Policy expertise

Harnessing natural resources for human development

Policy Area
Country/Region
Africa
Funder
Bill & Melinda Gates Foundation
Duration
March 2014 - August 2015
OPM contact

This project has provided practical advice for policymakers on how to leverage newly discovered natural resources for improved human development outcomes in Africa.

Many counties have expressed the aim of using wealth from natural resources to meet stated ambitions in education, health and social protection. They also want to make sure the discovery of extractives translates into more and better jobs and business opportunities. Yet, they are also aware that delivering on those commitments demands tough and sometimes complex policy choices: balancing the need for social sector investments with that of other sectors across the economy; being transparent and carefully managing citizen expectations; and adequately distributing benefits both between extractives and non-extractives communities and between current and future generations.

Funded by the Bill and Melinda Gates Foundation and conducted jointly with the African Development Bank, our research explores the likely timing and scale of upcoming resource revenues in six selected African countries – Ghana, Liberia, Mozambique, Sierra Leone, Tanzania and Uganda – and compare them to financing needs in health, education and social protection as well as it explores public policy choices to harness extractives industry spending for economic and human development. Our finding are applicable in other contexts – providing a starting point for all policymakers looking to harness resource revenues for improved human development outcomes.

The so-called “resource curse” is much discussed: why do countries that discover abundant natural resource wealth go on to perform no better on human development metrics – and sometimes significantly worse – than countries at similar income levels without natural resources?

The answer lies in the many tough and complex policy choices that policymakers have to navigate on the path from natural resource discovery and extraction to human development. There are many possible pitfalls - for example, the temptation to bring forward anticipated resource revenues through borrowing, and expenditure on short-term political goals rather than informed, long-term investments.

What’s more, the influx of foreign currency that resource booms bring may not be well managed, leading to “Dutch disease” and adverse effects on non-resource sectors of the economy. Governments may spend revenues unwisely – for example, raising public sector wages to unsustainable levels, or building hospitals without budgeting for the recurrent expenses necessary to run them.

The challenges faced by each particular country are unique, depending, among other things, on its institutions and governance, the needs of its health and education sectors, and the likely scale and timing of expected resource revenue. There are no universal solutions.

This project was established to address the pressing need for a comprehensive framework to think through these decisions in each individual case.

Our team led the research programme, adopting a collaborative approach, working closely with a range of stakeholders including distinguished academics, government officials, extractive industry companies and civil society organisations.

Ensuring the policy-value of all research outputs was a key priority through the project. The programme of work was divided into eight streams with each stream led by an expert in the field. The final project outputs – eight research papers – underwent several rounds of feedback from consultations and dedicated peer review by experts and the project’s steering committee. We held consultations in Kigali alongside the AfDB’s annual meetings; in Washington DC alongside the World Bank and IMF annual meetings; at the Indaba mining conference in South Africa; and at two technical workshops in Oxford.

The eight research papers provide a framework for policymakers seeking to leverage natural resource wealth for human development outcomes – not only in the six countries considered in detail, but also in any low- or middle-income country with natural resource wealth and human development ambitions. The research will also be used by the BMGF to inform future programming and funding decisions for maximum development impact.

BMGF has also used the eight research papers to develop a “Flagship Report” summarising their take on the lessons that emerge. The flagship report, entitled Delivering on the promise: Leveraging natural resources to accelerate human development in Africa, will form a basis for BMGF advocacy on using natural resource revenues to invest in improving health and education outcomes.

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