13. NATER AKPEN

INTRODUCTION

Africa's natural resource wealth is expansive. Despite this wealth, Africans – and Africa – are poor. But some may say Africans are poor, not despite this wealth; Africans are poor because of this wealth. How is it that wealth can not only fail to make people rich but also make them poor? Assuming that this is not the order of nature, how can Africa’s natural resource wealth be in favour of Africans?

WHY NATURAL RESOURCES ARE NOT BENEFITTING AFRICANS

Three reasons have been identified regarding why natural resources have failed to benefit Africans (International Institute for Environment and Development [IIED]/World Business Council for Sustainable Development [WBCSD], 2002).  These are internal economic stresses, external market forces, and political forces.

Internal economic stresses

 The wider economy suffers – not because mining fails to contribute to it because – but because mining does contribute. The mineral economy has a reputation for stifling other economic sectors. In the 1960s/1970s Netherlands, an uptick in natural gas exports suffocated manufacturing and agriculture (IIED/WBCSD, 2002). The name Dutch disease had thus been born. The mineral economy stifles other economic sectors in the following ways. Due to its success, the mineral economy heightens the multi-sectoral cost of labour and other inputs, and thus the running costs of businesses. Further, a booming mineral economy upsets the exchange rate. The makes other exports less competitive given the currency appreciation. It is in this way that those economic advantages gained by mineral exploitation amount to losses elsewhere in the economy. 

Where mineral enterprises are failing, government tend to deploy quotas, tariffs and subsidies. That is, a country buys up its economic losses – at the expense of tangible development.

External market forces

The prices for minerals, globally, have dipped these past decades. Fingers have been pointed at ‘random shocks’ or falling production costs as reasons; the effect is clearer. From minerals, it is conventional to expect additional employment and infrastructure, advancement of skills and local businesses. Indeed, it is the World Bank’s position that 1 USD spent on mining generates about 3 USD in the broader economy (Weber-Fahr, 2001). Volatility in the sector would cause prevent companies from committing to a continuous programme of investment (and thus the economies of scale that would result therefrom). Employment statuses would be eventually marked by insecurity. Importantly, governments who fund budgets (largely or solely) from mineral revenue would move towards insolvency. Future investors would also be inhibited from taking the opening new frontiers. In short, price volatility reduces economic growth which should normally arise from mining operations. 

Political forces

By resetting the economic and influence power bases, mineral cash flow erodes the integrity of state institutions. National governments may also face disputes with local communities as a result. The tensions arising from this may eventually take on an ethnic colouration; the inability to handle these may set an open conflict – between citizens and the state – in motion. In this setting, wealth arising from the minerals would be used to finance the war through arms purchases (as was seen in Liberia and Sierra Leone). It is not accidental, therefore, that minerals signal a region that could be engaged in long-term conflict. War only hastens the descent of communities into underdevelopment.

Mineral wealth can also fund inefficient governments. Inefficiency is supposed to put a government out of power – through the electoral process or popular activism. But this would not happen when the government in power has wealth – from minerals – to repress dissenting voices and buy off opposition groups. Where mineral wealth is used to this end, finite finance would mean that development programmes would go unfunded, and for the many decades that the government would remain in power.

WHAT TO DO ABOUT IT

Governance has been described as an "overarching and most critical” element in the management of mineral resources (African Development Bank [AfDB], 2007). While accepting that governments are only components of a much broader and multifaceted mineral sector, their posture determines which way development outcomes as connected to minerals should proceed. The key to this is the embrace of transparency. Transparency is essential in establishing a reign of accountability and fighting corruption.

 At which point this transparency starts also critical. It needs to start with the concession contract and extend to the allocation and utilization of wealth that accrue from the sale of mineral resources. As relates to concession contracts, transparency will mean the elimination of confidentiality clauses that only serve to empower corrupt politicians and take away from the public the ability to hold such politicians accountable. Connecting to the accrued revenue, governments must publish what they earn (and how they use it) and companies, willing to publish what they pay. This way, there would be a basis upon which to interrogate disparities that may arise.  

The exploitation of resources is in the end a degradative one. Therefore, there needs to be regulation of it. Failure to do this would mean that, unalterably, there would come a time when mineral exploitation would undo the very gains that were supposed to have arisen from it. Indeed, in addition to the socio-economic component of development, there is also an environmental one.

CONCLUSION

The so-called Dutch disease affects nations that have had a less than optimal relationship with resources that nature had seemingly blessed them with. Now, such a disease, to follow the medical analogy, is not in-born nor is it untreatable. However, the reasons why people may be infected with it have been identified as internal and external market dynamics, and politics. As a treatment regimen, governance and transparency, and systematic regulation is prescribed. The patient, Africa, is expected to make a smooth recovery. Africans look on in hope.

REFERENCES

AfDB. (2007). African development plan. Abidjan: AfDB.

IIED/WBCSD. (2002). Breaking new ground: Mining, minerals, and sustainable development. London: Earthscan Publications Ltd.

Weber-Fahr, M., Kunanayagam, J., McMahon, R., & Sheldon, G. (2001). Mining and poverty reduction. Washington D.C.: World Bank.