Does a Windfall Lead to a Downfall? A Study of Mineral Rents and Genuine Growth in Selected African Countries

Abstract

The mining industry helps governments to increase revenues resulting in job creation, infrastructural development and enhancing the standard of living of the local communities. However, it is also a potential source of environmental pollution and rent-seeking. This study examines the relationship between mineral rents and genuine income in a multivariate panel data analysis in Botswana, Egypt, Ghana, Morocco, South Africa and Zambia at the aggregate and industrial levels. The findings suggest that mineral revenues have been a blessing to these countries at the aggregate level but affected industrial growth negatively. These findings support evidence in the literature that mineral resource abundance slows growth in industrial output. The study also reveals that growth in mineral rich countries is principally driven by investment in capital and energy consumption. It is therefore recommended that mineral revenues should be invested in capital and alternative energy sources to boost aggregate and industrial growth.