Diversification in resource-rich Africa, 1999–2019

Michael L. Ross and Eric Werker

Resources Policy, 2024, vol. 88, issue C

Abstract: We survey the performance of Sub-Saharan Africa's resource-dependent economies from 1999 to 2019, a period covering the commodity price supercycle, which generated enormous rents for natural resource producers. We show that despite high overall growth rates, these states failed to convert their windfalls into broader forms of development: their economies diversified more slowly than resource-poor countries in Sub-Saharan Africa; their economies became less complex; their low institutional quality regressed further; and they achieved slower progress on human development than their resource-poor counterparts. Case studies of the top three diversifiers—Botswana, Zambia, and Nigeria—underscore the challenges of diversification. We suggest two broad reasons for these patterns. First, economic diversification, especially export diversification, is intrinsically difficult for low-and-middle income resource-dependent countries, due to both Dutch Disease effects and the isolated product spaces of the oil, gas, and minerals sectors. Second, diversification in resource-dependent states is sensitive to institutional quality, yet institutional quality is sticky and typically constrained by political interests that are hostile to reforms. This implies that the development challenges of oil, gas, and mineral dependent states over the coming decades will be significant and difficult to surmount. We suggest a more modest set of goals focused on diversifying into related activities in the extractives value chain and unrelated sectors in the domestic economy, as well as narrowly-focused efforts to boost non-resource export industries.

Keywords: Economic diversification; Resource dependence; Resource-led development; Sub-saharan africa (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:88:y:2024:i:c:s0301420723011480

DOI: 10.1016/j.resourpol.2023.104437

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