Policy Brief | 4 Escaping the Resource Curse in Sub-Saharan Africa

August 2013

Manuella Appiah LL.M. Researcher and Ting Zhang MSc. Researcher 2 | Escaping the Resource Curse in Sub-Saharan Africa Policy Brief 4 | August 2013 Policy Brief 4 | August 2013 Escaping the Resource Curse in Sub-Saharan Africa | 3

Escaping the Resource Curse in Sub-Saharan Africa

Executive Summary

The resource curse refers to the paradox that countries with an abundance of natural resources often fail to grow as rapidly as those without such resources. Sub-Saharan Africa typifies this situation, in that its economic development lags behind the rest of the world in spite of its wealth of oil, gas, and minerals. In addition, negative impacts on human rights and the environment associated with the exploitation of natural resources are evident. Meanwhile, other resource-rich countries, such as Norway and Chile, have achieved high levels of development, turning their resources into a blessing. This policy brief outlines both the endogenous and exogenous factors that contribute significantly to the situation in sub-Saharan Africa. It concludes with recommendations—aimed at national governments, national and international civil society, international bodies, and the extractive industry— on how best to escape the resource curse.

Authors Manuella Appiah and Ting Zhang are both researchers at The Hague Institute for Global Justice Disclaimer under the Global Governance and Conflict Prevention programs, respectively. They can be contacted at This policy brief reflects the opinions of the authors and not necessarily those of The Hague Institute for Global [email protected] and [email protected]. For more information about Justice. For questions or comments, please contact the authors. the two programs, please refer to the Annex. 4 | Escaping the Resource Curse in Sub-Saharan Africa Policy Brief 4 | August 2013 Policy Brief 4 | August 2013 Escaping the Resource Curse in Sub-Saharan Africa | 5

Introduction Despite the downsides, the benefits from the extraction sub-Saharan Africa, but they tend to play a much and use of natural resources are considerable. bigger role in sub-Saharan Africa than in other areas. Apart from advancing economic and technological The abundance of natural resources in sub-Saharan Africa has been at the heart of many debates, development across the globe, the exploitation of especially in relation to the level of development in the region compared with other parts of the resources could have significant benefits for local Endogenous factors world. Sub-Saharan Africa is endowed with both a great volume and variety of natural resources. communities because it generates employment The first set of factors are related to institutions. Indeed, the variety of natural resources to be found in Africa is perhaps far greater than on any opportunities. Furthermore, the rents received Philip Lane and Aaron Tornell postulate the other continent.1 Despite the abundance, however, economic development has been marginal from properly managed exploitation can be used to existence of powerful coalitions formed to maximize relative to other resource-rich countries across the globe.2 This policy brief sheds light on the develop physical infrastructure in the resource-rich their share of natural resource exploitation rents to resource curse in sub-Saharan Africa and suggests measures to reverse and avoid it. country for the benefit of all. The involvement of local the detriment of the rest of society. These rent- communities in the exploitation process could improve seeking groups become greedier and demand an citizen participation in decision-making and contribute even larger influence over national economic policies to better institution-building. In countries such as to consolidate their advantage.6 In the resource- The Resource water and land, and depletion of resources; Chile, Australia, and Norway, resource exploitation rich countries of sub-Saharan Africa, this is often - corruption among investors and governments, has helped ensure economic development and a high the case because many do not have operational Curse camouflaged by a lack of transparency standard of living for citizens. institutions to exercise restraints on such groups. with closed-door agreements on extraction Countries with institutions that are too weak to handle The existence of a resource curse is highly debated concessions; and The following sections offer an analysis of the main conflicts and significant income inequality are less able in the literature. The term as used here refers to the - violent clashes between communities, regions, factors that contribute to underdevelopment in to withstand economic shocks, with growth tending phenomenon whereby countries with an abundance and countries due to unfair distribution of gains sub-Saharan Africa despite its abundance of natural to slow down or fail as a result. They are also more of natural resources grow more slowly than those and impacts of resource extraction and use, resources. vulnerable to civil strife and war because weakened without such an abundance. This theory is attributed and other indirect factors such as an influx of institutions are even less able to contain the resulting to Jeffrey Sachs and Andrew Warner, who in 2001 undocumented migrants. social pressure and conflict over the distribution of published the results of their empirical research on the These impacts are but a few of many. Underlying resources.7 growth rate of resource-rich economies: states with a high ratio of natural resource exports to GDP in 1971 Causes The lack of political freedom and democracy had abnormally slow growth rates between 1971 and The exploitation in much of the region is another problem. In recent 1989.3 Although academics differ strongly in opinion An abundance of natural resources can indeed be years, sub-Saharan Africa has ranked as the world’s about the existence of the resource curse in general, of resources could a blessing. For example, Norway is the world’s most politically volatile region, experiencing major most agree that certain factors specific to sub-Saharan seventh largest oil exporter and fourteenth largest democratic breakthroughs in some countries, but Africa correlate the abundance of natural resources to have significant oil producer. Over nearly half a century, petroleum coups, civil strife, and authoritarian crackdowns underdevelopment in the region. benefits for local production has added some US$1,600 billion to in others.8 The checks and balances to be enforced the country’s GDP, and the petroleum sector now by an informed civil society with political oversight The exploitation of natural resources for commercial communities in the represents 21 percent of the country’s total value are lacking, which increases the potential for abuse purposes has grave socioeconomic implications for creation.4 In the Global South, Chile has also in the exploitation of natural resources and the the communities directly affected by the exploitation form of employment undergone astonishing economic development in distribution of its revenues. Michael Ross has found and for nations as a whole. Negative impacts include real terms and in comparison with the rest of Latin tentative support for three causal mechanisms - loss or erosion of indigenous and cultural identity opportunities, infra- America by drawing effectively on its vast copper between oil wealth and the lack of political freedom of local communities; reserve. While profiting from its copper wealth, and democracy. First, governments use their oil - violation of land-rights of communities with little structure development, Chile has managed to diversify its economy and revenues to relieve social pressures that might or no compensation; develop innovative industries.5 otherwise lead to demands for accountability (for - conflicts relating to ethnic rivalry and land citizen participation example, through lower taxation, greater spending ownership; What is so different about sub-Saharan Africa that on patronage, and the prevention of investment - forced labor, child labor, unfair wages, and lack of in decision-making, has prevented the region from benefitting from its in human capital that may promote democratic freedom of association, among other labor rights and better institution- abundant natural resources? The following sections governance). Second, oil wealth allows governments violations; provide an overview of the likely contributing factors. to spend more on internal security, which may block - environmental degradation, pollution of drinking building. These factors are not necessarily only applicable to the population’s democratic aspirations (either due 6 | Escaping the Resource Curse in Sub-Saharan Africa Policy Brief 4 | August 2013 Policy Brief 4 | August 2013 Escaping the Resource Curse in Sub-Saharan Africa | 7

to self-interest or as a response to ethnic or regional Another factor is bad fiscal policies that tend power between resource-rich governments and increases the potential for conflict and subsequently conflicts). Third, oil wealth may not be translated into to be kept in place by governments. One example multinational corporations, which is elaborated also increases the difficulty of efficiently utilizing economic development that results in cultural and is the tendency to borrow excessively, especially in the following section. The second role is most (transboundary) resources.21 social changes (such as occupational specialization, during periods when the prices of resources on the suitably illustrated by the mainstream indicators urbanization, and higher levels of education). This international market are high. Once the resources of development (i.e. those with the greatest The volatility of natural resource revenues presents a challenge to democratization. These run out or the prices fall, financial crisis and influence on decision-making in both the public also contributes to the resource curse. Resource- mechanisms, as Ross has demonstrated, are hampered economic development are inevitable.13 and the private sector) that predominantly focus on rich economies often specialize in production of applicable not only to oil but also to other nonfuel Another example is the strict trade policies often economic criteria, such as growth or income per natural resources and are thus more susceptible to mineral resources..9 It can therefore be concluded put in place to avoid Dutch disease (to put it simply, capita. These metrics too often disregard or belittle fluctuations in commodity markets.22 An economic that resource wealth and a lack of political freedom the decline in the manufacturing sector that often the distributional effect of economic development or argument for why volatility hampers economic and democracy are interlocked in a cyclical process. accompanies exploitation of natural resources), the process of growth generation and are too seldom growth is that firms are more likely to hit liquidity which in turn may harm growth prospects.14 In well-integrated with other indicators in the areas of constraints and thus cannot afford to innovate, addition, subsidies that are often attached to social and sustainable development. The prevailing which depresses growth, especially in economies When checks and extractives, such as oil for fuel, are also macro- concept of economic development may not resonate with poorly developed financial institutions.23 A economically damaging. Energy subsidies absorb among some of sub-Saharan Africa’s citizens, political argument is that during commodity booms balances to be enforced a large share of scarce public resources in sub- who may take a different “sufficiency-based” countries often engage in a public spending bonanza Saharan Africa, costing an average about 4 percent approach to improving their standard of living, that is unsustainable and needs to be reversed when by an informed civil of GDP.15 Significant spending on energy subsidies rather than viewing development as analogous with global commodity prices collapse and revenues society with political crowds out more productive government spending, increased consumption.19 Given their mindset, local decrease.24 such as expenditure on health and education, as communities may have lower aspirations for the oversight are lacking, well as preventing the reconstruction of fiscal threshold of structural measures needed to combat Resource-rich countries have also experienced policy buffers in the wake of the global economic the curse. a long-term decline in the terms of trade as the potential for abuse crisis.17 postulated by the Prebisch-Singer thesis.25 Over time, natural resource export revenue buys fewer in the exploitation of The resource curse in sub-Saharan Africa may Exogenous factors and fewer imported capital goods, thereby inhibiting be further exacerbated by the geographic, Apart from those specific to sub-Saharan Africa, development-creating investment in an economy. natural resources and demographic, and public health features that factors on an international level contribute to the The declining terms of trade means that growth have also played a role in impeding economic growth resource curse. These are highlighted as a basis for in countries relying on the export of primary the distribution of in the continent. Many kinds of technologies, for policy recommendations. commodities is relatively weak over time and that example, do not transfer well across ecological prospects for development are constrained. revenues increases. zones. The temperate zones have also long had Although referred to differently within different much higher rates of endogenous technical change disciplines, the postcolonial legacy—which Another contributing factor is the often unfair On Transparency International’s 2012 Corruption than the tropics given the cumulative advantage still lingers over many areas of Africa today—is processes used to negotiate clauses contained Perceptions Index, 90 percent of sub-Saharan of larger markets for innovation over time. considered an important factor in the resource in bilateral and multilateral agreements African countries scored lower than 50 (on a Additionally, the tropics pose inherent difficulties curse. The term refers to the political and economic between investors and host-country governments. scale from 0 to 100, 0 being the most corrupt), far in agriculture, such as low productivity, and public relationship between postcolonial Africa and the The power imbalance between weak national exceeding the global average.10 This makes sub- health, such as prevalence of malaria and HIV/AIDS. West that has the same underpinnings and meets governments and powerful multinational Saharan Africa the second most corrupt region of all Last, the tropics are far from large mid-latitude the same objectives as that of the colonial period, companies frequently results in contracts with regions surveyed after eastern Europe and central markets and transport costs within Africa are high.17 and has a similar exploitative and asymmetric revenue distribution agreements that do not Asia.11 The relationship between corruption and the character.20 The political structure, culture, and take into account compensation for many of the resource curse is twofold. First, natural resource Furthermore, power relations also play important general policy handed over to the rulers or left negative social, economic, and environmental endowment may, as mentioned, lead to rent-seeking roles, both in how social forces have been involved behind by the colonial powers were not based impacts generated by the resource exploitation.26 behavior. Second, management of resources may in coordinating, negotiating and governing the on the choice, consent, will, and purpose of the For example, research by Human Rights Watch itself be corrupt, which may lead to a sub-optimal resource extraction process and in how certain African people. The arbitrary boundaries and indicates that the multinational mining companies, use of the resources and subsequently poor ideas about development are implemented and cultural differences created and imposed by the Vale and Rio Tinto, displaced over 1400 households development outcomes in terms of economic growth become dominant.18 Regarding the first, perhaps colonial powers are illustrative. Such forceful fusion in Mozambique between 2009 and 2011. Many of or poverty reduction.12 the best illustration is the imbalance in bargaining of incompatible national groups into one state these households lost regular access to food, water, 8 | Escaping the Resource Curse in Sub-Saharan Africa Policy Brief 4 | August 2013 Policy Brief 4 | August 2013 Escaping the Resource Curse in Sub-Saharan Africa | 9

and income opportunities instead of enjoying the The final factor isillicit financial flows, which the major problems that communities foresee as studying successful examples and by including benefits of economic growth that should have been corruption in resource-rich countries enables. accompanying resource extraction. qualified experts from these countries in their brought to the region.27 A report commissioned by Potential revenues from natural resources are negotiating teams to increase their bargaining power. the European Parliament’s Development Committee diverted out of the resource-rich countries found that, notwithstanding greater efforts rather than being utilized by those countries’ Regulatory frameworks to minimize negative towards corporate social responsibility, practices of governments for investment in infrastructure and Regulation aimed impacts of resource exploitation should multinational oil companies (such as oil spills and the development of other sectors. Corruption can include environmental regulation, labor regulation, gas flaring) contribute to impoverished livelihoods, be the source of illicit funds to be laundered, a at improving public regulation relating to the procurement of materials a degraded environment, displacement of local way of facilitating the creation of illicit funds, or needed for the exploitation, and provisions that communities that rely heavily on natural resources a way of enabling an illicit flow.30 The financial participation require the company involved in the exploitation for their survival, and long-term declines in (local) secrecy provided by the prevailing global financial should also contain to make a contribution to the development of the economic growth prospects due to—among others— architecture—which includes tax havens, secret community where the exploitation takes place. negative cumulative effects on the health of the local trusts, shell companies, and anonymous accounts— provisions on how people.28 Resource-rich countries are sometimes is an external enabling factor.31 Apart from involving the public—at the lowest even forced to compete with each other in a “race fair and equitable possible level of society—in government decision- to the bottom” on issues such as royalties and Interacting with the endogenous factors, these making related to the exploitation, it is important social and environmental safeguards.29 In addition, broader exogenous factors can aggravate the compensation will that other institutional arrangements are the process of awarding the contract is not always situation. A concerted international effort is organized not only to attract foreign investors but open for public bidding or review. Confidentiality necessary to help overcome the resource curse. be determined, also also to ensure transparency and accountability clauses in contracts also mean that the much-needed of government decisions and policies concerning transparency for parties to be held accountable in consultation with deals relating to the exploitation. These cannot be ensured. Turning the Curse arrangements should promote and ensure stakeholders. appropriate execution and implementation of the Around regulations. In the context of sub-Saharan Africa, The power imbalance It is recommended that all resource-rich countries it is important to combat corruption among As discussed, many countries with an abundance regulate consultative dialogues with stakeholders government officials and policymakers. between weak national of natural resources do not suffer from the in a flexible but binding legal framework. Communities Corruption is one of the root causes of violence, resource curse. They have been able to harness could then rely on the adopted framework in the event instability, and underdevelopment. Corruption governments and their resources in such a way that almost the entire of any possible exploitation of a natural resource and nepotism have two primary negative effects powerful multinational population benefits from the rents obtained from within the community. The need for such a document on development. First, concerned policymakers exploitation. Certain recommendations, when lies in the fact that it is not always easy to foresee who take measures not in the interest of the society but companies frequently adopted, could help sub-Saharan countries now the stakeholders are in certain situations. Room should with personal economic gains in mind. Similarly, facing the resource curse reverse the predicament. therefore be given to the possibility of broadening family members and other affiliates are often results in contracts with These recommendations could serve as guidelines the scope of application of the legal framework when given positions within a government even when for sub-Saharan nations that have discovered new necessary. Regulation aimed at improving public they are less qualified than other candidates. It is revenue distribution reserves of natural resources to avoid the curse. participation should also contain provisions on how essential that all possible measures are undertaken fair and equitable compensation will be determined, to prevent corruption and to tackle the effects of agreements that do Countries that have recently discovered such also in consultation with stakeholders. Promoting corrupt government practices. reserves first need to devote reasonable time to public participation in decisions is also a way of not take into account the phase before consignments for resource ensuring acceptance of the decision and preventing Measures that could be undertaken to combat exploitation are finalized. This preparatory possible conflicts that may arise because of the corruption include compensation for phase should be used to consult all stakeholders decision to allow exploitation. - adopting a transparent and concise legal negative impacts in the country as to the best way to regulate framework that includes guidelines for the exploitation. Consulting all stakeholders, Because some countries may not have the government officials involved in consignment generated by the especially the communities that will feel the technical and managerial knowledge needed in negotiations, accountability mechanisms, impact of the exploitation directly, will provide contract negotiations, it is critical for resource-rich and strong sanctions on those found guilty of resource exploitation. the government with considerable insight into governments to equip themselves by referring to and corruption; 10 | Escaping the Resource Curse in Sub-Saharan Africa Policy Brief 4 | August 2013 Policy Brief 4 | August 2013 Escaping the Resource Curse in Sub-Saharan Africa | 11

- establishing an autonomous and impartial nations regardless of their level of development. and promote quality education at all levels The inclusion of provisions concerning the supervisory mechanism to ensure proper An effective judicial system with qualified and and establish a robust health infrastructure responsibility of multinationals in ensuring implementation and execution of the legal independent officers is crucial for the enforcement of accessible to all citizens. corporate social responsibility—embedded in the framework and to enforce sanctions when regulations and the advancement of the rule of law. Ruggie principles—in company codes of conduct is a necessary; It is also important that national and international welcome first step. - empowering citizens to stigmatize corrupt civil societies in their own ways promote the good practices through anticorruption awareness Little or no regard for governance, transparency, and accountability campaigns; of governments of resource-rich countries in - ratifying and adopting international32 and the rule of law tends sub-Saharan Africa. Empowering the public in regional33 legal frameworks aimed at taking interest in decisions made by policymakers combating corruption and collaborating with to affect a country’s regarding natural resources is essential. concerned supervisory bodies that monitor the economic development performance of state-parties; and Preliminary research shows a need for the - participating in existing anticorruption and the well-being international community to more actively initiatives such as those undertaken by cooperate with governments in resource-rich Transparency International and the Extractive of its people. Rule of sub-Saharan countries in decision-making processes Industry Transparency Initiative. regarding the exploitation of resources. As much law based on respect as such decisions fall within the sovereignty of the Furthermore, because land disputes are often the concerned country, it is worth looking into the need for source of conflict in the region, it is recommended for fundamental an institute whose responsibility would be to advise— that necessary measures are taken to prevent on request by governments—on which policies such disputes and to peacefully resolve existing rights and equality regarding the natural resources may be best for the related conflicts.34 Land ownership is a key factor developmental needs of the concerned country and its in any economy because it confers property rights is essential for every citizens. and defines access to and control of land assets, nation’s development. including natural resources that exist in or on land.35 Perhaps the international community could do Hence, it is in the interest of both conflict prevention more to help combat corrupt practices among and foreign investment to properly regulate Reliance on the exploitation of natural resources policymakers in resource-rich societies. Some land and property rights and to ensure proper alone for the advancement of the economy is risky countries are known to explicitly condone such enforcement of these regulations. and a limited economic strategy. Good health— corruption and other illicit practices when signing which includes a higher quality of life and life consignments for natural resource exploitation. Governments should also take measures to promote expectancy—is a form of human capital that has a A strong signal from the international inclusive social dialogues to foster cohesiveness beneficial effect on productivity and increases per community as to the harm such practices have on among ethnic groups and societies within the capita income of a country.36 Similarly, education the livelihood of ordinary citizens, the potential to countries. This promotes trust among stakeholders, is correlated with several social development cause conflicts, and how these practices impede provides citizens with a sense of ownership of adopted outcomes; among these are health, fertility choices, development is strongly recommended. policies, and contributes to conflict prevention. and the education of children. Education also helps societies to develop, or adapt new technologies to The extractive industry is advised to comply with All of these measures are tightly linked to the rule local environments and build institutions integral international standards of conduct with regard of law and the administration of justice. Little to forming a sense of nationhood. Empirical to labor standards, to avoid corrupt practices, or no regard for the rule of law tends to affect a research concludes that educated people are, on and to return a fair share of the rents of natural country’s economic development and the well- average, better able to train in the use of new resource exploitation to populations affected by being of its people. Rule of law based on respect technologies and that they tend to be a country’s the exploitation. Companies are recommended for fundamental rights and equality is essential principal innovators.37 Therefore in addition to to, for example, commit to the Extractive Industry for every nation’s development. A well-equipped having a well-established institutional framework, Transparency Initiative and to participate in judicial infrastructure is also important for all it is recommended that governments invest in initiatives undertaken by the UN Global Compact. 12 | Escaping the Resource Curse in Sub-Saharan Africa Policy Brief 4 | August 2013 Policy Brief 4 | August 2013 Escaping the Resource Curse in Sub-Saharan Africa | 13

Final Remarks countries should undertake measures to learn from Endnotes as one region by Transparency International for countries which have been able to turn their natural their research. Over the past few decades, many researchers— resource reserves into a blessing. These lessons 1 | For a detailed analysis, see Raf Custers and Ken 12 | Ivar Kolstad, Tina Søreide and Aled Williams, notably economists, social scientists, political learned should not be copied blindly, but should Matthysen, “Africa’s Natural Resources in a “Corruption in Natural Resource Management scientists, and anthropologists—have attempted be adapted to the needs of local communities and Global Context,” (International Peace Information – An Introduction,” (U4 Issue No. 2, Bergen, to identify reasons for the persistent level of of the nation in general. It is only by doing so that Service, Antwerp, August 2009), http://www. 2008), http://www.cmi.no/publications/ underdevelopment in sub-Saharan Africa despite economic development and political stability can ipisresearch.be/att/20090812_Natural_ file/2936-corruption-in-natural-resource- the abundance of natural resources the region be ensured. Resources.pdf. management-an.pdf. boasts, such as vast oil, gas and mineral reserves, 2 | In recent years, Africa has seen exponential 13 | Osmel Mansano and Roberto Ribogon, and millions of hectares of rich agricultural lands. economic growth compared with previous years. “Resource Curse or Debt Overhang?” (NBER Many researchers qualify the phenomenon of Sub-Saharan African This trend, however, is not necessarily related to working paper No. 8390, Cambridge, MA, 2001). underdevelopment in sub-Saharan Africa, in spite measures taken to curb the resource curse, but 14 | Rabah Arezki and Frederik van der Ploeg, “Can of its abundance of natural resource, with the term countries should to other factors, such as increases in commodity the Natural Resource Curse be Turned into resource curse. No consensus on the phenomenon prices. a Blessing? The Role of Trade Policies and of the resource curse has been established given the learn from countries 3 | Jeffrey D. Sachs and Andrew M. Warner, “Natural Institutions,” (International Monetary Fund many countries across the globe that experienced which have been able Resources and Economic Development: The working paper, Washington, D.C., 2007). exponential economic growth despite their Curse of the Natural Resources,” European 15 | Nicholas Staines, “The Case for Carefully abundant natural resources. However, what many to turn their natural Economic Review 45 (2001): 827–38. Reducing Energy Subsidies,” (International researchers agree on is that certain factors specific 4 | Heikki Holmås and Joe Oteng-Adjei, “Breaking Monetary Fund, Luanda, 2013). to sub-Saharan Africa contribute to the region’s resource reserves the Mineral and Fuel Resource Curse in 16 | Ibid. underdevelopment. The authors have categorized Ghana,” in OECD, Development Cooperation 17 | See David E. Bloom and Jeffrey D. Sachs, many of these into endogenous and exogenous into a blessing. These Report: Lessons in Linking Sustainability and “Geography, Demography, and Economic Growth factors. Within the sub-Saharan African countries, Development, 123–31 (OECD Publishing, Paris, in Africa,” Brookings Papers on Economic Activity factors such as rent-seeking groups, bad fiscal lessons learned 2012). http://dx.doi.org/10.1787/dcr-2012-16-en. 1998 (2) (1998): 207–95; Mathias Risse, “What policies, the growing level of corruption, and the 5 | Gøril Havro and Javier Santiso, “To Benefit from We Owe to the Global Poor,” Journal of Ethics 9 lack of political freedom all interact to perpetuate should be adapted Plenty: Lessons from Chile and Norway,” (OECD (1/2) (2005): 81–117. the curse, resulting in unequal socioeconomic and to the needs of local policy brief No. 37, Paris, 2008). 18 | Tim DiMuzio, “The Real Resource Curse and environmental distribution of both the costs and 6 | Philip Lane and Aaron Tornell, “Power, Growth the Imperialism of Development,” Suomen benefits of resource endowments. The manifestation communities and of and the Voracity Effect,” Journal of Economic Antropologi 35 (1) (2010): 94–97. of these factors is further facilitated by the general Growth 1 (2) (1996): 213–41. 19 | “Sufficiency” relates to the question of “how macro-economic conditions of volatility of natural the nation in general. 7 | Dani Rodrik, “Where Did All the Growth Go? much is enough”. Ashok Khosla, former resources revenues and declining terms of trade. External Shocks, Social Conflict, and Growth director of the United Nations Environment In addition, a power imbalance between the sub- Collapses,” Journal of Economic Growth 4 (1999): Programme, refers to more moderate and more Saharan African states and the extractive industry 385-412. locally anchored production and consumption exacerbates the curse even further. 8 | Arch Puddington, “Freedom in the World 2013: patterns as a way of achieving “sufficiency”. Democratic Breakthroughs in the Balance,” See for example Ashok Khosla, “Sufficiency After examining the underlying causes of the (Freedom House, Washington, D.C., 2013), http:// and Efficiency: Putting Need above Greed,” resource curse in sub-Saharan Africa, this paper www.freedomhouse.org/sites/default/files/ (Development Alternatives, Delhi, 2005). http:// laid out several recommendations for reversing FIW%202013%20Booklet.pdf. www.devalt.org/newsletter/jan05/Edit.htm. and avoiding the curse. These include regulating 9 | Michael J. Ross, “Does Oil Hinder Democracy,” 20 | Joy A. Alemazung, “Post-Colonial Colonialism: compulsory consultative dialogues with all World Politics 53 (3) (2001): 325–61. An Analysis of International Factors and Actors stakeholders in the preparatory phase of extraction 10 | Transparency International, “2012 Corruption Marring African Socio-Economic and Political consignments, taking practical and structural Perception Index,” (Transparency International, Development,” Journal of Pan African Studies 3 measures to combat corruption, properly regulating Berlin, 2012) http://files.transparency.org/ (10) (2010): 62–84. land and property rights, and establishing an content/download/537/2229/file/2012_CPI_ 21 | Francis N. Ikome, “Africa’s International Borders effective judicial system in the countries concerned. brochure_EN.pdf. as Potential Sources of Conflict and Future In the authors’ opinion, sub-Saharan African 11 | Eastern Europe and Central Asia are considered Threats to Peace and Security,” (Institute for 14 | Escaping the Resource Curse in Sub-Saharan Africa Policy Brief 4 | August 2013 Policy Brief 4 | August 2013 Escaping the Resource Curse in Sub-Saharan Africa | 15

Security Studies Papers No. 233, 2012). http:// 30 | Quentin Reed and Alessandra Fontana, Annex multilateral and cannot be resolved unilaterally. www.issafrica.org/uploads/Paper_233.pdf. “Corruption and Illicit Financial Flows: The As globalization brings the world and its problems 22 | Frederick van der Ploeg and Steven Poelhekke, Limits and Possibilities of Current Approaches,” closer together and as geopolitical power shifts from “Volatility and the Natural Resource Curse,” (U4 Issue No. 2, Bergen, 2011). http://www. The Global the West to the rest, the Global Governance Program (Oxford Centre for Analysis of Resource Rich u4.no/publications/corruption-and-illicit- seeks to detect the deficiencies in the international Economies research paper No. 2008-03, Oxford, financial-flows-the-limits-and-possibilities-of- Governance system and investigate the conditions for political 2009). current-approaches-2/. activity and committing all relevant actors to global 23 | Philippe Aghion, Philippe Bacchetta, Romain 31 | Norwegian Ministry of Foreign Affairs, “Illicit action. Particular attention will be paid to how Rancière, and Kenneth Rogoff, “Exchange Rate Financial Flows” (Norwegian Ministry of Program current international institutions and political Volatility and Productivity Growth: The Role of Foreign Affairs policy sheet, 2012). http://www. processes can more effectively resolve urgent global Financial Development,” (Center for Economic regjeringen.no/upload/UD/Vedlegg/dialog/ problems. Policy Research discussion paper No. 5629, Ulovlig_kapitalflyt_Eng_WEB.pdf. and Conflict London, 2006). 32 | For example, the United Nations Convention Key Projects 24 | Van der Ploeg and Poelhekke, “Volatility and the against Corruption. Prevention The Forum for Global Governance, already under Natural Resource Curse.” 33 | For example, the African Union Convention on way, engages renowned experts with state and 25 | See Raul Prebisch, “The Economic Development Preventing and Combating Corruption. nonstate affiliations from the West, the BRICS, and of Latin America and Its Principal Problems,” 34 | The drawing of borderlines in sub-Saharan Program of other emerging-market and developing countries in (Department of Economic Affairs paper, United Africa during the colonial period occurred the search to improve global governance. It produces Nations, Lake Success NY, 1950); H.W. Singer, with little regard for their impact on the social The Hague empirical research on the constraining and enabling “The Distribution of Trade Between Investing cohesion of different ethnic groups. Post- factors for effective, efficient, and legitimate global and Borrowing Countries,” American Economic colonial land reforms resulting in expropriation governance across (three policy domains) and Review 40 (2) (1950): 473–85. are undertaken with little or no compensation Institute generates actionable policy recommendations on 26 | Oxfam International, “Lifting the Resource to the affected peoples. See Joost van der how institutions and political processes can be Curse: How Poor People Can and Should Benefit Zwan, “Conflict-Sensitive Land Policy and designed or reformed to guarantee enforcement from the Revenues of Extractive Industries” Land Governance in Africa,” (International Alert Global Governance by each stakeholder, thus fulfilling the shared (Oxfam briefing paper No. 134, Washington, Practice note 7). http://www.international- responsibility for concerted action. D.C., 2009). http://www.oxfam.org/sites/www. alert.org/sites/default/files/publications/ Program oxfam.org/files/bp134-lifting-the-resource- PracticeNote7.pdf. The Intellectual Property Management for Global curse-011209.pdf. 35 | Urmilla Bob, “Land-related Conflicts in Program Objectives Justice project undertakes research and capacity- 27 | Human Rights Watch, “‘What is a House Sub-Saharan Africa,” African Centre for the Making global governance work is one of the building activities to promote intellectual property without Food?’ Mozambique’s Coal Mining Constructive Resolution of Disputes (ACCORD), 10 defining challenges of our time, as too often the infrastructure in least developed countries in Boom and Resettlements,” (Human Rights (2) (2010): 49-64. world has failed to agree on, let alone engage in, order to stimulate innovation for the benefit of the Watch, 2013). http://www.hrw.org/sites/ 36 | Guillem Lopez-Casasnovas, Berta Rivera and concerted action to effectively address pressing poorest. The project also looks into current pro-poor default/files/reports/mozambique0513_ Luis Currais, “Health and Economic Growth: cross-border problems. The Hague Institute’s Global technology-transfer initiatives and examines how Upload_0.pdf. Findings and Policy Implications,” http://www. Governance Program engages relevant stakeholders they could be executed to reduce least developed 28 | Heike Baumüller, Elizabeth Donnelly, Alex upf.edu/pdi/cres/lopez_casasnovas/_pdf/ near and far to create partnerships for extensive countries’ dependence on innovations from abroad. Vines and Markus Weimer, “The Effects of Oil health_economic.pdf. dialogue, research, and knowledge exchange. It aims Companies’ Activities on the Environment, 37 | Kwabena Gyimah-Brempong, “Education and to provide innovative and demand-driven solutions Health and Development in Africa,” (Directorate- Economic Development in Africa,” (Paper for collective action; its projects are designed to General for External Policies of the Union, prepared for the 4th African Economic Conference, generate the robust empirical knowledge necessary Conflict Prevention Directorate B, Policy Department, 2011). Tunis, 2010). http://www.afdb.org/fileadmin/ to promote effective, efficient, and humane global http://www.chathamhouse.org/sites/default/ uploads/afdb/Documents/Knowledge/ governance in the twenty-first century. Program files/0811ep_report_0.pdf. Session%20II.2.1_2.%20Education%20and%20 29 | Oxfam International, “Lifting the Resource Economic%20Development%20in%20Africa.pdf. Thematic Focus Program Objectives Curse: How Poor People Can and Should Benefit The risks and challenges facing the world today— The Hague Institute’s Conflict Prevention Program from the Revenues of Extractive Industries.” such as pandemics, climate change, economic aims to produce knowledge that shapes academic crises, terrorism, and cybercrime—are increasingly and policy discussion within the Netherlands 16 | Escaping the Resource Curse in Sub-Saharan Africa Policy Brief 4 | August 2013 Policy Brief 4 | August 2013 Escaping the Resource Curse in Sub-Saharan Africa | 17

and abroad on how to avert and restrain violent Key Projects conflicts. In recent decades we have learned that the The Institute is a member of a Water Diplomacy effects of civil wars, ethnic conflicts, state failures, Consortium that aspires to become a global hub and systematic violations of human rights are for water diplomacy, governance, and law, and to not constrained to disputing parties, but threaten contribute to conflict prevention and resolution stability and peace regionally and internationally. related to intrastate and transboundary water The program undertakes multidisciplinary, practice- management. A key project is Water Conflict oriented research, develops approaches and tools Prevention in and for Yemen, which maps the water that deal with the root causes of conflicts and norms governance issues that may cause conflicts within of protection, and disseminates such knowledge and Yemen and offers advice for mitigation measures. expertise to those involved in foreign affairs, security and international development policymakers in Together with well-known universities and regional governments and multinational organizations, NGOs, the Institute is also developing a research practitioners with protective roles, academics and project on climate-induced foreign agroinvestment researchers, and civil society. in Ethiopia and Uganda. The project examines how Under the Conflict Prevention Program, the Institute the current regulatory framework and institutional regularly invites experts and national, regional, landscape can accommodate the growing and international practitioners—including policy- phenomenon of investments in a way that benefits makers—to discuss relevant and timely questions. countries and corporations alike, while effectively It also holds special-subject training courses for protecting the rights of local and indigenous people. officials, managers, and activists to strengthen their conflict prevention and peacebuilding capabilities.

Thematic Focus The program’s first theme involves the role of natural resources in conflicts. Conflicts can occur over resource extraction as well as over the control of resources and resource trade. International frameworks and agreements in these areas are few and far between. A key element of conflict prevention is to ensure that resource extraction, trade, and use is carried out in a transparent, equitable, sustainable, and non-corrupt manner, so that long-term benefits accrue to key stakeholders, such as local communities and the state. The second theme concerns the responsibility to protect (R2P), an emerging principle in the international legal arena. In future projects, the Institute will improve the implementation of R2P by closing the gap between early warning and response, showing the potential compatibility between civilian protection and national sovereignty, and balancing comprehensiveness with parsimony of the concept. Related to the second theme, the Institute will further develop the doctrine and practical tools to enable peacekeepers to ensure the protection of civilians during interventions. 18 | Escaping the Resource Curse in Sub-Saharan Africa Policy Brief 4 | August 2013 Sophialaan 10, 2514 JR The Hague, The Netherlands P.O. Box 85925, 2508 CP The Hague, The Netherlands t +31 (0)70 30 28 130 | e [email protected] | @HagueInstitute w TheHagueInstitute.org