[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
                  IS THERE AN AFRICAN RESOURCE CURSE?

=======================================================================


                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON AFRICA, GLOBAL HEALTH,

                        GLOBAL HUMAN RIGHTS, AND

                      INTERNATIONAL ORGANIZATIONS

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 18, 2013

                               __________

                           Serial No. 113-91

                               __________

        Printed for the use of the Committee on Foreign Affairs


Available via the World Wide Web: http://www.foreignaffairs.house.gov/ 
                                  or 
                       http://www.gpo.gov/fdsys/

                                 ______




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                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         ENI F.H. FALEOMAVAEGA, American 
DANA ROHRABACHER, California             Samoa
STEVE CHABOT, Ohio                   BRAD SHERMAN, California
JOE WILSON, South Carolina           GREGORY W. MEEKS, New York
MICHAEL T. McCAUL, Texas             ALBIO SIRES, New Jersey
TED POE, Texas                       GERALD E. CONNOLLY, Virginia
MATT SALMON, Arizona                 THEODORE E. DEUTCH, Florida
TOM MARINO, Pennsylvania             BRIAN HIGGINS, New York
JEFF DUNCAN, South Carolina          KAREN BASS, California
ADAM KINZINGER, Illinois             WILLIAM KEATING, Massachusetts
MO BROOKS, Alabama                   DAVID CICILLINE, Rhode Island
TOM COTTON, Arkansas                 ALAN GRAYSON, Florida
PAUL COOK, California                JUAN VARGAS, California
GEORGE HOLDING, North Carolina       BRADLEY S. SCHNEIDER, Illinois
RANDY K. WEBER SR., Texas            JOSEPH P. KENNEDY III, 
SCOTT PERRY, Pennsylvania                Massachusetts
STEVE STOCKMAN, Texas                AMI BERA, California
RON DeSANTIS, Florida                ALAN S. LOWENTHAL, California
TREY RADEL, Florida                  GRACE MENG, New York
DOUG COLLINS, Georgia                LOIS FRANKEL, Florida
MARK MEADOWS, North Carolina         TULSI GABBARD, Hawaii
TED S. YOHO, Florida                 JOAQUIN CASTRO, Texas
LUKE MESSER, Indiana

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director
                                 ------                                

    Subcommittee on Africa, Global Health, Global Human Rights, and 
                      International Organizations

               CHRISTOPHER H. SMITH, New Jersey, Chairman
TOM MARINO, Pennsylvania             KAREN BASS, California
RANDY K. WEBER SR., Texas            DAVID CICILLINE, Rhode Island
STEVE STOCKMAN, Texas                AMI BERA, California
MARK MEADOWS, North Carolina


                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Ms. Corinna Gilfillan, director, Global Witness, USA.............     7
Mr. Mohammed Amin Adam, executive director, Africa Centre for 
  Energy Policy..................................................    22
Mr. Anquan Boldin, Ambassador, Oxfam America.....................    34
Mr. Tutu Alicante, executive director, EG Justice................    38

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Ms. Corinna Gilfillan: Prepared statement........................     9
Mr. Mohammed Amin Adam: Prepared statement.......................    24
Mr. Anquan Boldin: Prepared statement............................    36
Mr. Tutu Alicante: Prepared statement............................    40

                                APPENDIX

Hearing notice...................................................    74
Hearing minutes..................................................    75


                  IS THERE AN AFRICAN RESOURCE CURSE?

                              ----------                              


                        THURSDAY, JULY 18, 2013

                       House of Representatives,

                 Subcommittee on Africa, Global Health,

         Global Human Rights, and International Organizations,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The subcommittee met, pursuant to notice, at 2 o'clock 
p.m., in room 2167 Rayburn House Office Building, Hon. 
Christopher H. Smith (chairman of the subcommittee) presiding.
    Mr. Smith. Good afternoon, everybody. Today's hearing 
probes the question of whether or not there is an African 
resource curse. The resource curse refers to the paradox in 
which countries and regions with an abundance of natural 
resources, specifically non-renewable resources like minerals 
and fuels, tend to have less economic growth and worse 
development outcomes than countries with fewer natural 
resources. This is believed to happen for many reasons, 
including a decline in the competitiveness of other economic 
sectors, the volatility of revenues from the natural resource 
sector due to global commodity market swings; government 
mismanagement of resources; or weak, ineffectual, unstable or 
corrupt institutions.
    Africa has abundant natural resources, from critical and 
desirable agricultural products, such as gum arabic, to 
strategic minerals, such as cobalt, titanium, and coltan, to 
energy resources, such as petroleum and natural gas. However, 
under the so-called African resource curse, African citizens 
don't benefit from these resources to the extent that would be 
expected. Education, health care, and other services too often 
are not provided to citizens by their governments who profit 
from African resources but, rather, are too often paid for by 
donors.
    Throughout history, African resources have often led to 
negative outcomes for African people such as slavery, 
colonization, predatory governments, and vicious rebel group 
activity. The ivory trade opened Africa to trans-Saharan trade 
to the Middle East and beyond, but it also opened Africa up to 
the earliest days of international slavery. African gold and 
other natural wealth made the continent and personalities in it 
famous and admired, but also led to the even more expansive 
trans-Atlantic slave trade.
    Ivory hunters wiped out the elephant population in various 
locations in Africa and in recent years included the Lord's 
Resistance Army and its murderous reign of terror in the Great 
Lakes region. Minerals that power modern society also fund the 
chaos brought by militias, such as M23 and the numerous other 
militias now terrorizing the eastern portion of the Democratic 
Republic of the Congo. So-called blood diamonds earlier funded 
predatory rebels in Liberia and Sierra Leone.
    What should be a blessing, abundant natural resources, has 
all-too-often been a curse. It has been argued, for example, 
that one can correlate the rise and fall in the price of 
petroleum with the rise and fall of the implementation of human 
rights in major oil-producing countries. Protection of human 
rights throughout resource-cursed countries is dismal or 
completely lacking. Most resource-cursed countries are ruled by 
either authoritarian or other types of highly repressive 
regimes. These regimes are kept in power by an elite group, 
such as those comprised of high-ranking politicians and 
military leaders. As long as the existing government keeps 
these few people happy, they can rule without fear of 
consequences. This system is set up so that those most in need 
of protection are left to fend for themselves.
    Equatorial Guinea is an example of how the resource curse 
works. It is a small country with a population of slightly more 
than \1/2\ million people but a Gross Domestic Product that has 
increased more than 125 times, not 125 percent, 125 times, 
since oil production began in the mid-1990s. On paper, the 
wealth per capita in Equatorial Guinea is as high as almost any 
wealthy country in Africa, if not higher. Yet, if you visit the 
country and move beyond the gleaming new hotels and resorts, 
you will find numerous people who are forced to survive on $1 a 
day or less.
    Corruption in Equatorial Guinea is rampant. President 
Obiang owns two luxury homes in the Washington, DC, area, and 
his sons own two homes and numerous luxury cars in California. 
In fact, it is estimated that the President's son spent more on 
houses and cars alone between 2004 and 2006 than the entire 
government spent on education in the year of 2005.
    Facts involving Equatorial Guinea's Government's siphoning 
of natural resource profits were revealed in a 2004 U.S. Senate 
investigation of Riggs Bank, which could no longer continue 
operations due to financial improprieties, partly involving 
questionable funds from Equatorial Guinea. The Obiang family 
dominates private business in the country so commerce there 
benefits them first and foremost, rather than provide a means 
of economic opportunity more broadly.
    In order to counteract corrupt practices from profits from 
natural resources and to ensure they are not diverted or 
otherwise abused, various international agreements, as we all 
know, have been created. The Extractive Industries Transparency 
Initiative, or EITI, was created and announced at the 2002 
World Summit for Sustainable Development in Johannesburg to 
provide a multi-stakeholder system that would require 
disclosure of profits from natural resource extraction. Thus 
far, 34 countries have produced EITI reports, covering $1.02 
billion in total government revenue. Four African countries 
have been officially suspended from the process for 
noncompliance: The Central African Republic, the Democratic 
Republic of the Congo, Madagascar, and Sierra Leone.
    Similarly, the Kimberly Process Certification Scheme, 
established in 2009 by the U.N. General Assembly Resolution 55/
56, is designed to prevent conflict diamonds from entering the 
mainstream rough diamond markets. Global Witness, which present 
testimony today, pulled out of the scheme 2 years ago, but 
there are those within the organization that reportedly still 
believe it provides at least a basis for addressing the problem 
of blood diamonds.
    Neither African governments nor the international community 
are helpless to effectively address the misuse of African 
natural resources. Working together, we can ensure that 
corruption is minimized, if not eliminated altogether. 
Protection of wildlife and other natural resources must be 
achieved. The days of corrupt governments shirking their 
responsibilities so that a select few can benefit from their 
country's blessings must be ended.
    Earlier today in Congress, we honored the life, legacy, and 
values of former South African President Nelson Mandela on his 
95th birthday. During one of his visits to Congress, he told 
Members that to deny a person's human rights is to deny their 
humanity. We must do all we can, not only to ensure that 
African natural resources benefit the people of African 
countries economically, but also to guarantee that the human 
rights of African people are more fully respected by those who 
wield power through government authority or by the barrel of a 
gun.
    Thank you very much, to my colleagues, for being here. And 
I would like to yield to Karen Bass, the ranking member, for 
any opening comments she might have.
    Ms. Bass. As always, thank you, Mr. Chair, for convening 
this meeting on African resources and what will be done to 
ensure that a continent with immense resource wealth is able to 
leverage those resources to promote broad and sustained 
development.
    I also want to thank today's witnesses for making 
yourselves available to brief this committee and the work all 
of you do to expose the challenges on this and other relevant 
topics. I also want to give a special greeting and thanks to 
Mr. Boldin for lending your star power to this issue. Mr. 
Boldin, I know that you will mention in your statement that in 
consultation with Oxfam, I have also written a letter that is 
cosigned by Members of Congress that calls on ECOWAS to develop 
a regional mining code that will apply to all 15 member nations 
and that will protect the basic rights of local communities.
    I have often shared my strong interest in this committee 
focusing on Africa and the growth opportunities that exist 
throughout the continent. Mr. Obama recently returned from 
Senegal, South Africa, and Tanzania. And his message was clear. 
Our language, our perception of Africa must change. Business, 
trade, and investment are the conversations we need to have 
with African nations. I have to tell you that I was a little 
disappointed in the coverage of his trip because oftentimes the 
news covered Africa and the fact that he was on the continent 
almost as a backdrop and focused on other issues of the day 
that were important to our country but really didn't spend a 
lot of time covering the nations that he was visiting.
    I am pleased that today's panel is prepared to discuss a 
set of issues that present extraordinary opportunity and at the 
same time illustrates the deep challenges that face African 
nations. The question before us is, how can African nations 
benefit from their natural resource wealth and take that wealth 
to expand and accelerate development that will ultimately lift 
millions out of poverty?
    As I often mention, Africa is not the next economic 
frontier, but the emerging market of today. We have seen strong 
double-digit and near double-digit growth in places like 
Angola, Nigeria, Mozambique, and Rwanda.
    I visited several African nations over the last year that 
share with us their strong desire not to engage our Government 
in more of the same forms of aid but to shift our discussion to 
topics of trade dealing in arrangements that provide and 
promote private sector engagement, economic growth, and job 
creation.
    What is remarkable about this is that our nation has the 
comparative advantage to play a key role in the continent's 
economic emergence, but we have yet to fully act. These trade 
and business gains cannot be fully realized, however, until we 
address some of the well-known barriers, including and 
specifically around natural resources, extractive industries, 
and the laws and regulatory environments needed to ensure 
billions of the world poor benefit from their country's natural 
resources. Countries like Ghana, Sierra Leone, and Liberia are 
poised to reap benefits from new discoveries of oil, but many 
wonder if they will.
    In my travels, I have grown deeply concerned with contracts 
from multinational companies, particularly those from more 
developed nations where resource extraction doesn't necessarily 
do much for the majority of the people. I would like to learn 
more about those contracts. I had an experience of being in the 
DRC and just leaving from the airport and going to the Embassy 
and seeing such unbelievable poverty and knowing that the 
resources in the DRC are some of the greatest on the planet and 
what companies are doing business that is extracting those 
resources. And I am particularly interested if any of them are 
our companies or companies from the United States. I know that 
some of the issues are that some of the African countries might 
negotiate poor terms with the extractive companies. They don't 
necessarily collect resource revenues effectively. And then 
when they do, where those resources go, of course, is a 
question.
    So I am pleased that there are a number of programs and 
initiatives, including Dodd-Frank, that have been created to 
address and bring greater accountability and transparency 
across the African continent and the world. These include the 
extractive industries, transparency initiative, a voluntary 
multi-stakeholder program that promotes revenue transparency, 
and accountability associated with the extractive industries, 
the open government partnership, a multilateral initiative to 
promote more effective responses to governance by improving 
public services, increasing public integrity, managing public 
resources, creating safer communities, and increasing corporate 
accountability.
    Now, I have also heard that some of the provisions that 
were put into Dodd-Frank actually have some unintended 
consequences when it comes to the extractive industries. And I 
am not sure if we will learn about those today, but hopefully 
some of our witnesses might be able to reference that.
    Now, I believe these programs are making a real difference. 
And I will be interested to also hear from our witnesses if the 
programs are effective. I am also interested to know how the 
2013 resource governance index ensures resource wealth benefits 
to those countries and people who greatly depend on proper 
management of those resources.
    I want to thank you. And I look forward to the testimony 
from our witnesses today.
    Mr. Smith. Yes. Thank you so very much.
    Mr. Meadows?
    Mr. Meadows. Thank you, Mr. Chairman. And thank you for 
being here. And on a personal note, as an avid Florida State 
fan, I have cheered for you for many years with each reception. 
And it is those wonderful hands that today I cheer for you even 
louder because of what you are doing here today and this 
important work. And I just want to say thank you on behalf of 
many here in Congress for highlighting this particular issue.
    You know, we have known for a long time that Africa has 
just a great potential with natural resources, you know, a 
number of natural resources that not only could serve as an 
engine for economic development but possibly move the entire 
continent to a new era of prosperity. Unfortunately, that 
hasn't happened. We have seen, as the chairman and the ranking 
member have testified already and shared, that those challenges 
from around the world just really create areas of great 
concern. Some of those challenges are gone. Many of them still 
remain. And some of those challenges now are new. They are 
evolving each day as we start to look at it.
    You know, today too much of Africa is really ruled by 
repressive and oppressive regimes that take those natural 
resources as an asset to leverage power and to stay in power 
and truly not to improve the lives of the people within their 
own country. That is deplorable. Human rights violations, as we 
have heard testimony a number of times before this committee, 
the human rights violations continue to happen over and over 
again. And this leverage, this tool that continues to get used 
really needs to be one that we hold those that are using them 
as a weapon, hold them accountable.
    The chairman and the ranking member have really on a 
bipartisan really worked very well together to make sure not 
only that it is highlighted, that we in Congress make sure that 
we do what is possible from a legislative standpoint to 
address. And so I look forward to hearing that.
    I hope that we look to an Africa that is truly transformed 
one day because some of the testimony that we hear today 
affects the lives of the people in many countries throughout 
that wonderful continent.
    I am going to apologize beforehand. Because of votes and 
everything, I have got two hearings. And so I will be bouncing 
back and forth. But I just want to say thank you for coming. 
Thank you for your interest. And I thank the chairman and 
ranking member. And I yield back.
    Mr. Smith. Mr. Meadows, thank you very much for your 
leadership and for your participation in a very meaningful way 
in every hearing and markup we have had.
    I would like to now welcome our very distinguished panel of 
witnesses, beginning with Corinna Gilfillan, who is the head of 
the U.S. office for Global Witness and has worked for more than 
10 years to strengthen governance over natural resources. She 
led Global Witness' campaign to combat conflict diamonds and 
since 2004 has directed Global Witness' U.S. office right here 
in DC. She currently serves on the international board of the 
Extractive Industries Transparency Initiative and has been an 
adjunct instructor at Princeton University's Woodrow Wilson 
School of Public and International Affairs. She also previously 
worked for the U.N. Environmental Program in Paris and was 
Director of Friends of the Earth U.S.'s Ozone Protection 
Program.
    We will then hear from Mohammed Amin Adam, who is the 
executive director of the Africa Centre for Energy Policy. 
Before joining ACEP, he was coordinator of Ibis' Extraction 
Industries Program in Africa. He has also worked as an oil 
coordinator to Publish What You Pay for Ghana. Mr. Adam also 
served in various positions in the public sector in Ghana, 
including in the Energy Ministry and as mayor of Ghana's third 
largest city. He is also a member of the consortium that worked 
on Ghana's first EITI report on oil and gas. He also 
participated in designing meetings for two global governance 
initiatives: The Open Governance Partnership and Open 
Contracting.
    Then we will hear from Anquan Boldin. I would just point 
out that I had and Greg had the privilege of meeting with 
Anquan on June 24th and had a very good meeting. He gave us an 
update of his work in this area. And while Greg and I have been 
talking about doing a hearing like this sometime in the future, 
it crystallized at that meeting that sooner would be better 
than later. And, as a matter of fact, we asked what his 
availability was with training coming up, so that is why it is 
being done and was put together rather quickly.
    Anquan Boldin is a professional football player, as we all 
know, with the San Francisco 49ers but is here today in his 
capacity as an Ambassador of Oxfam. He has worked tirelessly to 
give back, both in the United States and in Africa. And in 
connection with this work, he founded the Anquan Boldin Q81 
Foundation to bring hope to underprivileged children. In March 
2012, in response to a severe drought in Ethiopia, he traveled 
with a friend and former teammate, Larry Fitzgerald, to 
Ethiopia to visit Oxfam programs and to bring attention to the 
need in that region. Together he and Mr. Fitzgerald visited 
people in communities working hard to rebuild and carry the 
story for the people they met back home, appearing on many 
prominent news outlets and again before the U.S. Congress to 
speak to each and every one of us.
    We will then hear from Mr. Tutu Alicante, who is from 
Equatorial Guinea and is a founder and executive director of EG 
Justice. His organization is dedicated to promoting human 
rights to rule of law, transparency, and civic participation in 
his homeland. Before founding EG Justice, he worked as a legal 
consultant with international NGOs promoting legal 
accountability and transparency in the extractive industry. In 
2007, he received a fellowship from Echoing Green to establish 
EG Justice. Prior to that, he worked as an employment attorney 
with the Southern Migrant Legal Services, where he represented 
migrant farm workers.
    So, Corinna, if we could begin with you? And, again, I want 
to thank our distinguished witnesses for sharing their 
expertise and their time with our subcommittee today.
    Ms. Gilfillan. Thank you.

 STATEMENT OF MS. CORINNA GILFILLAN, DIRECTOR, GLOBAL WITNESS, 
                              USA

    Ms. Gilfillan. Good afternoon, Chairman Smith, Ranking 
Member Bass, and members of the subcommittee. Thank you very 
much for holding this hearing today to focus on the resource 
curse in Africa.
    I work for Global Witness, which is an international 
advocacy organization working to break the links between 
natural resources, conflict, and corruption.
    The African continent is rich in oil, gas, and other 
minerals. In 2010, the value of exports of oil and minerals 
from Africa was worth $333 billion, about 6 times the value of 
exported agricultural products and nearly 7 times the value of 
international aid. Such resource wealth has the potential to 
lift many of Africa's poorest out of poverty. Yet, often we see 
the opposite. African resource-rich countries mired in poverty 
because of public revenues earned from selling these resources 
are being squandered through corruption and lack of government 
accountability.
    An example of this is in the Democratic Republic of the 
Congo, one of the richest countries in natural resources, that 
is at the bottom of the human development index. Congo lost at 
least $1.36 billion from the underpriced sales of copper and 
cobalt mining assets between 2010 and 2012. In secret deals 
involving companies registered in British overseas territories 
that could keep their ownership secret, this is almost twice 
the country's annual spending on health and education combined.
    In Guinea, there are corruption concerns related to the 
company BSGR's acquisition of flocks 1 and 2 of the massive 
Simandou iron ore concession. A series of secret contracts seen 
by Global Witness spells out how BSGR promised Mamadie Toure, 
one of the four wives of then Guinean dictator Lansana Conte, 
millions of dollars in shares in Simandou in return for help in 
acquiring the licenses. BSGR paid nothing for its rights in 
Simandou and sold 51 percent of its stakes to Vale in 2010 for 
$2.5 billion. To put this deal into context, the Guinean 
Government's entire annual budget in 2010 amounted to just $1.2 
billion.
    Natural resources are also funding conflict in Africa. For 
the last 15 years, armed groups and members of the National 
Army have used profits from the trade in certain minerals to 
finance themselves and their operations in eastern DRC, fueling 
of war that has cost over 5.4 million lives. The metals mined 
in eastern Congo enter global markets and make their way into 
products we use every day, such as mobile phones, cars, 
airplanes, and jewelry.
    In Zimbabwe, the ruling ZANU-PF elite is using Zimbabwe's 
diamond wealth as a source of off-budget financing for partisan 
security forces with a track record of committing human rights 
violations against Zimbabwe's civilian population.
    Increasing transparency in the extractive sector is crucial 
to combat the resource curse. It deters corruption, creating an 
enabling environment for better resource governance and giving 
citizens information to hold their governments to account.
    The encouraging news is that there is a rising tide of 
transparency. The U.S. Government has exhibited strong 
leadership by passing sections 1502 and 1504 of Dodd-Frank. 
Section 1502, the conflict minerals provision, aims to cut off 
financing to abusive armed groups involved in the minerals 
trade in eastern Congo. Section 1504 requires extractive 
companies to publicly disclose payments to governments on a 
country and project level. U.S. leadership has catalyzed global 
action. The European Union and other countries are now 
following suit.
    Increased transparency through initiatives like the 
Extraction Industry Transparency Initiative will also empower 
citizens in African resource-rich countries to demand 
government accountability for responsible resource use. The 
Africa Progress Panel, led by Kofi Annan, recently issued a 
ground-breaking report entitled, ``Equity in Extractives,'' 
which calls on governments to promote greater transparency of 
the extractive sector and tackle hidden company ownership.
    We very much appreciate the work of the subcommittee in 
addressing corruption and human rights issues in Africa and 
today would like to make the following policy proposals for 
consideration: First, effectively implement and enforce 
sections 1502 and 1504 of Dodd-Frank; second, make the 
transparent and responsible management of natural resources an 
integral part of U.S. foreign policy objectives and mainstream 
resource governance as a core part of U.S. assistance to 
resource-rich countries. A key part of this should involve 
protecting human rights and actively supporting civil society 
in its efforts to hold governments to account over management 
of resource revenues. Third, tackle hidden company ownership in 
the U.S. to prevent American companies from being misused to 
move corrupt and other dirty money into the U.S. financial 
system.
    In conclusion, the U.S. Government has an important role to 
play in helping address the resource curse in Africa. Better 
governance of natural resources will contribute to stability 
and economic development in African countries, help protect 
U.S. national energy security interests, and promote a more 
stable operating environment for American companies and 
investors.
    Thank you.
    [The prepared statement of Ms. Gilfillan follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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    Mr. Smith. Thank you so very much.
    Mr. Adam?

STATEMENT OF MR. MOHAMMED AMIN ADAM, EXECUTIVE DIRECTOR, AFRICA 
                    CENTRE FOR ENERGY POLICY

    Mr. Adam. Mr. Chairman, ranking member of the committee, 
thank you most sincerely for inviting me to a hearing of the 
subcommittee addressing the question, ``Is There an African 
Resource Curse?''; and, in particular, to give a testimony to 
this subject. As you know, the subject of resource curse in 
Africa is very broad, and I would like with your permission to 
focus my testimony on Ghana's management of her natural 
resources.
    As a petroleum economist and an activist, I read by the 
day--allow me to read--that Africa's natural resources are 
being plundered, but Ghana is trying recently to take a 
departure from this path.
    At the height of the global financial and economic crisis 
in 2007, Ghana discovered oil and gas in commercial quantities 
estimated at 1.8 billion barrels of reserves. Oil has now 
become the second largest export commodity of Ghana following 
gold but overtaking cocoa. By the end of 2012, more than 50 
million barrels of crude oil were produced from what we call 
the Jubilee Fields, which commenced production in late 2010.
    The positive impact of oil is already being felt in the 
budget. The Government of Ghana received $541 million last 
year. Significant efforts have been made, as I said, to avoid 
the case of oil burden on our ever-improving democratic regime, 
which many people consider a new paradigm of countries in 
Africa determined to break away from the resource case.
    Once called the Gold Coast, Ghana has been a major producer 
of gold, which is now in the largest export commodity of the 
country. This year, 2012, marked Ghana's highest earning from 
mining in its history with export revenues of $5.7 billion. But 
in spite of these developments, the cost of mining to the 
country has been too high. Destruction to the environment, 
human rights abuses, displacement of communities, and low 
compensation paid to affected communities while mineral 
revenues have not translated to tangible development outcomes.
    In its attempt to avoid the mistakes of the mining industry 
and those of oil-producing countries which got entangled in the 
case of resource world, the Government of Ghana embarked on 
far-reaching policy and legislative development, both on public 
consultations and greater openness. This includes the Petroleum 
Revenue Management Act and the Petroleum Commission Act.
    Some of the most important provisions in these laws are a 
requirement that oil receipts, production lifting, and sales 
prices, and expenditure from oil must be published quarterly 
and annually and the establishment of the Public Interest and 
Accountability Committee to provide independent assessment of 
how oil revenues are being used. Ghana is an EITI-compliant 
country and has already issued a reconciliation report on oil 2 
years into production.
    While these good efforts are commendable, good laws only 
provide a framework for managing the resources. Indeed, the 
resource case is a manifestation of poor implementation of 
regulations. And Ghana is one of the countries that is unable 
to implement its good laws.
    Abuse of regulations through regulatory capture and weak 
accountability institutions capable of checking rent-seeking 
behavior and vested interest, these problems are compounded by 
impunity and political patronage, which have often undermined 
the government's ability to act.
    Ghana is, therefore, unlikely to escape the resource curse 
with oil unless a number of issues are addressed. One, Ghana's 
accountability institutions and regulators are still weak and 
are not resourced to work independently. The Public Interest 
and Accountability Committee and the new Petroleum Commission, 
two institutions responsible for oil revenue monitoring and oil 
regulations, have not been provided with a budget since they 
were established.
    Two, for both oil and minerals, there is no open tendering 
or bidding process for acquiring prospecting or exploration 
rights. There is also no mandatory contract disclosure, and 
contracts are published at the discretion of the Minister of 
Energy or Natural Resources. Oil and mining deals are kept 
confidential, and the system provides opportunities for hidden 
benefits to companies as well as avenues for tax evasion. 
Further, beneficial owners are not disclosed, which promotes 
rent-seeking behavior.
    Three, Ghana is losing revenues through tax avoidance and 
transfer pricing and has been 1970 and 2008 lost $4.9 billion 
through illicit financial flows, including lost revenues from 
resource taxes.
    Four, also, the country is not deriving value from money 
from the infrastructure projects funded with oil and gas 
revenues as most of the projects have been delayed, operating 
under costly extensions, and leading to cost overruns.
    Mr. Chairman, Ghana has shown the way, in spite of these 
challenges, and is fully determined to change course and escape 
the resource case, but important challenges still remain which 
need to be looked at. The United States can support Ghana and 
other African countries to address these challenges.
    The need to implement the extractive industry payment 
disclosure provisions in the Dodd-Frank Wall Street Reform and 
Consumer Protection Act is long overdue. The U.S. support for 
the implementation of an Economic Community of West African 
States Directive on Mining that includes transparency 
safeguards but also protection of free, prior, and informed 
consent for communities impacted negatively by these projects 
is also important.
    Finally, the U.S. should also support the building of 
strong institutions, including negotiation capacity and 
technical support, to help establish the geological data that 
enhances the value of these natural resources. If the U.S. is 
forthcoming with this support, I believe that Ghana and many 
other African countries would change a course and, therefore, 
would be ready to manage these resources efficiently and in the 
interest of their people.
    I thank you very much for the opportunity.
    [The prepared statement of Mr. Adam follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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    Mr. Smith. Mr. Adam, thank you very much for your 
testimony.
    I would like now, Mr. Boldin, if you would proceed.

   STATEMENT OF MR. ANQUAN BOLDIN, AMBASSADOR, OXFAM AMERICA

    Mr. Boldin. Mr. Chairman, it is an honor to be here today. 
Thank you for your personal invite for me to testify. On behalf 
of myself and Oxfam America, I want to say thank you and the 
ranking member for holding this important hearing on natural 
resources in Africa. The issues you are discussing today are 
critically important to Africa's future. There are experts here 
today who will talk about how natural resource wealth in Africa 
can be seen as both a blessing and a curse. I would like to 
share what I learned about how this resource wealth plays out 
in communities where these resources are extracted.
    During my visits to Africa, I promised the people I met 
that I would do everything I can to bring their stories back to 
the U.S., to the leaders who cam make improvements. This is why 
I am here today. I believe you have the power to really help 
people in Africa, and specifically Senegal.
    Earlier this year, I traveled to the Village of Sabodala in 
eastern Senegal. I met many warm and wonderful people there. 
They opened their community to me and shared their experiences 
with me; my wife, Dionne; and my friends Roddy White and Larry 
Fitzgerald.
    Sadly, the community of Sabodala and many others like it 
throughout West Africa has been directly and severely impacted 
by large scale gold-mining operations. Just a few years ago, 
the people of Sabodala farmed their land sustainably and rarely 
worried about whether they would have enough food to feed their 
families. In their spare time, many community members mined for 
small quantities of gold, just as they have for countless 
generations. They use it to supplement their farming income. 
And neither they nor the generations before them were ever 
dependent on the gold they would find in the ground for their 
livelihood.
    All that changed a few years ago. When the land they farmed 
was sold right out from up under them to a large mining 
company, the community, which had been farming the same land 
for generations, suddenly had nothing. They were given a 
choice: Accept new land high up on a hillside miles away from 
their homes or take a small one-time cash buyout that could not 
sustain their families the way the farm had for so many years.
    Every day, communities in Africa are losing their land and 
seeing little or no benefit from the enormous mining operations 
that are pushing them aside and moving into their backyards. No 
percentage of the revenue from the mine in Sabodala, which is 
bigger than several football stadiums and brings in untold 
revenues, ever makes its way back to the community.
    They pull rocks from the road, sometimes miles away from 
where they live. They break them in bowls with metal poles. 
They grind the rock into fine dirt. They sift the dirt to find 
gold dust. Then they use mercury to extract the gold by hand. 
It is a grueling, dangerous process, and it is absolutely no 
way to make a living.
    I told the people of Sabodala that I would bring their 
stories back to the U.S. I believe the U.S. Congress should 
call on Senegal's President, Macky Sall, to take action to 
improve the conditions of mining-affected communities in 
eastern Senegal. President Sall should ensure that mining 
companies respect human rights, that mining revenue is managed 
in a transparent way, and that communities receive an adequate 
compensation and have a meaningful voice in decision-making 
about where mining takes place.
    The good news is that the countries of West Africa, 
including Senegal, are considering adopting a regional mining 
code that would apply to 15 countries in the region. I believe 
that adoption of this code would help strengthen protections 
for the human rights of people in mining-affected communities 
like Kedougou. I call on the Congress to support this and other 
measures to strengthen human rights protections for communities 
impacted by the oil and mining industries in Africa.
    One thing, one important thing, I respectfully request you 
all do right now is to sign onto Congresswoman Bass' letter in 
support of the regional mining code. This letter can have a big 
impact in West African countries as they consider adoption of 
the code.
    As a professional athlete, I believe strongly in fair play. 
I believe that Congress can play an important role in helping 
ensure fair play for Africans and that the money produced by 
the gold, oil, and other resources that come out of Africa's 
ground are used to help all Africans prosper. I hope that you 
will join me in taking action to ensure that this happens.
    Thank you, Mr. Chairman and the members of the committee, 
for your attention to this issue.
    [The prepared statement of Mr. Boldin follows:]
    
    
    
    
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    Mr. Smith. Mr. Boldin, thank you very much for your 
testimony and you and your wife for the visit that we did have, 
which I think was very, very meaningful to me and I know to 
Greg and the rest of my staff. So thank you again for your very 
concrete recommendations and for doing what you said you would 
do, bring back to the Congress and to the American people what 
exactly is going on in Senegal and in other places in West 
Africa.
    Mr. Alicante?

 STATEMENT OF MR. TUTU ALICANTE, EXECUTIVE DIRECTOR, EG JUSTICE

    Mr. Alicante. Chairman Smith, Ranking Member Bass, and 
distinguished members of this committee, thank you for this 
opportunity.
    In 1993, the military arrived in my village in Equatorial 
Guinea to suppress an uprising. They arrested and tortured all 
the young men in sight, publicly executed two of them. They 
burned down my family's house. That evening I asked my father 
what we could do. His response to me was that it was nothing we 
can do. His words of defeat reflect the environment of gross 
human rights violations, absolute impunity in which I grew up. 
Five months later I came to the United States. I became a 
lawyer and have since worked for human rights and transparency 
in Equatorial Guinea.
    Imagine a tiny country of 700,000 people suddenly 
flourished with oil money, where the wealth per person is on 
par with that of Italy. Now imagine a place where nearly two-
thirds of the population lives in extreme poverty. Infant and 
child mortality are on par with ravaged Democratic Republic of 
the Congo. Impossible as this sounds, these two scenarios 
describe the same country: Equatorial Guinea. It is a textbook 
case for the resource curse.
    Oil production in Equatorial Guinea began 20 years ago. 
Today Equatorial Guinea has the highest GDP per capita in 
Africa. However, despite this enormous wealth, the majority of 
citizens are mired in poverty without access to water or 
sanitation. The country is richer than Poland but has a child 
death rate 20 times higher. It boasts the largest gap between 
income and human development. It ranks among the lowest for 
primary school enrollment.
    The Obiang regime, in power since 1979, has a long record 
of human rights violations, including arbitrary arrest and 
torture. Freedom House ranks it among the worst of the worst. 
Corruption is endemic.
    Equatorial Guinea is among the least transparent countries 
in the world. Contracts for oil exploration and production were 
and continue to be negotiated in secret without an opportunity 
for national debate or informed consent. President Obiang has 
stated that oil revenues are secret, a state secret. He uses 
oil to monopolize economic, political, and military power. Oil 
revenues finance luxury purchases for the ruling family. 
According to the U.S. Department of Justice, between 2001 and 
2010, President Obiang's son allegedly spent more than $300 
million on mansions, sports cars, and luxury items, far 
exceeding the amount that the country spends per year on health 
and education combined. He allegedly uses numerous anonymous 
shell companies set up in the U.S. to secretly move a sizeable 
portion of that money into the U.S. The DOJ has concluded that 
the money was acquired through corrupt means and has moved to 
seize some of those assets.
    Four American oil companies, ExxonMobil, Hess, Marathon, 
and Noble Energy, dominate the oil industry in Equatorial 
Guinea. Therefore, the United States has an opportunity to help 
reverse the resource curse in Equatorial Guinea.
    Section 1504 of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act, which requires oil, gas, and mining 
companies to publish the payments they make to governments for 
natural resources, aims to provide citizens of countries like 
Equatorial Guinea with much needed information to hold 
governments accountable for the use of natural resource 
revenues. Disappointingly, some American companies, like 
ExxonMobil, are supporting the lawsuit aimed to undermine 1504, 
suggesting that they prefer secrecy to transparency.
    I respectfully ask this committee to take specific steps 
that would lead to improved governance in Equatorial Guinea, 
including first urging the SEC to issue strong rules in support 
of the Dodd-Frank 1504; second, supporting the Incorporation 
Transparency and Law Enforcement Assistance Act that 
Congresswoman Maloney plans to introduce, hopefully tomorrow, 
to put an end to the anonymous shell companies so often used by 
corrupt government officials to move and hide illicit money; 
press the Government of Equatorial Guinea to respect civil 
society organizations and political opposition parties; expand 
the Magnitsky Act to cover kleptocrats and human rights 
violators globally; implement Presidential Proclamation No. 
7750 to deny U.S. visas to members of the Government of 
Equatorial Guinea.
    I look forward to the day that all Equatorial Guineans can 
fully and equitably benefit from our natural resources of our 
country. I thank the U.S. Government for working hard to bring 
that closer. And I thank you for holding this important 
hearing. Thank you.
    [The prepared statement of Mr. Alicante follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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    Mr. Smith. Thank you so very much for your testimony. Thank 
you for your perseverance, obviously under very, very difficult 
and dire circumstances, and for being here to encourage us, 
give us a blueprint, as you all have done.
    Let me just ask. Three of you have mentioned section 1504 
of the Dodd-Frank bill. To effectively implement it was 
mentioned, the need to implement, apparently the failure to do 
so. And I am sure there are some reasons why they have not 
gotten around to doing it, including court challenges. But if 
you, any of you, would like to expand upon what you construe to 
be the holdup as to why that very important provision has not 
been implemented?
    Ms. Gilfillan. Thank you, Chairman Smith. I am happy to 
start answering that question. I know others on the panel can 
as well.
    The SEC actually issued rules, final rules, for section 
1504 in August 2012. And they were very strong rules. They met 
the full intent of what Congress intended. Unfortunately, there 
was a lawsuit that was then filed by the American Petroleum 
Institute challenging section 1504. And that was done in the 
fall. And so right now, there is a court battle on that issue. 
And the court recently took a decision. The DC District Court 
recently took a decision that would require the SEC to go back 
and re-look at the rules.
    But one of the things that I would want to really put into 
context with this is that as this is happening in court, the 
European Union recently adopted transparency and an accounting 
directive that is very complementary to Dodd-Frank. And so with 
the combination of the U.S. and the EU now requiring mandatory 
disclosure, that covers 70 percent of extractive companies 
globally that are going to have to be more transparent. And 
that includes Chinese companies, Russian companies, American 
companies, and European companies.
    So I think there is overall a rising tide of transparency. 
I think the court battle is hopefully a temporary one, that the 
law remains the law of the land, and the SEC we hope will move 
forward with finalizing the rule based on in the next step of 
the process.
    Mr. Smith. Do you have a sense when this might be 
concluded?
    Ms. Gilfillan. No, I do not, but I know that the SEC came 
out with a strong rule and I think very strongly defended why 
they made provisions in the rule. And so we are hoping that 
they will move forward quickly with issuing a rule.
    I think that we are going to see the fact that Europe--
Canada also wants to disclose. They have announced their 
commitment recently. Switzerland is thinking about it. Because 
there is all of this global momentum, I think that the pressure 
is really on the U.S. to keep on moving forward and not 
backwards.
    Mr. Smith. Mr. Adam?
    Mr. Adam. Yes. Mr. Chairman, thank you for this question.
    I think that the leadership the United States of America 
showed the world in passing these provisions in the Dodd-Frank 
Reform Act is commendable. And I believe this was what 
influenced the European Union to recently pass a similar law.
    The United Kingdom and France have indicated that they want 
to fast track the mainstreaming of the EU law into their 
national laws and to begin implementation of the law. And I am 
just wondering if the EU was just taking a cue from the 
leadership provided by the U.S., why the U.S. was lax as far as 
pushing the implementation of these provisions.
    And so I want to encourage you and through you the SEC to 
also fast track the process. If they have to bring up new 
rules, they should do it as a matter of agency because African 
citizens, you know, citizens of African countries, cannot wait 
any longer while corporate corruption with the connivers of our 
governments are plundering the resources God has blessed us 
with.
    Thank you.
    Mr. Smith. You know, unfortunately, our courts move so 
slowly. We just had, from my point of view, a setback, 
unrelated to today's discussion. Back in the beginnings of the 
PEPFAR program, I wrote a provision into the bill to preclude 
funding to those groups that were not overtly against sex 
trafficking and prostitution. And a very workable way of 
dealing with women who are in brothels was worked out by USAID. 
And, despite that, it took 10 years for that provision to make 
its way to the U.S. Supreme Court. I was there during the oral 
arguments at the U.S. Supreme Court earlier. Unfortunately, 
they ruled against the provision that I offered 10 years to the 
original President's Emergency Plan for Aids Relief, which was 
a true setback, because I lead in this Congress on combatting 
sex trafficking.
    And even during the oral stage, Justice Roberts asked a 
question. And I am only saying this because fast tracking is 
something that once it gets into our courts, the chances are 
slim and none. Hopefully here it will at least be slim. And 
that is that Justice Roberts asked the question--and, again, 
this is unrelated but just to give it further insight as to why 
your frustration, which is shared by those of us on this side 
of the dais as well--and he asked a very good question. He said 
if an organization was doing wonderful work on clean water in 
South Africa during the years of apartheid and another group 
was totally against apartheid, one group, an NGO, was for it 
and we made a choice to go with the group that was anti-
apartheid, would that be constitutionally suspect or could it 
be allowed? And the lawyer for the other side had no good 
answer. And, yet, they have ruled against our provision. But it 
took 10 years, the point I am trying to make.
    Mr. Boldin, if I could ask you with regards to meeting with 
the farmers who were displaced, you mentioned that they were 
offered a cash buyout. Did they give you any indication how 
poor, how inferior, how inadequte that buyout was? How little 
money was it?
    Mr. Boldin. I think if I can remember, I think it was about 
$10,000, which we all know isn't enough money to sustain----
    Mr. Smith. For a farm?
    Mr. Boldin. Yes. And, like I said, they were living off of 
their land. So that obviously is not enough money to sustain 
them. And, I mean, just from my experience, I mean, I think it 
obviously is unfair, but it is inhumane for people to be 
treated that way, to be literally living on top of a gold mine 
and have your land taken from you. And then the people that 
have taken your land from you come in and make millions, 
billions of dollars off of your land. So, I mean, we all know 
$10,000 isn't fairly enough, you know, to be compensated for.
    Mr. Smith. And it is your land, and it has the gold.
    Mr. Boldin. Exactly.
    Mr. Smith. It has to be a double insult.
    Let me ask you, if I could, with regards to, what are those 
people doing now? You know, how displaced are they? Are they in 
abject poverty as a direct result of this? And did the 
government give any indication of trying to provide some kind 
of recompense tool?
    Mr. Boldin. Unfortunately, we didn't have a chance to speak 
with government officials. You know, we talk to the local 
officials. And yes, they are in poverty, which is the reason 
why a lot of the locals are trying to take to mining to even 
put a meal on the table.
    And, like I described in my letter, you know, I had an 
opportunity to go through the entire process of trying to find 
gold. And, trust me, it is not fun. But this is what they are 
reduced to on a daily basis just to try to survive.
    Mr. Smith. Mr. Alicante, you mentioned in your testimony 
and you list how the President's family and friends have so 
egregiously benefitted from, you know, the wealth. The son of 
the President of Equatorial Guinea has allegedly used several 
anonymous U.S. shell companies to launder more than $100 
million of corrupt funds into the United States to finance a 
number of luxury purchases. DOJ we are told is investigating 
that. Do you have any insight as to how well the 
investigations, not just on his case but some of these other 
cases, are proceeding by the U.S. Department of Justice?
    Mr. Alicante. Thank you, Chairman, for that question.
    Yes. We are in touch with some of the investigators in the 
Department of Justice. Our sense is right now the case, the 
judges in both cases--in the U.S., there are two cases, one in 
California, one in Washington, DC, the judges in both cases 
have required the DOJ to file additional documents proving 
probable cause and showing a direct link to Mr. Teodoro Nguema 
Obiang Mangue.
    In response to your earlier question, Mr. Chairman, about 
the holdup on 1504 and connected to this question, I think part 
of what we are hoping that you would do here is help create an 
environment in which transparency becomes an essential part, 
the quintessential part, of U.S. policy with countries like 
Equatorial Guinea.
    I mentioned in my remarks I alluded to the Incorporation 
Transparency and Law Enforcement Assistance Act, which 
Congresswoman Maloney will introduce. I think that the section 
1504, the Foreign Corrupt Practices Act, and several different 
tools are what need to become part of how U.S. engages with 
countries or governments, like the ones in Senegal, Equatorial 
Guinea, Ghana, and others.
    Mr. Smith. Thank you for that. You mentioned in your 
testimony that the 2013 Africa Progress Report by Kofi Annan 
showed that Equatorial Guinea is richer than Poland but has a 
child death rate nearly 20 times higher. And I know some years 
back, the government and USAID had entered into an agreement 
and some $20 million was spent on social programs. And I am 
wondering if you could shed some insight onto that; and it has 
failed. It didn't proceed and go forward, you know, with all of 
that wealth, the fact that children are dying or having high 
morbidity rates is just appalling. Maybe you could just 
elaborate on that a little bit.
    Mr. Alicante. Indeed, that is the situation, Mr. Chairman, 
in which there is a vast amount of money coming from oil in 
Equatorial Guinea. And those of us from that country cannot 
understand why our nieces and nephews continue to suffer, 
despite this amount of money. My sense of the different 
programs is that those the government has claimed to have 
instituted have not gone anywhere. The government now has an 
economic plan, Horizon 2020, which is not even funded. The 
project that they have with USAID has not gone anywhere. So we 
don't know what the government is doing in terms of social 
development inside the country.
    Mr. Smith. Let me just ask you--and others might want to 
say something on this as well. We haven't mentioned China. And 
China certainly has been ripping off Africa. I mean, it is no 
excuse for the foreign multinationals, including those of the 
United States, that take advantage and fleece governments and 
the people by extension. But we know China.
    And I remember Greg and I were actually in the DR Congo on 
one trip en route to Goma. And we heard story after story of 
roads being built in such a way to ensure that the Chinese 
Government was able to again extract minerals and things that 
they wanted. And the cost of that was the road. And whatever 
they found on the right and on the left somehow went into their 
pocket. And it is a huge problem. We know that Africa is 
looking for investment. And roads and infrastructure are at the 
top of the list, but the Chinese come in. And in exchange for 
that work, they end up in a very bad bargain in my opinion 
because we heard about--a number of them in DR Congo get these 
very, very precious minerals and metals at below bargain 
basement prices. If you wanted to speak to that?
    And, secondly, I would like to ask if you could--Corinna, 
you had numbers, actual numbers, for the DR Congo, $1.36 
billion from the underpriced sales of cobalt and copper mining 
between 2010 and 2012. One-point-thirty-six billion dollars was 
paid. Is there any estimate as to what the real market price 
would have been? You know, how far below the real cost is that? 
So if you could speak to the China issue, anyone who would like 
to, and then to that?
    Ms. Gilfillan. Thank you, Chairman Smith.
    On the issue of China, just a few things on that. Global 
Witness has definitely looked at Chinese investment in the 
extractive sector in China because it has grown so much. We 
looked, for example, in the Democratic Republic of the Congo at 
a resource for instructor agreement there and looked into how 
there was nearly $24 million of a Chinese Government's senior 
bonus payment that were not answered as far as regarding that 
payment. And so what we are finding is that though China is 
investing in the region, China is also vulnerable to these 
issues of corruption and conflict. And so any kind of 
corruption or conflict in these resource-rich countries can 
adversely affect China and their investment. And so one of the 
things that we are looking at, for example, is to try to engage 
with the Chinese Government to raise their awareness about 
transparency and how transparency can actually help in their 
own operations.
    I was actually just in Shanghai in May to basically talk 
with some of the policymakers in Shanghai about the work that 
we are doing on transparency.
    The other thing is that I think we are going to bring in 
some Chinese companies to be more transparent through 
implementation of the Dodd-Frank Act. You will have big Chinese 
companies like Sinopec and PetroChina that will have to 
disclose. So we will be bringing in Chinese companies that way.
    The Extractive Industries Transparency Initiative actually 
does have Chinese companies already disclosing in EITI. And you 
have that in countries like Mongolia and Nigeria. So at least 
you are bringing in Chinese companies and to an extent the 
Chinese Government and raising awareness about the importance 
of transparency and how that could adversely affect them.
    On the issue of the DRC and the selling of the secret 
mining assets, those assets, as I understand it, were sold at 
1/16th of the value. So that was a huge--I mean, just 
tragically what a loss to Congo to have their valuable mining 
assets sold at 1/16th of the commercial market value. So that 
is just an example of what happens when you have these secret 
mining deals. You have these deals done in secret. And you are 
basically allowing these companies, sometimes companies you 
don't even know who owns the companies, enter into deals with 
government elites, essentially robbing the country of billions 
of dollars. And so that is why we are calling for transparency, 
not just of revenues but transparency across the value chain. 
So you have transparency of bidding processes, transparency of 
contracts. We are hearing about how in Ghana, contracts aren't 
made public. We are talking about transparency around who owns 
companies. Those are the kinds of transparency that we need 
that will hopefully prevent some of these really bad and 
harmful deals from happening. And we are hoping very much that 
the U.S. can help support more transparency in its foreign 
policy and through actively supporting the EITI and moving 
forward with Dodd-Frank.
    Mr. Smith. Yes, Mr. Adam?
    Mr. Adam. Yes. I want to touch on the China question. 
China's relationship with Ghana's natural resources is at three 
levels. First of all, the Government of Ghana signed an 
agreement with the China Development Bank for a loan facility 
of $3 billion. And that is the highest loan facility Ghana has 
ever constructed.
    But the difficulty with this loan is that it is 
collateralized against future oil revenues. And, therefore, 
when the loans are not used efficiently to develop the country, 
future oil revenues, and future development for that matter, 
are compromised. But the difficulty around this loan also is 
that a Chinese company, Bolsa, China Bolsa, has acquired a 
mining concession, what we call Awaso mines, to exploit 
bauxite. And two projects that are to be funded from the loan 
contracted from China are to benefit China, rather than Ghana 
because one of these projects is a real line which is to be 
constructed to the bauxite mine, which is now owned by a 
Chinese company, to enable them to exploit and transport 
bauxite.
    The second project is the expansion of the port where the 
bauxite will be shipped out. And both projects are funded from 
a loan contracted from the China Development Bank, which Ghana 
will have to pay with future oil revenues and which others said 
earlier will compromise future development.
    The second level of China's relationship with our natural 
resources has to do with small-scale mining. Our country's law 
does not allow foreigners to partake in small-scale mining, but 
a small-scale mining sector in Ghana lately has been dominated 
by Chinese workers. And we have recorded a series of human 
rights abuses, destruction of the environment, which led to the 
Government of Ghana setting up a task force of security 
agencies to arrest----
    Mr. Smith. What kind of human rights abuses, if you could 
just elaborate on that? What kind of human rights abuses?
    Mr. Adam. Human rights abuses in the sense that the 
communities who are living near the exploitation of these 
resources, you know, their water has been polluted. Their 
farmlands are being mined. And they are not able to prevent the 
Chinese workers from mining on their farmlands, you know. And 
in some cases when they have complained, Chinese mine workers 
have used weapons against them. And we have actually recorded 
some deaths in those areas.
    So this angered the Government of Ghana. That led to the 
setting up of a task force of security agencies. And 501 
Chinese workers have been arrested by the Government of Ghana, 
most of whom have been deported. But this has also brought 
about a diplomatic row between the Chinese Government and Ghana 
for which reason requirements for visas from China has been 
made more stringent. Some Ghanian traders go to China to bring 
in goods. And, therefore, because of the difficulties Ghana has 
faced, as a result of which Chinese mine workers are being 
deported, they have made stringent the requirements for 
acquiring visas to Ghana.
    There are some discussions between the two governments, but 
the indication I get is that the Chinese are able to find their 
way out. And this is why transparency is so important. But 
beyond transparency, the need to support civil society, the 
citizens who will bring pressure to bear on the government so 
that their government is able to contract loans, that would 
serve the interests of the country other than the lenders. And 
when I say this, it is not just the Awaso mine. Ghana is 
compelled to sell this oil to China alone. And, therefore, as 
part of the loan agreement, it is an optical agreement for oil. 
We cannot sell our oil to any other country of our choice 
except China. And so this is how they tie your hands, through 
loans like this. And if the citizenry are not given the support 
in the capacity to voice our consents, to put pressure to bear 
on the government to contract, you know, good loans, the 
country will suffer eventually.
    Mr. Smith. Just one small question. How long, in effect, 
will be this requirement of selling all of the oil to China?
    Mr. Adam. Yes, until we are able to repay the loan. And 
that is supposed to take a period of 10 to 15 years.
    Mr. Smith. Wow. Okay. Would anybody else like--yes?
    Mr. Alicante. Mr. Chairman, if I may, I would like to 
reiterate the points that Mr. Adam has made about the 
importance of civil society because Equatorial Guinea is one of 
those cases in which transparency alone is not enough. 
Equatorial Guinea does not have an independent press. 
Equatorial Guinea has a congress, a Parliament, that is 99 
percent the ruling party--Equatorial Guinea does not have an 
independent judiciary. Equatorial Guinea does not have a 
vibrant civil society. So the point that my colleague makes 
about supporting civil society, about building the 
infrastructure for good governance is critical before it is 
1504 and EITI and other transparency mechanisms can be fully 
realized in a place like Equatorial Guinea.
    China is not invested in the oil industry in Equatorial 
Guinea. China is invested in the construction industry in 
Equatorial Guinea. But one point I make to people in the United 
States is that there is a certain reputational value that comes 
with operating with the United States. President Obiang and his 
government know that, but there is a reason why President 
Obiang spends millions of dollars in lobbying here in 
Washington, DC. They know that it is important to keep their 
businesses with the United States. And that for me is a 
leverage point. That to me is why Congress can actually help 
address the resource curse in a place like Equatorial Guinea, 
despite the threat of China.
    Mr. Smith. Ms. Bass?
    Ms. Bass. Well, I have to tell you that some of the 
testimony today is a little discouraging, I guess, especially 
from a country like Ghana, which I want to ask you some 
question about. But, you know, I just refuse to view this as 
Africa's curse because to me, if you say that, then you are 
almost saying that there is nothing that can be done about it. 
Any other time we would look at the unbelievable natural 
resources as a blessing. And I think that it is important to 
have that frame of mind because policy can change. These 
situations can change. So, anyway, that is my little editorial 
statement, but did you want to say something?
    Mr. Alicante. Sure. Congresswoman Bass, certainly. 
Resources in Equatorial Guinea, the oil itself, the gas itself, 
we consider those a blessing. Our problem, again, is the 
governance----
    Ms. Bass. Right.
    Mr. Alicante [continuing]. The lack of an accountable 
government, the a lack of a transparent--we have one of the 
most closed societies in Equatorial Guinea. And that is what 
turns oil itself into a curse.
    Ms. Bass. Sure.
    Mr. Alicante. So I agree with you.
    Ms. Bass. Absolutely. And, you know, one issue I want to 
take up in general with all of the panelists because, you know, 
I am sitting here in Washington, DC. I want to know about U.S. 
corporate involvement and U.S. practices. And you do make some 
mentions, especially in your recommendations.
    You said a few minutes ago, I think, that education, 
working with the Chinese--and I guess I am curious as to why 
you think that educating the Chinese about transparency--I 
mean, I think they would know, right, why the--go ahead.
    Ms. Gilfillan. Well, actually, for Global Witness, we do 
investigations into what governments are doing and companies 
are doing as far as the trade in natural resources. And so we 
are not just educating the Chinese Government. We are actually 
doing investigations, basically looking at Chinese investment 
in Africa and how that affects Africa. That is why we did look 
at the resource for infrastructure deals that China did, for 
example, in the Congo. And we found a lot of problems with that 
with the bill at the----
    Ms. Bass. Would they be receptive to the investigations, 
even----
    Ms. Gilfillan. Well, we are kind of having a dialogue with 
them, but it is not necessarily translating into any huge 
policy change yet. I think what we are also advocating, though, 
is for regulations. And that is why Dodd-Frank is so effective, 
because it will bring in Chinese companies. Any Chinese company 
registered with the SEC will have no choice but to comply with 
Dodd-Frank, the same with the EITI. Any Chinese company 
operating in a country that is part of the EITI, that Chinese 
company will have to participate in EITI. It will have to 
disclose information.
    So at Global Witness, we are approaching a lot of different 
tools. We are doing investigations to expose the problems, 
whether it is the Chinese companies or Chinese Government. We 
are doing policy measures that will bring in the Chinese. And 
we are also doing dialogue with the Chinese Government, like we 
do with all governments and with companies.
    Ms. Bass. Thank you.
    Ms. Gilfillan. As far as company involvement, I think that 
that is a very crucial question. And I also want to respond to 
your question or your comment about how this isn't all, we have 
to look at these resources as a blessing. And I think one of 
the things that I wanted to get across in the testimony was 
that there are some good things going on. We are kind of----
    Ms. Bass. Those definitely are a----
    Ms. Gilfillan. There is a lot of momentum on transparency. 
And we are beginning to see through the EITI and through other 
mechanisms where citizens are starting to use this data and go 
to governments and say, ``Wait a minute. What is going on with 
our resources?'' And, for example, with EITI, if you talk about 
Nigeria and even Liberia because of EITI, they are actually 
looking at what are the companies say they pay to the 
government? What is the government saying that they are 
receiving? And they are finding missing money. For example, in 
Nigeria, they found about $800 million that was going missing. 
And they were able to rectify that through the EITI. So and we 
are seeing----
    Ms. Bass. They found the money and people were arrested or 
what?
    Ms. Gilfillan. I am sorry?
    Ms. Bass. They found you said $800 million.
    Ms. Gilfillan. Well, in that case, sometimes it was an 
issue of collection, not even keeping track of what companies 
should be paying. So it is even things like that, you know, 
basic things like that, where you can find some problems in the 
system.
    And then we are seeing that civil society groups are 
starting to engage with governments. For example, in Tanzania, 
I know that there were civil society groups and parliamentary 
review that found problems with the collection of taxes and 
royalties. And through those efforts, they found loopholes. And 
they have done a law. They have done some efforts to close a 
loophole, the loophole.
    So I think as more of this data comes out, we are seeing 
citizens using that. Parliaments use that as well. So I think 
there is some reason to be optimistic in that we have got this 
data coming out. I think what is really important is that the 
transparency tie needs to move forward. And we cannot just 
focus on revenues, but we need to focus across the value chain. 
We need to look at allocation of licenses, contracts, making 
that all public.
    The United States Government has such an important role to 
play. And we would like to see the U.S. Government make natural 
resource requirements, transparency requirements, an integral 
part of its assistance, so to say to resource countries, ``We 
will give you aid, but we would like to see some progress on 
transparency.''
    As far as companies, it is very important for companies to 
be more transparent about their operations. And we are seeing 
some companies do that. For example, Newmont, a huge mining 
company that operates in Africa, they actually realize----
    Ms. Bass. That is a U.S. company?
    Ms. Gilfillan. Yes, a U.S. company. Sorry. Yes.
    Ms. Bass. Where?
    Ms. Gilfillan. Sorry?
    Ms. Bass. Where? From where?
    Ms. Gilfillan. I think it is based in Colorado. Yes. So 
they realized in the 1990s, for example--I think it was one 
country was Indonesia. They were realizing that. They were 
paying their taxes to the government. And they realized that 
communities weren't--they didn't know how much Newmont Mining 
was paying to the government. And so there was a lot of 
concern. And so Newmont thought, ``Well, maybe we need to 
publish the taxes, et cetera, that we are paying to the 
government. Otherwise, this helps to build trust with the 
communities. Otherwise, if we don't publish that information, 
then communities, rightfully so, are going to be like `Wait a 
minute. These are our resources. Where is the money going when 
you are here in our communities? Where is the money going?' '' 
So that is why Newmont Mining is now publishing the payments 
that it is making.
    I think another really important aspect of this, though, is 
not just on the transparency of whether it is the contracts or 
the revenues but also on the human rights side of things. What 
are the impacts on mining, for example, in mining to 
communities? And I know that Oxfam, you know, is working a lot 
on free prior informed consent. So that is really having 
meaningful dialogue with communities and giving them the 
opportunity to be able to decide, you know, whether they want 
extractive and how it should be done. So I think that that is 
another thing, but it is a positive movement. Some mining 
companies are starting to embrace that principle.
    So I think we are seeing some positive movement by some 
companies. I think other companies, like the oil companies, the 
big, you know, oil companies, Shell, BP, Exxon, Chevron, are 
kind of putting their heads in the sand. And they are not 
wanting to be transparent, at least not with Dodd-Frank. But 
they are actually already signed up to transparency to an 
extent because they support the Extractive Industries 
Transparency Initiative. So there is kind of a disconnect with 
the position, but I think that the tie globally is for 
transparency. And all of these companies are going to have to 
be transparent under Dodd-Frank and through EITI.
    Ms. Bass. Thank you. Thank you.
    Mr. Adam, you had mentioned when you were talking about 
Ghana and you describe Ghana positively in the sense that, you 
know, there are movements toward transparency and things are 
getting better. But one of the things you pointed out that I 
wanted to ask you if you would talk a little bit more about was 
it sounded like a capacity issue, as opposed to a political 
will issue. And I think you talked about Ghana was unable to 
implement accountability measures and wanted to know if you 
could speak a little more about that. What is holding it back? 
Is there a way the U.S. can be supportive?
    Mr. Adam. First of all, let me say two things about U.S. 
corporate involvement in Ghana. We have three companies, 
Newmont and Anadarko and Kosmos, but I want to talk about 
Kosmos in particular. Kosmos' involvement in Ghana has been 
positive and negative somehow.
    Ms. Bass. What does Kosmos do?
    Mr. Adam. Kosmos Energy is an oil company from Texas area, 
yes. Okay.
    Ms. Bass. Go ahead.
    Mr. Adam. So the first issue is Kosmos once spewed toxic 
mud in Ghana's waters. Our laws provides for polluter pay 
principle. That is, the polluter will have to be responsible 
for the pollution. But our Government didn't have the capacity 
to establish the extent of pollution. And so that led to 
difficulties between Kosmos and the Government of Ghana. Even 
though Kosmos eventually paid about 15 million U.S. dollars as 
compensation, it exposed the weaknesses of our country as far 
as environmental management is concerned.
    But the other side, which I think is positive, is that our 
Government used to argue against contract disclosure on the 
excuse that it would compromise commercially sensitive 
information. And that will put the government in the light of 
our latent contracts, but because Kosmos had to list on one of 
the U.S. stock exchanges as a requirement, they have to 
disclose their contracts. And so we went back to our Government 
and said, ``The reason for which you were holding the contract 
is no longer valid'' because Kosmos by listing under a U.S. 
stock exchange has disclosed the contract. And that then 
compelled our Government to disclose the contract and six other 
contracts. And this is what I think is very positive, the fact 
that----
    Ms. Bass. Because they were listed on the stock exchange?
    Mr. Adam. New York, yes, New York Stock Exchange.
    Ms. Bass. Could you explain that again?
    Mr. Adam. Yes.
    Ms. Bass. They listed the contract and then Ghana was able 
to expose what was in the contract?
    Mr. Adam. Yes. They listed under U.S. Stock----
    Ms. Bass. Right.
    Mr. Adam [continuing]. New York Stock Exchange.
    Ms. Bass. Right.
    Mr. Adam. And that required them to disclose all 
information----
    Ms. Bass. Oh, I see.
    Mr. Adam [continuing]. Relating to their operation, 
including the petroleum contracts. So our Government didn't 
have the moral justification for holding the contracts 
confidential any longer.
    Ms. Bass. Right.
    Mr. Adam. And this I think was very positive. The fact that 
Kosmos listed on the New York Stock Exchange that compelled our 
Government eventually to disclose the contract and six other 
contracts, which we think is very positive.
    But, coming to your question, the issue in Ghana is both 
our political will but also a capacity issue. We are relatively 
doing better within our region in terms of capacity. And, 
therefore, our governance structure seems to be working, even 
though there are challenges, including budgetary challenges, 
sometimes political interference. I think that our democracy is 
quite strong. And the citizenry is also quite awake. Civil 
society is very active.
    Apart from that, our citizens are mighty strong when it 
comes to voicing our concerns. And our Government has been open 
as far as providing the space for dialogue with citizens. So 
these are some of the measures that have pushed Ghana forward 
in terms of how we manage our resources and the governance 
around our resources.
    But, as I said, there are risks involved. And some of the 
risks are associated with the fact that we haven't developed 
some of our petroleum-related legislation to the level that 
would support openness. So far we do not have provision on open 
and competent bidding process for oil concession in our law 
because the industry is also new in Ghana. We are into 2 years 
of production.
    We also do not have mandatory disclosure. The disclosures 
we have had so far were at the discretion of the minister. And 
so if you have a different minister who has a different policy, 
it means that contracts will not be disclosed any longer.
    And the issue we are worried about is the budget that the 
new institutions we are establishing to protect the integrity 
of our oil resources is not given. The Petroleum Commission is 
the regulator, supposed to be an independent regulator. The 
Public Interest and Accountability Committee is supposed to 
conduct independent assessment of how the oil revenues are 
used, but they are not given resources to work. And that is 
problematic. If you create any institutions by law and you are 
not providing resources for them to execute the mandate, then 
if you had those institutions, they are better for you. And 
that is the risk that we are going into.
    Compared to Nigeria, where the vested interest is too 
entrenched and where the elite class has already been built, we 
have yet to see the building of certain elite class because the 
industry is still new, but if it has happened in Nigeria, it 
could happen in Ghana. The potential for oil to also----
    Ms. Bass. Right.
    Mr. Adam [continuing]. Weaken our institutions is also 
high. And so we want to support citizenry, the civil society, 
so that we are empowered beyond where we are to hold our 
Government and other companies operating in Ghana accountable.
    Ms. Bass. And, you know, the U.S. supporting civil society 
is clear. Are there ways that you think the U.S. could be 
supportive in terms of building the other ways, building the 
accountability structure?
    Mr. Adam. Yes. The U.S. can support it in many ways, first 
of all, providing technical support to the institutions in 
Ghana working in the natural resources sector. For instance, 
our revenue authorities need capacity to be able to conduct 
petroleum auditing.
    Ms. Bass. Do we do that? We need to do it or we need to do 
more of it?
    Mr. Adam. At the moment, no.
    Ms. Bass. What did you say?
    Mr. Adam. No.
    Ms. Bass. We don't do it?
    Mr. Adam. Yes. You have to do that. You have to support us.
    Ms. Bass. Did anyone else want to comment about the general 
questions?
    Mr. Alicante. Definitely the question of U.S. oil 
companies' involvement in Equatorial Guinea, as I mentioned 
during my remarks, the major companies are American companies. 
American companies arrived to Equatorial Guinea in a time where 
there was no law. There was no legal regime regulating the 
activities of oil companies or anything that was going to 
affect the industry as a whole.
    They had an opportunity to help set the environment for 
fair play that Mr. Boldin referred to. That did not happen. And 
right now what we are seeing is that many of these companies 
are the ones that are siding with the American Petroleum 
Institute to ensure the 1504 does not become the law of the 
land, sending a clear message that they prefer to operate in 
that type of secret environment.
    In a situation like Equatorial Guinea, I think critically 
one thing that is missing is political will from the 
government, which is why I think, as Mr. Adam talked about, 
support for civil society is supposed to create independent 
institutions that can hold governments accountable. Support to 
create free press is critical for countries, resource-rich 
countries, in Africa in order to help reverse the resource 
curse.
    Ms. Bass. So what kind of support do we provide for civil 
society in Equatorial Guinea? Do you know?
    Mr. Alicante. Right now, very minimal. It is partly because 
of the challenges of the government that we are dealing with.
    Ms. Bass. Right. I mean, to me--and it is interesting. The 
chair spoke that earlier today we acknowledged President 
Mandela's 95th birthday. And a lot of the presentations talked 
about the history of the anti-apartheid movement in the United 
States. You know, it is one thing for us to talk about how 
people in other countries should hold their governments 
accountable, but I think if we have U.S. businesses behaving in 
this way, then we need to look at their level of 
accountability. And there is a long history here in our country 
of holding our businesses accountable. And I think it is 
important that we look at what is happening in Equatorial 
Guinea and look at ways that we might be able to be supportive. 
Dodd-Frank is great, but there are other things as well.
    Mr. Alicante. Indeed. I mean, I think I can point to at the 
very least two critical things that the U.S. can do. Certainly 
ensuring that government, of people in government, in 
Equatorial Guinea do not travel to the United States I think is 
critical, you know----
    Ms. Bass. Don't travel to the United States what?
    Mr. Alicante. Denying visas to members of the EG 
Government, the Equatorial Guinea Government, whether it is 
through Presidential Proclamation 7750 or whether it is by 
finding a way to expand the Magnitsky Act, which I referred to, 
I think that is critical. But, besides that, I mean, I think 
definitely supporting with funding organizations based in the 
country I think is critical. My understanding is that U.S. 
State Department has a number of programs where there is 
cultural visitation, cultural ambassadorships, and different 
programs. They allow for members of civil society in places 
like Equatorial Guinea where the government makes it impossible 
for civil society to operate to come to other countries or go 
to other countries in Africa and network with people working on 
some of these critical issues.
    So there are a number of ways which are brought to the 
attention of people in the African Bureau and DRL, the 
Department of Democracy, Human Rights, and Labor, which we are 
hoping begin to find ways to support civil society underground.
    Ms. Bass. You know, Botswana is often held up as a country 
that has been a great steward of their natural resources; in 
particular, the diamonds. I don't know if anybody on the panel 
is prepared to comment about that, but I did want to kind of 
shift to ask what do you as members of the panel think are good 
examples on the continent where people have been good stewards? 
Mr. Adam?
    Mr. Adam. Yes. I think that Botswana is a good example, 
indeed, but this is as a result of two factors: One, because of 
the provisions in their law that promotes transparency; and, 
secondly, because of their investment policy, they are able to 
invest the revenues that are coming from their natural 
resources in areas that promote the highest return. Education 
is one of the priorities in Botswana. And so through education, 
you are building even a more critical citizenry that will 
continue to demand accountability of you. And that compels you 
to be more transparent and more accountable. That has been the 
secret behind Botswana. And Ghana, as I said earlier, is 
following this path by making laws that promote transparency 
and accountability, but the difficulty in Ghana is whether we 
are able to implement some of the regulations and the rules 
that we are developing.
    Ms. Bass. Oh, go ahead. I am sorry.
    Ms. Gilfillan. Yes. I was just going to agree with the 
example of Botswana, although I think that it could still be 
stronger transparency measures. One thing on the issue of 
holding companies to account, I think that is a really 
important issue. And I just wanted to follow up on that because 
I know for Global Witness, we do a lot of work, as I mentioned 
before, looking at companies that could be complicit in 
corruption.
    And in the United States, the Foreign Corrupt Practices Act 
is very much an important law for holding companies to account 
for bribery. And that is one of the things that we are looking 
for as far as the U.S. Government really being proactive as far 
as investigating some of these major corruption cases, some of 
the ones that I have outlined today, actually, the one in 
Guinea, which I understand the U.S. Government is 
investigating.
    There is a case in Nigeria as well about Shell giving 
payments to the Nigerian Government that then went to a company 
called Malibu Oil and Gas that we found out was controlled by 
the Abacha-era oil minister, Dan Etete. And so there are some 
real corruption concerns related to that case. It is a very 
active case or controversial issue in Nigeria. And that is an 
example of where we think the U.S. should be investigating more 
and looking for issues of corruption.
    I think Tutu Alicante had mentioned the case of Riggs--I 
forgot the bank's name now. It has been a while, been around 
for a while. It used to be a big institution in DC. But for 
Riggs Bank and how that was followed up on, there wasn't 
really--a full FCPA investigation of the Riggs Bank did go down 
related to some issues around that. But I just think that the 
FCPA is encouraging that the administration has been 
prosecuting a lot of companies where it is merited, but we do 
think that there could be more done, especially in these 
extractive cases where you have just huge amounts of money that 
are involved and potentially serious corruption issues. So I 
think that is a very important way to hold companies to 
account. I just wanted to follow up on that, on your point.
    Ms. Bass. Does anybody want to comment on the role of the 
African Union? I mean, I can imagine what its potential is, but 
what about what it is doing now?
    Mr. Adam. Yes. The African Union is concerned about how 
natural resources have been managed so far. And they now see 
natural resources as one of the important growths that could 
transform African economies. And so they have developed and 
published what we called African Mind and Vision, which defines 
the framework for exploiting Africa's natural resources. And 
the vision has a very strong transparency component but also 
very strong investment policies on how revenues from natural 
resources can be invested to support the growth of Africa's 
economies.
    The African Mind and Vision has been endorsed by African 
heads of state, but as an institution, we all recognize the 
weaknesses of that institution. And whether they can be able to 
push the mind and vision, as excellent as it is, into the laws 
of member countries is another issue. The fact is that some 
countries in Africa are doing well in governance, others are 
not. And the African Union doesn't have that leverage to be 
able to carry everybody along. And this is why in my testimony 
I was also calling for the strengthening of the regional level 
initiative, the African Union, the ECOWAS so that they are able 
to justify why their member states must adopt good practices 
and good governance practices in the management of the natural 
resources.
    Mr. Alicante. Mr. Adam has addressed the points that we 
were going to raise. I think to say the African Union has faced 
its challenges, you know, is really to state the obvious. The 
fact that President Obiang was the chair of the African Union a 
couple of years ago sends a clear message of what one should 
expect of the African Union. Nevertheless, the fact that the 
U.S. has an Ambassador and has a presence in the African Union 
to me represents yet another opportunity, where Members of this 
Congress can actually pose the African Union to do certain 
things, to stand by the principles of transparency by the 
principles of democracy and human rights.
    Mr. Smith. Mr. Marino?
    Mr. Marino. Thank you, Chairman.
    And I want to thank the witnesses for being here. Like my 
colleagues, I am very concerned about--and I will use the term 
loosely--investments being made in Africa around the various 
countries within Africa, particularly by China, which plans to 
spend over $23 billion in Nigeria to build oil refineries; 
Iran, at least 6 countries they are talking about building oil 
refineries; and Egypt as well. And it is disconcerting given 
the fact that we are talking about China, a Communist country, 
and Iran, a radical dictatorship, are having such a footprint 
on the continent of Africa. And I think there have to be some 
answers. This has to be done globally, I think. The free market 
and banking industry is saying, you know, ``What is happening 
with this money?''
    I have been to Ghana. I have been to Liberia. I know Ghana 
is in a little better shape than Liberia. But we are talking 
about billions and billions of dollars in investments by these 
countries, Communist countries, and terrorist-backed countries. 
And still the United States is still pumping about $5 billion 
to $6 billion a year into countries in and around Africa for 
humanitarian purposes. And I guess I am making a statement more 
so than asking a question as to what are the terms of these 
loans.
    I understand first billionaire, on the continent, Dangote, 
is worth $20 billion now, just accumulated about $12 billion 
over the last couple of years, securing a $4\1/2\-billion loan 
from overseas banks to build an oil refinery. I hope that is a 
good thing for the continent and the countries because of jobs 
and money coming into them, but we need to keep a close watch 
on what is taking place there given the fact that we are 
dumping almost $6 billion a year for humanitarian needs. If 
anyone wants to respond to my thoughts on this, I would be glad 
to hear it. Please?
    Ms. Gilfillan. Thank you, Representative Marino.
    We completely agree with you on the point of the fact that 
the United States is giving aid to these countries. We are not 
opposed to the aid, but I think one of the questions that is 
concerning is that if you are giving aid to a country that is 
rich in natural resources but those resources and their 
revenues are being squandered, then you are subsidizing 
corruption essentially.
    And so, you know, I think that is why we are very, very 
much focused on, one, the issue of transparency, transparency 
around deals, the terms of the deals, who is benefitting from 
the deals, because, at least if you bring that out into the 
open, that is a very powerful way of deterring corruption and 
giving citizens, Parliaments, and others the ability to 
challenge that or to say, ``What is going on here?'' And so 
that is transparency all across the value chain. That is 
transparency when you are having bidding, biddings for these 
rights. Oftentimes the bids are secretive. There is not 
transparency around the bidding processes. And that just fuels 
corruption and allows the kind of deals that you are 
potentially talking about. So I think that is one really 
important thing that we can do to try and stop those kinds of 
harmful deals from happening.
    The other thing is as far as U.S. assistance to resource-
rich countries, I think that we do need to look at the 
assistance that we are giving and whether we want to tie 
certain conditions or requirements. If we are giving assistance 
to a resource-rich country, where there is a lot of corruption 
and mismanagement, do we to have some benchmarks for that 
country to have to meet, requiring greater transparency, open 
that kind of thing----
    Mr. Marino. Let me stop you there because, you know, as a 
prosecutor for 18 years--now, I am not accusing anyone of 
corruption at this point because I don't have facts indicating 
that. I could make a supposition of some type, but I have 
always followed the money, whether that is in organized crime 
or drug dealing or selling arms illegally to countries that we 
shouldn't, that an individual shouldn't. But I am concerned 
because being on Foreign Affairs and on the NATO Parliamentary 
Assembly, I see a great deal that is taking place that the 
United States alone cannot have an impact on.
    This is an international crisis, I think. And I have 
studied for the longest time China and the Soviet Union. And we 
used to think at one time foolishly that China wanted to take 
the world over militarily. Well, they don't have to do that 
anymore. They can do it financially and economically. China's 
investments around the world are staggering. Who is investing 
in Afghanistan? Other than the U.S. being there and some 
allies, China is dumping tons of money into Afghanistan, not 
for tomorrow, not for next year, but 5 or 10 years from now, 
because they know, China knows, the natural resources that are 
valuable natural resources that only Afghanistan has. And China 
is going to get its arms around that. I think it is doing the 
same thing in Africa.
    And there is a parallel here that is I think a paradox 
because at this point, I have seen how poor the conditions are. 
Liberia, for example, has one of the highest infant mortality 
rates in the world. But when a country comes in and starts 
dumping money and eventually figures, ``Well, we will build a 
hospital here. We will build a school there,'' I do not blame 
the people of those countries wanting that. But there is an 
ulterior motive.
    And internationally this is going to have to be handled. 
Internationally the United Nations should be looking into these 
matters as well, but, you know, we know we are not going to get 
very much service from the United Nations in situations like 
this.
    So I am in a quandary here. I mean, we could simply say it 
would be foolish for us to say the U.S. is going to stop all 
humanitarian aid to countries in the continent of Africa. I 
don't know if China or Iran or Egypt would step in and continue 
aid, humanitarian aid, with their resources. I kind of guess 
that that may not happen.
    So simply just pulling money out and stopping aid is not 
the answer. And the United States is going to need input from 
other democratic countries as well on how we--it is none of our 
business to a certain extent on what is being done with the 
funds and the profits, but I think from a humanitarian 
standpoint, we have to at least, someone has to, show the rest 
of the world what is happening with these profits and who is 
walking away with it.
    That said, I have no questions. If any of the other 
gentlemen would like to comment on my statement? Please?
    Mr. Adam. I will start. Mr. Chairman, one of the factors 
that increased China's entry into resource-rich countries is 
because for those resource-rich countries, they have come to 
realize that increased resource world increases their leverage, 
increases their strength, they become more creditworthy. And, 
therefore, they can go and pledge their oil, minerals for loans 
from China, as opposed to the international development, 
financial organizations like the World Bank, IMF, and some 
other private banks, but through the equitable principals who 
will demand certain governance requirements as a condition for 
granting them the loan. This I believe is what has pushed some 
of them to go into China.
    And so if the U.S. will withdraw their support on 
humanitarian grounds, citizens are going to suffer for the 
mistakes of their governments. And I think that one of the ways 
to go about it is to support increased democratization in these 
countries. When citizens are given greater democracy and 
greater participation, when reforms about governments are 
pursued in those countries, citizens can hold their governments 
to account and then influence who their governments go into a 
relationship or a contract with.
    Mr. Marino. I understand what you are saying there, but we 
certainly don't want a situation. We don't want a continued 
drawn-out civil war, like we have seen in Liberia. We certainly 
don't want any civil war. But, once again, I am perplexed on 
the way we go about this unless democratic countries around the 
world coalesce and come up with some type of plan to address 
these issues and to call countries like China and Iran out on 
what they are doing and let the rest of the world know, are 
these legitimate transactions? What is happening with the funds 
that are being generated there? Please go ahead.
    Ms. Gilfillan. Can I just respond? And I agree 
wholeheartedly with what Mr. Adam said. And I think for 
humanitarian aid, that is very crucial to Africa.
    But one thing on where this money goes, I think another 
effective policy tool is really combatting the illicit flows 
that are going out of Africa. And you had mentioned your 
background. And I think that that is a very interesting tool 
for the United States to use, is that you have all of this 
corrupt money that is exiting Africa and going out into the 
U.S. financial system. In fact, there are estimates from the 
Global Financial Integrity that you have $1.4 trillion in 
illicit financial flows going out of Africa.
    And what we are finding through our investigations and what 
we have heard about Equatorial Guinea and other places is when 
you have these corrupt deals, then these government elites 
basically take the money and siphon it off and put it offshore 
in the United States and other places.
    So I think in answer to your question, one really important 
policy tool is for the United States to do everything it can to 
prevent corrupt and illicit money from entering into the U.S. 
and there are several ways we could do it. One is through our 
anti-money laundering laws. We can enforce those much more 
effectively.
    Another thing we can do is require transparency around who 
ultimately owns companies here in the United States because I 
think corrupt money can come into the United States and other 
places through anonymous shell companies. So those kinds of 
reforms could really make a difference and address one of the 
issues you are talking about, which is where does all of this 
money go. If we make it difficult for it to go to the United 
States, then maybe it has more of a chance of actually staying 
in Africa and contributing to development there.
    Mr. Marino. I agree with you to a certain extent, but don't 
forget when we look at trade, just simply trade, from here in 
the United States around the world, 95 percent of our trade, 
the people who are going to buy our products live outside the 
United States. So it is going to be difficult for the United 
States, which we should be following the money in the United 
States to see if it is laundered, but that is not going to 
solve the problem. They are just going to go to another 
country. They are going to make investments back in China. Who 
knows what is going to happen in Iran? They are financially in 
a bad position now. But I just don't think the United States is 
going to have that much of an impact on following money that is 
invested from these types of countries here in the United 
States.
    So, with that, I yield back the time that I do not have 
left.
    Mr. Smith. Thank you very much, Mr. Marino. You know, this 
committee is blessed with very effective and very credentialed 
members. It is worth noting that when it comes to prosecutions, 
we do have a former U.S. Attorney in Mr. Marino. And he has 
been a very effective member of this committee. And I am 
grateful for his leadership.
    I do have just a few final questions before we conclude. 
Mr. Boldin, you mentioned in your testimony the need for a 
regional mining code. And I wonder if you might want to expand 
upon that a bit or anyone else on this distinguished panel, 
which would apply to 15 countries in the region. It is 
suggested that it would be a value-added. It would give a much 
more useful tool to this whole effort to promote transparency 
and accountability. If you would like to expand upon that or 
any of the other members of the panel?
    Mr. Boldin. Yes. I think just adopting the regional mining 
code not only promotes transparency, but it also puts everybody 
on a level playing field. You know, as for me, you know, Mr. 
Marino said, you know, that we are dumping foreign aid into 
these countries and it is not our business. But, to be honest 
with you, if we are dumping that kind of money into a country, 
I think it is our business to make everybody accountable on the 
money that is being spent in those countries. I think the U.S. 
does a great job outside of this country as far as helping 
others, but I also think that we have to spend responsibly as 
well in other countries and make other countries accountable 
for the money that we are dumping into their countries.
    Mr. Smith. Thank you.
    Anyone else? Mr. Adam?
    Mr. Adam. Mr. Chairman, one of the important safeguards in 
the African ECOWAS mandate and directive is the protection of 
communities affected by the exploitation of these resources. 
When the companies and government want to exploit their 
resource, they do not seek the consent of the communities. 
There are some countries, like Ghana, that have laws which 
empower the government to compulsorily acquire the land and 
farmlands belonging to the people. What they do is to pay 
compensation, which in most cases is very low because they are 
determined by government agencies, as opposed to market rates. 
And so communities are disadvantaged. They are paid one of 
compensation, but they will have to suffer for the rest of 
their lives. And, therefore, the ECOWAS mandate and directive 
seeks to protect the rights of communities by requiring 
government and companies to seek their consent before even a 
development of a filled or a minor area is done.
    And this, I think communities are looking up to the 
implementation of the directive. What some countries have done 
is just discuss it, the directive, but they do not mainstream 
it into their laws. And when you discuss the directive, that 
doesn't necessarily make it a law. Even though the original 
intention of the drafting of that mining code is for African, 
West African, countries to mainstream the directive into their 
laws, they don't do that. And so if they are supported to 
enforce these directives in ensuring that the member states 
appreciate the value of the code, I think that communities 
would be protected. And, therefore, human rights abuses would 
be limited and communities eventually will also benefit.
    And this brings to mind the issue of project by project 
reporting because these communities are suffering. And, yet, 
they don't even know how much revenue the state is collecting 
in respect of the exploitation of the area. And so when we have 
project by project reporting, that will further empower 
communities to demand of their government how much they are 
receiving from projects in their areas and also to constitute 
the basis for demanding what is due them as far as promoting 
their own circumstances is concerned.
    Mr. Smith. Ms. Gilfillan, you made a statement, part of 
your second recommendation was to make the transparent and 
responsible management of natural resources an integral part of 
U.S. foreign policy objectives. And then you give very specific 
examples on page 12 of your testimony. My question is, is the 
Obama administration doing that right now in July or is this a 
hope that you have that they will do it? And has any other 
previous administration been responsive in that regard?
    Ms. Gilfillan. In the past, we have very much focused on 
looking at the U.S. aid to resource-rich countries, more 
focused on, for example, the World Bank and how the World Bank 
is actually looking at natural resource governance and lending 
to resource-rich countries. But in relation to some of the U.S. 
assistance, right now I don't believe that they are doing that. 
In particular, I would like to point out some of the programs 
that the U.S. has. For example, the U.S. Energy Governance and 
Capacity Initiative, which is an initiative led by the State 
Department that is focusing on helping increase capacity of 
governments, particularly emerging countries with emerging oil/
gas sectors. And these kinds of initiatives are very important, 
you know, to help promote governance in the sectors in Africa 
and elsewhere. But we would like to see more of this type 
assistance be explicitly linked to transparency commitments and 
progress made in achieving them.
    If the U.S. is going to be providing assistance, then I 
think that assistance will be more effective if there are 
benchmarks for a country to demonstrate that it is making 
progress. So I think we would like to see more efforts. By 
that, I think the U.S. can also exert its influence through the 
World Bank, through the IMF, to try and make sure that those 
institutions are looking at natural resource governance and 
trying to integrate those in its lending programs in resource-
rich countries.
    Interestingly enough, the IMF has done that, for example, 
in the Congo, where they did withhold part of a loan because of 
concerns around corruption in the sector, in the extractive 
sector, in DRC. So there are examples of where that has been 
done, but we generally would like to see it done in a more 
consistent manner.
    Mr. Smith. Finally? And then if you have any closing 
statements you would like to make? As we all know, section 1502 
mandates that the SEC issue regulations requiring publicly 
traded companies to disclose the origins of illicit conflict 
materials. And 1504 requires resource extraction issues to 
disclose payments made to foreign governments.
    Now, the SEC obviously promulgated regulations. They are 
enjoined in court. We don't have any idea--at least I don't, 
and perhaps you do--as to when that court case may be 
ultimately resolved one way or the other. In your view, any of 
you, was Dodd-Frank drafted properly if it falls? Do we have a 
fallback that you would recommend? You know, it is not too soon 
to be thinking. You know, the idea is transparency and 
accountability. What do we do if the court were to find this to 
be unconstitutional?
    Part of the lawsuit that has been brought by the National 
Association of Manufacturers, they point out that the SEC 
requirements are extremely burdensome when it comes to tracing 
minerals back to the smelter or refinery. It seems to me, you 
know, we have got to be realists about, you know, the perfect 
sometimes is the enemy of the good. Is there a way of making 
sure that we know where these materials are coming from, these 
minerals, that could gain constitutional muster?
    Ms. Gilfillan. As far as your first question about were 
sections 1502 and 1504 done properly, I think that there were 
many years of deliberations in Congress where the issues of 
extractive industry transparency and conflict minerals have 
come up, both in hearings, both on the House and the Senate 
sides. I know that for Global Witness, we have worked on this 
issue since the late 1990s. And I have certainly been in 
Washington since 2004 working with Members of Congress in both 
the House and the Senate on both of these issues: On conflict 
minerals, on extractive industry transparency. So there were 
hearings done in both issues.
    There was legislation introduced. It was bipartisan and 
particularly Senator Lugar and Senator Brownback along with 
Senator Cardin. And Senator Feingold, actually, is no longer 
there, along with Lugar. But, anyway, they were some of the 
champions of these pieces of legislation in the Senate side. 
And so it was a bipartisan effort. There was a lot of 
deliberation. There was legislation out there before that was 
then put into Dodd-Frank. So we do believe that there was a lot 
of careful thought given to this.
    We are seeing it really enforced now with all of the other 
countries like the European Union that basically has adopted a 
similar provision. And we saw the Africa Progress Panel report 
that just came out this spring that pretty much embraced the 
whole idea of mandatory reporting that is in Dodd-Frank.
    As far as what is our backup, just on the section 1502 
case, that there has been no decision on that. Oral arguments 
were heard about a couple of weeks ago, but there is no 
decision on that. So we don't know where that is.
    But I think the reality for section 1504 is that the rest 
of the world is moving toward transparency. So Europe has 
adopted it, as I said. Canada has announced they are adopting 
it. I think other countries are going to be moving forward as 
well. The G-8 just made a commitment to doing it as well. So I 
think that it really is here. And I think that we are hopeful 
that the SEC will be able to move forward with finalizing the 
rules and having implementation as soon as possible. We 
certainly believe that the SEC did the rule and did it in a way 
that was consistent with the congressional intent in the 
statute.
    Just on section 1502 on the conflict minerals provision, 
there has been a lot of progress since that provision came into 
effect. We have never seen so much attention focused on the 
Congo and trying to stop conflict minerals. Since Dodd-Frank, 
we have seen so much action from companies, from the Congolese 
Government, from other actors in the Congo. For example, the 
DRC Government now has a law requiring all companies in the 
trading in the mining sector, to carry out due diligence to 
avoid sourcing conflict minerals. That is the biggest that we 
have seen. That is a huge development. And before Dodd-Frank, 
we really didn't see much meaningful progress by the Congolese 
Government. So I think that that is huge.
    Another thing that is very important is that all of the 
private sector is really galvanized and working to comply. Now, 
obviously there are challenges with knowing your supply chain, 
but we have got major companies, like AMD, H.P., G.E., that are 
actively involved in developing these joint industry 
initiatives that are now going on to be able to trade supply 
chains.
    So I think it is very, very positive what is going on on 
the ground. We certainly work with, for example, the Conference 
of Catholic Bishops in the Congo, who has testified here in 
Congress. And they continue to believe that Dodd-Frank is 
incredibly important to break the links between minerals in 
conflict. It will enable people in the Congo. Because of the 
conflict in the mining areas, lots of people have not been able 
to pursue other livelihoods, like agriculture, for example.
    And so the Catholic bishops believe there that if you have 
Dodd-Frank if you kind of break this link between minerals in 
conflict, you will be able to have people going back into other 
livelihoods because the mining sector is not particularly a 
great livelihood for people. It is slave-like conditions. It is 
very, very horrible working conditions.
    So I think we are in that transitional period where we are 
moving forward with the implementation. But we have seen demote 
militarization of mining areas. We have seen a lot of progress 
and a lot of important impact. So I would just want to, you 
know, make that clear that that is what we are finding. And we 
are very much hoping that the U.S. will move forward.
    And Europe also is now considering a similar type of 
provision. So that is encouraging, too.
    Mr. Smith. Thank you.
    Would anyone else like to make a final comment before we 
conclude?
    Mr. Alicante. Sure. Not much to add to what Corinna had to 
say about Dodd-Frank 1504, only to say that, as I mentioned 
earlier, the rate of importance of creating a whole environment 
in which transparency is valued and is protected in the United 
States, which in my mind means also ensuring that anti-money 
laundering laws are taken seriously, ensuring that 
incorporation transparency to avoid illicit money coming into 
the United States to shell companies is taken seriously, 
ensuring that the EITI, for instance, Equatorial Guinea is in 
the process of reapplying, so ensuring that Equatorial Guinea 
is only considered after certain key benchmarks have met in the 
country and also balancing all of these efforts in transparency 
with efforts to promote human rights, to promote good 
governance in these resource-rich countries.
    And, again, Mr. Chairman, I want to thank you very much for 
these wonderful opportunities to speak on this issue.
    Mr. Smith. Thank you, Mr. Alicante.
    Mr. Adam. Yes.
    Mr. Smith. Mr. Adam?
    Mr. Adam. Mr. Chairman, I also want to thank you very much 
and to reiterate that Ghana has shown the way, the willingness 
to govern the management of these resources transparently and 
also to invest the revenues from oil and other minerals 
efficiently. But Ghana still needs support in terms of 
institutional building.
    There are other countries that are emerging: Liberia, 
Sierra Leone, Guinea, if Ghana is successful. I believe that it 
will have a spillover effect on these countries so that we can 
enhance improved governance of natural resources in the area.
    Finally, some of the contracts which we describe as bad 
deals are producing oil, which is consumed by many important 
countries, including the U.S. I understand in the U.S., the oil 
you consume, about 12 percent of that is from some African or 
West African countries. And if some of the oil you consume is 
coming from badly negotiated contracts, contracts that are 
tainted with corruption, I think that the U.S. will be 
promoting corruption if you continue to consume that oil. And, 
therefore, as part of your bilateral relationship with 
countries where you are getting your oil from, you will play a 
very important role if you help them to improve on the 
governance around the contracts so that you will be consuming 
clean oil. And then we will be setting an example why other 
countries around the world should consume clean oil as well. I 
want to thank you once again for the opportunity.
    Mr. Smith. Yes?
    Mr. Boldin. I would just like to say thank you on behalf of 
myself and Oxfam for lending your ear, for allowing us to make 
our voice heard today. So thank you.
    Mr. Smith. Thank you, Mr. Boldin. Thank you.
    Ms. Gilfillan. Sorry. I had forgotten I really wanted to 
also thank you, Chairman Smith. And thank you for your 
longstanding leadership on this issue, on transparency of 
extractive industries. I know that you and your staff have 
really been committed to this issue. And I think that that is 
very important. So I want to thank you for all your leadership. 
And we look forward to working with you more on these issues.
    Mr. Smith. I want to thank each and every one of you. You 
have provided extraordinary insight and recommendations that 
are very specific. This is an activist subcommittee. So I can 
assure you we will follow up with what you have conveyed today 
as well as previously, but I think today now, you know, we are 
at a turning point in many ways on this whole issue. Good has 
been accomplished. As you said, the Europeans are now taking up 
this cause very robustly.
    And I especially, Anquan, want to thank you because the 
meeting we had just a few weeks ago, you know, we were going to 
do this at some point, but you just brought it all to a head 
and said, you know, let's go ahead and bring this information 
forward to hold all of us accountable. That includes the 
executive branch as well as the legislative branch. We don't 
have much influence on the judicial branch, but let's hope they 
get their act together and rule soon and hopefully favorably. 
So thank you again for your leadership. And I am sure the 
people back in Senegal have to be much pleased by your keeping 
your promise to keep their interests ever in front of the minds 
of Americans. Thank you all.
    And the hearing is adjourned.
    [Whereupon, at 4:41 p.m., the subcommittee was adjourned.]
                                     

                                     

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