Opinion
Africa must benefit from its mineral and natural resources
By Carlos Lopes
Africa’s political economy is deeply ingrained with its history of the exploitation and (mis)-management of its mineral and natural resources.
More than 500 years after commercial exploitation of Africa’s resources, Africa continues to host many of the large and unexploited deposits of minerals globally. For example, Africa accounts for three-quarters of the world’s platinum supply, and half of its diamonds and chromium. It has up to one-fifth of gold and uranium supplies and it is increasingly home to oil and gas production with over thirty countries now in this category.
Yet, with minor exceptions, Africa does not consume or add significant value to these and other mineral products which it has in abundance. Rather, we are net exporters of raw materials that fuel prosperity and development in other regions.
Africa is largely seen as a price taker rather than a price-maker, with a marginal role in international trade. The question that arises therefore is why the continent continues to struggle with limited economic transformation, low or no resource rents and scarce employment.
In the last ten years commodity prices have hit a super-cycle, yet Africa’s share of windfall earnings have been miniscule, compared to what mining companies have realized. Average net profits for the top 40 mining companies grew by 156 percent in 2010 whereas the take for governments grew by only 60 percent, most of which was accounted for by Australia and Canada, two countries that graciously want to share their experience with Africa. Indeed, most African countries got much less than this due to generous tax holidays given to mining companies!
Looking at the issue from another dimension, the profit made by the same set of mining companies in 2010 was US$110 billion which was equivalent to the merchandise exports of all African least developed countries (LDCs) in the same year.
It is fair to say therefore that the resource-to-development model puts raw materials suppliers at a significant disadvantage. The conclusion that can then be drawn from this situation is that the current resource-for-development model is not working to bring about equity or boost development.
