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The Case for Sharing Africa’s New Minerals Wealth With All Africans

Makhtar Diop's picture

In country after country in Sub-Saharan Africa, new discoveries of oil, natural gas and mineral deposits have been making headlines every other week it seems. When Ghana’s Jubilee oil field hits peak production in 2013, it will produce 120,000 barrels a day. Uganda’s Lake Albert Rift Basin fields could potentially produce even greater quantities. Billions of dollars a year could flow into Mozambique and Tanzania thanks to natural gas findings. And in Sierra Leone, mining iron ore in Tonkolili could boost GDP by a remarkable 25 percent in 2012.

My strong hope is that all the people living in these resource-rich African countries also get to share in this new oil and mineral wealth. So far, with one of few exceptions being Botswana, natural resources haven’t always improved the lives of people and their families. From what I see on my constant travels to the continent, economic growth in most resource-rich countries is not automatically translating into better health, education, and other key services for poor people.

Many resource-rich countries tend to gravitate towards the bottom of the global Human Development Index, which is a composite measure of life expectancy, education and income. 

One strikingly effective way to make sure that all people, especially the poorest, share in the new minerals prosperity is through safety nets and social protection programs. These are designed to protect vulnerable families and promote job opportunities among poor people who are able to work. This in turn makes communities stronger and more secure, while reducing painful inequalities between people.

Social protection programs are already central to poverty-fighting, higher growth national strategies across Africa, and have played a significant role reducing chronic poverty and helping families become more resilient in the face of setbacks such as unemployment, sudden illness, or natural disasters such as droughts or floods. These programs have also allowed families to invest in more livestock or grow more food, and increase their earnings. 

You can see Africa’s growing interest in social safety nets in the fact that governments have set up more than 130 cash transfer programs in over 35 countries. Direct cash transfers to poor people often work side-by-side with workfare programs that create jobs for people in public works such as building roads. Where these programs have been well set-up and managed, the results have been excellent.

In Rwanda, the government attributes its plunging poverty rate from 57 percent in 2006 to 45 percent in 2011 partly to the Vision 2020 Umurenge program of cash transfers and public works. In Ethiopia, the Productive Safety Net Program covering a tenth of the population has created green fields, helped people add more goats and cows to their livestock herds,  and protected  people against the worst effects of drought and high food prices, while reducing emergency payments at the same time, for the remarkably affordable price of 1.2 percent of GDP.

While these programs can always be improved, there is no doubt that in addition to helping people become healthier and more educated, with better job prospects, they can also have other powerful benefits.

Take the case of Zambia, where as much as one-third of cash transferred to destitute households affected by HIV/AIDS was invested in small livestock, farming and other small business opportunities. In Lesotho, the Child Grants Program has shown significant spillover benefits, with cash transfers increasing the real income of other family members by about 24 percent. 

We can now see vivid examples in Africa today of how safety nets and other social protection programs can be powerful assets to governments and communities in their efforts to reduce poverty and inequality while promoting more social cohesion and less instability in countries which have become stuck in poverty and conflict trap, despite, or perhaps because of, their natural resources wealth.

When poverty falls and people become more hopeful and take new interest in the transformational promise of natural resource revenues, governments will  slowly become more accountable to citizens—often a major gap in post-conflict and conflict-affected states. Also, social protection programs in fragile and violent settings can quickly help stabilize high-risk situations by creating work and providing much-need income for people battered by insecurity and fear. Overall, programs like these can help communities and families rebuild their lives after the guns stop firing, and create the possibility of a lasting, restorative peace for the next generation.

So, a burning issue is how to translate natural resources wealth into better education, health, and livelihoods for all Africans, and not just the fortunate few who may be well-connected. This in turn helps to reduce poverty and speed the steady evolution of well-diversified economies in the years ahead—regardless of commodity price levels.

Investing in people is more important than ever given that Africa is home to a fast-expanding group of teenagers and young adults throughout the continent. The World Bank’s new strategy on labor and social protection, which has been greatly shaped by consultations with stakeholders in Africa, and by lessons from Latin America and elsewhere, recommends that African governments see the vast development potential of social protection systems which protect poor and other vulnerable people in resource-rich countries.

Social protection is a smart, strategic, and proven means to sustaining the remarkable economic and social transformation underway across many countries in Africa today.
 

More Information:
Social Protection Strategy for Africa

Watch:

Boosting Food Security in Niger

Rebuilding Social Infrastructure in Post-Conflict Sudan

Building Skills for Youth in Kenya

The Rise of Social Safety Nets in Africa

 

Comments

Submitted by Yewande on
In addition to safety nets and social protection projects, countries need to put in place macroeconomic policies and legal frameworks to ensure that government spending is de-linked from mineral wealth revenues, which are often subject to volatity induced by international and/or domestic factors.

Submitted by Wanahun Birhanie on
We can do! All things are possible. We unite 4evere!!!

Has the World Bank decided to work for African countries rather than for the rich countries that have been pillaging them for decades? That's good news. Perhaps you could start in a country like Tanzania, where you don't even have the excuse of war or anything like that. Currently, foreign companies can extract 97% of the country's gold, uranium and other resources; what happens to the 3% Tanzania is entitled to is anyone's guess, but many doubt that the country even receives that. Does the World Bank have plans to do something different from what they have been doing for decades in health, education and other areas of development, and what makes it different? And why are mining companies still able to come into the country, decade after decade, and claim that the country does not have the capacity to even mine its own resources, let alone process them and get some benefit from them? And will the World Bank protect the artisanal Tanzanian miners who are currently being attacked, beaten and even shot by police who appear to have been paid to do so by the foreign miners. It's great to have the World Bank on board. When can we expect some results? Finally, is the World Bank per diem still roughly the equivalent of the per capita GDP of some poor countries?

Submitted by Souleymane on
Another way to share the mineral rents with the population (in addition to ensuring sound social services to poor) could be by channeling some of the windfall into building intergative cross-border infrastructures connecting leading cities among themselves and to transport hubs. Declining transport and communication costs combined with the right policies on urbanization, territorial development and regional integration can support inclusive growth and diversification away of traditional production sectors (WDR2009). The Poverty and Prosperity goals can both be pursued with well-managed natural resource sectors in African countries.

Submitted by Maniza Naqvi on
I wholeheartedly agree with the post that all the people living in resource-rich African countries, which are the majority of countries on the continent, also get to share in this new oil and mineral wealth. The revenues from the oil and mineral wealth could be managed through sovereign funds for the purpose of social protection and improving Human Development and bettering lives of all citizens. I am thrilled to see this post by Makhtar. The Bank's own Jennifer Johnson Calari who is now the Director/Global Head of Reserve Advisory Management in FABRP has edited and contributed to a book on this subject which describes funds in Alaska, Norway, Wisonsin, Botswana, Kuwait and many more that have been set up for this purpose. I have just finished reading this very important book. And highly recommend it. I hope that supporting Governments to set up these funds with the objective of using the funds for social protection, education, health and poverty reduction will be our focus in our Africa Region's work and I would love to be a part of that! Here is the link to the book http://www.amazon.com/Sovereign-Management-Jennifer-Johnson-Calari-Rietveld/dp/1902182464 Maniza

Submitted by Phil Hay on
Great comments from readers to this blog so far. For example, I thought Souleymane's case for investing more mineral wealth in regional integration programmes was a welcome additional insight, along with Yewande's appeal for strong macroeconomic and legal frameworks that complement the work of social safety net programmes while ensuring that government spending is de-linked from mineral wealth revenues. Take a minute to read our latest edition of Africa's Pulse (http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/AFRICAEXT/0,,contentMDK:23004589~pagePK:146736~piPK:226340~theSitePK:258644,00.html)which points to Africa's new oil, gas and mineral wealth discoveries as a renewed opportunity for inclusive development, encouraging African countries to increase investments in better health and education, cheap, nutritious food, more jobs, more electricity, and other transformational programmes. This is why we are establishing a new trust fund (http://www.worldbank.org/en/news/2012/10/05/world-bank-launches-fund-african-countries-negotiate-deals-for-oil-gas-minerals)that will help African countries win the best possible deals from the big international minerals companies for their new discoveries of oil, gas, gold, and other natural resources, while also encouraging governments to invest their new-found wealth in the sort of long-term development investments that will power their countries forward for the next generation and the next. Also see a New York Times blog on the same subject (http://green.blogs.nytimes.com/2012/12/10/fighting-the-resource-curse-part-2/). For the reader who raised the case of Tanzania, our development mission is determined by the country and its communities themselves, namely to help generate growth, deliver better quality health, education, and other key services, including stronger social safety nets, while also helping to create jobs, build vital infrastructure, and promote social accountability and good governance. Feel free to visit our Tanzania country website and see our development impact first-hand at: http://www.worldbank.org/en/country/tanzania

Submitted by Terence on
It is also important to deal with the crowding out of other important and productive sectors as a result of reliance on natural resources. A lot of the big mining projects are capital intensive and poor,agriculture dependent, communities have in many cases not seen a material improvement in their lives because not everyone is able to get a job with these companies or benefit from them. The principal benefit as proposed would be through social safety nets but there is also a need for targeted investment that makes a difference in people's lives. I think with enough windfall revenue many state can choose to fund these programs but with periodic declines in resource prices what will happen to the programs.

Submitted by kbn Rayana on
Analyze the water availability in Africa and its value in the diff. african countries and link them to catch and utilize for all public advantages and good agriculture. That stops not only poverty builds micro economy with self sustainable economy then C happy america

Submitted by perruques on
In addition to safety nets and social protection projects, countries need to put in place macroeconomic policies and legal frameworks to ensure that government spending is de-linked from mineral wealth revenues, which are often subject to volatity induced by international and/or domestic factors.

Submitted by Java on
Another way to share the mineral rents with the population (in addition to ensuring sound social services to poor) could be by channeling some of the windfall into building intergative cross-border infrastructures connecting leading cities among themselves and to transport hubs. Declining transport and communication costs combined with the right policies on urbanization, territorial development and regional integration can support inclusive growth and diversification away of traditional production sectors (WDR2009). The Poverty and Prosperity goals can both be pursued with well-managed natural resource sectors in African countries.

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