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African Development Bank Group Working Paper Series n°283 September 2017 Louis Moussi Sopp and Anthony Leiman Mineral Resource Accounting Measures in Africa

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Page 1: Mineral Resource Accounting Measures in Africa · and Green Growth, and its High-5 priority areas—to Power Africa, Feed Africa, Industrialize Africa, Integrate Africa and Improve

African

Develop

ment Ba

nk Grou

p

Working

Pape

r Serie

s

n°283

Septe

mber 2

017

Louis Moussi Sopp and Anthony Leiman

Mineral Resource AccountingMeasures in Africa

Page 2: Mineral Resource Accounting Measures in Africa · and Green Growth, and its High-5 priority areas—to Power Africa, Feed Africa, Industrialize Africa, Integrate Africa and Improve

Working Paper No 283

Abstract Prior to the end of the prolonged commodity boom that led up to the 2008 recession, much was made of the rapid growth in GDP demonstrated by many African countries. The continent’s rising GDPs were held to be heralding a new dawn: a turn in the evolutionary economic downward cycles that had typified many of its economies since the end of the colonial era. The rapid fall in commodity prices as the global recession took hold showed the limitations of these high hopes, and the weak foundations on which some of them had been based. In this paper, we will begin by checking the veracity

of this economic portrait, assessing the dependence of the income of eight mineral-resource-rich sub-Saharan African countries on their mineral commodities. The paper then compares the relationship between an economy’s fiscal deficit before borrowing and National Income as conventionally recorded, as opposed to that between the deficit and the National Income as calculated following the El Serafy method. It then discusses some of the challenges towards efficient resource management in low-income mineral-resource-rich sub-Saharan African countries.

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The text and data in this publication may be reproduced as long as the source is cited. Reproduction for commercial purposes

is forbidden. The WPS disseminates the findings of work in progress, preliminary research results, and development

experience and lessons, to encourage the exchange of ideas and innovative thinking among researchers, development

practitioners, policy makers, and donors. The findings, interpretations, and conclusions expressed in the Bank’s WPS are

entirely those of the author(s) and do not necessarily represent the view of the African Development Bank Group, its Board

of Directors, or the countries they represent.

Working Papers are available online at https://www.afdb.org/en/documents/publications/working-paper-series/

Produced by Macroeconomics Policy, Forecasting, and Research Department

Coordinator

Adeleke O. Salami

This paper is the product of the Vice-Presidency for Economic Governance and Knowledge Management. It is part of a larger effort by the African Development Bank to promote knowledge and learning, share ideas, provide open access to its research, and make a contribution to development policy. The papers featured in the Working Paper Series (WPS) are those considered to have a bearing on the mission of AfDB, its strategic objectives of Inclusive and Green Growth, and its High-5 priority areas—to Power Africa, Feed Africa, Industrialize Africa, Integrate Africa and Improve Living Conditions of Africans. The authors may be contacted at [email protected].

Correct citation: Sopp L. M. and A. Leiman (2017), Mineral Resource Accounting Measures in Africa, Working Paper Series N°283, African Development Bank, Abidjan, Côte d’Ivoire.

Page 3: Mineral Resource Accounting Measures in Africa · and Green Growth, and its High-5 priority areas—to Power Africa, Feed Africa, Industrialize Africa, Integrate Africa and Improve

Mineral Resource Accounting Measures in Africa1

Louis Moussi Sopp and Anthony Leiman

JEL Codes: E01, Q32, Q56

Keywords: National income, ‘El Serafy’ method, accounting, mineral resources

1 School of Economics, University of Cape Town, Private Bag| Rondebosch 7701, South Africa, email: [email protected]. School of Economics| University of Cape Town, Private Bag, Rondebosch 7701, South Africa, email: [email protected]

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[N]atural resources are not purchased from mother nature who produced them so

that their valuation must inevitably be artificial and controversial. … the national

accounts ought not to show the using up of assets whose creation has not first been

recorded in the accounts.… Nature is not recognised as a factor of production by

economists or national accountants and nature’s production of resources is not,

and perhaps could never be, recorded in the accounts.

Derek Blades (1989, 215)

1. Introduction

Good policymaking needs good information. In the 1989 paper from the Organisation for

Economic Co-operation and Development (OECD) cited above, Blades argued that the United

Nation’s System of National Accounts then in place gave little aid to resource planners and

decision makers. Four years later, the UN adopted satellite accounting to mitigate this

deficiency. Despite their adoption by the United Nations, satellite accounts have not become

universal, nor have the policy lessons they offer been fully recognised. Nowhere has this

problem been clearer than in Africa’s recent growth surge, so much of which was mineral

based.

Prior to the end of the prolonged commodity boom that led up to the 2008 recession,

much was made of the rapid growth in gross domestic product (GDP) demonstrated by many

African countries. The continent’s rising GDPs were held to be heralding a new dawn; an up-

turn that was reversing the downward economic trends that had typified so many of the

continent’s economies since the end of the colonial era. Unfortunately, the rapid fall in

commodity prices that ensued as the global recession took hold, showed the limitations of these

high hopes and the weak foundations on which some of them had been based. Since then

commodity prices have begun to recover, but the lessons of the price shocks have not

necessarily been built into the fiscal policies of those economies most susceptible to such

shocks.

In this paper, we will begin by checking the veracity of this economic portrait, assessing

the dependence of the continent’s income on primary commodities, and the performance of its

non-commodity sectors in the past decade. An index of risk is calculated for African

economies. This is based on the contribution of major minerals to GDP and to Gross Exports,

together with the historic variances in their prices (i.e. the amplitudes and frequencies of

historic price fluctuations).

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While many countries, following the lead of 1993 UN System of National Accounts,

have begun compiling satellite accounts, and while the interpretation of these has been

significantly improved (see United Nations et al., 2009, chapters 12 and 29), the real message

of this data may have been missed by policy makers. A simple test can be used to reveal the

extent to which policy makers have internalised the message of the satellite accounts. This

would take the relationship between an economy’s fiscal deficit before borrowing and its

nominal net domestic product (NDP) as conventionally recorded, significantly improved (see

and compare it to the relationship between the country’s fiscal deficit and its National Income

as calculated using the El Serafy method (which follows Hicks’s view of income as the time

derivative of wealth). Such a comparison would provide a mechanism to test the fragility of

economies (or the risk their fiscal policies entail in the face of commodity price fluctuations).

A more complete indicator of an economy’s exposure to fluctuating commodity prices

would be relationship between national debt and NDP as computed in these two manners. Such

tests will provide the remainder of the paper. The data to be used is taken from a sample of

eight selected sub-Saharan African countries for the period 1990-2015. These countries are

Angola, Botswana, Congo (Brazzaville), Gabon, Equatorial Guinea, Mauritania, Nigeria, and

South Africa. The essential data comprises GDP, NDP, specific mineral rents, sector shares

(minerals and mining as percentage of NDP or NY), budget deficit, and national debt.

2. Literature review

Macroeconomic analysis usually focuses on GDP growth as the principal measure of economic

performance; however, as is now widely established, GDP gives an incomplete picture of an

economy’s true situation and the welfare of its inhabitants. Other indicators, while harder to

quantify, can provide valuable information on the state of an economy.

This is particularly true for countries with a large endowment of mineral resources, as

is the case of many sub-Saharan African countries. GDP and comparable measures describe

the value of total production in the economy without accounting for changes to the capital stock

(which would be captured in NDP or in National Income if ideally calculated). Particularly

important are the depreciation of capital assets, including the exhaustion of non-renewable

resources, damages to the ecosystem, the accumulation of human and physical capital, and new

mineral discoveries. In resource-rich economies, these subtleties have vital implications for the

sustainability of long-term growth and the design of fiscal policies.

The relationship between natural resources and economic success has confounded

economists for a long time now. In spite of being endowed with considerable natural resources,

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many African countries are still considered among the poorest nations in the world and have

neither been able to embark on sustainable long-run economic growth paths, nor implement

stable fiscal policies necessary to sustain that growth. The role of natural resources in

established theories of economic wealth ranges from highly beneficial for economic growth to

deeply undermining. The empirical weak relationship between resources and economic

performance has promoted an emphasis on country-context-specific factors that promote the

success or failure in harnessing resource wealth. It is in this environment that wealth accounting

can be used to measure the natural and intangible capital that contribute to economic growth.

The subsequent analysis attempts to identify patterns in natural capital depletion in

Angola, Botswana, Congo (Brazzaville), Equatorial Guinea, Gabon, Mauritania, and Nigeria,

and to discuss the implications for the long-term growth and development. This analysis uses

the methodology developed by El Serafy to determine the value of mineral resources.

One of the most valuable indicators of changes in an economy’s underlying productive

capital stock is the ratio of Adjusted Net Savings to Gross National Income. To derive Adjusted

Net Savings we need five main components namely:

Gross National Saving

Current education expenditures

Depreciation of produced capital

Depreciation of natural resources

Damage caused by CO2 emissions

The main advantage of this measure is that it allows an assessment of the degree to which the

investment of natural resource rents and consequent increases in the stock of produced and

human capital compensate for the present depletion of natural resources. This has significant

consequences for intergenerational equity in the exploitation of natural resources and welfare.

Numerous studies on Adjusted Net Savings rates have revealed a disturbing trend

among natural resource-rich countries in sub-Saharan Africa, where high GDP growth rates

often hide decreases in the underlying stock of natural capital. While a very few countries have

been able to successfully transform their natural capital into human and produced capital, the

vast majority have failed to do so. In several cases, the exploitation of natural resources has

created an unsustainable surge in current consumption expenditure at the expense of long-term

sustained economic growth. Furthermore, some studies have shown a strong correlation

between negative adjusted savings rates and persistently low socioeconomic development

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indicators, such as literacy rate, infant mortality and access to water and electricity (Collier et

al., 2010).

Figure 1: Contribution of mining to GDP

Source: United States Geological Survey, IMF International Financial Statistics, The World Bank

As Figure 1 shows, mineral resources play an important role in the growth of the

economies we shall be examining. It is for this reason therefore that the focus of this analysis

is restricted to mineral resources. Natural resources also include elements like wildlife, forest,

fisheries but these are excluded for the purpose of this analysis. In the remainder of this paper,

any reference to natural resources should be taken to mean mineral resources alone.

Before starting the analysis, it is important to calculating resource rents for each

category of mineral resource. Resource rents can be defined as grossly be defined as:

Unit Rents*Production where Unit Rents = Unit Price – Unit Cost

In the 1990s, attempts to measure sustainability were popular and numerous studies attempted

to provide a good measure of sustainability for single countries or a selection of countries.

These included Repetto et al. (1989) for Indonesia, Repetto and Cruz (1991) for Costa Rica,

van Tongeren et al. (1993) for Mexico, Bartelmus et al. (1993) for Papua New Guinea, Serôa

0

10

20

30

40

50

60

70

80

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da Motta and Young (1995) for Brazil, Pearce and Atkinson (1993), and Hamilton and

Atkinson (1996). In this analysis, the El Serafy method will be used to compute resource rents

for the eight countries to ascertain which of them can be classified as weakly sustainable and

formulate the appropriate policy recommendations.

The El Serafy method for computing resource rents

In order to calculate the user costs for resource depletion according to the El Serafy method,

we need to get four different terms:

P-AC (net price of the resource)

R, Production (Resource Depletion)

r, the real discount rate (discount rate used in analysis is 4 percent p.a.)

n, the number of years of reserves remaining at current production rates and current

extraction technologies (reserves to production ratio).

The El Serafy formula for user cost can be expressed as shown below:

Source: Neumayer (2000)

It is an estimate of the total Hotelling Rent (only an estimate, since Hotelling used marginal

rather than average extraction cost) that the resource could provide, but following Keynes’s

terminology is called the ‘user cost’ of resource depletion as it indicates the share of resource

receipts that should be considered as capital depreciation. With this method, an explicit

correction term for resource discoveries is not needed because discoveries and new

technologies that affect effective reserves enter the formula via changes to n, and the formula

is re-calculated again for each year.

The logic behind the formula for the El Serafy method is that, sustainability need not

require that all resource rent be invested (as Hartwick, 1997 suggested) but that a portion can

be consumed. While the earnings from the resource stock will end at some finite time,

sustainable income by definition must persist. Therefore, a finite cash flow has to be converted

into an infinite one. Sustainable income is that part of resource receipts which if received

infinitely would have a present value just equal to the present value of the finite stream of

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resource receipts over the lifetime of the resource; i.e. if each year’s resource rents were used

to purchase an infinitely long lasting annuity, sustainable income (and the El Serafy user cost)

would be the annual pay out from that annuity.

An advantage of using the El Serafy method is that it does not presume efficient

resource pricing i.e. resource rent growing at the rate of interest according to Hotelling’s rule.

This is because the El Serafy method does not depend on an optimisation model. It is an ‘after

the fact’ approach thus making it more flexible than competing resource-rent calculation

methods (World Bank, 2013). Consequently, future resource receipts have to be discounted

and the El Serafy method requires the selection of a discount rate r. If either the remaining

lifetime of the mineral resource, n, or the discount rate r are quite small, then user cost value

will consequently be relatively large.

Computing resource rents according to the El Serafy method In the following section, resource rents have been computed using the El Serafy method. Table

1 shows which resources we used for the analysis, and that for Angola, Congo (Brazzaville),

Equatorial Guinea, Gabon, and Nigeria the dominating resources are oil and natural gas. For

Mauritania, the dominating resource is iron ore and for Botswana it is diamonds. Figure 1

(above) indicates the share of mining (includes oil and natural gas) as a percentage of GDP.

Table 1: Share of single natural resources of total resource rents

Share of Oil & Natural Gas of Rents in percent 1990-1999 2000-2009 2010-2016

Angola 99.35 92.04 91.5

Congo (Brazzaville) 90.34 97.49 98.91

Equatorial Guinea 95.00 96.00 97.00

Gabon 86.30 85.00 85.41

Mauritania

Nigeria 99.77 99.59 95.17

Share of Iron Ore of Rents in percent

Mauritania 100.00 97.00 91.30

Share of Copper & Nickel of Rents in percent

Botswana 0.00 0.04 0.03

Share of Diamonds of Rents in percent

Angola 0.00 0.04 0.03

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Botswana 90.16 93.31 96.68

Sources: United States Geological Survey, IMF International Financial Statistics, The World Bank

Figure 2: Mineral exports as a percentage of total exports

Sources: United States Geological Survey, IMF International Financial Statistics, The World Bank

Figure 2 shows that the exports of these countries also tend to be very concentrated and

dominated by mineral exports. This makes them very vulnerable in terms of trade shocks when

the prices of the primary commodities suddenly fall.

Results

Figure 3: Angola adjusted net savings (percentage GNI) and gross national savings

(percentage GNI) 1994-2012

Source: Author’s own calculation

0

10

20

30

40

50

60

70

80

90

100

-100.00

-75.00

-50.00

-25.00

0.00

25.00

50.00

75.00

100.00

1994 1996 1998 2000 2002 2004 2006 2008 2010

Extended Genuine Saving II (El Serafy 4% p.a) Gross Savings (% GNI)

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Figure 4: Botswana adjusted net savings (percentage GNI) and gross national savings (percentage GNI) 1992-2014

Source: Author’s own calculation

Figure 5: Congo (Brazzaville) adjusted net savings (percentage GNI) and gross national savings (percentage GNI) 1994-2012

Source: Author’s own calculation

0.00

10.00

20.00

30.00

40.00

50.00

60.00

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Extended Genuine Saving II (El Serafy 4% p.a) Gross Savings (% GNI)

-80.00

-60.00

-40.00

-20.00

0.00

20.00

40.00

60.00

1992 1994 1996 1998 2000 2002 2004 2006

Extended Genuine Saving II (El Serafy 4% p.a) Gross Savings (% GNI)

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Figure 6: Equatorial Guinea adjusted net savings (percentage GNI) and gross national savings (percentage GNI) 1994-2012

Source: Author’s own calculation

Figure 7: Gabon adjusted net savings (percentage GNI) and gross national savings

(percentage GNI) 1992-2005

Source: Author’s own calculation

-150.00

-125.00

-100.00

-75.00

-50.00

-25.00

0.00

25.00

50.00

75.00

Gross Savings (% GNI) Adjusted Net Savings_El Serafy (%GNI)

-30.00

-20.00

-10.00

0.00

10.00

20.00

30.00

40.00

50.00

60.00

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Extended Genuine Saving II (El Serafy 4% p.a) Gross Savings (% GNI)

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Figure 8: Mauritania adjusted net savings (percentage GNI) and gross national savings (percentage GNI) 1992-1998

Source: Author’s own calculation

Figure 9: Nigeria adjusted net savings (percentage GNI) and gross national savings (percentage GNI) 1992-2014

Source: Author’s own calculation

0.00

10.00

20.00

30.00

40.00

50.00

60.00

1992 1993 1994 1995 1996 1997 1998

Extended Genuine Saving II (El Serafy 4% p.a) Gross Savings (% GNI)

-55.00

-40.00

-25.00

-10.00

5.00

20.00

35.00

50.00

65.00

80.00

95.00

110.00

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Extended Genuine Saving II (El Serafy 4% p.a) Nigeria

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Figure 10: South Africa adjusted net savings (percentage GNI) and gross national savings (percentage GNI) 1992-2014

Source: Author’s own calculation

The figures above are illuminating. Much has recently been made of who should be

appointed to head the Angolan sovereign wealth fund, a body whose objective is to accumulate

assets that parallel the hypothetical ones in the El Serafy calculation. The persistence of

negative Adjusted Net Savings for Angola and Congo (Brazzaville) certainly highlights the

need for better resource management in the future. As the figures show, there are large

discrepancies between Gross Savings and Adjusted Net Savings (El Serafy) for Angola, Congo

(Brazzaville), and Equatorial Guinea. These discrepancies suggest that these countries have not

been able to capitalise on the considerable opportunities given to them through their natural

resource endowments to build up and maintain their physical and human stock of capital in

exchange for the exhaustion of their stock of natural capital. Botswana consistently experienced

positive Adjusted Net Savings and, with very high reserves to production ratios, there seems

to be no indication of weak sustainability. Although it is true that the El Serafy method allows

for some of the resource rents to be consumed, the widening of the gap in recent years between

Gross Savings and Adjusted Net Savings (El Serafy) suggests that some amount of the national

wealth that is consumed is in excess of what should be the case under efficient resource-rent

management.

It is a stylised fact that commodity prices are more volatile than manufactured goods.

It is also well documented that many resource-dependent countries experience more

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

Gross Savings (% GNI) Adjusted Net Savings_El Serafy (%GNI)

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generalised macroeconomic volatility and have a strong tendency towards procyclicality

(Hausmann and Rigobon, 2003; Van der Ploeg and Poelhekke, 2009). Lastly, it has been shown

repeatedly that such volatility is not good for sustainable long-term economic growth and

welfare (Ramey and Ramey, 1995).

Table 2: Sustainability risk index

Angola 3.3

Botswana 4.1

Congo (Brazzaville) 3.2

Equatorial Guinea 4.3

Gabon 2.7

Mauritania 1.8

Nigeria 1.9

South Africa 0.8

We then construct a sustainability index (Table 2) that indicates how at-risk an economy

is to shocks or fluctuations in the price of the dominant natural resource. The higher the index

value, the more at risk the economy is to fluctuations in the price of the dominant natural

resource. According to this index, we see that Equatorial Guinea is the most at risk followed

by Botswana and then Angola. South Africa is the least at risk followed by Mauritania and then

Nigeria. It should not be surprising that South Africa is the least exposed given that its economy

is more diversified relative to the other countries.

5. Discussion and policy implications Robinson et al. (2006) produced one of the most comprehensive studies on the relationship

between abundance of resource revenues, political accountability and the quality of institutions

in the economy. Their argument and empirical evidence suggest that governments that do not

have to introduce socially tolerable and consistent systems of taxation, but can rather finance

themselves through resource revenues, have reduced incentives to be accountable and

responsive to their citizens. Consequently, they do not have a stake in the development of a

thriving market-based, non-resource economy that is otherwise required to establish a taxable

economic base and secure the fiscal sustainability of the state. In contrast, governments in non-

resource countries have an incentive to promote the development of such a market-based

economy as it generates a multitude of corporate and individual taxpayers, providing a steady

and stable source of revenue for the state.

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In the Robinson et al. (2006) model, the existence of resources and the associated rents

increases the utility of holding political power for too long. As a result, political horizons across

a range of policy issues are short sighted and sub-optimal from a social welfare perspective.

Most of the resource revenues are directed towards the single purpose of keeping political

power. One manifestation of this is a bloated public sector that establishes a stake in keeping

the status quo and is paid off through the rents emanating from the resource sector.

Unsurprisingly, a number of prominent studies have found strong evidence that resource

abundance is associated with higher levels of corruption.

The rent-seeking and broader political economy literature on the resource curse helps

explain the prevalence of poor public investments financed by resource related public revenue

windfalls. Torvik (2009) suggests that one of the biggest issues concerning resource-rich

countries is why massive domestic investments in some of them have not resulted in greater

growth gains. Gelb (1988) estimated that more than half of the bonus gains from the rise in oil

prices in the 1970s were invested in domestic projects. Any of the leading growth models

would have predicted that, following such significant public investments, strong and

sustainable economic growth will have occurred, but this was not the case for most if not all of

the countries in this study.

There are a number of reasonable arguments that may be brought forward to explain

why the expected growth failed to happen. In a study of the response by the Nigerian

government to positive terms of trade shocks during the oil boom, Gavin (1993) found that the

government largely invested in projects with high prestige and political gains but which made

little economic sense. Nigeria is not the only country with this issue. The tendency of investing

in projects with negative social surplus is typical of many resource-rich African governments.

Several studies have also highlighted the strong relationship between resource

abundance and conflict and war. Collier and Hoeffler (1998 and 2004) argue that resource-rich

countries face conflict for two main reasons. Firstly, the resource rents are used to buy weapons

and pay the soldiers. Secondly, because resources often have a winner-takes-all quality with

big payoffs for the winner, and limited need for cooperation with losers in the future to extract

rents, resources trigger fierce struggles over control.

The Brundtland report’s approach to sustainable growth (WCED, 1987) is broad:

‘growth that meets the needs of the present without compromising the ability of future

generations to meet their own needs and the management of human, natural and financial assets

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to increase long term economic wellbeing’. An economy that experiences rapid expenditure

growth funded by extraction of mineral resources, and does so without increasing its overall

stock of wealth by investing in physical and human capital, will not be able to sustain its

economic growth in the long run and risks sacrificing the wealth of the future generations to

finance current consumption; i.e. it fails even the Brundtland definition of sustainability.

A growth strategy that is sustainable needs to account for the temporal and

intergenerational dimensions of resource wealth by ensuring that current growth does not come

at the expense of future growth. It is important to acknowledge that a new discovery of mineral

resources, or an increase in the stock of reserves of existing mineral resources can also play a

positive role.

Adopting and implementing policies that increase savings and maximise rents from

mineral resources, sustaining human capital investment, putting in place transparent and

consistent fiscal policies will be vital to building the government’s policy credibility and

expanding the available space for public investment or to free up resources to build fiscal

reserves. It is also important for sustainable economic growth to be achieved that the revenues

from mineral resources are reinvested into different types of productive capital. This requires

a strong policy framework grounded by clear policy commitments. According to the World

Bank (2013) such policy commitments should include

(i) efforts to promote efficient resource extraction with a view to maximizing

resource rents;

(ii) a fiscal regime for the resource sector that enables the government to recover an

equitable share of resource rents;

(iii) well-designed investment policies that use resource rents to generate sustainable

returns over the long term.

6. Challenges in efficiently managing resource rents The first issue is the availability of information to estimate the stock of mineral resources and

total wealth. With the exception of Botswana, there is no comprehensive data or statistics on

wealth accounting, nor a facade by the governments of Angola, Congo (Brazzaville),

Equatorial Guinea, Gabon, Nigeria, and Mauritania to even create and regularly update this

accounting to show the evolution of the stock of mineral resources. The full or even partial

implementation of the United Nations SEEA System by these countries would be an important

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first step towards preserving, protecting, and enhancing their national wealth, thus building the

foundation for the prosperity of all generations.

Another difficulty with efficiently managing resource rents in order to achieve

sustained economic growth involves determining the right amount of the resource rents to

invest and consume. A key element in this trade-off is the marginal returns offered by different

types of public investment. Mauritania for example suffers from a considerable lack of

infrastructure in the form of reliable roads, like many African countries. This deficiency may

suggest that increased investment in physical infrastructure will generate strong economic

returns. Even though shortages of physical capital certainly constrain development, on the other

hand and in the medium term especially, the absorptive capacity of Mauritania is likely to be

low and an overemphasis on these forms of capital may result in unproductive investments.

Therefore, the time path for the use of revenues needs to be carefully thought out. One

possibility could be to keep at least some part of the revenues in a sovereign wealth fund in the

short term, as is the case with many of the oil-rich middle-eastern Arab countries. The quality

of institutions as well as the roles they play in the management of resource revenues forms an

important part of this discussion.

References

Bartelmus, Peter, Lutz, Ernst, and Schweinfest, Stefan (1993) ‘Integrated Environmental and Economic Accounting: A Case Study of Papua New Guinea’, in Ernst Lutz, ed., Toward Improved Accounting for the Environment: an UNSTAT–World Bank Symposium, Washington D.C.: The World Bank: 108-143.

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APPENDIX 1 Data sources Angola Oil and natural gas production figures source: OPEC Database. Diamond production estimates from the Kimberley Process Website. Botswana Diamond, gold, coal, copper, and nickel production data sources: Botswana Mineral Accounts Report, Statistics Botswana and Economic Accounting of Mineral Resources in Botswana. Congo (Brazzaville) Oil and natural gas production data source: OPEC Database. Equatorial Guinea Oil and natural gas production figures data source: OPEC Database. Gabon Oil and natural gas production figures data source: OPEC Database. Another major mineral is manganese but production figures were unavailable. Mauritania Iron ore and crude oil production figures data source: the Mauritania Natural Wealth for a Sustainable Future Report. Nigeria Oil and natural gas production figures data source: the OPEC Database. Other minerals such as lead, zinc, and tin are also present in Nigeria but data on production and reserve levels for these minerals were unavailable. South Africa Data on coal, gold, platinum and diamond production data sources: Statistics South Africa, the South African Department of Trade & Industry and the Kimberley Process Website.

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APPENDIX 2 Figure A1: Platinum $/Oz price fluctuations

Source: International Monetary Fund: World Economic Outlook

Figure A2: Gold $/Oz price fluctuations

Source: International Monetary Fund: World Economic Outlook

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Figure A3: Volatility crude oil

Source: International Monetary Fund: World Economic Outlook

Figure A4a: Mineral exports as a percentage of total exports (countries A-Le)

Source: International Monetary Fund: World Economic Outlook

Figure A4b: Mineral exports as a percentage of total exports (countries Li-Z)

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Source: International Monetary Fund: World Economic Outlook

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