDA

The Economist Intelligence Unit: GDP Growth (%): pic.twitter.com/aQ0Yn8CcPf

Notable Growth of several African economies (EIU): http://bit.ly/17t2NIS

REFERENCES

[i] http://www.pca-cpa.org/showpage.asp?pag_id=1150

[ii] http://www.afdb.org/en/countries/east-africa/eritrea/

[iii] http://www.reuters.com/article/2009/05/21/ozabs-eritrea-mining-idAFJOE54K06C20090521

[iv] http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Eritrea%20Full%20PDF%20Country%20Note_01.pdf

[v] Campbell, Tom. 2002. How Law and Economic Development Fit Together: The Role of Research in Nation-Building, University of Asmara.

[vi] http://unpan1.un.org/intradoc/groups/public/documents/un/unpan023263.pdf

[vii] http://www.pca-cpa.org/showpage.asp?pag_id=1150

[i] http://hdr.undp.org/en/statistics/

[ii] Hernandez-Cata, E., K. Schwab, and A. Lopez-Claros. 2004. “The Africa Competitiveness Report: 2004.” World Economic Forum. Geneva, SUI.

[iii] Logie, D. and S. Benatar. 1997. “Africa in the 21st Century: Can Despair Be Turned to Hope?” BMJ. 315 (7120): 1444-1446.

[iv] Sachs, J., J. McArthur, G. Schmidt-Traub, M. Kruk, C. Bahadur, M. Faye, and G. McCord. 2004. “Ending Africa’s Poverty Trap.” Brookings Papers on Economic Activity. 1: 117-240.

[v] http://www.un.org/apps/news/story.asp?NewsID=44735#.UdhNzrbN514

[vi] http://www.policymic.com/articles/10632/6-myths-about-the-evils-of-chinese-influence-on-african-economic-development

[vii] http://www.ibtimes.com/creeping-tiger-indias-presence-africa-grows-even-china-steals-spotlight-1324989

[viii]http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=10366

[ix] http://www.ft.com/intl/cms/s/0/538e9550-b3e1-11e2-ace9-00144feabdc0.html

[x] http://www.globalresearch.ca/oil-geopolitics-in-the-horn-africa-somaliland-dno-oil-deal-adds-fuel-to-the-conflict-in-north-somalia/5332717

[xi] http://www.eia.gov/countries/cab.cfm?fips=SU

[xii] http://www.guardian.co.uk/world/2013/jun/18/egypt-ethiopia-dam-blue-nile

[xiii] http://www.youtube.com/watch?v=sSxkori-tPw

[xiv][xiv] http://oilprice.com/Energy/Energy-General/Last-Stops-on-the-East-Africa-Oil-Gas-Frontier-Eritrea-Ethiopia.html

[xv] http://www.miningreview.com/node/19494

[xvi] http://www.tesfanews.net/tag/eritrea-mining/

[xvii] http://www.capitaleritrea.com/eritrea-opens-up/#..&@1&1&0&{%22s%22%3A%22set_title%22%2C%22f%22%3A%22%22%2C%22c%22%3A0%2C%22a%22%3A[%22Live%20Quotes%22]%2C%22t%22%3A%222072486939%22

[xviii] 2005 Government of Eritrea Millennium Development Goals Report http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=8&ved=0CGIQFjAH&url=http%3A%2F%2Fwww.er.undp.org%2Fmdgs%2Fdocs%2Fmdgr_pub_eritrea.pdf&ei=OMXRUb_QFY6c9QSymIDoAQ&usg=AFQjCNFmbV7FfY5VAJU7ksTXl-mV10fUnw&sig2=d1BZ-keue-P-s3fdsmEpJw&bvm=bv.48572450,d.eWU

[xix] Thomas, C. 1999. “International Debt Forgiveness and Global Poverty Reduction.” Fordham Urban Law Journal. 27 (5): 1711-24.

[xx] Okonta, I. and O. Douglas. 2001. Where Vultures Feast: Shell, Human Rights, and Oil in the Niger Delta. San Francisco, CA: Sierra Club Books.

[xxi] http://t.co/cwQHHsEOQ1

[xxii] http://www.miningreview.com/node/19494

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