The revenue accruable from agriculture as well as the oil mineral sectors portends bright and promising socio-economic prospects for Africa. Africa’s agricultural and oil-blessed economies could contribute individually and collectively to promoting positive structural transformation and also address poverty, inequality and youth unemployment by capitalizing on their resource endowments and high international commodity prices. Against this background, increasing number of African countries have continued to experience economic growth over the past two decades, partly due to their commitment to achieving the CAADP objectives, as well as the unprecedented inflows of foreign direct investments (FDI) to the strategic sectors of their economies. According to the UNCTAD World Investment Report 2012, investment in extractive industries remains the most important driver of FDI to African countries such as Democratic Republic of the Congo, Mauritania, Mozambique and Uganda. Further inflows to Mozambique, for example, doubled to USD5.2 billion, attracted by the country’s huge offshore gas deposits. The discovery of gas reserves in the United Republic of Tanzania and oil fields in Uganda drew increased FDI to East Africa, expanding the value from USD4.5 billion in 2011 to 6.3 billion in 2012.
By implication, natural resources (including agriculture-related) are still the mainstay of FDI flows in Africa, though FDI in consumer-oriented manufacturing, agro-allied and services are beginning to climb, reflecting the growing purchasing power of Africa’s emerging middle class. Invariably, these Greenfield investments (investment in businesses or economic sectors that are new to a given recipient country) partly reinforces the role of diversification policies as levers for economic transformation in Africa.
However, poverty is still quite high and governance institutions remain pathologically weak, thereby, undermining the capacity of the regional economy to manage its oil wealth and agricultural booms in an accountable and transparent manner. In fact, Africa’s growth has been non-inclusive and highly characterised by insufficient poverty reduction, persistent unemployment, increased income inequalities and political tyrannism.
At the 2012 UNECA Eighth African Development Forum (ADF-VIII) on Governing and Harnessing Natural Resources for Africa’s Development, during the roundtable on ‘mineral resources for Africa’s development: anchoring a new vision’, it was emphasised that Africa should have a vision that dispels the misconception of linking Africa with resource curse.’ In other words, natural resources and agricultural booms should stimulate blessings rather than invoke curses on Africa.
A strategic policy dialogue should be organized in order to identify the conditions under which oil rents will be efficiently collected in order for it to positively transform African economy. According to the 2013 AfDB African Economic Outlook, this dialogue should build on the following two key pillars: (i) how to maximise the utilization of the oil revenue collection while ensuring predictability of outcomes and an adequate rate of returns on investments; (ii) how to develop, establish and strengthen oil revenue management, institutions and governance, such that, managing revenue volatility should be based on the adoption of transparency and accountability tools.
Gbadebo Odularu
