Africa is generally incredibly poor, with 490 million people in extreme poverty – defined as living on less than 1.90 USD a day. However, the continent is hugely rich in natural resources. African countries have massive deposits of gold, diamonds, oil, natural gas, uranium, platinum, iron, copper, cobalt, and cocoa. These natural resources are key to the modern global economy, but if Africa has such an abundance, why it is still so poor?
1. Mismanagement of Natural Resources
The first reason Africa is poor despite its natural resources is because of mismanagement. Many African countries have enormous reserves of minerals. However, mineral extraction in many African countries is riddled with bureaucracy, inefficiency, and lack of development. This means countries across Africa are less able to benefit from their abundance of natural resources.
Natural resources can bring huge wealth to a country. However, in order to gain the most from raw materials, countries must be able to plan, coordinate and control the process of extracting, exporting and selling them. Many countries in Africa fail to do this and it’s a key reason why they remain poor.
Another way that African countries mismanage their natural resources is through a lack of research and development. This means many resource extraction sectors across the continent are not as efficient or profitable as they could be, as they rely on outdated technologies and methods.
Many countries in Africa need to improve the management of their natural resources in order to lift themselves out of poverty.
2. Poor Governance
As well as the mismanagement of the resource extraction sectors in many African countries, the continent remains poor because of overall poor governance. African governments are generally weak and ineffective, unable to provide services, collect taxes or direct the economy as needed. This limits the wealth they can generate from their natural resources and is an important reason they stay poor.
Many African countries have over-bloated public sectors and governments that struggle to oversee the country successfully. As a result, despite the abundance of natural resources on the continent, African countries are unable to capitalize on the wealth they could bring.
In order for resource extraction to benefit communities across a country, governments must be able to channel the funds raised from the sector to help boost the wider economy. Many African countries fail to do this, and it is a reason the continent is generally poor – despite having some of the richest natural resource reserves in the world.
Improving governance is key for African countries if they are to see the benefits of their natural resources and for the continent to develop.
3. Over Reliance on External Expertise
A further reason why Africa is poor despite the continent having huge reserves of raw materials is because of an over reliance on foreign expertise. Extracting natural resources, processing, and refining them, moving them to market and trading them internationally are all highly advanced areas. Many countries in Africa lack the skills needed to manage their natural resource sectors and so rely on external expertise. This reduces the efficiency and independence of these sectors, which in-turn reduces the wealth that can be generated from them.
Most African countries have poor education systems. This means there is a lack of training related to the resource extraction sectors, as well as a general lack of highly skilled workers. As a result, Africa imports many skilled workers from abroad to assist in processing their natural resources. This means African workers are not getting the skills they need to manage their own industries, further reducing their competitiveness and profitability.
Another result of Africa’s generally under-skilled workforce is a lack of innovation in many sectors. This affects how much African countries can make from their natural resources and is a further reason the continent is poor.
4. Economies Over Dependant on Resource Extraction
Many African economies are over reliant on natural resources. This is a major reason why the continent is poor.
Although there is significant wealth that can be developed from natural resources, economies need to be diversified if a country is to become prosperous. Many African countries have economies where resource extraction dominate. A result of this is that many other economic sectors fail to develop. Workers and investments are pulled towards resources attraction industries because they dominate, and this further reduces the development of other sectors.
African countries need to use the funds they raise from their natural resources to broaden their economic base. For most countries in Africa, a failure to do this is a major reason they are poor.
Having a heavy reliance on natural resources can also distort the rest of the economy. Price increases, inflation, government spending and taxation can all be distorted. This is known as the ‘Dutch Disease’ and many African countries are poor because of its impacts.
5. Widespread Corruption
A major reason why Africa is poor despite huge quantities of natural resources is because of corruption. Many African countries are massively corrupt. Six out of the ten most corrupt countries in the world are in Africa. Corruption holds back a country’s development, so despite having huge amounts of raw materials, African countries are held back by corruption.
Corruption is rampant across Africa. This includes in the resource extraction sectors. Corruption here limits the spread of funds raised through natural resources, preventing them from being used to lift people out of poverty. Corruption also makes extracting and processing natural resources more expensive, pushing up prices and reducing the industries competitiveness. These are all factors that keep Africa poor, despite its mineral wealth.
Another area that corruption holds back African countries and prevents widespread prosperity, despite their mineral wealth, is in the government. Government corruption means that money raised from natural resources is lost, misspent, or does not reach projects that help lift people out of poverty.
Africa needs to tackle its corruption issues if the continent is to enjoy the wealth its natural resources can bring.
6. Lack of Infrastructure
An important reason why the people of Africa remain mostly poor, despite the abundance of natural resources their countries have, is because of bad infrastructure.
The continent of Africa is vast – over 30.37 million Km2. It also has huge areas of inhospitable terrain, including mountains, deserts, and jungles. Instructure – roads, bridges, railways, airports, communication, and energy, are generally poor across Africa. This means that wealth generated by natural resource extraction struggles to reach poorer communities. It also makes moving, processing, and selling raw materials more expensive and difficult.
It is often easier for African countries to ship their raw materials abroad than move them around their own countries.
Many African counties also lack modern infrastructure in their raw material sectors. Outdated equipment, work methods, tools and processing all reduce the international competitiveness of natural resources coming out of Africa. Often, minerals in Africa are sent abroad for processing, meaning African countries miss out on a significant portion of the wealth they generate. This keeps them poor.
7. Rampant Inequality
The final reason why Africa is poor, despite its natural resources, is the widespread inequality across the continent.
Africa has some of the most unequal countries in the world. South Africa, a country whose economy has large natural resource sectors is the most unequal country in the world. Inequality means that the wealth that is generated on the continent by raw materials does not reach poorer members of society. This means they cannot benefit from the natural resources their countries have.
Africa now has an extremely rich elite. The continent has 125,000 millionaires and 22 billionaires. Many of these people live lavish lifestyles whilst millions across the continent live in poverty. A big part of the wealth of the African elite is generated by exploiting natural resources. However, inequality prevents the benefits from being enjoyed by all Africans.
Inequality is one of the most important reasons why Africa can have some of the largest deposits of natural resources, worth hundreds of billions of dollars, and still have hundreds of millions of people living in poverty. African countries must address their unequal societies if they are prosper.