Financial Effects of the Natural Resource Curse in Africa

Updated June 26, 2021

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Financial Effects of the Natural Resource Curse in Africa essay

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More than half of the countries in Africa are regarded as the most economically deprived in the world. The Continent overall has lower rungs of success economically than any of the other six continents across the globe. Africa has seen momentous economic transformations and improvements in the past decade. However, many nation-states are not exhibiting economic maturation, and even the countries that are rising are not experiencing high financial yields as the nation(s) would like. Economical anxiety, political disorder, and civil warfare have left many African citizens living a life of poverty (worldpopulationreview.com)

Natural resources are exceedingly important in the world economy and trade, especially the non-renewable natural resources such as oil, gas, and finite minerals. An abundance of these resources is commonly considered a good fortune for the nations that deal with trade agreements. For nation-states that possess them, these amenities are viewed as a blessing, however, over the last few decades, analytic pundits report an “unusual paradox” of nations that are rich in natural resources have low economic growth and are often associated with poverty and a slower profitable growth rate.

The majority of these financially strapped nations, in Africa, which is extremely rich in natural resources, have no positive benefit from them. This phenomenon is called the resource curse or “the paradox of natural resources” (Dr. Nau, p. 388), and it demonstrates the disparity in their distinctly reduced economic growth and development. The poorest nation-states by GDP per capita are in Africa (as measured by GDP per capita and exports of natural resources) and are the most affected by the natural resource curse.

Since economic experts consider natural resources as a prospective source of income, and sourcing locale has changed the primary origin of resources, the modification in output would require FDI in the future. Foreign Direct Investments (FDI) may foster inapplicable engineering of goods and services deemed necessary by the investing parties of Multinational-Corporations which in turn obstruct the evolution of the host country’s resource industries. Moreover, by conforming to a Multinational-Corporation’s technology, the localized commercial enterprise becomes too dependent on these business firms which could decelerate their development and inhibit local entrepreneurship.

Economic researchers show the poorest African countries have the greatest need for profitable growth, but eventually, they succumb to government corruption, low literacy rates, and lack of job training. These hapless countries in Africa do not have an effective central government or reputable banking system to develop independent industries that provide infrastructure to procure sideline income to provide for their respective communities. Due to these highlighted disparities, dishonest political officials, at all levels, leech money from the economic system put in place to assist these forlorn nations by “redirecting” assistance from the West and “taxing” whatever the country’s immature industries manufacture on their own (businessinsider.com)

The biggest difficulty for all of these economically divergent counties is that they have limited means to improve their financial conditions. Some of Africa’s resource-rich countries have benefited from foreign direct investments. Nigeria, one of the amplest oil-producing countries in Africa, utilize their economic investments to leverage sideline business ventures by organizing rural citizens looking to create income from processing natural resource materials into finished commercially produced goods.

While places like the Democratic Republic of Congo do not possess the financial means to develop a framework that could cultivate the land and manipulate its resources. These countries are relying on the assistance they obtain from America and China. Each of these nations and several others continues to engage in a ruinous cycle of economic insecurity. They are now and will consistently remain the most disenfranchised nations from the disabling support of investors who make profits from their demise.

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Financial Effects of the Natural Resource Curse in Africa. (2021, Jun 26). Retrieved from https://samploon.com/financial-effects-of-the-natural-resource-curse-in-africa/


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