Mineral resources are vital input for social and economic development of a country. Indeed, not all countries of the world are endowed with these natural resources. The magnitude and variety of minerals and other natural resources also varies between countries. But where the resource is available it has been contributing duly to the economic and social development of the country.
Many of the world’s richest countries have benefited greatly from minerals extraction. Australia, Canada, Finland, Sweden, and the United States, for example, have all had extensive minerals industries and used them as a platform for broad-based industrial development.
Africa is the second largest continent in terms of its size as well as population. Both are resources that can be harnessed to propel the fast growth of the continents economy. However, the continent is known to the world as poor and backward where its people languish in problems that result from poverty.
Yet, Africa is also known for its abundant wealth of natural, mineral resources that could have helped its economic and social development. While mineral is agreeable in its contribution for development, its role in Africa is sometimes contested either as a curse or blessing. This is as a result of the suffering the continent sustained due to the poor management of its resources, corruption and conflict related to its exploration and utilization.
In a recent meeting held here in Addis Ababa with the attendance of African Ministers of Environment, the Acting Executive Secretary of the Economic Commission for Africa, Antonio Pedro has stipulated that the continent should harness its vast mineral reserves to drive economic transformation and accelerate sustainable development on the back of power poverty. He further highlighting that the continent is well position to spearhead clean energy transition.
“The top priority for Africa is to achieve inclusive and sustainable economic transformation that delivers tangible impacts on job creation and poverty eradication while addressing the triple planetary crises of climate change, biodiversity loss and pollution,” Mr. Pedro, said in a video address at the 17th August opening of the 19th Ordinary Session of the African Ministerial Conference on the Environment (AMCEN) in Addis Ababa, Ethiopia.
The Ministerial Segment of the 19th Ordinary Session of AMCEN was held under the theme: Seizing opportunities and enhancing collaboration to address environmental challenges in Africa. Mr. Pedro reiterated that Africa was in the spotlight because of its rich mineral reserves which it must harness to tackle its development challenges.
“Africa therefore needs a deep rethink on how it addresses its vast development challenges if it is to meet the goals of Agenda 2063, the UN 2030 Agenda for Sustainable Development and various national development goals, while positioning itself at the center of the global clean energy transition agenda,” Mr. Pedro said.
Home to up to one-third of global mineral reserves, Africa currently produces over half of the world’s platinum group metals, manganese, cobalt, and others. With the global demand for wind turbines, electric vehicles and other products that can generate electricity and transport people and goods without emitting C02, there is a projected huge increase in demand for lithium, cobalt, graphite, nickel, and copper by 2040.
Mr. Pedro said the Continent was uniquely placed to translate its mineral and metal endowments into tools for industrialization, economic transformation, job creation and electrification but cautioned that political will was needed to realize the Africa Mining Vision.
ECA has been working closely with member states and other stakeholders to assist countries maximize benefits from the ‘green’ minerals boom. For example, ECA and its partners are currently supporting the building of a regional Battery and Electric Vehicle Value Chain in the Democratic Republic of Congo and Zambia.
“Africa has the opportunity to shape itself for a compelling energy transition agenda, premised on its industrialization priorities, while positioning itself at the center of global decarbonization by harnessing its abundant clean energy resources to transform its critical minerals for regional and global electric batteries value chains, “he said. A green energy transition is essential for Africa, a region accounting for 80% of the 733 million people globally without access to electricity and 39% of the 2.4 billion people without access to clean cooking.
Highlighting the huge opportunity for Africa to tap into the carbon markets to drive investments to benefit local communities, promote energy transition and attain national commitments on climate change and sustainable development, Mr. Pedro lamented the continent’s low participation in the carbon markets. It has not harnessed the full potential of its resources, especially the largest carbon sinks in the Congo Basin, including the peat lands and rain forest.
This was a result of the lack of efficient carbon market instruments, unfair and unreasonable carbon prices, limited or absent legal and regulatory frameworks, and limited technical capacities, Mr. Pedro said. The ECA has assisted the 16 member countries of the Congo-Basin Climate Commission (CBCC) to develop a regional carbon registry that allows the fast-tracking of relevant credits as well as the projects from which the credits have been generated.
While the outcomes of the conference to revamp Africa’s potential for mining and extract the maximum benefit it can obtain, it is important to alleviate obstacles that are hindering the countries of the continent from extracting their mineral resources and utilize it to develop the continents fledgling economy.
Studies indicate that there are three categories of problems to take the blame for the hindrance of countries from using their mineral resources. The first blames external market forces – and more specifically, volatile or low commodity prices. The second emphasizes internal economic stresses, arguing that a large natural resource base can cause the economy to veer off in one direction and destabilize or damage other sectors. The third argues that windfall mineral revenues tend to distort processes of economic decision-making and may foster the kind of corruption that undermines political and social institutions.
External Market Forces World prices for mineral products have unquestionably fallen relative to the prices of manufactured goods over the past two decades. Some economists have argued that this was not inevitable – that the declines of recent years resulted from a number of random shocks and thus do not indicate a consistent, predictable trend. Others, however, suggest that mineral prices dropped when production costs fell as a result of technological innovation.
If mining companies are selling fungible products on commodity exchanges, there is scant room to compete by offering better or innovative products. Instead, companies have little choice but to focus on being low-cost producers – by seeking operational improvements at existing operations, undertaking grassroots exploration in search of high-quality deposits, acquiring developed properties during the bottom of the mineral-price cycle, and carrying out research and development to improve production processes.
Another difficulty for mineral economies is that a booming natural resource export sector can squeeze out other industries. In the Netherlands, for example, in the 1960s and 1970s a sudden increase in natural gas exports seemed to damage traditional export sectors, notably manufacturing and agriculture. What came to be known as the ‘Dutch disease’ also appears subsequently to have affected other primary commodity producers in the 1970s and 1980s.
The damage can be done in two main ways. First, buoyant resource industries can bid up the prices for labor and other inputs. This harms traditional export industries – their costs increase but they are unable to recoup these by raising prices, since the latter are set by world markets. (Other parts of the economy may not suffer so much. Indeed, service industries may even benefit; not only can they offset cost increases by national price increases, but they can also gather more business by providing services to the expanding export industries). Second, natural resource exports can also damage traditional exports through the exchange rate: if booming exports cause the currency to appreciate, this too renders other exports less competitive.
Some of these stresses are inevitable in economies undergoing structural changes. Market economies constantly evolve as some sectors expand while others contract. And there need be no overall reduction of economic growth if the gains from minerals exports more than offset the losses experienced elsewhere.
The effects may be felt most where governments respond to political pressure and intervene to protect vulnerable industries. This can lead to a general misallocation of resources – including tariffs, quotas, or other restrictions that will render the country less open to international trade. And the damage can be compounded if the boom in mineral exports is temporary and the country is subsequently unable to restart traditional export industries.
The third main reason put forward for the poor performance of some mineral economies is that the distortions caused by a sudden flow of mineral wealth can erode the integrity of national institutions. Some of this takes place through corruption (as discussed later in this chapter). But the arrival of mineral wealth can also cause more general shifts in economic power and influence that make the economy work less efficiently.
These being the prevailing facts surrounding the extraction of mineral resources, it is necessary to table such hindrances to the bilateral and multilateral discussions of the continents relevant officials to address them on time or through time so as to alleviate the social and economic shortfalls of the continent.
BY STAFF REPORTER
THE ETHIOPIAN HERALD TUESDAY 29 AUGUST 2023
