How can Africa make the most of its resources?

The continent faces both political and economic challenges if it is to achieve sustained growth

By Prospect Team  

Africa's path to growth is challenging but full of promise

Listen to an audio recording of our roundtable here:

It has become commonplace to observe that in many developing nations foreign investment has not always led to growth but to corruption of further investment. But that need not be the case. Africa faces many challenges if it is to make the most of its natural resources, but with the right partnerships from overseas and careful planning, the continent can achieve sustained growth. A Prospect roundtable on 9th December with Professor Sir Paul Collier, sponsored by Rio Tinto, explored ways to make this happen.

Paul Collier opened the session, arguing that the decade to come could, in theory, be good for Africa because Chinese demand, even if slower, would underpin resource prices. However, the question is how African governments extract these resources, and what they do with them. In this, he said, Africa faces both political and economic challenges.

On the economic side, he said that a considered, long-term investment strategy was crucial. The conversation around Africa had been dominated by talk of how to maximise revenues. But once revenues begin to come in, it is vital that businesses and governments think carefully about “how to spend it.” Collier spoke of the importance of building up sufficient financial infrastructure within African nations to ensure that money earned from resources went back into projects which would spur further growth and development. He called this “investing in investing.”

On the political side a key challenge he identified was how governments might create a narrative around their resources which would whip up enthusiasm for (often costly and time-consuming) extraction among their people. He referred to the campaign for Scottish independence as a warning. In Scotland, he said: “[a] 300 year old union, much older than African unions, got badly mismanaged.” When oil was discovered in the North Sea, in claiming it as “Scotland’s oil” the SNP made thousands of formerly happy “British” Scots abandon their sense of shared identity with the rest of the Isles. Collier pointed to Botswana as an example of a country which has developed a much healthier narrative around the extraction of its diamonds. According to Collier, the message Botswana’s government used was “we’re poor, therefore we have to carry a heavy load.” This helped shore up popular support for the country’s burgeoning diamond trade, now its primary export.

Alan Davies, Chief Executive of Rio Tinto‘s diamonds and minerals division, outlined some of the priorities from his perspective. He stressed the importance of investing in and developing infrastructure within Africa. Without infrastructure, he pointed out, African nations would not be able to make much of their resources. Through encouraging infrastructure development, he said, mining companies could be “catalyst[s] for change.”

Transparency is crucial in Africa, Davies added, both for governments and for corporations. He said that Rio Tinto had published details of its contracts in Guinea, for example, which helps to foster trust among the international development community and among local populations. Without transparency, said Davies, it’s still possible to attract serious capital, but “will you attract the capital that [your country] benefits from, or will you attract capital… that sows the seeds of despair?”

In a wide ranging discussion, representatives of African government offered insights about the reality of working on major projects. Steve Vermunavi Katjiuanjo, High Commissioner of the Republic of Namibia, raised the issue of trust: historic issues with long term planning or service delivery can make it hard for people to buy into a project sold to them by government. Collier stressed the importance of building trust, which doesn’t just foster political harmony, but makes good economic sense too. Better governments get better private sectors, he argued, because they are able to “screen out crooks.” Amos Chanda, Acting Deputy High Commissioner at the Zambian High Commission in the UK, also cautioned that corporates sometimes had a tendency to look too far ahead in African projects, neglecting immediate problems and thus “randomis[ing] social stability.”

The crucial objective, Collier concluded, is to reconcile the goals of commercial organisations with those of the aid and development communities. “What African governments want,” he said, “is reputable investments, not donations.” Parties around the table may have disagreed about exactly how to achieve this, but it seems clear that corporates, politicians and development specialists are ever more committed to a model of self-sustaining growth in Africa.

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