Enter Paper Title]The Impact of Extractive Industry on Economic Growth of Mozambique in the Context of SADC Countries

Abstract

This study was inspired by the literature of the hypothesis of the curse of natural resources, but particularly in authors such as Castelo-Branco (2010), Tiess (2011), Sigam and Garcia (2012), Obiri (2014), Halland et al. (2015) and Addison and Roe (2018).These authors deal with the issue of natural resources from the perspective of the extractive industry. So, the objective of this study was to estimate the impact of the extractive industry of natural resources on the economic growth of Mozambique in the context of the SADC countries. To carry out the study, an econometric model of economic growth based on panel data was estimated, more specifically the autoregressive distributed lag model (ARDL) using data from 11 SADC countries between 1980 and 2017. The main results of the study indicate that, taking into account all 11 SADC countries, in the long-run the extractive industry rents have a negative and statistically significant impact on economic growth. In the short-run the extractive industry has no impact on the economic growth of the SADC countries. In the context of Mozambique, the results show that, in the short-run extractive industry rents has a negative but statistically insignificant effect, i.e. have no impact on Mozambique's economic growth. These results suggest that extractive industry rents in Mozambique and in SADC, in general, are not used as a factor of production applied in other sectors to directly raise the national product. It’s leased for the remuneration of production factor and/or for consumption. Thus, for the short run the study recommends policies for allocating the rents of extractive industries in productive and economically efficient investments in the detriment of political efficiency and the creation of sovereign wealth funds. For such policies to have results, in the short run, Mozambique must improve the quality of the institutions which at long run will be the antibiotics against the voracious and rentist effects of local elites and bureaucrats