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Lamentations over what was lost by African countries to colonial masters during the foreign domination era seem to be a never-ending excuse by current and past corrupt leaders who have been at the forefront of mismanaging their economies with impunity.
Relatedly, and non-trivially, one of the leading obsessions among Africans is “We’re poor because they are stealing our natural resources.” Is it true that trillions of dollars of value in natural resources have been stolen from African nations? Absolutely. Many books have documented such crimes again and again and again.
At the same time, our obsession with this issue will not make us more prosperous. To begin with, in development economics there is a well-known “natural resources curse.”
The name refers to the fact that having abundant natural resources can actually hinder economic development. There are several ways this takes place:
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Natural resource wealth lends itself to corruption/rent-seeking. It is common for leaders and their cronies to siphon off a portion of the wealth. Leaders of oil-producing nations in Africa often leave office with hundreds of millions, and sometimes billions of dollars, in personal wealth. So, yes, foreign governments and corporations often steal our natural resource wealth—and our leaders and elites do so as well, at an immense scale.
Relatedly, having natural resource wealth often prevents nations from developing better economic policies. Not only do the leaders pay themselves, but they often also bribe the people with, say, low fuel prices or subsidized food or other benefits. If the people aren’t too miserable, they won’t put as much pressure on the government to create jobs and lasting prosperity. The leaders continue to enjoy their luxury cars and shopping trips to Paris and Dubai, the people get tiny scraps, and no policy improvements take place. The nation limps along with a terrible business environment.
In some cases, as in Venezuela, once the oil price dipped the results were devastating with people starving, electricity shortages constant, and the health care infrastructure collapsing. Thus natural resource wealth can act as a misleading mask making a nation appear as if it is more economically successful than it actually is.
Conversely, it is not an accident that the most successful jurisdictions in the world had no natural resources. Hong Kong and Singapore both went from African-level poverty in 1960 to greater prosperity than the UK today (on a per capita basis), and both had no natural resources. Dubai’s rapid growth began largely after they realized they were running out of oil—their brilliant special economic zone strategy was deliberately developed as an economic development pathway so that they wouldn’t collapse after their oil ran out. Mauritius, the most economically successful African nation, now approaching the prosperity of the poorer European nations, is a small island with no natural resources. The Bahamas and Cayman Islands began to compete without having natural resources, and so forth. For all of these jurisdictions, it has been a blessing NOT to have natural resources because it drove them to develop some of the best business environments in the world.
The other problem with the eternal “they stole our resources from us” narrative is that it obscures real win-win opportunities in natural resource development. The most successful African nation on the continent (Mauritius is an island), Botswana, became prosperous using a partnership with the DeBeers diamond company. They did not threaten to expropriate. They were not hostile to their corporate partners. They developed a successful win-win strategy that led both to growth for Botswana and profits for DeBeers. Could Botswana have done better than it did? No doubt we can envision alternative pathways that would have gone even better. But Botswana has outperformed other diamond-rich and oil-rich nations by cooperating with its multinational mining partner rather than by hostility and attacks.
Again, none of this is glamorous. People love the glamour of Che fighting for the justice of the people. In Africa, Sankara has the romance of a Che to this day. The founders of African independence such as Kwame Nkrumah and Julius Nyerere were passionate advocates of socialism—and ran their countries into the ground. Meanwhile, almost no one knows about Seretse Khama, who actually put Botswana on the path to prosperity rather than giving impassioned speeches about justice. How can we get excited about partnering successfully with DeBeers?
Uganda, in East Africa, joins the league of oil-producing countries with its first oil expected on the market in 2025. The biggest worry there is, as is in most African poorly governed countries, there is a leader who has personalised the country that the coming oil has ridiculously been baptized “ my oil” by himself.
In power for nearly four decades from 1986, Museveni, 79, has refused to retire often chipping in with “Who will I leave my oil for if I retire?” This is reason enough to worry for any sane Ugandan, especially as the government resorts to an insane foreign borrowing spree to finance the exploration, drilling, processing and transportation infrastructure. This is creating an enormous debt burden to the already struggling economy that the next generations will struggle to offset unless the proceeds from the oil are put to the best use. In his various speeches, Museveni has been variously heard boasting of how most of the services his government has failed to provide will be realised when “ my oil gets to the market.” That’s the problem with the oil curse. Efforts to strengthen economic systems to sustain the country are overlooked in favour of quick fixes. When accountability issues set in, like it’s almost expected for Uganda, then disaster takes over.
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