Mainstreaming Mineral Wealth in Growth and Poverty Reduction Strategies

Abstract

Many studies claim that mineral resources impact negatively on economic growth particularly in developing countries. This paper briefly reviews this argument (the natural resources curse hypothesis) and subjects it to examination. The paper argues that poor performance is not an inherent characteristic of minerals‐driven economies. It considers mineral endowments a capital that can spur growth and reduce poverty in developing countries if deployed under appropriate conditions. The paper identifies the benefit streams of mining and the challenges for their equitable creation, investment, distribution and management. It articulates the conditions, success factors and strategies to maximizing the contribution of the minerals sector to growth and development in Africa. The entry points include creating a conducive and competitive policy, legal and regulatory environment and frameworks for business development; improving governance and management systems anchored on strong and capable institutions; opening up opportunities including capitalizing on the low entry barriers offered by artisanal and small‐scale mining; sharpening investment decisions; including the minerals sector in poverty reduction strategies and other national development plans; promoting linkages between the minerals sector and other sectors of the economy; empowering communities; establishing coalitions of change; and facilitating knowledge and competencies creation for more local processing and value addition.

Keywords:

• Minerals — mining — resource curse — Africa — developing countries — poverty reduction — growth — wealth — benefits — linkages and governance

ACKNOWLEDGEMENTS

This paper has benefited from substantive and editorial comments and inputs from Yinka Adeyemi, Maria Thundu, Augustin Fosu, Chantal Dupasquier, Wilfred Lombe, Oliver Maponga, Albert Yama, Awa Busia, Isatou Gaye, Bjorg Sandkjaer, and Yousif Hassan, all from ECA. The first draft of the paper was submitted for validation to an ECA Seminar Series held on 30 April 2004, facilitated by Kasirim Nwuke and chaired by Mr Josue Dione, Director of the Sustainable Development Division of ECA. About 30 ECA staff members attended the seminar. Their valuable comments have been taken into consideration in finalizing the paper. Contributions external to ECA were received from Olle Ostenson, Magnus Ericsson, Pentti Noras, Jesse Czelusta, Gavin Hilson and Brigitte Bocoum. To all, the author extends his sincere gratitude.

Notes

1. Senior Economic Affairs and Leader of the Natural Resources Development Team, United Nations Economic Commission for Africa, Adds Ababa, Ethiopia.

2. The effects of the Dutch Disease include 1) high inflation and currency appreciation; 2) rise in input costs, especially wages; 3) expansion or shrinking of the non‐traded goods and services sector due to growth‐inhibiting effects of rising input costs, or growth‐promoting effects of higher incomes and demand respectively; and 4) reallocation of resources (financial and human), from less attractive sectors such as agriculture and manufacturing to the booming minerals sector, with the resulting contraction and loss of competitiveness in those sectors.

3. ILO (ILO, 1999) estimates that 3.0–3.7 million people are employed directly in small‐scale mining in Africa; 6.7–7.2 million in Asia/Pacific countries; 1.4–1.6 million in Latin America; and about 0.4–0.5 million in the rest of the world. Approximately 80–100 million people depend on the sub‐sector for their livelihood.

4. The Yaounde Vision was adopted during a joint ECA/UNDESA Seminar on ‘Artisanal and Small‐scale Mining in Africa: Identifying Best Practices and Building Sustainable Livelihoods of Communities’, held in Yaounde, Cameroon from 18 to 22 November, 2002.

5. See www.casmsite.org