Introduction - Africa and the Resource Curse

Historically, the availability of raw materials on the African continent has been a strong motivator for external involvement. The colonial period was characterised by a focus on mineral exploitation by the European powers. Post-independence Africa has retained strong economic links with Europe, with a continued dependency on commodity exports. Given the highly competitive nature of the international economic system and the increasing globalisation of industry and manufacturing, Africa’s management of its raw material exports has become critical for the continent’s economic development.

Claude Kabemba's picture

Director of the Southern Africa Resource Watch (SARW)

October 3rd, 2012

Historically, the availability of raw materials on the African continent has been a strong motivator for external involvement. The colonial period was characterised by a focus on mineral exploitation by the European powers. Post-independence Africa has retained strong economic links with Europe, with a continued dependency on commodity exports. Given the highly competitive nature of the international economic system and the increasing globalisation of industry and manufacturing, Africa’s management of its raw material exports has become critical for the continent’s economic development. The dominant role of natural resources in African economies requires careful strategic management to provide a foundation for longer-term economic development. Using natural resources to build sustainable economic development is the challenge faced by many African governments. A judicious business model which ensures wealth creation at all levels in local economies could be the key to providing long-term economic prosperity based on raw material extraction and export.

Growing global demand for Africa’s natural resources offers Africa the prospect of increased exports over the next few decades. The industrialised nations are expected to increasingly engage Africa in pursuit of mineral exploitation. The challenge for Africa is to direct, control, and effectively manage this process for maximum economic benefit. The US for example, expects to increase oil imports from Africa to 25 percent of external demand by 2015. US government forecasts predict that Africa will become the fastest growing source of oil and natural gas for the American market. Besides hydrocarbons, a wide range of raw materials which can be sourced in Africa are critical for continued development in the industrialised societies. Continued economic growth in the developed world will result in increased and more intense competition for African resources.

With the possible exception of South Africa, African countries have been unable to leverage raw material extraction into industrialisation and sustainable development. Resource extraction has been the key driver of development in Africa over the last decade and holds the potential for significant future growth. Current estimates suggest that Africa accounts for almost 50 percent of the world’s reserves of key minerals (see Table 1 below). Despite this wealth, trends in global resource investments do not indicate significant capital flows to Africa. Only around 15 percent of the total global investment in resource extraction has been targeted at Africa. Problems of political governance in Africa have been identified as key impediments to new investments. Issues relating to the rule of law, respect for property rights, legislation and regulatory regimes, democracy, transparency and accountability are impediments to stronger investment flows. The high cost of doing business in Africa is also identified as a major impediment to new investment.

Despite relatively significant resource investments in Africa since the 1990s, ordinary Africans have failed to see the benefits of this process. The impact (as manifested in the so-called “resource curse”) has often been negative overall. Research by John Ghazvinian, author of Untapped: The Scramble for Africa’s Oil, indicates that between 1970 and 1993, countries without oil saw their economies grow four times faster than oil-exporting countries. Oil exports inflate the value of a country’s currency, making all other exports uncompetitive, while oil exports attract workers and local investors, undermining other sectors of the economy, transforming the country into import-dependency. This is the almost inevitable outcome of “Dutch Disease” – the economic phenomenon which occurred in Holland, during the 1960s, following the discovery of natural gas in the North Sea. The Netherlands shifted towards a focus on the exploitation, transport and sale of natural gas, while the rest of the economy withered and the currency strengthened significantly. In the African context, Gabon has a relatively strong agricultural sector, but a focus on oil exports has undermined prospects for sustainable development.

An over-dependence on natural resources also tends to distort the political process and political leadership. Development plans are short-term in focus, based on the resource’s taxable revenue, or rent-seeking behaviour, rather than designed to ensure long-term sustainable development. Governments are not dependent on a national tax base and are able to ignore the economic concerns and aspirations of their own citizens. The state thus no longer functions as an engineer of economic growth, but rather as a consumer of limited resources and an impediment to sustainable growth. Political leaders and the economic elite compete for control of natural resources, while the ordinary people are excluded from the economic process. In African oil-producing countries, little of the wealth is invested back into the general economy and employment is limited. Small numbers of the economic elite benefit from these capital-intensive (but not labour intensive) activities. Overall economic development is neglected and the long-term prospects for a future economy without oil (or natural resources) to export is ignored.

In the face of a new and more intense competition for resources, Africa’s position in the global economy has been further weakened by continued poverty, related social problems, and accelerated de-industrialisation. The power relationships created by the exploitation of Africa’s resources, along with the political economy of access, ownership and distribution, have undermined and distorted development programmes in resource-rich countries. Natural resource wealth should provide the foundation for development, but for this to happen there need to be adequate governance systems, capacity to administer these sectors, and a positive linkage between resource extraction and other sectors of the economy. In Africa, resources have created distorted and concentrated centres of profit and power, undermining the overall development effort. An extensive literature on the contradictions created by the resource curse is now widely available.

The challenge to Africa caused by the resource curse requires urgent attention in the resource-rich countries. In this context, critical questions relating to the ownership and management of resources are brought into focus. Mineral-rich countries claim ownership of resources, but rely on foreign capital and technology to develop these resources. The role of the state in developing long-term resource-based development strategies is weak, or completely absent. Consequently, Africans are denied participation in resource supply chains and related economic activities. Job creation, skills enhancement and technology transfers are limited, while external actors and local political collaborators maximise benefits.

The African challenge is to effectively use an abundant natural resource base to underpin poverty alleviation and economic growth strategies. Appropriate laws and regulations need to be crafted with a view to incorporating natural resource extraction directly into national development plans and strategies. Useful guidelines for constructive development processes come from Botswana, Canada and Norway, where natural resources have been used to advance overall developmental objectives. Informed by success elsewhere, African countries could harness resources for development, but broadly this would require:



•                     African ownership of development plans and processes;

•                     strengthening of governance systems;

•                     crafting new legal frameworks to protect and regulate the extractive industries;

•                     enhancing institutional capacity;

•                     investing natural resource wealth in development;

•                     production of new knowledge to drive resource-based development;

•                     negotiating better terms with external investors;

•                     improving investment and business process transparency; and

•                     fully integrating natural resource sectors into national development plans. 

 

About the author(s)

Claude Kabemba is the Director of the Southern Africa Resource Watch (SARW). In 2006, the Open Society Initiative for Southern Africa (OSISA) asked him to spearhead the formation of SARW. He holds a PhD in International Relations (Political economy) at the University of the Witwatersrand (Thesis: Democratisation and the Political Economy of a Dysfunctional State: The Case of the Democratic Republic of Congo). Before joining SARW, he worked at the Human Sciences Research Council and the Electoral institute of Southern Africa as a Chief Research Manager and Research Manager respectively. He has also worked at the Development Bank of Southern Africa and the Centre for Policy Studies as Policy Analyst. Dr. Kabemba’s main areas of research interest include: Political economy of Sub Saharan Africa with focus on Southern and Central Africa looking specifically on issues of democratization and governance, natural resources governance, election politics, citizen participation, conflicts, media, political parties, civil society and social policies. He has consulted for international organizations such Oxfam, UNHCR, The Norwegian People’s Aid, Electoral Commissions and the African Union. He has undertaken various evaluations related to the work of Electoral Commissions and civil society groups interventions in the electoral process in many African countries. He is regularly approached by both local and international media for comments on political and social issues on the continent. His publication record spans from books (as editor), book chapters, journal articles, monographs, research reports, and newspaper articles.

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