Managing oil, gas, and minerals

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Africa’s natural resources belong to its people—today and in the future. How, then, can countries ensure that extracting those resources benefits more than a few? By managing everything that’s involved—well, fairly, and openly.

Africa is the least explored continent, but many African countries are endowed with abundant oil, gas, and mineral resources and have economies that depend heavily on their extraction and exports. The extractive industry in many of these countries is highly concentrated on extraction upstream, so the exports are also limited to the raw primary product, not semi-processed or processed versions. The upstream part of the value chain is often in an enclave with few links to the rest of the economy. Similarly, the concentration on unprocessed products misses opportunities to develop links with the economy to increase incomes and employment. Moreover, the exports of raw commodities can expose a country to volatile prices and thus volatile revenues. All this, coupled with the fact that extractive resources tend to be exhaustible and nonrenewable, makes sustainable development particularly challenging for countries highly dependent on them.

The goal must be to manage natural resource endowments to develop the rest of the economy—and to avoid concentrating wealth in the hands of a few, spending for current consumption rather than investing in the future, allowing the exchange rate to become overvalued to discourage other exports, and creating environmental nightmares. It must also be to avoid the curse of relying on highly volatile commodity export prices and public revenues.

Rather than rehashing Dutch disease and in lieu of providing a comprehensive analysis of natural resources in Africa, the chapter focuses on governance issues within the ambit of direct government action:

• Improving governance and management of the extractive sector
• Designing and executing fiscal regimes
• Linking resource extraction to the rest of the economy
• Adding local content and finding opportunities in the extractive value chain
• Managing artisanal mining

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