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AT a time of energy transition and rising demand for metals and minerals, resource-rich governments in Sub-Saharan Africa have an opportunity to better leverage their resources to finance their public programmes, diversify their economy, and expand energy access, the World Bank Group has said.
In a latest report titled : “Africa’s Resource Future” the World Bank says on average countries capture only about 40 percent of the revenue they could potentially collect from natural resources.
In other words, at a time when countries are burdened by slow growth and high debt, governments could more than double revenues from natural resources such as minerals, oil, and gas by adopting a better set of policies, implementing reforms, and investing in better fiscal administration and promoting good governance.
The World Bank notes that full taxation of natural resources is also important to charge the full cost of environmental and social impacts not always fully covered by producers, including petroleum resources. Failing to do so, it says, can act as an implicit production subsidy and raise carbon emissions.
“Maximising government revenues in the form of royalties and taxes paid by private natural resource industries, alongside attracting new investment, would offer a double dividend for people and planet by increasing fiscal space and removing implicit production subsidies,” said James Cust, senior economist in the World Bank Africa region and co-editor of the report.
The prospect of higher revenues is particularly welcome in countries that find themselves unable to make badly needed development investments because of high borrowing and debt service costs, the bank noted.
The global transition away from fossil fuels is creating unprecedented demand for a host of minerals and metals such as cobalt, lithium, copper, nickel, and rare earth elements (REEs) that are required to develop green technologies such as wind turbines, solar panels, and batteries.
Many of these resources are found in abundance across Africa. However, experience shows that natural resource wealth does not automatically translate into inclusive growth and prosperity, it said.
Minerals, oil, and gas account for a third or more of exports from most countries in Sub-Saharan Africa, but countries have struggled to convert this wealth into sustainable growth in the past.
“Regional dependence on global commodity prices has led to suboptimal management of public resources when prices are high, and economic busts and fiscal crises when prices crash,” says the global finance institution.
“Overall, resource-rich countries have been less resilient to economic shocks than non-resource-rich countries, a reminder of the risks of a ‘resource curse.'”
The World Bank has said that its ‘Africa’s Resource Future’ report provides policy-makers with practical recommendations for turning available resources into a big opportunity.
Among other recommendations, the report also highlights opportunities tied to the implementation of the African Continental Free Trade Area agreement that calls for phasing out 90 percent of tariffs over the next five to 10 years. Promoting regional integration and harmonising mining taxes and royalties across the region would also help.
“A regional approach to the extractives sector would allow the creation of value chains that add more value and create more jobs for people living in resource-rich countries than extraction alone,” said Albert Zeufack, World Bank country director for Angola, Burundi, Democratic Republic of Congo (DRC) and Sao Tome and Principe, and co-editor of the report.
“In this regard, the African Continental Free Trade Area (AfCFTA) and greater regional trade and economic integration offer an unprecedented opportunity for developing the mine-to-market value chain within the continent, as resource-driven development becomes more feasible with greater access to larger markets and the ability to pool resources, skills, and comparative advantages.”
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