Tackling the resource curse

Climate & Natural resources02 Dec 2013Eelco de Groot

To really tackle the resource curse, local communities need to obtain a meaningful and informed position in consultation processes, at the negotiation table and in monitoring panels. National legislation and regulation should support this. Donors should make funding available to train and advise communities and wider civil society, and assure that they are better organized and connected. Specialized NGOs have the knowledge and the network to do this. This is the most sustainable solution to the resource curse.

Due to rising global demand, non-renewable natural resources are increasingly extracted in politically unstable regions. In most legislative systems subsoil resources belong to the state and its citizens and these interests overrule individual or customary land rights. To put it simply, communities living on resource-rich territory have to relocate, at least from a legal perspective.

It is also true that 73 percent of mining project delays are due to “above-ground” or non-technical risk, including stakeholder resistance, compared to 21 percent due to technical risk1 . Stakeholder resistance ranges from demonstrations and corruption to armed opposition and local conflicts. This is known as the resource curse.

Can the resource curse be addressed? Yes. But it requires not only time and true willingness on the part of government, industry and civil society to collaborate, but prior to that. an equitable tripartite power relationship. Far away from capitals, illiterate and traditional communities in fragile environments are confronted with the best experts from extractive companies and consultancy and legal firms. That is an unfair and inequitable power relationship.

Conflicts at local level consist basically of two elements: unmanaged expectations and the undermining of traditional leadership. Both can be managed, but require investment in time and money, especially by the extractive company. Most problems arise because local communities have almost no idea what is happening to them, what their rights are, what their alternatives are and how they can optimize their interests. In the beginning, most communities have high and not so realistic expectations. When these are not met, they are susceptible to dark conspiracy theories. Secondly, traditional customary structures are undermined when jobs and capital come in. This can lead to further turmoil, sabotage and even armed conflict. Unfortunately, the most vulnerable (women, children, elderly) will suffer most – again.

The solution is easy and difficult at the same time. In the early days, agreements between local communities and extractive companies were all about land access, relocation and compensation. Today, modern Community Development Agreements (CDAs) contain clauses on labour, local content, a development plan, gender targets, monitoring and dispute mechanisms and infrastructure. Most importantly, they contain a post-closure plan on how the community will continue to survive when the company leaves. CDAs refer to the best international social and environmental standards, like ISO and IFC, and financial standards such as the Extractive Industries Transparency Initiative (EITI), and use transparent reporting standards such as GRI. All these standards have been developed with stakeholders from civil society, governments and industry, and therefore have the support of this multi-stakeholder group. As standards evolve over time, so do the CDAs: renegotiations and adjustments occur, so that best practices and ethics will be applied.

Constructing and negotiating a CDA requires deep technical and legal knowledge, which is not available at local level, and often not at national level either. Local communities need access to international social and environmental experts of the same quality as those advising extractive companies and host governments. These experts need to collaborate with NGOs to bridge cultural and linguistic gaps. Only then can communities profit from the latest insights and independent oversight to protect their interests.

Providing this technical assistance is essential in changing the power balance during consultations, negotiations and monitoring and therefore in addressing the resource curse. Several donors, like the World Bank and GIZ, already acknowledge this, but much more has to be done to get it right. Campaigning remains important to keep the resource curse on the agenda, but campaigning organizations focus mostly on the big players in the extractive industry. Junior companies, state-owned enterprises and new players in emerging markets often have a far worse social and environmental performance, but naming and shaming in campaigns does not work with unknown enterprises. This instrument is therefore limited.

The biggest asset of most NGOs is their grassroots partner network. Most NGOs have a good understanding of communities, but lack understanding of governance issues and business processes. If they can acquire these skills, they can truly bridge knowledge gaps and enter a new period in which the resource curse has finally been solved.


1 Hackenbruch, Michael, Jessica Davis Pluess (2011), Commercial Value From Sustainable Local Benefits in the Extractive Industries: Local Content. BSR, p. 3 (pdf)