Boom or Bust: Can mineral and oil resources end poverty in Africa?

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.

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One Response to Boom or Bust: Can mineral and oil resources end poverty in Africa?

  1. kyleedigregorio says:

    This is a very interesting topic, as the notion of the “resource curse” remains the subject of much debate and is very much germane with regard to the political economy of development and democratic consolidation throughout Africa. In addition to policy frameworks, good governance strategies, and institutional capacity, I think it is important to examine the role played by the international community—comprised of those actors which frequently import the natural resources of African nations and, thus, serve as the primary source of resource rents. We may take oil extraction in Nigeria as an example. As the line of reasoning goes, if the political accountability that a state wields in relation to its people deteriorates, then it will follow that the externally afforded sovereignty of that state will, as a result, also degenerate. Empirically, however, this procession of internal state weakness and internationally declared state collapse has not been consistently substantiated. The Federal Republic of Nigeria, which gained independence as a sovereign state in 1960, has, for all intents and purposes, ceased, by definition, to exemplify an autonomous state. The poor performance exhibited by the Nigerian Government with respect to the preservation of political accountability is manifested through escalating group grievance, increasingly uneven development and inequitable public service provision, and a tainted human rights record. These pervasive, and highly adverse, externalities have safeguarded Nigeria’s enduring position atop the Fund for Peace’s Failed States Index. Curiously, however, though the nation of Nigeria is widely, albeit unofficially, characterized as a failed state, the various administrations that have constituted the Government of Nigeria throughout the last four decades have never been confronted with enforced jurisdictional change.

    Perhaps this may be attributed to the fact that the reliance on oil that many industrialized nations experience ultimately translates to Western reliance on those agents necessary in realizing the obtainment of oil: the nations which naturally harbor oil reserves. The state remains a pivotal actor from an extractive point of view. Because the reserves from which oil is exported are located within the territorial borders of Nigeria, the oil extracted from such reserves is owned by the Nigerian Government. Further, the framework of international commercial law is premised upon the courts of national systems that exist at the will of states. Thus, the exploitation of oil reserves by MNCs cannot lawfully occur outside a state-firm partnership. In light of this international structure, oil multinationals—and, in turn, the oil importing states which are dependent upon them—are absolutely reliant on the existence of a sovereign entity with which they may strike partnerships. Thus, nations with a vested interest in the importation of oil, and oil MNCs necessary to facilitate this importation, have ample incentive to attest to the sovereignty of oil-rich states such as Nigeria, irrespective of domestic political or socio-economic conditions. Thus, it would be interesting to critically examine the nature of the correlation between the political accountability that a state demonstrates with regard to its citizenry on the one hand, and the sovereignty such state upholds within the Westphalian system of international structure and organization, on the other in the context of resource rich nations. Though perhaps somewhat controversial, it may be relevant to pose the question of whether the international political economy surrounding various natural resources formulates an incentive structure that ultimately undermines the capacity, the will, and the need for a government– albeit a government of a resource rich nation– to maintain political accountability to its people, given the uncontested sovereignty that is seemingly ensured so long as the flow of resources continues.

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