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A Business Plan for Africa Breakaway Sessions 1: Africa Inc. Product Mix. Session 2: Smart Management & Monetization of our Natural R esources. November 7th, 2013. Policy Recommendations within the Africa 2.0 Manifesto.
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A Business Plan for Africa Breakaway Sessions 1: Africa Inc. Product Mix Session 2: Smart Management & Monetization of our Natural Resources November 7th, 2013
Policy Recommendations within the Africa 2.0 Manifesto • Social contract between Government, private sector & civil society should enhance the governance of natural resources revenues. Publish What You Pay (2002) is a global network of civil society organizations advocating for an open and accountable extractive sector, to ensure that oil, gas and mining revenue can improve the lives of citizens in resource rich countries. • Optimizing natural resources taxation. • Promoting the introduction of common standards reduces transaction costs and benefits the upstream industry. Harmonization is crucial to prevent adverse effects on trade. • Applied research in natural resources has been fundamental to structural transformation elsewhere and has so far been Africa’s Achilles heel. The exploration and exploitation of extractive natural resources need good conditions and regulations that create the right incentives. Investing in geological knowledge has proved important.
Key Facts and Figures Fact 1: At the end of 2012, Africa’s proven oil reserves totaled 130.3 thousand million barrels, which is 7.8% of the world’s reserves (source: Mo Ibrahim Foundation, 2013). Fact 2: The US Geological Survey estimates that Africa will expand its metal & mineral production of 15 important metals by 78% between 2010 & 2017 -compared to only 30% in the Americas & Asia. • Fact 3: • Africa has around 16% of the world arable land.
Leveraging Strengths and Opportunities, Addressing Weaknesses and Threats IMPLICATIONS WEAKNESSES AND THREATS Poor value addition to the extraction of natural resources. Africa spends less than 1⁄10 of the amount that major mineral producers such as Australia and Canada spend on exploration on a per km2 basis. (source: Mo Ibrahim Foundation, 2013). In the 2013 RGI, 76% of African countries assessed were categorized with ‘Weak’ or ‘Failing’ resource governance, with no African country assessed scoring as 'Satisfactory' at the overall level. The high level of commodity dependence makes Africa vulnerable to the volatility of commodity prices. Africa’s resource taxes rely heavily on volatile international commodity prices.Between 2002 and 2008 resource taxes increased from $45 billion to $230 billion, driven by the commodity priceboom. In contrast, in 2009, the year the global economic crisis hit, resource taxes fell back to $129 billion. This uncertainty causes prejudice in budget planning. while the booming resource sector carries the obvious risk of further deindustrializing Africa as it specializes in commodity production and export and provides revenues to pay for imports of consumer goods
Leveraging Strengths and Opportunities, Addressing Weaknesses and Threats Under-taxation is frequent in Africa IMPLICATIONS The Zambian government estimates that it loses $2 billion a year (15% of GDP) to tax avoidance by corporations operating copper mines within the country. International evidence suggests that governments should be able to collect 40% to 60% of resource rents for mining & 65% to 85% for petroleum. Trade mispricing
Leveraging Strengths and Opportunities, Addressing Weaknesses and Threats OPPORTUNITIES Africa has a range of unexploited renewable energy resources, from solar and wind, to geothermal and hydroelectric. Hydroelectricity offers a largely untapped source of energy in the middle of the continent, with only 5% of Africa's total hydropower potential exploited. Africa is home to between 40,000 and 60,000 plant species, of which at least 35,000 are unique to the continent. To date, Africa has lost less of its biodiversity in terms of species extinctions than other continents have. Sustainable use and conservation of biodiversity is essential for poverty reduction and sustainable development. The biggest hurdles are those of catching up on technologies, competitiveness and skills. In terms of jobs, backward linkages into the supply chains of resource producers offer significant potential for employment creation. The untapped water resources in Africa’s transboundary river basins can, if managed effectively, ensure water security through their irrigation and hydropower potential. (Source: Mo Ibrahim Foundation, 2013).
Best Practices • Botswana has made successful use of rent funds and avoided Dutch Disease effects since the discovery of its large diamond deposits in the 1970s. • The Ethiopian Commodities Exchange (ECX) assures all commodity market players the security they need in the market through providing a secure and reliable End-to-End system for handling, grading, and storing commodities, matching offers and bids for commodity transactions, and a risk-free payment and goods delivery system to settle transactions, while serving all fairly and efficiently. About 90% of all coffee, beans and sesame produced in Ethiopia are traded on the ECX.
Action prioritization Matrix and Stakeholder Engagement Matrix Complete the Action Prioritization Matrix below with the key short, medium and long-term leapfrogging actions. For each identified leapfrogging action, complete the Stakeholder Engagement Matrix below:
