BY Fredrick Ngugi, 10:00am July 27, 2016,

Why Natural Resources in Africa Are Considered a Curse

A child soldier in South Sudan. Photo (Voa News)

Despite having some of world’s most expensive and sought-after natural resources, Africa is still one of the poorest continents. Many have actually resigned themselves to the notion that these resources are a curse to the continent.

Most African countries endowed with natural resources such as oil, gold, diamonds, and other minerals have some of the poorest populations on the entire continent. For example, Nigeria is one of the largest oil producers in the world, yet the gap between the rich and the poor continues to expand every day. This paradox raises legitimate questions as to why these resources are not translating into economic prosperity.

Strong Currency

Since most of these resources are used for export investments, they bring about a steady inflow of strong currencies such as dollars and euros, downgrading local currencies for export-oriented sectors and other economic pillars such as agriculture.

Since the agricultural sector in Africa is still starved of cash, it has proved extremely difficult for farmers and exporters in countries with oil and other valuable natural resource to compete internationally with nations that have strong currencies.

It’s also unfortunate that a big chunk of money generated from these resources is diverted to corrupt and extravagant spending at the expense of development.

Unemployment

Despite having been in operation for many decades, the mining industry in Africa has failed to provide stable and sustainable employment to millions of African graduates. This has led to perennial civil conflicts as different groups fight to take control of the natural resources.

In South Africa for instance, the mining industry currently faces myriad challenges, including reduced commodity prices, labor wage wars, dwindling investor confidence, and increasing operation costs.

Many of South Africa’s gold mines are closing down due to depleted reserves, leaving a generation of poor South Africans to scavenge for any leftovers to survive.

Volatile Resource Pricing

Africa’s large oil exporters are always faced with the problem of market uncertainty, which tends to trigger high export and import bills with a direct and adverse effect on inflation, operation cost, and employment opportunities.

Price volatility also makes it hard for companies to predict their marginal costs of production, which often leads to reduced investment and consequently harms the country’s economic growth.

Signing bad contracts with natural resource companies is another reason why Africa is yet to enjoy the full benefit of its natural resources. Many African countries have already entered into bad agreements with private foreign mining companies, whose aim is to get the largest share of the resources’ value.

A time has come for African countries to put in place policies, institutions, and legal frameworks that will ensure all citizens benefit from their natural resources.

Last Edited by:Deidre Gantt Updated: July 27, 2016

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