MEFMI to Practically Address Natural Resources Management Capacity Gaps its Region

 MEFMI is in the process of finalising its new capacity building initiative in natural resources management (NRM). Like other interventions, NRM will be fully mainstreamed into MEFMI strategic plan. The project document is being finalized at a retreat in Kadoma in Zimbabwe.  Present at the retreat is the Permanent Secretary in the Zimbabwe Ministry of Finance, Mr Willard Manungo, MEFMI Executive Director, Caleb Fundanga, MEFMI staff, officials from the Zimbabwe Revenue Authority, Zimbabwe Chamber of Mines and the Reserve Bank of Zimbabwe.

The project is motivated by the need to practically address natural resources management capacity gaps in the MEFMI region.  

 MEFMI recognizes that Africa is projected to expand its metal and mineral production by 78% between 2010 and 2017, compared to only 30% in the Americas and Asia. Four out of ten diamond producing countries in the world are from the MEFMI region, namely Angola, Botswana, Namibia and Zimbabwe. More than 150,000 metric tons of platinum have recently been discovered in the Southern African Countries including countries in the MEFMI region such as Zimbabwe (US Geological Survey Updates -www.usgs.gov). The MEFMI region has emerged as one of the world’s natural resource rich zones with huge deposits of natural gas following discoveries in Mozambique and Tanzania; and oil in Uganda and Kenya (The Oxford Institute for Energy Studies Publication, 2013).

 The occurrence of this significantly huge and untapped mineral wealth, is therefore, anticipated to be a major driver of economic growth in the MEFMI region in the next decade and beyond. Additionally, improved prospects for corporate profits in the mining sector and the growing global demand driven by increased industrialization in countries such as China, Brazil, India, Russia and South Africa, popularly known as the BRICS is equally anticipated to propel natural resources activities in the region.  

 Robust macroeconomic performance attest the significant role played by natural resources sector in the MEFMI region. Albeit the looming global market turmoil in industrialised countries and unfavourable geopolitical developments, including the Ebola epidemic, growth in the MEFMI region is estimated at 5.1% in 2014, far above South Africa and the same as the growth estimated for Sub-Saharan Africa. The resilience in growth performance is attributable to increased investment in natural resources, particularly minerals, oil, natural gas, agriculture, as well as infrastructure development. MEFMI countries, which drive regional growth include Angola, Kenya, Malawi, Mozambique, Namibia, Rwanda, Tanzania, Uganda and Zambia. This is partly attributable to capital formation in the mineral, oil, as well as infrastructure development industries.

 Inflationary pressures have eased in many countries as energy prices have stopped rising and food prices have declined. Annual inflation in the MEFMI region decreased to an average of 6.7% in 2014, compared to 7.0% in 2013. Moderate food and oil prices coupled with prudent monetary and fiscal policies should facilitate a further decline in inflation in most countries in the MEFMI region, going forward. These developments, together with prudent fiscal policies, are also expected to provide some scope for monetary policy to ease interest rates. Favourable inflation outcomes are also expected to provide favourable macroeconomic environment for economic growth and poverty reduction.

 To increase contributions from the natural resources sector, MEFMI countries are pursuing policies to reduce the cost of doing business by cutting supply side bottlenecks and strengthening manufacturing and services sectors. These are expected to help the region gain a stronger foothold in global value. South Africa, one of the major trading partners to MEFMI countries, with a high level of industrialization, has relatively performed well in this regard.

 It remains disappointing however that in spite of registered robust economic growth, proven abundant mineral and natural resources, a number of the MEFMI’s resource rich countries have had to contend with the paradoxical paralysis of being rich and yet starved of economically emancipating growth and sustainable development. The Africa Economic Outlook Report 2013 shows that by end 2012, MDGs scores among natural resource rich countries in the MEFMI region were relatively low ranging from 0 to 4 score value. This finding raises a pertinent issue on why growth and mineral resources richness have not been effectively translated into wealth that gravitates to poverty reduction in the MEFMI region?

 Though the empirical findings from the MEFMI study (2014) rule out any incidence of natural resources curse in the MEFMI region as in the long-run, real GDP has been growing together with investment in natural resources and on account for, long-run increasing trend of terms of trade and significant contribution of FDI on government revenue, the study diagnosed a number of symptoms, which may, in the long-run push the region into a curse if they remain unaddressed. These include inadequate investment in human capital, low savings and underdeveloped financial sectors. The region has started paying the price as a result of inadequate measures to address these critical local conditions for investment in natural resources. The study found negative Foreign Direct Investment (FDI) impact to GDP growth and per capita income. This is in spite of massive incentive packages extended to foreign investors for years. Inadequate absorptive capacity entailing weak institutions, inadequate human capital development and technological conditions accounted for FDI negative impact on GDP growth and per capita income. It is therefore critical for the region to address these local conditions if is to benefit from natural resources potential.

 In view of this reality, it is prudent to start building capacity in natural resources management to ensure that the MEFMI region do not fall prey to the natural resource curse. This will enhance good governance of natural resource rents for socio-economic development through strong institutions and skilled manpower.