Saturday, 31 January 2009

The Diversification Challenge in Africa's Resource-Rich Economies

For a growing number of countries in Africa the current commodity boom is a huge opportunity. But if the economic history of resource-rich, poor countries—especially in Africa—is any guide, rather than bringing prosperity, the resource boom may drive them into what Paul Collier (2007) in his influential book The Bottom Billion terms the “Natural Resources Trap.”

In Africa, countries dependent on oil, gas, and mining have tended to have weaker long-run growth, higher rates of poverty, and higher inequality than non mineral-dependent economies at similar levels of income. Two recent studies suggest both the potential and the risks of resource extraction. Reference: Brookings 31/01/09