The resource curse and the limited transformative capacity of natural resource-based economies in Africa: evidence from the oil and gas sector in Algeria and implications for innovation policy

Abstract

The strong growth and export performance in Africa for the last decade were largely due to higher international commodity prices and did not translate into the broad-based economic and social development needed to reduce poverty and create jobs for the underemployed. In this paper, we assume that this pattern of development can be explained by the weak nature and narrowness of the learning process that developed in relation to natural resource sectors. Lateral migration of knowledge from the natural resource-based sectors remains scarce in Africa. The paper examines the oil and gas sector in Algeria using the case of the oil giant producer Sonatrach. It shows that knowledge migration benefited internal capacity building and core downstream activities to a certain extent. The capacity of the dominant sector and company to contribute to competence building and innovation in general and specifically in manufacturing activities was, however, very limited and Algeria and, as many other African countries, remains overly dependent on the production and export of oil and gas.

Keywords:

• natural resources-based economies
• resource curse
• transformative capacity
• knowledge migration
• innovation policy

Acknowledgements

An earlier version of this paper was presented in Globelics conference held in Addis Ababa during 28–31 October 2014. We are thankful to the discussant who provided useful comments. We are also thankful to the two anonymous reviewers of this journal for their helpful comments. Finally our thanks go to Kinsuk Many Sinha who read the manuscript and provided suggestions for the improvement.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Both historical and current developments illustrate that it is possible to move from dependence on natural resources to a more diversified and knowledge-based economy. In this sense, there is nothing as a general resource curse. Nonetheless we find that the debate on ‘mechanisms’ that link natural resource dependence to slow growth raises useful and important insights.

2. There is a certain paternalistic element in the way scholars in the North present corruption and rent grabbing as characterizing only the poorest countries. It should be noted that in spite of transparency and low degrees of ‘direct corruption', financialization successfully pushed and guarded by the financial-industrial complex has led to a specialization that undermines stability and growth both in the rich countries themselves and worldwide. The impotence of the political system to correct this problem shows that rent-seeking is not uniquely a problem for the poorest countries.

3. It is obvious that there are important differences between the role in production, trade and economic growth of soft commodities emanating from agriculture, forestry and fishery and hard commodities emanating from mining and exploitation of oil and gas. In this paper, we will concentrate our discussion on learning, innovation and knowledge creation in relation to ‘hard commodities’.

4. This is a phenomenon well known from the history of Nordic countries – ultrafiltration techniques originally developed for dairy processing have turned out to be of crucial importance for a series of unrelated process industries in Denmark.

5. http://www.therichest.com/expensive-lifestyle/location/top-10-oil-producing-countries-in-africa-2013/ (accessed May 2014).

6. http://www.rigzone.com/jobs/countries/DZ/algeria_jobs.asp#sthash.uP4rR49m.dpuf (accessed May 2014).

7. CIA World Facebook: U.S. Department of State Country Background Notes (January 2012).

8. Declaration by the former Minister of Hydrocarbons and Energy.

9. INSEAD the Global Innovation Index 2013. http://www.globalinnovationindex.org/content.aspx?page=gii-full-report-2013#pdfopener.

10. SONTRACH stands for Société Nationale pour le Transport et la Commercialisation des Hydrocarbures.

11. http://www.sonatrach.com/en/elements-histoire.html (accessed February 2014).

12. TOE (ton oil equivalent) is equivalent to 7.4 barrels of crude oil in terms of energy and 1270 m³ of natural gas.

13. Sonatrach website: http://www.sonatrach.com/en/formation.htm (accessed March 2014).

14. Datant des premières années de l'indépendance et hérité de l'ex-entreprise française SNREPAL.

15. Sonatrach website: http://www.sonatrach.com/en/aval.html (accessed March 2014).

16. http://www.sonatrach.com/en/elements-histoire.html (accessed February 2014).

17. Ministry of Commerce: Algeria website (accessed March 2014).

18. To the extent that NR activities are becoming more knowledge-intensive, they demand more knowledge-intensive solutions. Interestingly, in the case of NRs very often solutions have to be local, given that problems are geographically localized, for example, seeds, so there are opportunities for developing local providers, more than in other activities.

19. Plan de soutien à la relance économique (PSRE).

20. Plan de soutien à la croissance économique (PSCE).

21. Website of BP http://www.bp.com/en/global/corporate/about-bp/bp-worldwide/bp-in-algeria.html.