Discoveries of large quantities of commercially viable hydrocarbons and
mineral ore in Eastern Africa continue to raise a fundamental question: can these
resources be a blessing that unleashes a tide of wealth and prosperity?
On average, the so-called resource rich countries have performed poorly
on political, social and economic indicators. Such countries tend to have
slower economic growth, which is often characterized by inequitable
distribution of national wealth. More often than not, resource rich do not
re-invest resource revenues into productive ventures. Moreover, political
wrangles and conflict over access and control of resource rents begets
corruption and undermines democratic institutions.
Governments can do a lot in the way of legal, policy and institutional
mechanisms to avert the resource curse. Countries where governments have turned
resources into a blessing such as Botswana and Norway, to mention just a few,
demonstrate what can be accomplished through transparent and accountable
political leadership.
At the macro level, extractive industries contribute substantial
revenues for host national governments in the form of royalties, income taxes
and other profit sharing mechanisms. For reasons largely attributed to the
resource curse, the benefits of the extractive sector have consistently failed
to generate growth, expand economic opportunity and reduce poverty, especially among
host communities.
Consequently, there is urgent need to examine the role of extractive
industries can play in expanding economic opportunity to improve livelihood choices
of the communities who live where resource are extracted. This is especially
critical in the Kenyan context where the resource-rich counties like Turkana,
Baringo, Kisumu, Mandera, Wajir, Garissa, Tana River, Lamu, Kilifi and Kwale are
among the poorest, with poverty levels ranging between 50-80 percent.
For poor host communities, livelihood options ranging from
entrepreneurship to employment are constrained by a spectrum of related
constraints including political marginalization, geographic isolation and
market failure. Poverty alleviation in resource rich poor communities must be
about creating economic opportunity. I think about economic opportunity in this
context a confluence of factors that enable the poor to harness their physical
and social assets to generate livelihood choices.
Some in the private sector may argue, and rightly so, that creating
opportunity is the responsibility of government, not the private sector. Such
an argument would be naïve. Here is why; creating opportunity at the local
level gives the private sector the credibility, enhance social license to
operate, and reduce the risk of local grievance and conflict.
As an academic who works on extractive resources, I am always baffled
the fact that very little work has been done in Africa on approaches by
extractive industries for enhancing economic opportunity for host communities, especially
evaluation of what works where and why.
There are four elements upon which the extractive industry players could
build a strategy for expanding economic opportunity and avert the resource
curse in the host community economy.
The first element is creating inclusive business operating models, which
involve the poor as entrepreneurs, suppliers, distributors, retailers,
consumers as well as employees. Local procurement of goods and services could
be framed as a contractual obligation under local content requirements.
Moreover, extractive sector can have greater impact when they incorporate local
SMEs into their value chains.
The second element is investing in developing human capital through
improving health-care, expanding access to tertiary education and
technical-vocational training and skills development for local workers. At the
school level special initiatives could be created to promote science,
technology, mathematics and the arts, especially among girls. Investments could
also be made in capacity building, including mentoring programs for local
suppliers, distributors and retailers, which target women and youth.
The third element is building institutional capacity through a variety
of initiatives such as providing funding for university programs in social
sciences, management and engineering, strengthening oversight capabilities in
civil society and community based organizations and supporting industry
networks and associations to facilitate knowledge transfer and sharing of best
practices among local entrepreneurs.
The fourth element is strengthening transparency and accountability
through engagement in governance and accountability process through publication
and verification of payments to governments. This could ensure that economic opportunities
from the extractive sector are distributed more equitably.
Extractive industries in East Africa do not have a wide range of choice
in investment locations. Hence expanding economic opportunity in host
communities is in their best interest and will increase profitability in the
long term and help avert the resource curse.
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