Effects of natural resource rent in sub-saharan Africa

Abstract

The rents from natural resources, primarily derived from the exploitation of oil, minerals, and gas, play a central role in the economies of Sub-Saharan Africa. However, their effects are ambivalent and vary depending on governance and national contexts. Resource-rich countries often experience unstable economic growth characterized by dependency on exports and limited economic diversification. This research aims to analyze the effects of natural resources in Sub-Saharan Africa. Using WDI and WGI data covering the period from 2000 to 2021, we applied the Generalized Method of Moments (GMM) in a dynamic panel framework to identify the impact of resource rents. Our results show that the effect of these rents varies depending on the variables analyzed. Gross Domestic Product per capita (GDP per capita) has a significant and positive impact on the profitability of natural resources, while Foreign Direct Investment (FDI) also exhibits a significant positive effect. In contrast, political stability has a significant and negative impact on natural resources. The effect of corruption, however, is not significant in our model. Human capital demonstrates a significant and negative impact. In this context, the study highlights the importance of prudent and balanced management of natural resources to ensure sustainable and inclusive economic development in Sub-Saharan Africa. These findings also underscore the critical role of balanced governance that promotes economic diversification, institutional stability, and the development of human capital to achieve sustainable and inclusive development in the region. Prudent management of resource rents is essential to transform these assets into sustainable benefits for future generations.

Keywords: Sub-saharan Africa, Growth, Natural resources, Annuity

JEL Classification : Q0, 00, 01

Paper type : Research paper