In Congo, Hillary Clinton Suggests Government Ownership of Industry Would be a Good Thing

By Adam Brickley | August 11, 2009 | 6:35pm EDT

US Secretary of State Hillary Rodham Clinton, right, purchases a shirt, at the Heal Africa clinic in Goma, Congo Tuesday Aug. 11, 2009. (AP Photo/Roberto Schmidt, Pool)

( - In a television interview Monday in the Democratic Republic of the Congo (DRC), Secretary of State Hillary Clinton suggested that it would be a good thing for the government to take an ownership interest in industry.

“How can you help this country?” Christian Lusakueno of the Congolese television station Raga TV asked Clinton.

“The future of this country is up to the Congolese people,” said Clinton. “The choices as to what direction you go are truly yours to make.

“For example, the country has an extremely rich reservoir of natural resources,” she continued.

“Right now, the benefits from those resources are not ending up broadly developing the country. They are either being taken out of the country or they are ending up in the hands of a very few people. There are models for what has worked elsewhere. The model that Botswana used when it discovered diamonds--it made sure there was a trust fund created for the country so that all of the money didn’t leave the country. In order to let a company like De Beers exploit their diamonds, they said we want to own 20 percent of the company. And as a result, if you go to Botswana, you see good roads, you see clean water, because the people and their leaders said we’re not going to be exploited and we’re not going to let the benefits end up in a very few hands.”

Brett Schaefer, a fellow in International Regulatory Affairs at the conservative Heritage Foundation, said of Clinton’s statement: “Her phrasing was extremely clumsy.”

“I think it’s probably a mistake to urge the government to have a control, or a controlling stake, in these types of industries because government historically, especially in Africa, has been particularly prone to corruption and mismanagement,” said Schaefer.
Botswana has indeed been successful in the diamond industry, said Karol Boudreaux, a senior research fellow at the Mercatus Center at George Mason University and the head of that organization’s Enterprise Africa! project. Boudreaux noted, however, that while Botswana has had success in the diamond industry, it history and political culture also makes its distinct from other African nations.
“I think we should be really careful about recommendations like that because we’re assuming that that government will be a good manager and a transparent manager, and an accountable manager--the way the Botswanan government has been,” said Boudreaux.
“The way it works there is that the government is actually in a 50 percent-50 percent partnership with the De Beers company, and so they jointly control this company called Debswana,” said Boudreaux. “Originally the government had a 15 percent share in that company, when diamonds were first discovered back in the late 60s, and the government has increased its ownership share over time.”
Boudreaux also said that while the Botswanan government owns half of Debswana, it does not own any shares of the De Beers Group.
According to Boudreaux, Botswana is also unique for the strict spending controls that the government places on itself.
“One thing that’s really unique about Botswana’s national development plans is that, once they’re passed by the parliament … they cannot be amended,” she said. “They cannot go back and adjust the plan, even if their diamond revenues increase substantially. So, putting that kind of constitutional constraint on yourself is a very unusual thing to do in Africa.”
Asked to contrast Botswana with the Democratic Republic of the Congo, where Secretary Clinton made her remark, Boudreaux said: “There’s just no comparison.”
The Democratic Republic of the Congo, she said, has a “history of just incredible corruption, tyranny, et cetera.”  
While noting that the Congolese government is making efforts to “get a handle” on mineral production in the nation’s war-torn East, Boudreaux said it is also “benefiting substantially” from illegal mining in the area. As for a Botswana-style venture, she said, “How should I put this? It’s not clear that there’ll be an initiative to extract minerals in a transparent fashion in East Congo any time soon.”
Schaefer concurred that most African nations are not like Botswana. “What you see in African countries,” he said, “is a pattern of corruption, a pattern of poor governance, a pattern of countries not using the resources that they have for the long term interest of the people. And so, while Botswana is an exception, I don’t know if it can be applied as a rule to follow for countries unless you address this critical lack of good governance.”
Boudreaux said Botswana had an advantage in that it had avoided diverting significant resources to a military establishment. “They had no standing army until very recently,” she said, “so the monies that they were generating through the diamond sector wasn’t really going to support an army, like it would be, say, in Nigeria or Angola.”
“I think, in fact, it’s very difficult to use the Botswana example and suggest that countries that have very different historical experiences can basically do easily what Botswana’s done, because I don’t think that they can,” said Boudreaux.
“One thing that’s kind of unique about Botswana that you’ll hear when you visit--that I’ve certainly heard when I visited there--is that people talk about their founding fathers just the same way that Americans talk about our founding fathers,” she said. “And so they are very aware that they had a unique group of people who set up their government, who placed limits on the powers of government, and then who themselves abided by those limitations.”
“That’s not a story that you hear in many other African countries,” she said.
Calls to the State Department were not returned.

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