The Vicious African Resource Curse

Updated: Aug 27, 2019

Africa is a continent of enormous economic potential because of its incredible abundance of resources. However, those resources often cause more bad than good. We go in depth about why natural resources have lead to endemic corruption on the African continent.


Many African countries have been hit with the infamous “resource curse,” which is defined as a “paradoxical situation in which countries with an abundance of non-renewable natural resources experience stagnant economic growth or even economic contraction.” Africa’s natural resource wealth has been a source of instability for the governments of many African countries, as it as led to corruption, staggering wealth inequality, as well as continuous scattered violence. These all stem from gross natural wealth mismanagement, combined with rampant corruption. However, resource rich African countries aren’t doomed. Countries such as Botswana have managed to positively exploit their natural resources, achieving a “high human development” status according to the UN, ranking higher than countries such as South Africa and India. This is due in part to solid democratic institutions, reasonable state control of national resource exploitation industries, as well as an intelligent- yet far from perfect- redistribution of wealth. Building off the successes of countries such as Botswana, while also assessing their failures and current difficulties, might provide answers for other African countries to finally capitalize on their enormous development potential; and why not use the occasion to build more functional democracies.

First, let us analyze how destructive a lucrative base of natural resources can be for countries with already fragile state institutions. Typically, a couple years after the discovery of natural resources, a previously poor country will have amassed massive amounts of wealth. This leads to multiple, almost irreversible issues. The first one is the establishment of unfortunately solid corruption and patronage networks. The link between authoritarianism and resource rich countries is clear. As Larry Diamond of Stanford University states: “There are 23 countries in the world that derive more than 60% of their exports from oil and gas, not a single one is a democracy.” Furthermore, bribery has been much harder to fight because of the growing use of offshore bank accounts, as revealed in scandals such as the Panama papers. According to Tom Burgis, a Financial Times investigative journalist, “Bribery now is much more sophisticated, and has become harder to define as bribery if it's (through) offshore transactions or people being given equity shares in offshore companies. You have to crack open a lot of offshore secrecy to see the conflict of interest that lies at the heart of them.” The discovery of natural resources will incentivize rich, often western companies, to speculate -buying crude resources not for current consumption, but for future use, in hopes that the price will increase- and exploit poor countries’ natural resources. Those companies rarely have any interest in improving the local population’s lifestyle, even less operating in ways that would respect citizens’ human rights, and protect the country’s environment. The level of disdain that Western companies express for the African population is exemplified in the European export of “African quality fuel” or “dirty fuel”, which is imported diesel with sulphur levels as high as 3,000 parts per million when the European maximum is 10 ppm.” In 2013, air pollution killed over 20,000 people in Ghana. It is important to remember that corporations are there to make a profit, not to promote the well being of the people.” This vicious cycle is extremely complicated to break because of the following reason: in a previously poor country, the choice between personal financial security and governmental integrity comes as an obvious choice for many of that country’s politicians. The money from the country’s natural resources thus ends up in the elites’ personal bank accounts rather than the state’s treasury. In Angola between 1997 and 2002, “$4.2bn in oil revenues illegally bypassed Angola's central bank and disappeared without explanation”, which is approximately equal to how much money was spent by foreign countries and the Angolan state on social and humanitarian services during that period of time. These conditions do not allow for investments in social services such as education and healthcare. The continuous cycle of an extreme wealth gap is thus perpetuated, blocking the country’s overall development.

Of the little money that gets to end up in the state’s bank account and which is used for social services is not only extremely limited but also extremely volatile. Indeed, as seen with Venezuela, an abundance in natural resources provides an easy and almost effortless source of money. And most African countries fall right into the trap of economic non-diversification. In countries that rely on primary commodity (natural resources) export, there is very limited investment in basic and essential industries such as agriculture. This leads to a dependence on foreign, basic-necessity goods even though the country could very well be self-sufficient. For example, Nigeria is the largest importer of rice in Africa, and is second worldwide behind China. Nigerian President Muhammadu Buhari has since tried to diversify Nigeria’s economy away from hydrocarbons by investing heavily in agriculture. This, however, is not a smooth process due to the sudden reliance on domestic rice farmers, which have had production issues due to flooding and insecurity. Therefore, cheap, foreign rice smuggling activities from neighboring countries like Benin are on the rise. Economic non-diversification is the main problem plaguing resource rich countries worldwide.

Lastly, I want to touch on the issue of “blood diamonds,” which are “any diamonds that have been mined in a zone of conflict and sold for profit to finance war efforts.” Ever since decolonization, pretty much every African country has been prone to violence of some kind, wether it be genocide in Rwanda, coup d’états in the DRC, or separatist militias in Nigeria. Sierra Leone is an example of how a supposedly blessed, diamond rich country can turn into complete chaos as a result of its ressources. The Sierra Leonese civil war, fought mainly between the government of Sierra Leone, the RUF (Revolutionary United Front ), lasted 11 years and killed over 120,000 people. Diamonds fueled much of this conflict, as both sides fought over the control of the diamond mines, and sold those diamonds in order to buy weapons. An already violent region, could not be more damned by the presence of natural resources in its territory. It is estimated that about 3.7 million lives have been lost as a result of wars related to diamonds of some kind.

As a conclusion, we can affirm that natural resource wealth has been a constant vice for historically weak governments in Africa, and have caused an unstable and fluctuating balance of power, which in turn provides the basis for near-constant governmental changes. And that instability has hindered the region's ability to capitalize on natural resources to provide social welfare and an increased quality of life for its citizens. Some African countries have been able to break the "Resource Curse," like Botswana, which is discussed in another of my articles, available on this website.




By Timothy Motte

French student studying international relations at the University of California, Santa Barbara. I was born in London, raised in Paris, and moved to the US my freshman year of high school. Along with my involvement with the AfterThought Institute, I am actively pursuing Mandarin and Spanish. Very internationally oriented, my goal is to work for any multilateral international organization, geopolitical consultancy, or foreign policy think tank. I am planning on studying at SciencePo Paris, as well as Shanghai Fudan University my junior year. Open minded and hardworking, I always strive to understand each side’s point of view before giving my opinion on it.

Contact:

mottetimothy@gmail.com

https://www.linkedin.com/in/timothy-motte-27470a169/

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