Saturday, September 22, 2012

Resource riches not as claimed

The African Union Chief in June 2010 said " Africa is the richest continent in the world, in terms of its natural and mineral resources...Africa supplies up to 31 percent of the world's demand for bauxite, cobalt, gold, manganese, phosphate and uranium. Additionally, it supplies 57 percent of the world's need for chromium and diamonds, and the hydrocarbon deposits are immense" [the continent produces 12 percent of the world's oil and has about 8 percent of reserves].

With the exception of bauxite and petroleum, these minerals are not as widely used in industry (or in the same considerable volumes) as a number other minerals, such as tin, copper, nickel, zinc, iron, coal, and lead, that Africa does not produce in sufficient quantities. Indeed, of the top 5 metallic minerals which constitute 62 percent of the total value of global production, Africa is only a significant producer of one of them: gold. Africa has 8 percent of the world's copper, 4 percent of aluminium, 3 percent of its iron ore, 2 percent of lead, less than 1 percent of zinc, and virtually no tin or nickel. To put these figures into perspective, recall that Africa has about 14.5 percent of the world's population.

There is a near-universal belief that Africa is the richest continent on Earth from a natural resource point of view. This belief is most strongly associated with mineral wealth, which is the form of natural resource endowment easiest to measure.  Africa is poor both because of and in spite of its fabulous mineral wealth. The logical implication of such a view is clearly then that Africa has to do little more than just chuck out "its greedy dictators" and/or "incompetent governments", for its natural endowments to translate into economic and financial wealth. Obvious enough. Or is it?  China, Indonesia, India, Malaysia and the Philippines are indeed amongst the world's most wealthy nations from a natural resource point of view.

Which country is the world's largest producer of gold? Many of them rush to say South Africa, and are puzzled when they learn that it is indeed China. South Africa is fourth down the list of major gold producers and may soon be overtaken by Russia and Peru. Both on a per-square mile and a per capita basis, Africa lags behind the global average in mineral production and reserves. Of a hundred minerals considered highly important to industrial production, Africa features strongly in only about ten. One realises immediately that Africa's low production of the 'hard minerals' minerals most intensely used in industry compared to the less widely used 'soft minerals' reduces its total take from the global mineral trade.

Of those few minerals that Africa is believed to hold globally significant or dominant reserves, nearly all of them are concentrated in 4 countries: South Africa, Angola, Democratic Republic of Congo and Guinea. When one computes the level of inequality of mineral distribution across different continental regions, Africa pulls up strongly, showing a far higher than average level of distribution 'imbalance' per capita or square mile. In very simple terms, it means that mineral wealth is more concentrated in a few countries in Africa compared to other continents. Africa's mineral wealth is not only concentrated in a very few countries but also in a very narrow mineral base. For instance, South Africa has 92 percent of its reserve wealth concentrated in platinum group minerals, while at the same time it has 90 percent of Africa's coal and 95 percent of its chromium. Guinea mines 90 percent of Africa's bauxite. Congo mines 90 percent of the continent's chromium. Ghana and South Africa accounts for 60 percent of Africa's gold. South Africa, Gabon and Ghana produce virtually all the manganese. The state of affairs described is compounded by the fact that Africa is witnessing a decline in the production of most minerals, such as gold, petroleum, and uranium, with new discoveries failing to offset falls in production in key countries.


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