The African continent is home to five of the top 30 oil producing countries in the world. As much as 500 tons of gold are produced in Africa yearly. The continent is also the largest producer of diamonds. About 30% of the world’s mineral reserves including unique deposits like uranium, bauxite, and cobalt can be found in Africa.
In the arithmetic of national prosperity, being blessed with these natural resources should equal wealth. It is however a sad irony that the direct opposite has been the reality.
Africa is a resource rich region but over 50% of its population live below $1.25 per day. This, exactly, embodies the resource curse. The resource curse is a product of abundant natural resources, their mismanagement and low economic development. This phenomenon ensures that the shared expectations of citizens and development experts are not met by leaving resource rich countries impoverished.
In this article, an investigation is made into the puzzling relationship between the state of African countries and their wealth of resources. It also provides workable solutions.
The resource curse in African countries is a reflection of certain circumstances that are typical to them. The list is not limited to poor governance, mono economies, and the Dutch disease syndrome (the relationship between the increase in the economic development of a specific sector and a decline in other sectors).
Perhaps the chief amongst these is poor governance. The lack of institutional quality in African countries is a root cause of problems. Corruption and inefficiency influence African leaders to divert the many incentives from natural resources into non-productive use.
Also, the availability of natural resources has been used as an excuse to jettison other sectors of economies. Little attention is paid to human capital, for instance. Meanwhile, the price of natural resources in the world market is not static. When price falls, the economies of dependent countries suffer.
What is possible? Ask Botswana.
With the right steps, the resource curse can be prevented and reversed. Countries in different parts of the world have proven this over time. Canada, Norway and Malaysia are examples of resource rich countries that are flourishing on all fronts. An African country that has recorded notable success is Botswana. The continent should pay attention.
Botswana is currently the world’s largest producer of diamonds. The natural resources in Botswana account for 40% of its GDP and three-quarter of its total exports. In decades, Botswana has grown from one of the poorest countries in the world, into a middle income country. The per capita income in Botswana, as at 2017, was $19,000.
According to the African Development Bank, the employment of a “three pronged” technique broke the resource curse in Botswana. This technique includes the divestment of revenue, economic diversification and investment of return from resources. Botswana also maintained a fiscal budget and trade surplus in preventing the Dutch disease syndrome. The nation’s response to price volatility in the world market is also effective. A large portion of the profits made from its diamond exports are saved for the purpose of cushioning the effects of the unstable market.
In addition to these, Botswana ranks at 34th amongst the least corrupt countries in the world. This is definitely an indicator of good governance and management.
New resources are still being discovered in Africa. The continent must take the resource curse seriously and tackle it accordingly. Botswana provides the necessary answers. The country’s model should be mirrored by every other African country.