Africa’s investment boom offers valuable lessons – by Geoffrey York (Globe and Mail – September 29, 2012)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

GOULGOULTOUN, BURKINA FASO – Within sight of the biggest gold mine in Burkina Faso, hundreds of children are slipping silently into starvation.

They live in flimsy wattle or mud huts in a scrub wasteland. They help their parents scrounge for flecks of gold in the sand. And every month, hundreds are so malnourished that they need emergency food at the village clinic – just a short walk from the perimeter of the massive high-tech gold mine, owned by a Canadian company.

I’ve seen the same contrasts and inequities across Africa: poverty and hunger in the shadow of gleaming new mines and plantations; luxury hotel towers rising near crowded slums; villagers gaining jobs from multinational projects while others lose their land; local entrepreneurs capitalizing on the economic growth even as most of the profits go to foreign shareholders.

Today’s investment boom is Africa’s biggest opportunity in decades, but will it seize the moment or squander it? Some African countries are getting it right and there are lessons to be drawn from their successes.

Lesson 1: Use your resources to create new industries

On the outskirts of Gaborone, visitors enter the ultra-modern Diamond Trading Company through a series of airlock-like security doors. The sorting floor is watched by 500 cameras, capable of zooming in on the smallest diamond that the 100 sorters are handling. “This is the safest building in the world – safer than the Pentagon,” says Kago Mmopi, corporate affairs manager at the trading company. “Theft is almost non-existent.”

The high-tech building is just one example of how Botswana has exploited its mineral resources to create thousands of jobs in gem processing. This small semi-desert country, with just two million inhabitants, is aiming to turn itself into a new version of Antwerp or Tel Aviv: a diamond hub where rough stones are turned into polished gems, to the benefit of the local economy.

When it gained independence in 1966, Botswana was one of the world’s poorest countries. Over the next three decades, as a result of massive diamond deposits, it became one of the fastest-growing countries in the world, expanding at 9 per cent annually. But its government realized that the growth would vanish if it didn’t figure out a way to move beyond a rudimentary mining sector.

Beginning in 2006, Botswana has been insisting on a bigger share of the processing industry, which was traditionally based in Europe and India. Today, after intense negotiations with diamond producer De Beers, there are 21 diamond factories and more than 3,200 processing jobs in Botswana. The government holds a 50-per-cent share of the new trading company and De Beers is transferring its rough-stone sorting and trading division from London to Gaborone.

For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/news/world/africas-investment-boom-offers-valuable-lessons/article4576431/