Delivering on the promise:Leveraging natural resources to accelerate human development in Africa
A joint report from the African Development Bank and the Bill & Melinda Gates Foundation
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.