On February 3, writers at The East African asked the question, “Will resource boom in Africa see end to poverty?” After citing numerous “steps in the right direction” including, the discovery of minerals and oil worth billions of dollars across the entire continent, an increase in FDI while global direct investment has shown a decline, and a market-based economy that is highly competitive and liberal, the question was left unanswered.
Looking to Botswana, the golden child of resource rich African nations, some light may be shed on whether we will see an end to poverty due to new resource discoveries. Although Botswana has a thriving economy and conducted 10 free and fair elections since independence in 1966, they have a 17.8% unemployment rate, 20.7% of the population is rated extremely poor, the nation has among the highest HIV prevalence rates in the world at 28.4%, and a fairly high GINI coefficient of .5 that expresses high levels of poverty and inequality. Just because a nation has resources and a functioning (if not thriving) democracy it does not necessarily translate into poverty reduction.
Although Botswana has high levels of poverty and inequality, the management of their resources has been done correctly. Nations like Kenya, Niger, Uganda, Zambia, Mozambique, and others could stand to learn something from the policies being implemented in Botswana. First, it is important to redistribute resource wealth to the nation over the leader’s ethnic group. Botswana’s Mine to Minerals Act of 1967 directed funds raised by the mining industry back into the nation rather than the President’s ethnic group. This foresight has led to stable policies and created an environment where there is virtually no ethic conflict.
It is also important to have good governance and strong policies against corruption, another strength of Botswana’s government. Terry Mutsvanga, director of the Coalition Against Corruption in Zimbabwe, warns that African countries will need to better manage their corrupt politicians before the discovered resources will benefit the overall population.
Without smart policies, good governance, and the foresight to utilize mineral discoveries for national development instead of personal or ethnic gain, just having minerals and oil will not end poverty. For example Zimbabwe and the DRC are both rich in diamonds, however six out of 10 households in Zimbabwe are living in dire poverty and 75% of the DRC’s population lives below the poverty line.
To conclude, “there is nothing inherent about resources that make them a curse; their impact depends very much on policy, good development governance, and the commitment of governments to turn natural resources into an engine of structural reform.” Africa’s failure to translate resource abundance and potential into capacity building, infrastructure, and structural transformations answers the question of whether a resource boom will end poverty or not with a strong no.