MAC: Mines and Communities

Africa's mineral wealth hardly denting poverty levels, says World Bank

Published by MAC on 2012-10-16
Source: Guardian

So why does it advocate even more mining?

The term "resource(s) curse" is indelibly associated with a state's fiscal dependency on mining, and the degree to which this skews or displaces alternative economic development.

(Just a week ago we used the term on this website, to typify the inflationary impacts of Burmese jade exports on land prices and small-scale industrial potential. See: Burmese student leader puts "cronies" on notice over Monywa mine)

However, while few experts doubt the curse exists, there's a wide spectrum of analysis on what causes it, and how to counter its effects.

A new report by the World Bank's Africa's Pulse records that citizens in some African states are enduring greater extreme poverty than they were before - citing Angola, Congo-Brazzaville and Gabon.

At the same time, it says, other countries on the continent, such as Guinea, Zambia, DR Congo, Ghana and Mali, are already accounting for a significant proportion of global mineral output. 

The report claims that, excluding South Africa (a notable exception, since it's historically been Africa's mining "melting pot"), sub-Saharan growth is forecast soon to rise to 6% from 4.8%.

However, it acknowledges that Chinese demand is key to such growth, and that this is by no means guarenteed to continue. (Indeed, it is already showing distinct signs of being reduced).

It's little surprise that the World Bank attributes the economic malaise of so many African states to their governments' failures to capture mineral-derived profits, rather than curb the exploitation of those minerals in the first place. See: World Bank funding for mining projects blasted by UK group

As prescribed by Shantayanan Devarajan, the World Bank's chief economist for Africa: 

"African countries have to make the conscious choice to invest in better health, education, and jobs, and less poverty for their people, because it will not happen automatically when countries strike it rich."

That's fair enough, one might agree. Except that many governments aren't doing this - the Ghanaian government perhaps demonstrating best what still needs to be done. See: Ghanaian Forum calls for major mining reforms

Other regimes remain hopelessly corrupt, or powerless to rein in corruption, much of which is inherited from recent (and continuing) bloody conflicts over access to the minerals themselves.

Furthermore, the "extreme poverty", which Africa Pulse rightly deplores, is intrinsically associated with the uprooting caused by these conflicts, and the dislodging of agriculturally-dependent communities from their productive lands.

In September 2005, the World Bank published a remarkable study which concluded that resource depletion was draining the net "savings" of the world's poorest countries - specifically in sub-Saharan Africa - and could cripple future generations.

Entitled "Where is the Wealth of Nations?", the report  called for "a new measure of wealth", going beyond evaluating traditional gross domestic product (GDP) and it argued that other variables should be used, including "damage to the environment".

The Bank proposed additional indices for calculating "total wealth," including ones for "produced capital, natural resources, and the value of human skills and capabilities".

Taken together, these showed that "many of the poorest countries ... are not on a sustainable path." See: Resource Depletion Damages Third World - World Bank

More's the pity, then, that Mr Devarajan and his organisation don't appear to have heeded these earlier lessons.

Is it any wonder that the plight of some of Africa's poorest peoples has materially worsened in the intervening seven years?

Africa's mineral wealth hardly denting poverty levels, says World Bank

Report finds discovery of oil and mineral resources doing little to improve prospects for poor people, whose lot may even worsen

Mark Tran

Guardian (UK)

5 October 2012

Strong economic growth in the past decade among African countries rich in oil and minerals has failed to make a significant dent on their poverty levels, according to a World Bank report.

Africa's Pulse, a twice-yearly analysis of Africa's economic prospects, noted that the decline in poverty rates in resource-rich countries has generally lagged behind that of countries without riches in the ground.

Some countries, such as Angola, Congo-Brazzaville and Gabon, have witnessed an increase in the percentage of the population living in extreme poverty.

The report confirms the common perception that, to a large extent, the benefits of growth have not reached the poorest segments of society. It raises questions for aid donors and African governments on how to deal with the "resource curse", with strikes in South African mines providing a stark illustration of what is at stake.

"Resource-rich African countries have to make the conscious choice to invest in better health, education, and jobs, and less poverty for their people, because it will not happen automatically when countries strike it rich," said Shantayanan Devarajan, the World Bank's chief economist for Africa, and lead author of Africa's Pulse. "Gabon, for example, with a per-capita income of $10,000 (£6,200) has one of the lowest child immunisation rates in Africa."

How to ensure that natural resources benefit the general population, not just the elite, is a question likely to grow more acute as discoveries of oil, gas and other minerals in African countries are expected to generate considerable wealth in the future.

The region's established oil producers represent less than 10% of the share of both global reserves and annual production. Nigeria, Africa's biggest oil producer, can keep supplying at 2011 levels for another 41 years, while Angola, the second largest producer in the region, has about 21 years remaining at current production levels before its known reserves are depleted.

With such sizeable reserves, it is likely the dependence on oil resources in these countries will continue. Production in new mineral countries such as Ghana, Mozambique, Sierra Leone and Uganda could last for a substantial number of years.

Others have considerable mineral resources. In 2010, Guinea represented more than 8% of total world bauxite production; Zambia and the Democratic Republic of the Congo have a combined share of 6.7% of the total world copper production; and Ghana and Mali together account for 5.8% of total world gold production.

Africa's Pulse underlines the continent's heavy dependence on commodities for its recent growth, although domestic demand has played its part. Sub-Saharan Africa is expected to grow at 4.8% in 2012, broadly unchanged from 4.9% growth in 2011, and is largely on track despite setbacks in the global economy. Excluding South Africa, the continent's largest economy, growth in sub-Saharan Africa is forecast to rise to 6%.

While African economies have not been immune to the crisis in the eurozone, the World Bank said consistently high commodity prices and strong export growth in countries with mineral discoveries in recent years have fuelled economic activity and are expected to underpin economic growth for the rest of the year.

A measure of the continent's economic success is strong investor interest. "An important indicator of how Africa is on the move is that investor interest in the region remains strong, with $31bn in foreign direct investment flows expected this year, despite difficult global conditions," said Makhtar Diop, World Bank vice-president for Africa.

The report noted that, after 10 years of high growth, an increasing number of countries are moving into "middle-income" status, defined as those countries reaching more than $1,000 per-capita income. Of 48 countries, 22 with a combined population of 400 million have officially achieved middle-income status.

But there are risks, with a fragile global economic recovery posing the greatest threat.

A "hard landing" for the Chinese economy would adversely affect growth prospects. Over the past decade, sub-Saharan exports to China have risen from 5% to around 19.3% in 2010, with producers of oil (Sudan, Congo) and metal and mineral exporters (Zambia, Mauritania, the Democratic Republic of the Congo) among countries heavily dependent on Chinese appetite for commodities.

The report noted that oil-rich countries systematically perform worse than any other country groups in terms of voice and accountability, political stability, rule of law and the control of corruption. Chad and Sudan are the worst performers, according to the World Bank, and their governance indicators improved little between 2000-2010.

Anti-poverty campaigners have been pressing for more transparency and accountability in the natural resource sector as a way of putting pressure on governments.

A focus of such efforts is the Extractive Industries Transparency Initiative, which provides an internationally-recognised framework for public disclosure by mining companies and governments of what they pay and earn respectively. However, the initiative is voluntary, leaving implementation to those who sign up.

A European parliamentary committee last month approved a measure requiring EU oil, gas, mining and timber companies to publish their payments to foreign governments. The vote puts the world on track to create strong global transparency standards with equivalent rules in the EU and the US.

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