Paul Collier speaks with an authoritative and original voice on the economics of African development. He is the author of The Bottom Billion: Why the Poorest Countries are Failing and What Can be Done About It and Director of Centre for the Study of African Economies at Oxford University. He spoke at a Royal African Society Business Breakfast on the subject of whether Africa can harness its resources for development.
The value of Africa’s natural resources – valued in the trillions of dollars – dwarf other sources of capital such as remittances and aid. High commodity prices (despite some variation) ensure that they will remain a valuable asset to African countries. However, these natural resources are substantially unknown (relative to OECD countries.)
The history of resource extraction is however substantially a history of plunder. Plunder has been directed by powerful forces both internal to African economies, and externally from foreign companies, which have largely been the beneficiaries of these resources. The task is to counter this model of plunder.
Collier used the example of Germany – the best run economy in Europe – to demonstrate that the most effective motivation for economic renaissance is to have experienced a period of absolute economic failure. For Germany, this was the crisis of the early 1930s, and for Africa this is the present day.
Collier sought to answer the question: What will it take for Africa to do a Germany? – this was covered in the following four areas.
The discovery process – Africa needs geological information to be made public before it goes to auction with private companies seeking to invest in resource extraction. This will enable it to better the financial returns it gets from what are at present poorly negotiated deals.
Capturing value – Africa needs to institute a more effective tax system. Put simply, African countries must ‘tax what they can observe’ and tax systems must be built with the notion that this is a volatile world. Contracts should be designed that allow for contingent events and contract stability, and must be founded on a well designed tax system…Read more.