Africa's 2004–2014 commodity boom brought its resource-rich countries faster growth and bigger revenues, but many consumed the windfall rather than investing it, and growth collapsed when prices fell.
In plain language
The question
From around 2004 to 2014, the world saw the longest sustained period of high commodity prices on record. For Africa’s countries rich in oil, gas and minerals, revenues rose and growth accelerated. This paper asks what the boom left behind once prices fell. It compares the region’s 26 resource-rich countries with their 22 less resource-endowed neighbours before, during and after the boom.
What we find
- Growth surged, then collapsed. GDP growth in resource-rich countries rose from 4.6 percent to 5.4 percent a year during the boom, then fell to 2.7 percent afterwards, far below its pre-boom level. Once the expanding resource sector is taken out, growth was not significantly higher than in the rest of Africa, even during the boom.
- Dependence and poverty rose. The number of countries classed as resource-rich rose from 18 to 26 during the boom. Poverty and inequality rose even in the boom years, despite strong GDP growth. On projections made in 2021, 62 percent of the world’s extreme poor could be living in resource-rich Sub-Saharan Africa by 2030, up from 13 percent in 2000.
- The boom was consumed, not invested. Countries failed to diversify their exports or their asset base, and little of the revenue was reinvested in assets for the future. Several entered debt crises after 2014.
The missed opportunity was not universal. The countries that sustained higher growth after the boom were those that saved and invested more of their resource revenues, building up physical capital, human capital and other natural capital, such as forests and fisheries, as their oil and minerals were depleted.
Why it matters for policy
Resource wealth does not condemn a country to weak economic performance: policy choices matter. As a new period of elevated commodity prices begins, the lesson is to use the revenues to turn wealth below the ground into productive capital above it, and to diversify away from resource dependence before prices turn. The countries that did not were left poorly prepared for the end of the boom, and more exposed to the COVID-19 crisis and the global slowdown that followed.
Abstract
The commodity price boom from 2004–2014 was a huge economic opportunity for African countries abundant in oil, gas and minerals. During this period their government revenues from resources grew by an average of 1.1 billion US$ per year, and economic growth in those same resource-rich countries surged. GDP growth in resource-rich countries accelerated from 4.6% to 5.4% as countries entered a decade long period of sustained high commodity prices. Nonetheless, the paper traces a significant missed opportunity for resource-rich countries in Africa, with little to show for it in the post-boom period, which saw growth collapse far below pre-boom levels, to 2.7% per annum. This paper considers the record of performance during the boom (2004–2014) and subsequent bust from 2015 onwards. The paper describes four main outcomes of the boom: 1) measures of resource dependency rose in Sub-Saharan Africa during the boom, 2) the growth record was strong during the boom but collapsed once commodity prices fell, 3) poverty and inequality rose during the boom despite strong GDP growth, 4) resource-rich countries failed to diversify both their exports and their asset base, leaving them poorly prepared for the end of the boom and a period of lower commodity prices and subsequent COVID-19 pandemic. The conclusions are stark. During this golden decade of sustained high commodity prices and booming revenues, there was limited re-investment of those revenues into building sustainable assets for the future. In other words, countries consumed the boom, rather than successfully transformed their economies. The conclusion is that many resource-rich countries in the region squandered their 'once in a generation' opportunity for economic transformation, offering policy lessons that may prove valuable as we enter a new period of elevated commodity prices.
Cite as
James Cust, Alexis Rivera Ballesteros and Albert G. Zeufack (2022). "The Dog that Didn't Bark: The Missed Opportunity of Africa's Resource Boom." World Bank Policy Research Working Paper 10120.