OXFORD –In the coming decade, extraction of oil, gas, and mineral ores will constitute by far the most important economic opportunity in Africa’s history. Africa is the last frontier for resource discovery, having long been relatively neglected by mining and other resource-extraction companies, owing to difficult political conditions. But rising commodity prices are overcoming reluctance, and prospecting is generating a multitude of new discoveries.
Given that resource extraction per square kilometer in Africa is about 20% of the OECD average, the total volume of extraction could easily grow fivefold. High prices and future discoveries will generate money flows so vast that, if properly managed, they could transform desperately poor parts of Africa into regions of prosperity. Certainly, income from resource extraction will dwarf all other financial flows there.
But, too often in Africa’s history, money that should have financed productive investment has been looted or squandered. The challenge now is to prevent the continent’s sad history of exploitation from repeating itself during the coming era of massive resource extraction.
Whether natural resources are plundered or harnessed for development depends upon several factors. The first task is to capture for society as a whole enough of the value of the extracted resources. This, in turn, requires a proper procedure, based on transparent competition, for the initial sale of prospecting rights, as well as a well-designed tax system to collect revenues from subsequent corporate profits.