Resource-rich African Countries Research Articles

The interplay of mineral and energy security: A nexus approach to Africa's economic diversification

The increasing global demand for critical minerals, driven by the energy transition and digitisation, can be a double-edged sword for resource-rich African countries (RRACs). While these countries possess abundant reserves of these minerals, they face a critical decision point. They must adapt their policies to leverage these resources for economic development in a rapidly changing landscape, at the same time balancing national interests with global call for decarbonisation. Simultaneously, the global shift towards renewable energy sources threatens to diminish the market for coal and gas resources, which are abundant in RRACs but underutilised. While this necessitates swift policy and strategic actions to facilitate resource utilisation for economic diversification, RRACs may find themselves in a race against time. Using insights from multi-stakeholder interviews and existing literature, this paper explores avenues for RRACs to industrialise and diversify their economies. The analysis underscores the significance of mineral and revenue utilisation; public-private collaboration; and regional strategies in investment, and supply and value chains for economic diversification in the context of energy transition.

Forecasting China-Africa economic integration using Wavelet-ARIMA hybrid approach

China-Africa economic integration generally looks lucid, as evidenced by rising bilateral trade, as well as Chinese FDI, aid, and debt financing for infrastructure development in Africa. The engagement, however, appears to be strategically channeled to benefit China’s resource endowment strategy. First, Chinese FDI in Africa is primarily resource-seeking, with minimum manufacturing value addition. Second, China has successfully replicated the Angola model in other resource-rich African countries, and most infrastructure loans-for-natural resources barter deals are said to be undervalued. There is also a resource-backed loan arrangement in place, in which default Chinese loans are repaid in natural resources. Third, while China claims that its financial aid is critical to Africa’s growth and development processes, a significant portion of the aid is spent on non-development projects such as building parliaments and government buildings. This lend credence to the notion that China uses aid to gain diplomatic recognition from African leaders, with resource-rich and/or institutionally unstable countries being the most targeted. The preceding arguments support why Africa’s exports to China dominate other China’s financial flows to Africa, and consist mainly of natural resources. Accordingly, this study aims to forecast China-Africa economic integration through the lens of China’s demand for natural resources and Africa’s demand for capital, both of which are reflected in Africa’s exports to China. The study used a MODWT-ARIMA hybrid forecasting technique to account for the short period of available China-Africa bilateral trade dataset (1992–2021), and found that Africa’s exports to China are likely to decline from US$ 119.20 billion in 2022 to US$ 13.68 billion in 2026 on average. This finding coincides with a period in which Chinese demand for Africa’s natural resources is expected to decline.

The impact of China’s financing to Africa on bilateral trade intensity under the Belt and Road Initiative

ABSTRACT Based on panel data from 2000 to 2021 covering African 52 countries under the Belt and Road Initiative (BRI), and utilizing a system generalized method of moments with instrumental variables, the study finds that China’s financing has played a positive role in both export and import intensities of African countries with China. However, the impacts of different financing types on trade intensities vary by different country groups and periods. First, Chinese outward foreign direct investment (OFDI) has a much bigger impact on both export intensity and import intensity, and aid has a much bigger impact on export intensity in resource-rich African countries than other countries. Second, Chinese OFDI has a much bigger impact on export intensity and aid has a much bigger impact on both export and import intensities in low-income African countries than other countries. Third, the regression results from different periods indicate that Chinese financing has enhanced the bidirectional trade relations between China and Africa since BRI launch. The study is conducive to the exploration of multinational corporations and foreign aid’s role in trade relations and will help African countries use Chinese capital to promote bilateral cooperation and get rid of poverty.

The relevance of resource wealth in output growth and industrial development in Africa

The study examines the role of natural resources in promoting income growth and industrial performance among twenty-two (22) resource-rich African nations from 1999 to 2019. The explained regressors include economic growth and industrial development, while natural resources, control of corruption, foreign direct investment, gross capital formation and trade openness are the predictors. The employed panel ARDL estimation reveals that economic growth positively but insignificantly impacted short-term natural resource wealth. Again, natural resources negatively and significantly affect growth, implying the reality of the resource curse syndrome in the selected resource-rich African countries. Also, natural resources significantly but negatively impact long-run industrial development. The findings indicate that resource-rich African economies must channel their resource revenues into developing and boosting their industrial sectors.

Strengths, weaknesses, and opportunities of local content policy, legal, and institutional framework in the upstream natural gas sector in Tanzania

Tanzania is expected to become a major exporter of liquefied natural gas (LNG) in the future, following the discovery of natural gas reserves totalling 57.25 trillion normal cubic feet (TCF). In Lindi, Tanzania, a proposal is being made to export two-train LNG, a US$ 30 billion liquefied natural gas (LNG) project. However, it's unclear whether the existing LCP will be enough to prevent Tanzania from following in the footsteps of other resource-rich African countries, such as Algeria, Egypt, Angola, the Democratic Republic of the Congo, and Somalia, which have all experienced resource-related wars, disputes, crises, and conflicts. Therefore, this paper critically assesses the strengths, weaknesses, and opportunities in the Tanzanian upstream natural gas sector's local content policy, legal, and institutional framework.A qualitative study was conducted utilising a SWOT analysis on local content policy, legal, and institutional framework on the national level. The authors used the SWOT (strengths, weaknesses, opportunities, and threats) analysis to conduct a narrative document review and literature review. The SWOT approach is well-structured and enables both descriptive and cross-sectional qualitative studies. In addition, the SWOT analysis helps draw a portrait of how challenging it is to establish and implement suitable policies, institutional frameworks, and regulations adapted to local needs.The study finds that Tanzania's legal, policy, and institutional framework for local content in the upstream natural gas industry offers various strengths and opportunities; it also has several weaknesses and threats that must be addressed. First, Tanzania's local content policy, regulatory, and institutional frameworks failed to consider the actual state of Tanzanian industry or indigenous Tanzanian firms' preparedness and industrial capacity. Second, Tanzania's local content is limited by a lack of government coordination with other oil and gas government agencies and other stakeholders. Prioritising local suppliers is part of the local content policy, which also eases evaluation criteria for local firms. The fundamental institutions at stake are the rule of law, bureaucratic quality, government corruption, and the risk of expropriation and contract repudiation. Finally, unregulated lobbying can lead to regulatory capture by special interests or limited policy options. These findings apply to any context and can be utilised by decision-makers, managers, experts, and other stakeholders to focus on significant concerns and identify areas that need to be addressed.

Mining and linkages for economic transformation: Revealing multi-stakeholder perspectives through Q-methodology

One of the ways that resource-rich African countries (RRACs) seek to leverage mining for economic transformation is through creating a policy environment suitable for promoting linkages between mining and host economies. RRACs have focused on increasing government revenues through fiscal policies and purchasing goods and services locally through local content policies. An evolving literature suggests that these policy interventions have delivered mixed outcomes. This paper sets out to capture and understand stakeholder perspectives with respect to three research questions: (1) what are the main problems preventing RRACs from building linkages between the mining and other economic sectors? (2) what are the key conditions for leveraging mining linkages for broad-based economic transformation? and (3) can these conditions be created and, if so, how? A Q-methodology analysis involving 46 statements and 66 participants was undertaken, which revealed three shared perspectives that stress the need for redefined context-specific industrial policies and the development of infrastructure, knowledge-based assets, and supplier capacities to enable inter-sectoral linkages that promote economic transformation. The research offers insights on the key areas of consensus and dissensus amongst multi-stakeholder groups with respect to the state of, the barriers to, and the conditions for transformative linkage building in RRACs.

How critical are resource rents, agriculture, growth, and renewable energy to environmental degradation in the resource-rich African countries? The role of institutional quality

Although the literature is being increasingly flooded with studies on the determinants of environmental degradation, the peculiarities of some countries in some regions have been substantially overlooked. Yet, these unique peculiarities either instigate or hinder some factors which matter for environmental quality. This study therefore puts the resource richness of African countries into consideration in the examination of the impacts of resources rents, agriculture, growth, and renewable energy consumption on environmental degradation. Additionally, the influence of institutional quality is uniquely examined in the nexus. The baseline model reveals that environmental degradation is respectively reduced and worsened by renewable energy consumption and growth in both the short- and the long-run. The impacts of agriculture and resources rents vary across the periods, although they both raise the level of environmental degradation. Considering the moderating role of institutional quality, its influence is stronger in the long-run. It reverses the favourable influence of renewable energy, but strengthens the adverse impact of growth. Also, it aids the ability of agriculture and resources rents to reduce degradation. Finally, the threshold results show that the impacts of the indicators on environmental degradation are sensitive to institutional quality levels. Improved institutional quality only changes the size of the impacts of renewable energy use and growth. However, contrary to poor institutional quality, an improved institution results in the ability of agriculture to reduce degradation and militates against the adverse impact of resources rents.

Determinants of Chinese Foreign Direct Investment in Africa

ABSTRACT We investigate the role of institutions in attracting Chinese FDI into Africa. Focusing on market- and resource-seeking motivations, we consider whether the impact of institutions varies by motivation for FDI. Our data relates to 43 African countries over 11 years, and we use the Generalized Method of Moments to show that Chinese MNEs are market-seeking and are attracted by weaker institutions. This negative effect of institutions is especially strong in resource-rich and higher-income countries. Our study also finds that in resource-rich African countries, better infrastructure quality attracts Chinese FDI.

Governing new mining projects in D. R. Congo. A view from the HR department of a Chinese company

As in many other resource-rich African countries, the liberalization of the copper mining sector in the D. R. Congo in the 2000s has caused an influx of foreign investors who have started new mining projects. Drawing inspiration from Foucault, this article aims to shed new light on the government of such projects. To do so, it takes as a case study the HR management policy of a mining project first developed by a South African junior company and then bought out by a Chinese state-owned enterprise. Based on ethnographic fieldwork, the analysis shows that putting in place HR techniques such as recruitment methods, industrial relations procedures, or personnel administration tools do not follow a single power rationality. Caught in complex power games, these techniques have distinctive historical backgrounds, ends, and effects. Such an approach, it is argued, allows to develop a more complex understanding not only of the process through which mining companies localize their operations, but also of the changes brought by Chinese capital in Africa.

Assessing the policy adoption and impact of geoinformation for enhancing sustainable mining in Africa

Abstract This paper assesses the extent to which mineral rich African countries enable the creation of public geoinformation for enhancing sustainable mining in policy contexts. The paper reviews accessible works and searches databases of industry, governments, civil society, academia, and international organizations. Focus is on 23 major producer countries of globally relevant minerals across Africa. The paper finds a disconnect between mining sector policy regimes and the desire to achieve sustainable development, lack of deliberate policy provision for the adoption and usage of geoinformation to enhance Free, Prior Informed Consent and public participation in mineral resource development projects. Out of the 23, only 2 countries (9%) have expressed the need for geoinformation in mining policies; as an input to public debate and data-driven decision making. Only 3 countries (13%) have set parameters for buffering around environmental and social variables. Out of these 3, only 2 have explicit parameters delineating exploration and mining areas. By not requiring public geospatial data, the implications are existence of poor benefit sharing, poor understanding of environmental risks, and a lack of integrated land use planning in resource-rich African countries. Hence, policy-oriented recommendations include expanding awareness on the value of and enhancing access to geoinformation, establishing paragraphs on geoinformation in Country Mining Visions, and strengthening local capacity for handling these data. Mineral-rich African countries must optimize benefits derivable from emerging Earth Observation technologies and associated spatial data for measuring contributions of the mining sector to specific SDGs.

Illicit financial flows and inequality in Africa: How to reverse the tide in Zimbabwe

ABSTRACTIn a 2017 UN report on the state of inequality in sub-Saharan Africa, Southern Africa was identified as the region with the highest rate of income inequality. Resource dependent states were also identified as having high rates of inequality, and illicit financial flows were identified in the report as a leading cause of inequality. Using Zimbabwe as a case study, this article critically assesses which tools are best for preventing illicit financial flows in order to achieve developmental equity in resource rich developing economies. The extent to which multinational companies currently comply with various financial disclosure rules is assessed through a review of two companies operating in Zimbabwe. The question that this article aims to ultimately answer is this: Can regulation serve as an effective mechanism to sufficiently tackle illicit financial flows and break the extractive-inequality link that is common across resource rich African countries?

Resource governance and community participation: Making hydrocarbon extraction work for Tanzania

Recent discoveries of natural gas in Tanzania have generated optimism and reignited hopes for socio-economic transformation. While extractive companies have not yet announced their investment decisions, the government has anticipated future activities by putting in place institutional, policy and legal frameworks to ensure that there is a stable basis for the development of the subsector. These measures aim to ensure a vibrant level of industrial development. However, it is not clear whether they will be sufficient to enable Tanzania to avoid the fate that has befallen some other resource rich African countries, namely the resource curse. Hence it is imperative that Tanzania finds a way to prevent potential adverse effects from becoming realities that eventually turn into a resource curse. This paper considers the role and significance of active community participation in natural gas decision making and governance processes. The paper draws on government documents for the energy sector and forty-four semi-structured interviews conducted between July 2016 and February 2017 with community members, religious leaders, local government officials, central government bureaucrats, civil society organisations and political representatives in Mtwara, Lindi and Dar es Salaam. The paper argues that active community engagement in decision-making and governance processes is as important as economic participation. This calls for a re-think of local content policy and regulations to ensure that communities not only participate in natural gas value and supply chains but also have the opportunity and capacity to influence decisions about how they participate and benefit from extractive resources.

Natural resource endowment and firm-level innovation in Africa: Evidence from cross-country analysis

This paper investigates the impact of a country’s natural resource endowment on the innovation propensity of firms in Africa. It was expected that firms in resource-rich countries have less incentive to innovate than firms in resource-poor countries due to the destructive effects of large resource rents on supportive institutions and political order. The data used for the empirical analysis were obtained from the World Bank’s enterprise surveys global development indicators and the African Economic Outlook reports. The hierarchical nature of the analysis called for a multilevel mixed effect modelling strategy. Results suggest that firms in resource-rich countries are not necessarily less innovative than firms in resource-poor countries. High natural resource endowment appeared to reduce firm-level innovation only if associated with poor institutional and technological capabilities. The innovativeness of firms in resource-rich sub-Saharan Africa countries was found to be lower than that of firms in North African countries. The negative effect of poor institutional quality appeared to be dampened among firms with better innovation capabilities. The findings imply that building effective institutional environments and enhancing firm-level innovative efforts would help mitigate the ‘resource curse’ which, in turn, is dictated by the resulting types of political settlements in resource-rich African countries.

How do natural resource endowment and institutional quality influence the nexus between external indebtedness and welfare in Africa?

Resource-rich African countries are often saddled with high external indebtedness. Yet, their management of resource endowment, a logical source of debt repayment, also remains a challenge, alongside their characteristic weak institutions. We investigate the relationship between external indebtedness and welfare whilst considering the pervasive influence of both natural resource rents and the quality of institutions. Using a two-stage analysis, we find that the quality of institutions, mineral- and oil-resource rents negatively affect indebtedness, while rents of aggregated natural resources, which include agricultural commodities, increase indebtedness. In the second stage, we find that welfare is enhanced by the quality of institutions, mineral- and oil-resource rents. These sets of results are interestingly conditional on the degree of resource endowment and the income level of countries, alongside the interesting effects of external indebtedness on welfare, both of which, importantly, nuance past results on the “resource curse”. Furthermore, the proxy for welfare matters: the human development index proxy reflects more the theoretical expectations of unsustainable indebtedness on welfare, than does the GDP per capita alternative. These and other results of our paper, which hold useful policy guides for African countries, are robust to alternative estimation techniques and other checks.

Economic reform as a precursor to political reform for development – does China have a model for resource-rich African Muslim countries?

Having gone through colonial exploitation for centuries, most of the colonies after independence from the West were confronted with two models. Contrary to the free market capitalist system based on power-sharing, some of the newly independent countries opted for an authoritarian model and ended up with unjust/distorted development based on exclusivist institutions. Despite having rich-resource endowments with less pressure of population, these countries essentially failed to promote inclusive economic institutions to ensure private property and an unbiased system of law which, in turn, would unleash the immense potentials based on incentives, talent and skills highly required for enhancing productivity and prosperity. The authoritarian but good governance (GG) under state-led development of East Asian miracle economies, in general, and China, in particular, pursuing the goal of economic modernisation before political reform made spectacular achievements in less than quarter of a century. But some of the resource-rich African countries, being unable to remain immune from the vested interest/political lobby groups, failed to make economic reform being promoted by agriculture-led development to facilitate political reform subsequently. Based on the main research question of this paper, it will be argued that the massive economic reform as that of China in terms of agriculture-led development can gradually set the stage for subsequent political reform. Based on the historical evidence of successful authoritarian development model, this paper argues in favour of Chinese style of gradualist development using incentives through empowering the households as well as individuals in materialising their potentials. However, only the effective inclusive institutions as experienced by way of ensuring all sorts of public and private goods can help the resource-rich African Muslim countries to pursue economic prosperity with fair distribution of economic, political and socio-cultural power resources. This, in turn, can help restore a ‘feeling of togetherness’ or what one of the greatest scholars of Islam – Ibn Khaldun – terms as ‘Asabiya’ for achieving a comprehensive, inclusive and sustainable development made possible by GG as opposed to liberal democracy.

An Institutional Analysis of the Resource Curse in Africa: Lessons for Ghana

The experience of oil producing countries in Africa has largely been a negative one, with development indicators suffering as a resource curse takes effect. This article examines the role that institutions will play in preventing Ghana from falling victim to the curse of oil following its discovery of off-shore oil in 2007. It draws upon the experiences of two other African nations with off-shore oil reserves, Angola and Gabon, to highlight the potential dangers that Ghana faces in managing its oil resources. The analysis is based around the role that oil can play in breaking down formal mechanisms for guaranteeing accountability between state and society and promoting instead discretionary forms of governance that operate along neo-patrimonial lines. The leading role that Ghana’s highly developed civil society must take in preventing this from happening is stressed. More broadly, the article seeks to understand the internal dynamics of resource management in African states, arguing that this should serve as the departure point for future interactions between resource-rich African countries and external forces. The article will conclude by emphasizing the importance of Ghana’s building upon its success as a model for democracy in Africa by also acting as a leader in resource management on the continent. Author’s Note: My interest in this topic follows from my interest in politics and development on the continent generally. This was really born during my trip to Tanzania in 2003 where I spent four months teaching prior to joining university. Since then I have returned to the continent a number of times, including a brief trip to Ghana in 2006 after doing some work in neighbouring Togo. The resource curse is an interesting topic for me because it draws on insights from many different disciplines including politics, economics and development. However it also relies on a firm understanding of contextual factors to account for the divergence in experiences between resource-rich countries and therefore, in the case of Ghana, relies heavily on an understanding of comparative African politics. Ghana’s prominence in both academia and the media as a leading light for democracy and good governance in Africa adds weight to this issue and there is a real sense that if Ghana cannot overcome these challenges then no country on the continent will be able to.

Resource nationalism and local content in Tanzania: Experiences from mining and consequences for the petroleum sector

Many resource-rich African countries have recently drafted local content policies for their petroleum sector. Using Tanzania as an example, this paper argues that previous experiences in the extractive industries are a central factor for public sentiments and debates on resource nationalism and local content in the petroleum sector. The paper focuses on the shifting local content polices in the mining sector over the last two decades and presents some of the initiatives that mining companies have taken to increase the local content. The 2010 Mining Act has weak and unbinding requirements on local content. National statistics show that there has been no increase in the local purchase of goods and services and that the percentage of expats in the sector has been relatively stable over the years. As in other African countries, local content is subject to elite capture and patronage, but support to cooperatives is one way of involving local communities in a positive manner. Discontent with the contribution of mining to the national economy entailed a heated debate on local content policies for the petroleum sector, but the legislations that were put in place in 2015 ended up being relatively ‘soft’, due to the fear of losing investors.

INTRA-REGIONAL TRADE IN AFRICA AND THE IMPACT OF CHINESE INTERVENTION: A GRAVITY MODEL APPROACH

1. INTRODUCTIONChina has grown at phenomenal rates in the last few decades. However, in order to sustain these high growth rates, China needs to ensure a steady supply of natural resources like oils, minerals etc. The country's energy demands have more than doubled in the past few decades, leading to increasing pressures for meeting demands for natural resources (Vines et al., 2009; Taylor, 2009). These factors led China to look overseas for sources of mineral resources and could explain the increasing involvement of China in Africa since the late 1990s (Berthelemy, 2011; The Economist, 2008; Mohan, 2008; Marysse and Geenen, 2009; Kaplinsky, McCormick and Morris, 2006; Meier zu Selhausen, 2010). The NYU Wagner School Study concluded that 'China's foreign aid is driven primarily by the need for natural resources' (Lum et al., 2009, p. 5). Similarly, Foster et al. (2008) conclude that 'most Chinese government-funded projects in Sub-Saharan Africa are ultimately aimed at securing a flow of Sub-Saharan Africa's natural resources for export to China.'China-Africa trade has increased sharply since 2000. China's bilateral trade with Africa grew from USD 11 billion in 2000 to about USD 170 billion in 2011 (Direction of Trade Statistics, IMF, 2012). China has gradually progressed from one of the smallest among the top 10 trading partners of Africa to become its leading bilateral trade partner.1 To promote trade with the continent, China removed tariffs on 196 types of imports from 28 least developed Africa countries in 2005. By 2007, this had expanded to 454 items (Besada, Wang, and Whalley, 2008). Most African exports now receive duty-free access to China's market. These preferential tariff treatments have helped expand African exports to China.But most of the products for which China grants tariff exemption are principally raw materials. Thus, most of the increased trade flows represent a rising export of natural resources to China. About two-thirds of all African exports to China are oil and oil-related products.2 Africa showed a USD 20 billion trade surplus with China in 2011. But more than three-quarters of the continent's exports were oil, gas, metals and minerals from only five countries - Sudan, Angola, Egypt, Nigeria and South Africa. Excluding oil exports, Africa had a trade deficit with China amounting to USD 28 billion in 2011.3 Thus, the growth of African exports to China is driven by a very few countries. Apart from these few very resource-rich countries, the majority of African countries have 'mounting trade deficits' with China (Corkin, and Burke, 2006). This highlights the asymmetry of the relationship between China and African countries.Chinese investment in Africa has also increased dramatically. From USD 20 million per year in the early 1990s, Chinese FDI in Africa jumped close to USD 100 million in 2000 and reached more than USD 1 billion in 2006 (Zafar, 2007). Most of these investments are focused on long-term access to raw materials. Five resource-rich African countries - South Africa, Nigeria, Zambia, Algeria, and Sudan accounted for 87 percent of Chinese FDI inflows on average during the four year period of 2005 to 2008 (Meier zu Selhausen, 2010). Eisenman (2012) argues that almost all of Chinese investment into rail projects in Africa is aimed at connecting African raw material suppliers with Chinese buyers and Chinese goods manufacturers with African customers.Since the late 1990s China's aid to Africa has also increased significantly. There's no consensus in the literature so far regarding the determinants of Chinese aid to Africa. While Naim (2007) argues that political and commercial interests are the principle determinants of Chinese aid to Africa, Dreher and Fuchs (2011) argue that China is no different from other donors and Chinese aid allocations are not dominated by natural resource considerations. However, a large number of studies do suggest that Chinese aid is increasingly directed towards resource-rich Sub-Saharan African economies (Kaplinsky, and Morris, 2009; Brookes, and Shin, 2006). …

Does China have a geoeconomic strategy towards Zimbabwe? The case of the Zimbabwean natural resource sector

The Chinese party-state and Chinese companies have become increasingly active in Sub-Saharan Africa, especially in the natural resource sector. Accessing natural resources is assumed to be one of the main goals of both the Chinese government and relevant Chinese companies in resource-rich African countries. In the article, the interplay between Chinese party-state and state-owned enterprises in Zimbabwe is analyzed from the viewpoint of China’s geoeconomic strategy. While existing literature has focused on various facets of China’s Africa policy, details of collaboration between Chinese party-state and corporate actors remain largely unexamined. In the natural resource sector, such collaboration ranges from negotiating access to natural resources to arranging large Chinese-financed projects repaid or collateralized in natural resources. The article analyzes in detail the cases of three companies that have been involved in such arrangements in Zimbabwe’s natural resource sector between 2000 and 2013: NORINCO, AFECC, and CMEC. The central argument advanced in the article is that China’s Ministry of Commerce, Eximbank and CDB have pressured the Zimbabwean government to offer resources as collateral for further Chinese loans, in particular in the mid-2000's. The article concludes that while a geoeconomic strategy seems to be in place, its implementation is hindered by the great variety of actors involved.

Analysts Examine Energy Security in Sub-Saharan Africa

Resource-rich African countries face economic challenges with the recent drop in oil prices.