“Africa needs to adopt policies to transform its natural resources into human capital and better living standards for its citizens and learn from the existing good practices on the continent.” These were the words of African Development Bank President Donald Kaberuka, at the launch of the report “Delivering on the promise: Leveraging natural resources to accelerate human development in Africa” on Friday, June 5 during the World Economic Forum for Africa in Cape Town.

The report is the fruit of an innovative partnership between the AfDB and the Bill and Melinda Gates Foundation, and highlights the options available for countries to use newly discovered natural resources to deliver a step change in human development outcomes. The report was spearheaded by the AfDB’s African Natural Resources Center with contributions from the Bank’s Development Research and Human Capital Development Departments. The publication looks at the cases of Ghana, Liberia, Mozambique, Sierra Leone, Tanzania and Uganda in building accessible policy frameworks to link revenue management decisions to human development agendas. The report also examines how best to leverage extractives companies’ employment, procurement, infrastructure and social investments.

“This report is about narrowing the knowledge gap between the process of extraction of resources and the delivery of human development outcomes for Africa,” said Mark Suzman, President for Global Policy and Advocacy at the Bill and Melinda Gates Foundation at the launch.

The launch event was attended by 20 eminent African policy-makers, industry leaders and civil society who gathered to discuss how to take forwards the report recommendations to transform human development in the continent. 

Sheila Khama, Director of the African Natural Resources Center, pointed out that “if this complex agenda is to succeed, African countries need to balance overreliance on revenues with direct linkages between the extractive industry and the rest of the domestic economy”.

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About the Report

Despite impressive economic growth in recent years, many African countries have seen uneven progress in improving health, education, and other social outcomes for their citizens. As domestic resources become more critical to financing these needs, new natural resource discoveries – oil, minerals, and gas – offer a new source of revenue for advancing human development and supporting countries on the path to self-sufficiency.

Most African governments have expressed a commitment to directing new revenues from natural resources toward improving social outcomes as well as creating more and better jobs and business opportunities. But several countries in the region are finding it challenging to scale up investments to the right level, and the contribution from extractives to socioeconomic development will remain unfulfilled unless their commitments become a significant part of their national development agendas.

Policymakers in these countries are aware that they face tough and often complex policy choices along the way: balancing social investments with needs in other sectors of the economy, being transparent and carefully managing citizen expectations, and ensuring benefits for both extractives and non-extractives communities and for current as well as future generations.

In light of these challenges, the African Development Bank and the Bill & Melinda Gates Foundation have produced a joint report to examine how revenues from extractives can be managed for greater social impact. The report makes three fresh contributions to the discussion:

• It provides a broad estimate of the magnitude and timing of new extractives revenues in Ghana, Liberia, Mozambique, Sierra Leone, Tanzania, and Uganda – six countries that have recently discovered significant oil, gas, or mineral reserves. The report shows that despite recent drops in commodity prices, these reserves could boost government revenues by 9% to 31%.

• It offers a policy framework for funding social sectors, absorbing and managing the revenues while maintaining economic stability, and creating appropriate fiscal rules. The report also provides an overview of different types of spending programs and their relative strengths.

• It highlights ways to leverage extractives companies’ direct spending – as well as procurement, skills transfer, and social investment – throughout the lifecycle of extractives projects to ensure that the benefits to businesses and individuals ultimately advance human development.

The following key policy priorities emerged from the research, conversations, and consultations that shaped the report:

• Define and commit to clear, achievable human development goals that will be linked to natural resource revenues.

• Use multiple channels to direct extractives resources toward human development outcomes.

• Be realistic about the timing and amount of new revenues, and communicate those expectations appropriately.

• Identify human development priorities and the best and most feasible interventions, given the revenue projections.

• Manage macroeconomic risks, and resist spending revenues before they arrive.

• Leverage private-sector investments at project sites.

• Engage with companies in the broader economy.