Africa should work on mineral value addition, taxation to maximize economic benefit

Despite having abundant natural mineral resources, Africa still struggles to build an economy that ensures the benefit of its citizens. It still depends on aid and loan from outside as it fails to properly harness its abundant mineral resources. One things that is suggested in this regard is that the continent needs to appraise the exploration, and utilization of its resources in such a way that it can boost the benefit for its citizens.

For instance, Zimbabwe has taken a stance that some of its mineral products like Lithium should not be exported raw as they have to add value, create jobs and maximize the national revenue. “The value addition, taxation … etc are the way forward for the utilization of our natural resources.” Says Mthuli Ncube, Finance Minister of Zimbabwe who briefed journalists last week in Addis Ababa.

This can be one of the examples set to rethink about the utilization of the precious natural resources that have not yet uplifted the continents economy to a certain extent.

According to United Nations Environment Program (UNEP), Africa is home to some 30 percent of the world’s mineral reserves, eight per cent of the world’s natural Gas and 12 per cent of the world’s oil reserves. The continent has 40 percent of the world’s gold and up to 90 percent of its chromium and platinum. The largest reserves of cobalt, diamonds, platinum and uranium in the world are in Africa. It holds 65 per cent of the world’s arable land and ten percent of the planet’s internal renewable fresh water source.

In most African countries, natural capital accounts for between 30 percent and 50 percent of total wealth. Over 70 per cent of people living in sub-Saharan Africa depend on forests and woodlands for their livelihoods. Land is an economic development asset as well as a socio-cultural resource. A significant share of these resources is, however, used unsustainably while others are lost through illegal activities, meaning that the stream of benefits generated from these resources is being reduced over time. For instance, Africa loses an estimated USD 195 billion annually of its natural capital through illicit financial flows, illegal mining, illegal logging, the illegal trade in wildlife, unregulated fishing and environmental degradation and loss.

Collectively, the continent has a lot to gain in pulling together and harnessing its vast natural resources to finance the development agenda towards greater prosperity; and it must also ensure that future growth and exploitation of natural resources is results-oriented, climate resilient and sustainable.

The GEO-6 Regional Assessment for  Africa points out that the environment is deteriorating faster than previously thought, emphasizing that governments must act faster to reverse the worst trends. The report recognizes Africa’s natural capital and observes that the economic growth of Africa hinges on the sustainable management of its natural capital. However, unsustainable exploitation of Africa’s natural resources by its burgeoning population, and the tardiness by authorities to effect sound and regulations to tame abuse and over exploitation of these resources is brewing trouble. Nature is issuing red alerts, as evidenced by the many catastrophes we are experiencing which if left unchecked, will keep aggravating food shortages, water scarcity, diseases, conflicts, migration and poverty, all of which could culminate in the destabilization of economies.

In order for Africa to reap the economic and social benefits inherent in this natural wealth, it is necessary to urgently address such issues as the management and the economic and environmental impacts of, their sustainable use.

The UNEP Africa Office supports African governments to translate decisions and statements made on natural resources into practical actions and innovative solutions at regional, national and local levels for the benefit of their populations. This will lead to wealth and job creation, revenue generation, food security, social equity and a healthy environment. stipulates that governments in Africa are already recognizing the transformative potential of their mineral reserves by taking steps to develop the sector. Some African countries have started to restrict exports of minerals in their raw states to promote local processing, such as the DRC. Ghana has approved a policy to manage the production and extraction of lithium, which “demands that not a single volume of lithium produced in this country will be allowed to be exported in its raw state”, according to Lands and Natural Resources Minister Samuel Jinapor. However, to reap the benefits of such policies, countries will need to expand their processing capabilities to produce intermediate goods or final products of higher value.

African governments have also tried to increase the benefits of mining for local communities by introducing local content policies, for example by requiring mining companies to employ a certain level of local workers. However, miners sometimes decide to open up operations elsewhere when these requirements are too stringent or constantly changing. Pan-African cooperation could prevent a potential ‘race to the bottom’ where countries try to attract investors by offering the least stringent requirements



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