Why the expansion of the raw material industry can intensify poverty in Africa

Why the expansion of the raw material industry can intensify poverty in Africa This is actually one of the big questions. You can often expect that a boom in the raw materials sector automatically brings fast growth and pushes the poverty back. But the practice in Africa often shows the opposite often. I've gathered the most important reasons for this. That is not supposed to be a flat-rate conviction of the industry, but rather an overview of the risks that you simply have on the screen and must actively tackle. A big problem is the so-called "Dutch disease". If suddenly a lot of money flows through raw materials into the country, the own currency often gains great value. That sounds good first, but makes other economic sectors - such as agriculture or smaller industries - to expensive on the world market. The native producers can no longer keep up, must close, and jobs are lost. Exactly in these areas, poverty increases. As almost everywhere in capitalism, the profits are also unevenly distributed. Sure, the mining creates jobs, but often the require high qualifications that many locals do not even have. Ultimately, foreign companies, a small local elite or tensioner specialists benefit from the income, but not the broad community. This leaves the scissors between the arm and rich further. Then there are the problems with administration and corruption. Unfortunately, raw material revenues are often a goal for abuse. Gelder seize in the pockets of officials or managers rather than the expansion of infrastructure, schools or health care. Weak institutions, opaque contracts and missing controls make things worse. Especially in Africa, the environmental damage is enormous, and their consequences must be considered. The degradation often leads to the pollution of water, soil and air. This directly affects the livelihoods of people: fields become worse, fish, and the population becomes ill. It creates a kind of "poverty trap": Who is sick, can work less, but has rising healthcare costs and slips even deeper into misery. All this results in social vibrations. For raw material projects people are often relocated and lose land they have traditionally managed. The destroys of grown lifestyles and takes them the source of income. If there are still many foreign workers to move, the local infrastructure as housing or schools burdenes and ensures social tensions. In addition, the price volatility comes. The revenue from the raw material sector are extremely unstable; They drastically break when the world market prices fall. If a country depends heavily on, it immediately meets the state trunk and exactly the social programs that should actually protect the weakest. And where the quick money flows, the diversification is often forgotten. If the focus is only on raw materials, other economic sectors are underdeveloped. If the boom ends, the land is precarious because it lacks alternative jobs. To clarify that: that does not mean that the raw material sector can not help to fight poverty. There are cases as diamond promotion in Botswana, where a prudent management has really advanced development. But it is crucial to create mechanisms for risk minimization: transparency, investment in other branches and education, the involvement of the local population and clear environmental standards. So what would have to be done to relieve or prevent this possible poverty? In fact, the expansion of the raw material industry in Africa can bring profits, but also intensify poverty if you are not targeted. I have summarized the most important steps to help prevent this risk. At the top, transparency and control stands. You have to make sure that the revenue is managed openly. Initiatives such as EITI help to prevent mouse and corruption. When payments and revenue is disclosed, public attention creates and increases the responsibility of governments and companies. We need strong institutions and legal framework. Weak institutions invite to abuse. Effective laws and control mechanisms are needed - for example, to write off concessions fairly, to drive taxes correctly and to tackle illegal cash flows. Also important is to create the value creation locally. Instead of just exporting raw materials, one should try to process them on site. This creates new, better paid jobs, and more value remains in the country. Examples are oil refineries in Nigeria or the processing of cobalt in the Congo. The economic policy must be inclusive. The advantages may not only benefit a small elite. Governments can start programs for the qualification of the population so that more people can take the new jobs. It also needs measures such as social security systems to reduce inequalities. Environmental protection and social responsibility are essential. Harmful practices directly destroy the livelihoods of many people, especially in the country. Therefore, strict environmental regulations and the obligation to recultivate are necessary. Projects must be designed to protect the rights of local communities. A country can not only rely on a pillar, the economy needs to be diversified. Strategies should be geared towards promoting other sectors such as agriculture, craft or services. The African Free Trade Agreement is an important step for regional growth opportunities. At short notice, social protection programs can protect the most affected groups for price shocks while building education and infrastructure long-term. Some challenges can only be solved through international cooperation based on fair conditions. Another important note to the conclusion: It is not just a question of single steps, but you need a systemic approach. The measures should act in a total context - with strong institutions, clear objectives against inequality and an active involvement of the population. 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