Fortune recently published an article entitled, “Another African resource curse? IEA says energy boom is not helping poorest.” The
resource curse is something I remain skeptical about, and while this article
brings about many valid points, I still believe other deep-rooted issues play
more of a role in the poverty and corruption that plagues many countries in
sub-Saharan Africa.
The facts of the article are definitely foreboding. Over the past fives years, 30 percent of
global oil and gas discoveries have been made in sub-Saharan Africa.
Nonetheless, four out of five people in the region still use charcoal and
firewood to cook their food due to a lack of electricity. It is frustrating to
think that the people who live in those countries are not even using the
resources that could be turned into electricity effectively, when they could
also be using their resources to attract investors to boost their economy.
While many may refer to this issue as a part of the curse, I think it has more
to do with the government’s inability to create reforms and legislation that
make using these resources easier. In the article, International Energy Agency Chief Economist Fatih Birol said the two biggest issues Africa faces when it comes to their natural resources is lack of governance and investors. Lack of governance would definitely be an issue in the region with or without the presence of oil, and the economies in sub-Saharan Africa are not likely to be attracting anyone. These two issues are definitely connected, and without a strong government, a strong economy is unlikely to follow.
There is also an infrastructure issue that is effecting the regions ability to use its resources effectively. The article goes on to explain that there are also
geothermal and other clean energy opportunities that could be used to attract
investors to the area as well. But, the infrastructures in the region would
first need to be updated in order to even begin attracting more investors.
Again, while the article attributes this issue all to the resource curse, I see
it as something completely different. The resources themselves are not causing
a lack of investors; it is the lack of updated infrastructure. Either the
government needs to start budgeting in order to update these infrastructures,
or they could contract out to the private sector. They could attract the private sector by
offering them tax deductions for working at a lower cost.
Most importantly, the countries in this region need to start
focusing on helping themselves. The article also says that a recent study shows
that $2 out of $3 in Africa is being used for export projects that are of not
use to any Africans. This is a problem that goes far beyond the resource curse.
The government needs to start prioritizing its own people before worrying about
the goods that are being sent to other countries. Again, the only way the government can force
the private sector to invest more in companies that will help Africans is through
incentives. Whether it is through tax reductions, or governments offering to
give some funding to start up companies that will invest in technologies that will help Africans specifically, something needs to be done to force companies to care about the people in the countries they are working in.
Another effect of the resource curse is seen through corrupt governments. This is definitely seen in sub-Saharan Africa, where there are millions of dollars stolen in oil annually making the rich richer and the poor poorer. Governments are doing very little to stop the corruption, and it is possible that many government officials are even benefiting from the oil profits. In this case, resources are able to become a tool for the already powerful and corrupt to put the majority at an even greater disadvantage. But, the social standing of the citizens of these countries was not created by the resource curse, it was just made worse by the resource curse. This is the position I hold with the resource curse. Countries that are already unstable and have a lack of organization and government will become even more conflict ridden with the abundance of natural resources, but the resources themselves are not what causes the problem.
While the IEA report claims that if governments and policies do not change, these countries will continue down a path of civil war and corruption, the outlook is not all negative. If African countries do begin to attract investors and use their resources effectively, the IEA estimates the countries economies could be boosted by 30 percent by 2014.
Another effect of the resource curse is seen through corrupt governments. This is definitely seen in sub-Saharan Africa, where there are millions of dollars stolen in oil annually making the rich richer and the poor poorer. Governments are doing very little to stop the corruption, and it is possible that many government officials are even benefiting from the oil profits. In this case, resources are able to become a tool for the already powerful and corrupt to put the majority at an even greater disadvantage. But, the social standing of the citizens of these countries was not created by the resource curse, it was just made worse by the resource curse. This is the position I hold with the resource curse. Countries that are already unstable and have a lack of organization and government will become even more conflict ridden with the abundance of natural resources, but the resources themselves are not what causes the problem.
While the IEA report claims that if governments and policies do not change, these countries will continue down a path of civil war and corruption, the outlook is not all negative. If African countries do begin to attract investors and use their resources effectively, the IEA estimates the countries economies could be boosted by 30 percent by 2014.
Interesting article and post. You seem to think that it is governance that is important and resources are epiphenomenal. What do you think Mitchell would say about this situation?
ReplyDeleteI agree that there is more than just a dependence on a single resource causing problems in these countries. Corruption and lack of infrastructure are both contributors as well. I believe that managing vast amounts of valuable resources may just be too much of a burden for fledgling countries to manage when there are powerful nations pressuring them to export more and more at cheaper prices to fuel their own consumption patterns. It is too easy to just dig up the diamonds, cut down the trees, and pump out the oil and collect money for corrupt uses. In contrast stepping up and using that revenue to actually build up the country is much less appealing and difficult.
ReplyDeleteProfessor Shirk - I think Mitchell would say that instead of resources and governance being separate, he would say they are directly connected. He would say the article oversimplifies the issue, and by figuring out what to do with these resources, the country will figure out their governments.
ReplyDeleteI agree that lack of infrastructure is a main reason that many people in these countries are in poverty and unable to increase their standard of living. However I think you also have to examine why do these countries have this lack of infrastructure? One viable reason is a weak government and lack of strong institutions. This is one of the noted results of the resource curse. Coming full circle, this lack of infrastructure therefore could be a result of the curse.
ReplyDelete