Why Africa’s natural resource wealth does not promote balanced growth

BBC

African economies have grown robustly over the past decade, but that has not solved the continent’s economic problems.

Students confronting police

According to Mthuli Ncube, chief economist of the African Development Bank (ADB), this is because Africa has weak manufacturing and agro-processing sectors.

He further maintains that at least 70% of growth over the past decade has been driven by natural resources.

“Exploiting natural resources is capital intensive and does not create many jobs directly,” he says.

He says that for more people to benefit and to create more jobs, there has to be value-added processing of those resources.

“But more importantly, the answer lies in creating what is known as sovereign wealth funds,” he says.

“These are resources that can be used for creating venture funds, to support new entrepreneurs, new business ideas, which could then create jobs,” he says.

He points to Botswana, which has done a good job in creating sovereign wealth funds out of its diamond revenues, as an ideal example of how such a concept can work.

Inherent concerns

One of the key functions of the ADB is to advise African governments on their economic policies.

Much of the continent remains poor and in some areas, youth unemployment stands at 50-60%.

“We were in Zambia recently, discussing the issue of youth employment with the whole cabinet and they were very receptive,” he says.

“We are working with them to see if we could set up clusters across Zambia – points where we could stimulate small to medium scale enterprises, support their ideas, build infrastructure, ensure electricity is available,” he says.

However, there are well-documented difficulties when it comes to getting governments involved in Africa – corruption and governance.

“We have to make it a mission and show the benefits of managing these resources transparently and efficiently through a sovereign wealth fund type structure,” he notes.

Miner in DR Congo Adding value to mined resources will help to create more permanent jobs for Africans

“Corruption is there, it will come in the way,” he concedes.

“One of the reasons why some of the governments are corrupt or difficult to work with is because of the presence of natural resources, where the elite capture all the benefits and the rest of the people are poor,” he adds. Read more…

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