How Important are Natural Resources for African Development?

Noé Michalon
Energy Trilemm: a critical analysis

Today, Noé Michalon breaks the myth of natural resources being a key factor of either the development or the decay of African countries. They surely played a role in emphasizing pre-existing factors but should be put in the background to focus on more important core activities.

When it comes to natural resources in Africa comes Manicheism: either a “blessing” or a “curse”, they are supposed to bring prosperity or chaos to the whole continent. The situation is far from being that simple. In this article, I assess that over-focusing on natural resources in an optimistic or pessimistic way actually threatens any other sector of the economy that could be promising.

Resources are unequal, and their value is relative

First of all, it is necessary to deconstruct two myths. On the one hand, Africa is unequally endowed in natural resources and is far from homogeneously benefit from them. Countries such as the Democratic Republic of Congo have particularly rich soils – with cobalt, diamonds, silver, gold, radium, bauxite, wood and so many others – and fertile, equatorial climates. Others, like Malawi, do not particularly benefit from any of these “precious” resources.

On the other hand, the value given to natural resources is highly cultural and time-changing. Gold or diamonds find the origins of their value in Western luxury standards, the same way rhino horns are particularly popular among Vietnamese and Chinese populations for their allegedly aphrodisiac properties. As for other minerals and metals, such as cobalt and coltan, particularly present in Central African countries as DRC, their value dramatically increased in recent decades with the technological, global boom of electronics. Their value is now peaking but is highly dependent on innovations and the development of new materials, the same way Gulf countries fear the end of the oil era.

These two aspects should push us to adopt a less biblical vocabulary regarding the continent: neither a blessing nor a curse, its resources have a fluctuating value on which it might be risky to bet.

Resources rarely bring long-term development

Of course, one can easily find examples of countries whose natural endowment helped develop. Oil-rich Arabic countries quickly grew in the past two decades and boast with the tallest skyscrapers their capital cities got. But this is not enough. Because this development is not sustainable – oil and gas represent up to 70% of Qatar’s revenues while they are not infinite and have a fluctuating price – and do not benefit the biggest part of the population. Although official statistics show positive figures regarding the Human Development Index (HDI), life expectancy or the Gini coefficient in various countries of the region (United Arab Emirates, Qatar, Saudi Arabia…), they do not take into account the significant part of foreigners in these populations. For instance, in Qatar, they represent nearly 90% of the whole population. These countries are massively investing in services and other non-oil-related sectors to ensure a bright future, and are succeeding in a way, given the tremendous growth of tourism or other activities.

But this does not mean resources alone automatically led to this hopeful situation. Contrary to the African case, countries of this region have been managing their resources otherwise for historical and political reasons: they have strong institutions.

Institutions are key for providing good management of natural resources. The rent they bring is negotiated with more strength, avoiding bad deals. The political stability ensures a peaceful repartition of the oil money among the political class – do not interpret it as “among the people” – and allows the construction of a long-term vision. Although the Arabic peninsula has also suffered the British domination, as did half of the African continent, Qatar has been governed by the same political system for more than 150 years. Saudi Arabia is dominated by the Saudi family since half of the 18th century. These countries kept their own language and religion, and their statuses of the protectorate in many cases allowed a “softer” kind of domination (which could still be harsh at some point).

As for African countries, one of the common patterns one can find for 52 of the countries of the continent – except Ethiopia and the particular case of Liberia – is the harsh, destructive, colonial past. In French, Belgian, German, Portuguese, Italian or British colonies, most of the pre-colonial institutions were destroyed or severely weakened after independence in the late 1950s, 1960s, and 1970s. The political elites, trained in Europe, could hardly be considered as legitimate and enforce laws that were in most of the cases translated from Western models.

Institutions first, resources second

This situation made them fragile at their independence. Most of the biggest economic actors remained Western and newly elected leaders quickly had to negotiate with oil majors, geopolitical superpowers and international organizations. Political instability struck most of the continent from the late 1960s due to the illegitimacy of the State. Without any liberal-democratic culture – the colonial rules were “decentralized despotism” asserted Mahmood Mamdani (1983), albeit the countries practicing them could be democracies in Europe – post-independence powers radicalized themselves (such as in Guinea or Cote d’Ivoire) or were overthrown by putsches (like in DRC, Togo, Ghana…). Such chaos laid the ground for even more dismay: natural resources kept interesting global powers in the context of booming oil and commodities prices, while industries and services could hardly survive in this situation.

Some countries entered a vicious circle: political instability led to resources mismanagement, which fuelled corruption and neo-patrimonialism practices, which themselves fostered political instability. This brought theorists like Auty to define a “resource curse” (1993) that could threaten African (but also Latin American) countries, the poorest and most violent ones often being the most endowed, such as the Central African Republic or the two Congos.

We need to highlight the fact that some countries actually proved the concept was wrong. One can quote the case of Botswana, whose immense diamond resources have brought significant financial means to the State in a context of peace, democracy and political stability. Scholars like Scott Pegg (2010) also observed the absence of any “pull effect” in this country: Botswana’s diamonds are hard to extract and need capital-intensive means to be collected. This makes it harder the choice for people working in non-extractive sectors to leave their activity to extract diamonds. This is not the case in Liberia or Sierra Leone, where diamonds could be acquired in rivers with very little means, and where the other sectors of the economy lost some of their dynamic workers, who preferred trying their luck in diamonds exploitations. Moreover, Botswana constituted a so-called “Pula Fund” to collect the revenues from this industry and re-invest them in stabilizing prices and investments, avoiding the “Dutch Disease” whereby the exports of a particular sector of the economy undermines the others and appreciates the national currency. Hence, strong institutions allowed a good use of this money and made Botswana a success-story frequently quoted (and debated!) in African Studies.

Nearly sixty years after most of the African independence, institutions are slowly getting better. They start to “matter” (Cheeseman, 2018) in political life: parliaments are no longer considered as rubber-stamping organs, supreme courts block allegedly fraudulent elections in countries like Kenya and the press as multi-partyism are free and legal since the wave of democratization that occurred in the 1990s. These are the symbols of institutions that could be more prone to strategically manage natural resources. Nevertheless, considering resources as such is actually misleading regarding how countries develop: the mainstream path of developed capitalist countries showed actually involves more resources than natural ones. European countries are quite deprived of such resources and acquired their development through industry and technical and organizational innovations.

More strategy required

The most fruitful investment could thus be on education, developing services – as is successfully doing Rwanda, for instance –bringing access to power and internet to the majority of the population to stimulate innovation and trying to export transformed rather than raw products.

This does not mean African resources should remain untapped. First, because they cannot really remain so. The global demand is so high, transnational firms are so powerful, blocking them is practically impossible. The biggest change could be in the mindsets: natural resources could be considered as a bonus to a given situation, additional revenue that can provide extra infrastructures, emergency plans or stabilize tougher upcoming times.

When your country is an oil-rich one, it is actually harder to lead a consistent public policy, to recruit civil servants and bring foreign investors on the long-run than when you’re not. Between 2014 and 2016, oil prices more than halved (and the oil-rich Arabic countries I was extolling a few lines above were the ones who suffered the most this crisis), while less famous resources also vary a lot, such as Bauxite or Alumina.

When a country is a resource-rich one, it is also more politically vulnerable. Not only because it is the object of all kinds of covetousness, also because a single event can make its government more fragile. The case of Venezuela, strongly hit by US sanctions and dropping oil prices, is one of the most blatant examples. To strike this country, striking its natural resources looks much easier than attacking a whole sector of services or a diversified industry.

What can one conclude then? It is necessary to make the relevant investments and to focus on institutions as quickly as possible. Focusing on something else than resources can also change the view we have of Africa, by having less “Biblical” narratives based on the fatality of a future of despair or joy and seeing the continent with a more pragmatic approach. Most Africans are young, bilingual (if not more) and connected. The power sector begins to thrive. This is a fertile ground for the development of entrepreneurship, services and industries that do not rely on natural resources. These can still help but could be put in the background. It should be a political choice, and it surely requires courage and an elaborate vision for the future.

Writer

Noé MICHALON

University of Oxford

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