Breaking the resource curse
Countries in Sub-Saharan Africa – despite their abundance of natural resources and relatively easy access to key raw materials – have not seen an attendant level of boom in higher value economic activities such as manufacturing and processing. In order to stimulate local and foreign investment in domestic downstream sectors and boost exports of ‘value added’ goods, many of these countries are increasingly relying on restrictions on the export of key industrial raw materials such as metals and minerals out of the country.
These restrictions take wide-ranging forms, from direct ‘tariff’ impositions such as export taxes to less direct restrictions such as export bans, quotas, export licences, minimum export prices and qualification criteria for exporters. The underlying rationale is that by limiting the export of relevant raw materials, domestic manufacturing and processing industries based on those raw materials will have greater supply of raw materials at lower prices, as competition from export markets for those materials is curtailed.
In this article, we explore the export restrictions through which many African states are seeking to secure wider economic benefits from resource exploitation. We consider their wider economic and legal implications, bilateral efforts by the EU to curb such restrictions and protect European industries, and the opportunities likely to open up for potential investors. We present a case study of copper smelter processing in Zambia to draw out some of the key considerations that potential investors in Africa’s downstream sectors should ideally factor into their investment decision.
In our experience, on the right terms and with the right partners, investment in African downstream infrastructure is no more or no less risky than similar projects elsewhere in the world, and with potentially greater returns on investment.