Ethiopian Review

Developing economies could better ride the current financial crisis with more effective maintenance of their natural resources, according to a new report.

The report – by the Natural Resources Charter – comes at a time when the economic downturn has caused a dramatic fall in demand for metals. These resources have been a huge source of revenue for developing nations.

While times are good, businesses and national economic planners tend to relax. That attitude has hurt many countries, especially those in Africa. Not long ago, fund managers were pointing to Africa as the place to invest. However the boom in the price of commodities such as oil, diamonds and coffee has waned.

The Natural Resource Charter report includes a set of guidelines designed by an independent group of economists, lawyers and political scientists to help developing countries manage their naturally-occurring raw materials.

Instead of governments signing up to a set of principles they would be held to account for their actions by their citizens, according to the articles of the charter. Missed opportunity Professor Paul Collier, an African economist at Oxford University, told World Business News that he had seen two big commodity booms in Africa during his lifetime. “Both have been huge opportunities and both have been missed,” he says.

In theory, the money African nations makes from oil, gold and diamonds could be used effectively to lift people out of poverty. But can African nations now find a better way of ensuring their natural resources are used in a way which really benefits their citizens?

Transparency

Dr Collier argues that an open and transparent system for the auctioning of commodities is a simple way of ensuring citizens get value for money.

“All too often it has been good deals for the companies and quite often good deals for the minister who negotiated it but not good deals for ordinary citizens,” he says.

A part of the charter related to how better to manage the sale of rights for mineral extraction.

The historical method of allocating mining rights has not benefitted the general populace.

“It has ruined African governance because it has encouraged corruption, so we want to alter that pattern of behaviour,” explains Dr Collier.

Whether or not African governments heed any advice, many investors still believe the continent should be well positioned in the event of another commodities boom.

- BBC