RACE AGAINST THE CLOCK: Industrial Policy for Resource-Rich African Least Developed Economies-Transforming Wealth into Productive Capacity

Marcus Vinicius de Freitas

No 2623, Research papers & Policy papers on Economic Trends and Policies from Policy Center for the New South

Abstract: This paper addresses the persistent challenge of resource dependence in the world's poorest countries, focusing on the ten poorest African nations where natural- resource rents average 14% of income. It argues that four decades of conventional policy advice, which treated resource dependence primarily as a revenue management problem, have failed to help these countries. While stabilization funds and permanent-income frameworks aim to smooth consumption, they do not answer the fundamental question of how to transform resource wealth into permanent productive capacity capable of generating income after rents decline. The paper identifies a critical research gap in industrial-policy literature: many African least developed countries (LDCs) occupy a unique position characterized by weak administrative capacity and small domestic markets, but possess temporarily large fiscal space created by resource rents. This combination creates a "race against the clock," as the global energy transition and rapid technological change are shortening the economic life of both hydrocarbons and critical minerals. The paper argues that the goal of resource policy must shift from "revenue smoothing" to "productive-capacity replacement" before this fiscal window closes.

Date: 2026-08
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Persistent link: https://EconPapers.repec.org/RePEc:ocp:rpaeco:rp13_26

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