Will resource boom in Africa see end to poverty?

Monday February 3 2014

Refugees queue for food rations at the Dadaab refugee camp in northern Kenya. FILE

Refugees queue for food rations at the Dadaab refugee camp in northern Kenya. Some of the world’s poorest people are said to live in Africa. FILE 

By Miriam Gathigah and Jeffrey Moyo

With its two-trillion-dollar economy, recent discoveries of billions of dollars’ worth of minerals and oil, and the number of investment opportunities it has to offer global players, Africa is slowly shedding its image as a development burden.

“While global direct investment has shown some decline, dropping by 18 per cent in 2012, in Africa foreign direct investment rose by five per cent,” said Ken Ogwang, an economic expert affiliated with the Kenya Private Sector Alliance (Kepsa), which has a membership of over 60 businesses.

Since 2012, Kenya has made a series of mineral discoveries, including unearthing $62.4 billion worth of Niobium — a rare earth deposit.

The discovery in Kenya’s Kwale County has made the area among the world’s top five rare earth deposits sites, and allows the country to enter a market that has long been dominated by China.

In 2012, Kenya discovered 600 million barrels of oil reserves in Turkana County, one of the country’s poorest regions. It was announced on January 15 that two more wells struck oil, increasing estimated reserves to one billion barrels of oil.

But Kenya, East Africa’s economic powerhouse, is not the only African nation that has made fresh mineral discoveries.

“The recent boom in new mining discoveries in countries like Niger, Sierra Leone and Zambia will attract billions in foreign direct investments. Other countries like Mozambique, Tanzania and Uganda will similarly attract billions due to petroleum discoveries there,” said Antony Mokaya of the Kenya Land Alliance, a local umbrella network of NGOs and individuals working on land reforms.

Last year, both Uganda and Mozambique discovered oil. In 2006, an estimated two billion barrels of oil reserves were discovered in western Uganda, but last year’s discovery brings Uganda’s total oil deposits to 3.5 billion barrels. Mozambique’s first oil discovery last year is estimated to be 200 million barrels.

Mr Ogwang predicts that these discoveries will soon see African countries dominating the list of the 15 fastest-growing economies in the world.

“More African countries, Kenya being a model example in East Africa, now favour a market-based economy, which is highly competitive and the most liberal economic system. In this system, market trends are driven by supply and demand with very few restrictions on who the actors are. [It is] a favourable environment for foreign investors,” he said, referring to the local mobile phone industry, which has been dominated by foreign investors because of its favourable regulatory policies.

“As a result, growth in this sector is phenomenal. In the first 11 months of 2013, Kenya’s mobile phone money transactions were $19.5 billion, which is more than the country’s current $18.4-billion-national budget,” said Mr Ogwang, adding that even more importantly, African countries are increasingly strengthening their partnerships with the East.

Statistics from Africa Economic Outlook, which provides comprehensive data on African economies, show that China is the largest destination for African exports, accounting for a quarter of all exports.

Trade with Brazil, Russia, India and China — the economic bloc referred to as BRIC — now accounts for 36 per cent or $144 billion of Africa’s exports, up from only nine per cent in 2002.

In comparison, Africa’s trade with the European Union and the United States combined totals $148 billion.

But Terry Mutsvanga, director of the Coalition Against Corruption, a lobby group in Zimbabwe, cautioned that Africa will first have to rein in its corrupt politicians before its resources can enrich its own people.

According to the World Bank, some of the world’s poorest people live in Africa, with one out of two Africans living in extreme poverty.

“Without Africa dealing with the cancer of political corruption blighting the continent and robbing it of revenue from mineral resources through corrupt politicians receiving bribes from investors … the continent shall [continue to have] the worst poverty levels globally,” said Mr Mutsvanga.

Independent economic analyst Jameson Gatawa from Zimbabwe agreed. “Underhanded dealings in the mining of diamonds and other rich minerals here have fuelled poverty. The rich are getting richer with the poor becoming poorer,” said Mr Gatawa.

Zimbabwe’s case

Zimbabwe is one of the world’s top 10 diamond producers. But six out of every 10 households in Zimbabwe, a country of about 13 million people, are living in dire poverty. This is according to a 2013 poverty assessment report by the Zimbabwe National Statistics Agency.

The Democratic Republic of Congo is another African country rich in diamonds, with its mineral wealth estimated in the trillions of dollars. But according to the United Nations, about 75 per cent of its people live below the poverty line.

More than half of these have no access to drinking water or to basic healthcare. Three out of every 10 children are poorly nourished, with up to 20 per cent of them predicted to die by the age of five.

While Ogwang says Africa’s best economic years are yet to come, it remains to be seen if the billions of dollars Africa has in natural resources will trickle down to people like Mutavara.