Exchange to Change January 2018 E2C January 2018 web - Page 16

16 RESEARCH

A positive note on natural resources and development in Sub-Saharan Africa : exploring Botswana ’ s case

The 2017 edition of Debating Development - an annual series of debates organized by IOB and USOS - addressed the question The global resource grab ?, with a focus on the problems related to the exploitation of natural resources , whether natural resources actually benefit the well-being of people and how the exploitation of these resources can be made more sustainable . In this short piece and as a sign of hope , we present a success story of natural resources being used to foster economic growth and reduce poverty .
Botswana is often cited as a success story of escaping the resource curse . Thanks to natural resources ( diamonds , copper / nickel , coal , wildlife , soils , forests , veld products , and ecosystems ), the country has one of the most successful economies in Africa and its revenue from mineral exports , especially diamonds , has enabled the implementation of different poverty-reduction policies .
A reminder of the natural resource curse
The natural resource curse refers to Sachs and Warner ’ s ( 1995 ) influential empirical observation that being a natural resource or mineral exporter reduces a country ’ s development prospects . However , once endogeneity is accounted for , this negative relationship no longer holds . Put differently , resources are not necessarily a curse and countries with mineral endowments , that fail to develop are often the ones that remain resource dependent ( Brunnschweiler and Bulte , 2008 ). The main reasons for natural resources to become a burden on development are Dutch disease , volatility curse and governance curse .
Dutch disease ( Corden and Neary , 1982 ): productive resources move from non-mineral traded goods ( the output of which declines ), to the booming mineral sector and the non-traded goods ( the output of which increases ), thereby causing a progressive “ deindustrialization ” contributing to poor long-run performance .
For example , since the start of its oil exports , Nigeria has seen its agricultural sector collapse and has become dependent on imported food ( Otaha , 2012 ).
The Volatility Curse ( Hausmann and Rigobon , 2003 ): volatility in the price of mineral prices translates into exchange rate fluctuations and inefficient “ stop-go ” provision of government services and infrastructure projects because of low predictability of public revenue . The higher dependence on mineral

“... we intend to conserve our resources wisely and not destroy them . Those of us who happen to live in Botswana in the 20th century are no more important than our descendants in centuries to come .” Hon . Sir QKI Masire , former President of Botswana

Exchange to change January 2018
16 RESEARCH A positive note on natural resources and development in Sub-Saharan Africa: exploring Botswana’s case The 2017 edition of Debating Development - an annual series of debates organized by IOB and USOS - addressed the question The global resource grab?, with a focus on the problems related to the exploitation of natural resources, whether natural resources actually benefit the well-being of people and how the exploitation of these resources can be made more sustainable. In this short piece and as a sign of hope, we present a success story of natural resources being used to foster economic growth and reduce poverty. Botswana is often cited as a success story of escaping the resource curse. Thanks to natural resources (diamonds, copper / nickel, coal, wildlife, soils, forests, veld products, and ecosystems), the country has one of the most successful economies in Africa and its revenue from mineral exports, especially diamonds, has enabled the implementation of different poverty-reduction policies. E xchange to change J anuary 2018 A reminder of the natural resource curse The natural resource curse refers to Sachs and Warner’s (1995) influential empirical observation that being a natural resource or mineral exporter reduces a country’s development prospects. However, once endogeneity is accounted for, this negative relationship no longer holds. Put differently, resources are not necessarily a curse and countries with mineral endowments, that fail to develop are often the ones that remain resource dependent (Brunnschweiler and Bulte, 2008). The main reasons for natural resources to become a burden on development are Dutch disease, volatility curse and governance curse. Dutch disease (Corden and Neary, 1982): productive resources move from non-mineral traded goods (the output of which declines), to the booming mineral sector and the non-traded goods (the output of which increases), thereby causing a progressive “deindustrialization” contributing to poor long-run performance. For example, since the start of its oil exports, Nigeria has seen its agricultural sector collapse and has become dependent on imported food (Otaha, 2012). The Volatility Curse (Hausmann and Rigobon, 2003): volatility in the price of mineral prices translates into exchange rate fluctuations and inefficient “stop-go” provision of government services and infrastructure projects because of low predictability of public revenue. The higher dependence on mineral “...we intend to conserve our resources wisely and not destroy them. Those of us who happen to live in Botswana in the 20th century are no more important than our descendants in centuries to come.” Hon. \RHX\\KܛY\\Y[و[