July 14, 2024

World Bank report highlights the potential for sub-Saharan countries to maximize their revenues from natural resources in “Africa’s Resource Future”

Albert G Zeufack, Chief Economist for Africa, World Bank. (Photo: Flickr / Brookings Institution)
Albert G Zeufack, Chief Economist for Africa, World Bank. (Photo: Flickr / Brookings Institution)

Resource-rich countries in Sub-Saharan Africa have an opportunity to maximize their revenues from natural resources, according to a World Bank report launched today.

The report, titled “Africa’s Resource Future,” finds that these countries capture only about 40% of the revenue they could potentially collect from natural resources. By adopting better policies, implementing reforms, and promoting good governance, governments could more than double revenues from natural resources such as minerals, oil, and gas.

“Maximizing government revenues in the form of royalties and taxes paid by private natural resource industries, alongside attracting new investment, would offer a double dividend for people and planet by increasing fiscal space and removing implicit production subsidies,” said James Cust, Senior Economist in the World Bank Africa Region and co-editor of the report.

The report also emphasizes the importance of full taxation of natural resources to charge the full cost of environmental and social impacts not always fully covered by producers, including petroleum resources. Failing to do so can act as an implicit production subsidy and raise carbon emissions.

The global transition away from fossil fuels is creating unprecedented demand for minerals and metals such as cobalt, lithium, copper, nickel, and rare earth elements (REEs) that are required to develop green technologies such as wind turbines, solar panels, and batteries. Many of these resources are found in abundance across Africa. However, experience shows that natural resource wealth does not automatically translate into inclusive growth and prosperity.

Albert Zeufack, World Bank Country Director for Angola, Burundi, Democratic Republic of Congo (DRC), and Sao Tome and Principe, and co-editor of the report, suggested that a “regional approach to the extractives sector would allow the creation of value chains that add more value and create more jobs for people living in resource-rich countries than extraction alone.”

The report also highlights opportunities tied to the implementation of the African Continental Free Trade Area agreement that calls for phasing out 90% of tariffs over the next five to 10 years. Promoting regional integration and harmonizing mining taxes and royalties across the region would also help.

“A just transition for Africa, and the world, will depend on successfully and equitably harnessing the economic benefits of natural resources in the region,” said the report. “Good governance and sound macro-fiscal management of resource revenues, while also preparing for a low carbon future, lies at the heart of this transition and must play a central role in economic transformation for Africa’s future.”

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