ABSTRACT
In recent years, Africa’s economies have posted high growth figures of 5 percent per annum and above. At the same time, the continent has also continued to report discoveries of vast natural resources – renewable (such as water, forestry, and fisheries) and non-renewable (minerals, coal, gas, and oil). Natural resources are increasingly becoming critical to the performance of many of these economies and are central to the systems of livelihoods therein. The resources form the basis of income and subsistence for populations and are a principal source of public revenue and national wealth. Given the right conditions, a natural resource boom can be an important catalyst for growth, transition, and broader socio-economic development. Unfortunately, in many African countries, natural resource booms have only to a limited extent set off a dynamic growth process and enhanced human development. This is largely due to the failure to implement inclusive growth policies that can deal with global economic volatility and to ensure that strong institutions are in place – thus making it very difficult to have a big push towards diversification and sustainable development. There is also another concern that much of Africa is not industrialized and exists in a staple trap, dependent on exports of a few natural resources. More importantly, commodity booms are transitory and prices tend to show some degree of mean reversion over time. Consequently, countries that experience one or more commodity export price booms typically also face high volatility of export prices. In many cases, natural resource booms encourage less prudent fiscal policies with limited control and inflation, further hampering growth, equity, and the alleviation of poverty. Historically, the majority of resource-rich countries tended to have limited transparency in the management of natural resource revenues, leading to the creation of parallel budgets as well as rent-seeking behaviors among the political and business elites.
