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In Africa, estimates indicate that an annual investment of $93 billion is required to address the continent’s basic infrastructure needs – more than double the current level of investment.
The lack of productive investment of resource revenues, with spending of these revenues often heavily tilted towards consumption, is a critical component of the so-called resource curse, the observation that countries rich in natural resources frequently have slow long-term growth. Following oil or mineral discoveries, as the expectation of increased wealth spreads, pressures to spend typically become hard for politicians to resist, public sector salaries go through the roof, wasteful spending increases, corruption may flourish, hidden foreign bank accounts may be established, and the number of unproductive “white elephant” projects grows.
How can resource-rich countries ensure that a large share of oil, gas, and mining revenues are used for productive investment rather than excessive or wasteful consumption?