THE MINING-DEVELOPMENT NEXUS

States across Sub-Saharan Africa (SSA) are well endowed with natural resources. In many cases, resource-rich[1] African states are economically dependent on the extractive sectors – mining for minerals and metals and drilling for oil and natural gas. According to Kaufmann (2012), extractive-dependent African societies can have as high as 80 percent of their populations living on less than $5 per day, and over 50 percent living on under $2 a day.

Raw commodities are exported to upstream sectors of the global value chains for energy i.e. hydrocarbon fuels and uranium, building materials i.e. lumber and cement, and technological products i.e. computers and batteries. Resource dependence occurs when the extractive sector has an over-sized impact on insufficiently diversified economies.

Despite these natural endowments, states are struggling to meet the United Nations Sustainable Development Goals (SDGs) and poverty continues to spread (Beegle et al. 2016). This political economy of energy and raw materials has to be scrutinized for its focus on economic activity at the expense of environmental integrity and human rights protections in mining-industry effected areas.

Balancing of market principles that drive mining corporations to extract and export raw minerals and protecting environmental integrity and human rights in mining-affected communities (MACs) remains a true global governance challenge.

Two competing perspectives about the mining industry exist about its impacts on Africa and across the Global South. The first, is that the industries produce negative socio-economic outcomes which is illustrated by the resource curse phenomena. The second perspective is that the mining sectors provide economic opportunity that has not yet been fully exploited. To better understand the complex dynamics of harmonizing industry and societal dynamics we must explore the global, regional, and domestic contexts of resource-rich African states.  


The resource curse phenomena

Why is it that the overwhelming majority of resource-rich[1] countries are unable to translate revenues into positive development gains for society? The correlation between natural resource-based economies and poor developmental outcomes in host-countries is so pervasive that the phenomenon has earned the inimical nomenclatures, ‘paradox of plenty’ (Karl 1997) and ‘resource curse.’

The resource curse takes many forms and states may experience combinations of negative externalities associated with the resource curse. The most common of these include: deficits in democracy, inter-state and intra-state conflicts, inefficient fiscal responsibility – spending  and borrowing, ‘Dutch disease’, patriarchy and gender-based challenges, limited government capture of benefits, weak institutional development and social and environmental problems (NRGI 2015).

 Moreover, the degenerative repercussions from mining creates attitudes of resentment in mining-affected communities where the environment, livelihoods and human health suffer. This resentment holds the potential to escalates into conflict and eventual violence between civil society and mining corporations. In comments on the exploration and exploitation of natural resources on the African continent, former United Nations Secretary-General Kofi Annan warned that mineral exploitation may be a “path leading to conflict, spiraling inequality, corruption and the failure of state institutions in Africa” (Annan 2012). This results from poor outcomes from natural resource extraction in developing countries, especially those in Africa, that fail to achieve prosperity and socio-economic advancement (Sovacool 2010 in ACBF 2013, 79).

Counter-Argument: Extractive-based Development

To the contrary of what was previously stated, certain economists identify the extractive industries as a good foundation on which a developing state may build an economy. Revenues derived from the extractive sector fund the state-system and domestic reinvestment is perceived as a good strategy for socio-economic development (Lin 2012; African Union 2009; Barma et al. 2012).

While many argue the existence of a ‘curse,’ it is widely believed that, “[n]atural resource endowments can spur development in African countries, if managed appropriately.” However, it is true that “resource exploitation does not automatically translate into meaningful development. Indeed, poor growth rates, high inequality, social exclusion, impoverishment, poor governance, environmental concerns, social tensions, and civil strife characterize many resource-rich countries across Africa and in the developing world” (Paul Collier 2007; Hanson, D’Alessandro, and Owusu 2014, 1). The dichotomy of perspectives as to whether extractive industries pose a threat or an opportunity for states drives the demand for continued research.

Varied experiences of resource-rich economies

The resource curse phenomenon contributes to widespread poverty in resource-rich countries; however, some countries are able to derive sufficient benefit. Norway is regularly presented as an example of a successful extractives-based economy particularly for its success in overcoming ‘Dutch disease’ and revitalizing the economy. Norway’s recovery was made possible through good policy choices, such as making oil wealth is a common-property resource by law. The Norwegian government takes in about 80% of the oil rent through taxes and fees and invests it into foreign securities; this combined with other good policies has turned abundant natural resource riches from a curse to a blessing (Gylfason 2000). In Sub-Saharan Africa, Botswana is an example of a successful resource-rich economy that achieves consistently strong economic growth performance. Like Norway, Botswana’s success is attributed to democratic governance and good policy choices (Good 1992; Harvey and Lewis 1980; Acemoglu, Johnson, and Robinson 2001).

Policy choice and implementation stand out as preventative measures against the resource curse. Cameroon, like Norway is an oil exporting state, but in contrast, Cameroon’s economy has been stagnant with an annual average growth rate around 3.5% over the past four decades. In the period between 1977 and 2007, Cameroon’s government captured a sizeable portion of oil rents, but only a third of that revenue was directed to the budget. The remainder, according to official accounts, was “saved” abroad, which is a good strategy as demonstrated by Norway where overseas investment protects the economy from resource-dependence and Dutch disease. Unfortunately for the people of Cameroon, the two-thirds remainder of state revenues cannot be accounted for because it was misappropriated by national leadership (Gauthier and Zeufack 2009). Countries that suffer from the resource curse like Cameroon and Mali are constrained by both structural economic and governance factors.

Analysis of the Mining-Development Nexus


The mining-development nexus is perceived from two generalized perspectives. The resource curse perspective argues that economic structures promote business efficiency at the expense of environmental integrity, human rights protections, and socio-economic development. The alternative viewpoint perceives the mining sector as a source of economic activity that has not yet been fully exploited. There is opportunity for states to develop up-stream and side-stream industries. Furthermore, opportunities exist in creating regional mining development hubs. This debate will be central to my 2020 study titled, Global Governance and Mining in Africa: The Africa Mining Vision as a Framework for Sustainable Developmental Regionalisms?, as well as, subsequent posts at #NaturalResourceGovernanceDiscourse.

References

Acemoglu, Daron, Simon Johnson, and James Robinson. 2001. “An African Success Story: Botswana.” 3219. London.

African Capacity Building Foundation (ACBF). 2013. “Capacity Development for Natural Resource Management: African Capacity Indicators 2013.” Harare. http://www.acbf-pact.org.

African Union. 2009. “African Mining Vision.” http://www.africaminingvision.org/amv_resources/AMV/Africa_Mining_Vision_English.pdf.

Annan, Kofi. 2012. “Momentum Rises to Lift Arica’s Curse.” The New York Times, September 14, 2012. http://www.nytimes.om/2012/09/14/opinion/kofi-annan-momentum-rises-to-lift-africas-resource-curse.html?_r=0.

Barma, Naazneen H, Kai Kaiser, Tuan Minh, and Le Lorena. 2012. Rents to Riches? The Political Economy of Natural Resource-Led Development. Washington D.C.: World Bank.

Beegle, Kathleen, Luc Christiaensen, Andrew Dabalen, and Isis Gaddis. 2016. “Poverty in a Rising Africa.” The World Bank Group.

Collier, Paul. 2007. The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It. Oxford University Press.

Gauthier, Bernard, and Albert Zeufack. 2009. “Governance and Oil Revenues in Cameroon.” Revenue Watch Project. Oxford.

Good, Kenneith. 1992. “Interpreting the Exceptionality of Botswana.” Journal of Modern African Studies 30: 69–95.

Gylfason, Thorvaldur. 2000. “Natural Resources, Education and Economic Development.” 2594. London. https://notendur.hi.is/gylfason/_borders/pdf/dp2594.pdf.

Hanson, Kobena T., Cristina D’Alessandro, and Francis Owusu, eds. 2014. Manging Africa’s Natural Resources: Capacities for Development. New York: Palgrave MacMillan.

Harvey, Charles, and Stephen Jr. Lewis. 1980. Policy Choice and Development Performance in Botswana. London: MacMillan Press.

IMF. 2012. “Macroeconomic Policy Frameworks for Resource-Rich Developing Countries: Background Paper 1-Suppliment 1.” Washington D.C.

Karl, Terry Lynn. 1997. The Paradox of Plenty: Oil Booms and Petro-States. London: University of California Press.

Kaufmann, Daniel. 2012. “Poverty in the Midst of Abundance: Governance Matters for Overcoming the Resource Curse.” The Brookings Institute.

Lin, Justin Yifu. 2012. New Structural Economics: A Framework for Rethinking Development and Policy. Washington D.C.: The World Bank.

NRGI. 2015. “The Resource Curse: The Political and Economic Challenges of Natural Resource Wealth.” In NRGI Reader. Natural Resource Governance institute. http://www.resourcegovernance.org.

Sovacool, Benjamin K. 2010. “The Political Economy of Oil and Gas in Southeast Asia: Heading towards the Natural Resource Curse?” Pacific Review 23 (2): 225–59.

[1]This classification is based on a country deriving at least 20 percent of exports or 20 percent of fiscal revenue from nonrenewable natural resources (based on 2006 –10 averages) (IMF 2012)

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