Harnessing Natural Resources for Diversification

Abstract

This article outlines a vision for Africa in 2050 in which the continent narrows the gap in per capita income and development outcomes that it has with middle-and high-income countries. Specifically, this article describes the challenges of building on Africa's endowment of natural resources to become a supplier of intermediate and finished goods and agricultural products, with a diversified private sector, a growing service sector, and a high degree of economic integration on the continent and in the world. First, the article outlines Africa's resource endowment. Africa has a fairly modest global reserve position, with the exception of gemstones, titanium, and bauxite. Second, the article evaluates African countries' track record in terms of extraction and processing, including a classification of countries according to their reliance on resource rents. Next, the authors present a vision for Africa's extractive industries that has the ultimate goal of macroeconomic stability. The article suggests that stabilization/ liquidity funds and wealth funds contribute to an increase in the quality of public investment and monetary policy. Finally, the authors suggest that African governments should encourage the growth of an ecosystem of supportive industries around the natural resource sector to increase the number of positive spinoffs from the extractive industries.