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Abstract
This article explores the recent debate over the quality of Africa's growth episode of the past decade, specifically insofar as it pertains to the pitfalls of commodity-dependent growth and the hypothesised ‘resource curse’. In addition, the article focuses on why political and economic institutions are important, and why they are indicators for the likely development impacts of Africa's evident mineral and hydrocarbon wealth. Third, it suggests a useful theoretical framework for understanding these indicators, especially with regard to the differing constraints under which foreign investors operate and interact with host countries. Developing on the latter points, the article looks at the nature of Chinese foreign investment in Africa's extractive industries. Finally, the article suggests an agenda for future research that could better inform development policy for the purpose of promoting high-quality growth in Africa.
Note on Contributor
Ross Harvey holds an M.Phil in Public Policy from the University of Cape Town, and is a PhD student at the School of Economics, UCT. He works at the South African Institute of International Affairs for the Governance of Africa's Resources Programme as a visiting research fellow. His research interests include the political economy of mining in South Africa, and mining's contribution to development more generally across the African continent.
Notes
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6. The term ‘unproductive rent-seeking’ is used to distinguish it from its potentially productive counterpart. The political economy literature tends to define ‘rent-seeking’ as inherently pernicious – political insiders capturing revenue streams at the expense of the public good. See Olson M, Logic of Collective Action. Cambridge, MA: Harvard University Press, 1965. However, even societies with strong institutions have politicians who attempt to generate rents. The difference is that these societies tend to impose binding constraints of accountability and transparency, which limit the potential pernicious effects on the common good.
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9. There is an extensive literature on this hypothesis now, although it has yet to be understood within a unified theory. A relative consensus appears to be emerging that institutional quality at the time of discovering an exploitable mineral or hydrocarbon deposit is primarily determinative of the likely development outcome of that wealth. For the best recent overview, see Van der Ploeg F, ‘Natural resources: Curse or blessing?’, Journal of Economic Literature, 49.2, 2011, pp. 366–420.
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12. Martinez M & M Mlachila, ‘The quality of the recent high-growth episode in Sub-Saharan Africa, 2013’, IMF Working Paper, WP/13/53, p. 3.
13. Martinez M & M Mlachila, ‘The quality of the recent high-growth episode in Sub-Saharan Africa, 2013’, IMF Working Paper, WP/13/53, p. 4.
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17. These terms are largely interchangeable in the literature, and refer to the divergence between social costs and private returns. Externalities are those costs or benefits produced by a firm but not taken into account by market prices. See Scheffer M, F Westley & W Brock, ‘Slow responses of societies to new problems: Causes and costs’, Ecosystems, 6, 2003, pp. 493–502.
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27. ‘Discount rates’ are the rates at which people discount the future. In other words, they reflect the value tht one places on that future. If the future is uncertain (or one expects negative utility from it), for instance, one may wish to cash in one's investments in the present, as opposed to waiting for the value of that investment to grow over time. That would constitute a high discount rate. For politicians in volatile contexts, the future is often uncertain, increasing the incentive to amass wealth in the present (or while access to wealth through the exercise of political power is available). See Becker G & CB Mulligan, ‘The endogenous determination of time preference’, The Quarterly Journal of Economics, 112.3, pp. 729–58. The explanation on p. 741 is especially helpful.
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45. Granger causality is different from other types of causation, and was specifically designed to capture time sequence – yt occurs before xt+1 and therefore may suggest a causal relationship between the two – and y contains useful information for forecasting what xt+1 might look like. For further information, see <http://www.scholarpedia.org/article/Granger_causality>.
46. Granger causality is different from other types of causation, and was specifically designed to capture time sequence – yt occurs before xt+1 and therefore may suggest a causal relationship between the two – and y contains useful information for forecasting what xt+1 might look like. For further information, see <http://www.scholarpedia.org/article/Granger_causality>, p. 519.
47. Granger causality is different from other types of causation, and was specifically designed to capture time sequence – yt occurs before xt+1 and therefore may suggest a causal relationship between the two – and y contains useful information for forecasting what xt+1 might look like. For further information, see <http://www.scholarpedia.org/article/Granger_causality>, p. 519.
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52. Ownership of a resource is fundamentally an institutional question, as one of the most important institutions for economic growth is the protection of private property rights.
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