Resource wealth and the development dilemma in Africa: The role of policy syndromes

Abstract

Although recent decades have been characterised by remarkable improvements in growth and poverty reduction across several developing economies around the world, the African continent has continued to record dismal growth rates despite its proven natural resource endowments. This study therefore aims to empirically examine the direct and indirect effects of natural resources on economic development in Africa. Employing the System Generalised Method of Moments estimation technique, the results confirm the resource curse hypothesis in Africa since natural resources rents are found to impede economic growth of African economies. Although the negative growth impacts of natural resources rents are consistent for different measures of natural resources, the effects are divergent across regional economic blocks. Moreover, the study shows that while governance negatively impacts economic growth, industrialisation and ICT diffusion exert positive impacts on economic growth in Africa. Besides the direct effects of natural resources on economic growth, this study further reveals that the developmental effects of natural resources are modulated through ICT diffusion, industrialisation and governance. While various modulating variables interact with natural resources to produce negative synergy effects, positive and negative net effects are produced when alternative measures of natural resources are interacted with industrialisation, thereby leading to the computation of actionable policy thresholds for industrialisation. Contingent on these findings, there is need to promote policies aimed at simultaneously enhancing ICT diffusion, good governance and industrialisation in order to promote sustainable economic development in Africa.