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Economy

Why poverty plagues Africa despite riches

Oil exploration in Northern Kenya. FILE PHOTO | NMG
Oil exploration in Northern Kenya. FILE PHOTO | NMG 

A large number of commodity-rich African countries have long struggled under the weight of mismanagement of the revenues from resources, leaving many of their citizens wallowing in poverty.

Known as Africa’s resource curse, the countries have failed to invest prudently the revenue of their resources, leading to civil strife and economic hardship whenever the prices of these commodities fall.

Africa’s largest oil producer Nigeria, which pumps nearly two million barrels of high quality crude per day, has often sagged under the weight of endemic corruption which has seen billions flow into the pockets of a select few.

The same is replicated in Angola, which due to the oil revenue has also become one of the most expensive countries to live in on the continent, especially for expatriates.

However, there have been some success stories on the continent in managing commodity revenue  such as South Africa with gold and platinum, Botswana with diamonds, Egypt, Algeria and lately, Ghana in the oil sector.

The lack of diversification from dependence on commodities has hit a number of African economies hard in the past two years.

The economies of Angola and Nigeria slowed down considerably after the price of crude fell sharply from June 2014, to hit lows of $30 per barrel in 2016. The commodity’s price is yet to fully recover, trading currently at $63 per barrel. Nigeria was particularly hard hit, with her currency coming under pressure and eventually being devalued last year as the economy contracted.

The Organisation of the Petroleum Exporting Countries says the oil and gas sector accounts for about 35 per cent of Nigeria’s gross domestic product, while 90 per cent of the country’s export revenue comes from oil.

Commodities have also fomented conflict across a number of African countries where citizens have felt excluded from sharing in the windfall, and where these countries have failed to invest the revenue in the non-resource economy.

Democratic Republic of Congo has been a prime example of minerals fuelling war, while in West Africa Liberia and Sierra Leone had seen brutal civil conflict mainly by individuals seeking to benefit from proceeds of diamond trading.

In Kenya, the new oil laws have been held up due to ongoing debate on how the oil revenue will be shared out between the national government and local communities. Kenya’s major oil discoveries have also taken place in the volatile northern region, where fears over safety have already cost the country the Uganda oil pipeline which will instead be routed through Tanzania.

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