The World Bank said that resource-rich governments in sub-Saharan Africa have the opportunity to make better use of their resources to finance their public programs, diversify their economies, and increase access to energy.
Entitled "Africa's Resource Future," the World Bank report, released yesterday, finds that, on average, countries capture only about 40% of the revenues they could potentially get from their natural resources.
The financial institution avers that at a time when countries are burdened by slow growth and high debt, governments could more than double revenues from natural resources such as minerals, oil and gas by adopting a better set of policies, implementing reforms and investing in better fiscal administration.
Full taxation of natural resources is also important to collect the full cost of environmental and social impacts, not always fully covered by producers, including oil resources. Not doing so can act as an implicit subsidy to production and increase carbon emissions. Maximizing government revenues in the form of royalties and taxes paid by the private industries exploiting natural resources, like attracting new investment, would be a double benefit to people and planet by increasing fiscal space and removing implicit subsidies to production," says James Cust, senior economist for the World Bank's Africa Region and co-editor of the report.
The paper argues that the global transition away from fossil fuels is creating unprecedented demand for various minerals and metals such as cobalt, lithium, copper, nickel, and rare earth elements needed for the development of green technologies such as wind turbines, solar panels, and batteries, noting that many of these resources exist in abundance across Africa.
However, experience shows that natural resource wealth does not automatically translate into inclusive growth and prosperity. Minerals, oil, and gas account for a third or more of exports from most Sub-Saharan African countries, but countries have struggled to convert this wealth into sustainable growth. Regional dependence on global commodity prices has led to suboptimal management of public resources when prices are high and economic and fiscal crises when prices fall,? the report says.
The World Bank laments the fact that resource-rich countries are generally less resilient to economic shocks than countries with fewer resources, pointing to the risks of a "resource curse" in African countries.
Africa's Resource Future" recommends that policy makers turn the "resource curse" into a resource opportunity, in which countries not only capture the full value of resource revenues but also attract private sector investment, and governments should prepare for boom and bust cycles by investing resource revenues in productive capital, health and education of the people, and infrastructure that can support diversification of the economy. (The Country)