Inclusive growth in Africa: the 'good-times gap'

Is there a name for the high expectations accompanying new major resource finds in sub-Saharan Africa? I will call it the 'good-times gap': the distance between what locals might hope to see, and the potential for a significantly less transformational outcome.

Last week I attended the 'Galvanising Growth' conference at Oxford's Blavatnik School of Government. Of the many issues that emerged, one stood out -- at least in the session on governance of natural resources.

One can approach that issue from many angles -- revenue transparency and management, conflict prevention, sustainability and environmental issues, or (which was the conference's intended overall theme) in terms of capitalising on natural resource wealth to deliver economic growth.

I think we all should have revised the topic explicitly to 'galvanising inclusive growth' and spent more time developing the points made by various speakers -- from Nigeria's finance minister to a senior Rio Tinto executive -- on the imperatives of local job-creation and appropriate sharing (as between investors, governments and communities) of both the revenues and responsibilities related to major resources projects.

On the Paul Collier-mediated resources panel, in my view one issue came through strongest: the problem of explaining, to those populations who should stand to benefit from newly-tapped resource wealth, the many caveats potentially involved in its realisation. The challenge is really one of education, of 'public relations' in its literal or deeper sense. Especially where youth unemployment is high, the disappointment from unmet high expectations can translate into political instability, or 'vuvuzela politics', resource nationalism and populist politics. Sometimes 'populism' is merely a call for fair terms or distribution, but it can have significant impact on investment. Poor information compounds it.

It is a problem shared by governments and firms exposed to the consequences. Often even the officials involved in negotiating deals may not fully appreciate the long timeframes and the potential for changed global conditions to substantially affect local projects, or other variables. Misapprehension is likely to be higher on the street. Listed firms are obliged to report finds or deals to the market. Increasingly, this information (often expressed in terms of billions of dollars of reserves or projected capital investment) is available in the host community. Yet its wider context may not be appreciated. Locals who receive news of a $1.2 billion dollar project may believe that this sum represents what will be transferred to government.

Many colleagues working in corporate external affairs, corporate responsibility etc., spend a lot of their energy on social impact / social investment reporting where the audience is the market, the potential regulator, the Western media or NGO world, all in the home country. Yet from a risk perspective, the main audience that suggests itself is perhaps in the host country where projects are actually situated. Major mining and hydrocarbons projects that have triggered many media headlines -- and boosted GDP growth projections -- seldom directly create as many jobs, at least for the less-skilled. Helping to stimulate local economic opportunities while addressing job-creation expectations will remain pressing challenges for extractive sector firms and their host governments.

If 'uncertainty' is an indicator for risk calculations, the uncertainty of host populations about what developing their resource entails is a relevant issue on which risk-mitigation and 'external relations' might focus. It is tricky: how do firms stimulate a national conversation about new revenue wealth and its management -- and in the process, say, manage overall popular expectations -- without either trespassing into government's zone or triggering its disapproval, or other unexpected consequences? How do firms align themselves with government education programmes, if any, on the new resource?

One other stand-out theme from the expert panels was this: the immense difficulty, whatever the design of one's policy, of implementing public policy generally. The humility that shared experience suggests we should harbour on implementation is not unrelated to the 'good-times gap': if policymakers should be more realistic about what is really do-able, one can see why there's a need to dilute the expectations of recipient / host communities about major resources projects.

As we know, and may come in future to see more starkly, greater awareness + unmet expectations = a source of instability risk for investors and governments. Yet from the perspective of a transparency activist -- of which there were a few at the conference -- these high hopes might also help fuel local demand for greater accountability on the part of state officials for the proceeds of natural resource extraction.

Jo

Various previous posts (for example, here) have dealt with dilemmas where the private sector attempts overtly to enter public policy debates in Africa.

Many previous posts deal with the related issue of firms 'educating' counterparts in government about their constraints or contingencies -- and problems with thinking of it like that.

Last week's post, including the Blavatnik conference link, is here.