Tapping Africa’s vast mineral resources for development has been a longstanding challenge. Indeed, the difficulties associated with commodities-based growth strategies are so significant that development economists have often seen natural resources as a “curse.”

There is nothing inherent about resources that make them a curse; their impact depends very much on policy, good development governance, and the commitment of governments to turn natural resources into an engine of structural transformation. We all know that growth based on natural resources may bring wealth, but it does not bring inclusive and sustainable development.

No country has ever been able to reduce poverty and achieve sustainable development without undergoing a process of structural transformation and developing productive capacities.

These are essential features of any development process and they are inherent and indispensable for moving up the development ladder. Thus, the only way resource-rich African countries can attain inclusive and sustainable development is by using their resources to build their productive capacities.

Indeed, the failure to translate resource potential into concrete delivery in terms of productive capacity building and structural transformation is what explains Africa’s “resource paradox.”

Productive capacities are composed of three elements:

The first is “productive resources” such as physical and financial capital, natural resources and human capital;

The second is “entrepreneurial capabilities,” which are the skills that firms and farms need to manage their business activities and engage in innovation and productivity growth.

The third element is “production linkages,” which are the interactions between different firms and farms; between diverse sectors of economic activity; and the relations between the domestic economy and the international environment through trade, investment and technology flows.

These three elements of productive capacities are necessary conditions for sustainable development. Indeed, their absence is at the heart of the plight of most Least Developed Countries, and of the development challenge.

Resource-rich countries are in a particularly favourable position vis-a-vis other African countries to build such productive capacities and initiate the process of structural transformation, which involves shifting capital and labour from low-value-added to more productive and higher-value-added economic activities. The mechanisms for transmitting gains from mineral resources into productive capacity building are well known.

First, mineral resources generate rents, which can be used to finance the development of the three elements of productive capacities I mentioned earlier. Mineral resource rents could finance physical infrastructure such as transport, energy, telecommunications, or irrigation, which are essential for building production capacity in both the urban and rural areas.

The Maputo Corridor, which connects Mozambique with industrial areas in South Africa and Swaziland, is one example of a successful infrastructure development that has boosted intra-regional activity and generated additional investments in other sectors such as agriculture or tourism.

Mineral rents can also finance the building of human capital (through spending on education and health) or policies to foster enterprise development, improve agricultural productivity, and foster a strong manufacturing base — critical for generating employment. African governments could earmark a certain percentage of their annual natural resource rent for promoting sustainable structural transformation.

Second, with the right policies, the mineral sector can serve as a driver of economic diversification by creating opportunities for domestic enterprises to supply some of the services and intermediate goods needed by the mining industry.

Such development through backward linkages has taken place in many developing countries and, quite honestly, I do not see any good reason why African countries cannot follow the same pattern of development.

Of course, a successful minerals-based development strategy also requires — and this is my third point — that African countries obtain fair compensation for their natural resources.

Thus, it would be a mistake for African governments to ignore the striking findings of the recent study on the “Management of African Mineral Resources" conducted under the guidance of the former secretary-general of the United Nations, Kofi Annan.

Among other things, the report reveals that transfer pricing — the practice of shifting profits to lower-tax jurisdictions — currently costs African countries $34 billion annually, more than the amount the region receives in bilateral aid.

If this amount of annual capital leakage had been spent on building the productive capacities of mineral exporting countries, they would by now have reduced their dependence on commodity exports and on imports of processed goods significantly.

One way of obtaining a fairer share of the resource rents is to improve transparency in the sector. Improving the availability of data on Africa’s resource potential and the mineral value chain will boost investment and strengthen the continent’s bargaining power in negotiations with partners.

Resource endowments do not have to be a curse. On the contrary, they have been a blessing for countries like Australia, Canada, North European countries and emerging economies like Brazil, Chile, South Africa and others.

It is encouraging that Africa has now a collective vision and an action plan to make mineral resources contribute to the economic development of the continent.

Mukhisa Kituyi is the Secretary-General of Unctad, the United Nations Conference on Trade and Development