Can Africa’s natural resources lift people out of poverty?

Several African countries are among today’s fastest-growing economies in the world, often driven by discoveries of oil, natural gas and strategic mineral reserves. Extreme poverty on the continent, overall, is in decline. This is good news!

However, millions of Africans are not benefitting from this impressive growth. Sub-Saharan Africa is home to a third of the world’s poorest people, and six of the world’s 10 most unequal countries are in Africa. This inequality is dimming Africa’s potential, undermining the ability of poor people to access the essential services they need – basic health and education – to be fully productive citizens.

The private sector is the engine of Africa’s economy and, if it works responsibly, holds the key to fair and sustainable economic development. Companies can contribute greatly to tackling poverty through their core business strategies, provided they move beyond mere corporate social responsibility, and towards business models that genuinely include people living in poverty, and treat them fairly. That includes paying their fair share of taxes.

Unfortunately, Africa loses more through illicit outflows than it gets in aid and foreign direct investment. Tax evasion and trade mispricing by multinational oil, gas and mining companies, in collusion with corrupt officials, is a serious problem. Africa’s natural resource wealth has the potential to lift millions of people out of poverty, but illicit capital flows and income inequalities are cheating Africa of its potential.

Africa must not be perpetually confined to managing poverty. Ultimately, African countries can raise their own finances, from within their own borders, to pay for long-term sustainable development. To do this, they must strike a balance between investment-friendly policies and securing revenue through fair tax regimes, and allocating the proceeds to support basic services and development. Having sat on the Uganda parliamentary budget committee that oversees budget allocations, and the public accounts committee that oversees public expenditures, I know that it is possible for most countries in Africa to raise the resources they need to fund their development priorities.

As the Africa Commission has said, “History has shown us that development cannot and does not work if policies are shaped and forced by outsiders”. But Africa cannot do it alone. Africa’s people, governments, business leaders and the wider international community must act in concert to ensure that the revenues from natural resources, set to increase over the next decade, will create opportunities for growth and for human development.

For now, bilateral aid remains an important source of finance for many countries. Pulling the plug on aid now – or even in five or ten years’ time – would mean vast increases in poverty and major reverses in development progress. Our challenge is to make development assistance work as a better catalyst to support revenue administrations and regulatory systems.

In the long run, this is the road that will lead Africa away from the need for aid, and towards meeting Africa’s promise.

Author: Winnie Byanyima is International Executive Director of Oxfam International

Image:Pools of mineral-coloured water gather on salt flats in Senegal REUTERS/Finbarr O’Reilly