Natural resources management, particularly in the extractives industry, can make a meaningful contribution to a country’s economic growth when it leads to linkages to the broader economy. To maximize the economic benefits of extractives, the sector needs to broaden its use of non-mining goods and services and policymakers need to ensure that the sectors infrastructure needs are closely aligned with those of the country’s development plans.
In Africa, especially, mining and other companies that handle natural resources traditionally provide their own power, railways, roads, and services to run their operations. This “enclave” approach to infrastructure development is not always aligned with national infrastructure development plans.
For economists, it is borderline redundant to say that corruption has economic origins—classic and contemporary work has long held the belief that higher salaries are better for corruption. Due to the obvious difficulties of doing real policy reform in developing countries however, researchers and policy makers have seen little evidence that sheds light on this statement; especially in African countries where salaries are often low and where corruption is still a great concern.
It’s 38°C (99°F) in Ouagadougou, the capitol city of Burkina Faso, today—and it’s been this hot all week. The end of the warm season is near, but in places like Ouaga (pronounced WAH-ga, as its better known), temperatures stay high year-round. These are the African drylands: hot, arid, and vulnerable.
Over 40 percent of the African continent is classified as drylands, and it is home to over 325 million people. For millennia, the people of these regions have adapted to conditions of permanent water scarcity, erratic precipitation patterns, and the constant threat of drought. But while urban centers like Cairo and Johannesburg have managed to thrive under these harsh conditions, others have remained mired in low productivity and widespread poverty.
The World Bank has been partnering with a team of regional and international agencies to prepare a major study on policies, programs, and projects to reduce the vulnerability and enhance the resilience of populations living in drylands regions of Sub-Saharan Africa.
The Nigerien city of Gaya is booming. Sitting on the banks of the Niger River not far from the borders of Benin and Nigeria, Gaya has grown from a quiet village to a hopping new hub. Its population is five times what it was just a few decades ago. So what has Gaya on the go?
To some extent, it's a trade story. Price differences across its nearby borders, helped by a ban on imports of second-hand clothes in Nigeria, and an avoidance of tax collection by customs officials have all been important factors in explaining the boom of trade in the region. Yet, combining these with an analysis of the development of transnational networks gives a more complete picture.
This is where Social Network Analysis sheds new light on the story of Gaya, by looking at these interactions to help improve our understanding of the dynamics involved.
Most people seem to think that intra-African trade could be substantially larger than it currently is. This would explain the recent statement of the heads of the African Union to “boost” intra-African trade substantially and to create an Africa-wide Free Trade Area by 2017.
Optimism about Africa’s future is no longer scarce. The continent’s growth has been exemplary in recent years. Yet it is just as easy to find signs of distrust in the global economy.
Multilateral agencies insist that international integration offers opportunities for accelerating economic growth. Official parlance has become tame since the heyday of structural reforms in the early 1990s, but they have found subtle ways to argue that trade is good. The World Bank recently launched “Defragmenting Africa,” providing an exhaustive and exhausting list of policies to increase international trade within the continent.
Unsurprisingly the prescriptions can be costly. Removing import taxes might improve economic efficiency and enhance consumer welfare, but revenues can fall in countries with limited public resources. Although Africa harbors some of the highest trade taxes in the world (World Development Report 2009), the point is that there are tradeoffs. The same applies to policies that entail investments in infrastructure for “trade facilitation.”
What would Africa get in return?
African Head of States and Governments will convene in Addis Ababa, Ethiopia later this month to launch a continent-wide free trade agreement (CFTA). The summit will focus on solutions to the numerous impediments that hinder intra-African trade: inefficient transit regimes and border crossings procedures for goods, services and people; poor implementation of regional integration commitments.
Once again, commodity prices are on the rise.
Unlike in 2008, when oil importers and exporters experienced symmetric shocks (one negative, the other positive), this time it appears as if both oil exporters and some oil importers in Africa are experiencing positive shocks.
The reason is probably that, along with oil prices, other minerals such as gold and copper, cotton, and cocoa prices are also up—so even an oil importer may have on net a favorable terms of trade shock. In addition, although some world food prices are rising, most food is domestically produced and not traded, so the negative effect of that may also be muted. Of course, the situation may change if oil prices rise even further.
The following summary table, taken from the complete data set prepared by my colleague Cristina Savescu, gives the ten countries with the biggest positive and negative terms of trade shocks between December 2009 and December 2010, as a share of 2009 GDP.
Terms of trade change December 2009-December 2010 as a percent of 2009 GDP:
Consider the following description of a trucker’s journey in Cameroon: “The plan was to carry 1,600 crates of Guinness and other drinks from the factory in Douala where they were brewed to Bertoua. According to a rather optimistic schedule, it should have taken 20 hours, including an overnight rest. It took four days. When the truck arrived, it was carrying only two-thirds of its original load.”
And this is how a Tanzanian exporter explains why few firms stay in the exporting business: “They discover that it is a miserable experience. Having gone to the effort of getting an export order they then spend weeks pounding through bureaucracy, endlessly waiting in dirty government corridors trying to find a morose civil servant prepared to do his job.”
How do these costs affect Africa’s trade?