In the coming decade, extraction of oil, gas, and mineral ores will constitute by far the most important economic opportunity in Africa’s history. . . .February 25, 2011
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. . . .
Second, a substantial share of the revenues should be invested in assets rather than used to boost consumption. To do otherwise is to infringe upon the rights of members of future generations, to whom natural assets also belong. . . .
Finally, revenues should be open to public scrutiny and their efficient use, both for investment and consumption, must be ensured by institutional mechanisms that impose clear accountability on public
Second, a substantial share of the revenues should be invested in assets rather than used to boost consumption. To do otherwise is to infringe upon the rights of members of future generations, to whom natural assets also belong.
But revenue and expenditure transparency alone is not enough to ensure good use of natural resources. The many decisions required to ensure success must be gotten right not just once but repeatedly, though, without such transparency, the risks of corruption and misallocation obviously are much higher.
Saturday, February 26, 2011
Transparency Standards in African Resource Development
From Paul Collier, author of The Plundered Planet: