Aid and Africa’s Resource Potential
African natural resources are largely unexplored and undeveloped. If harnessed correctly by African nations, these resources can be a catalyst for ending chronic poverty.
Last week, Dr. Paul Collier entertained and informed an audience of scholars, practitioners and students at SAIS with a presentation called “Making Natural Resources Work for Development.” Dr. Collier framed his remarks around a fundamental point: African natural resources are largely unexplored and undeveloped. If harnessed correctly by African nations, these resources can be a catalyst for ending chronic poverty.
Collier noted that current estimates give Africa an underground resource value of around $60,000/square mile – compared with $300,000/square mile in OECD countries. But Africa is not abnormally resource-poor; it’s just that its vast mineral, oil, and other resources stores have yet to be fully explored. The real figure is probably at least $300,000/square mile, and perhaps significantly more.
Once the room was appropriately impressed with the magnitude of this opportunity, Dr. Collier highlighted several key points from his book The Plundered Planet, and outlined a number of fundamental economic and political decisions that countries must make to ensure that natural resource rents boost their economies in the long term. But before digging into these issues, Dr. Collier noted that finding and developing underground resources is probably best done by the public sector. Free markets respond to a “gold rush” once deposits are discovered, but a dedicated public sector can put in the long, arduous hours it takes to find and begin extracting resources.
In true AidData fashion, we couldn’t help but wonder what donors are doing to influence the process of natural resource discovery and extraction in Africa. The figure below gives a picture of the total aid directed to underground resource extraction in Sub-Saharan Africa from 1975-2009 as found in the AidData data portal:
Download the data displayed above here.
Projects with an AidData purpose code relating to mineral extraction or development are included in the analysis. The data are for all OECD donors and all other bilateral and multilateral donors currently included in AidData.
While aid to the sector has fluctuated widely over the years, there appears to be a downward trend for donor support to mineral resource exploration and production. The major up-ticks during the last two decades have been due to large World Bank investments in a few oil fields; otherwise, donor support to the sector has remained fairly static.
In fairness, this quick analysis provides an imperfect picture of donor commitment to the African natural resource sector. The data do not contain information on investments from China, which are likely heavily tilted toward resource development. But one thing seems clear – If the opportunities for development are as promising as Dr. Collier suggests, it may be time for traditional donors to up the ante on investing in African natural resource development.
This post is a continuation of AidData's series looking at the relationship between development finance and its impact on the environment. For more on the series, check out here.
Dustin Homer is an Associate with Development Gateway