Can local shareholding in extractive companies remove the resource curse?

Abstract

Can domestic stake holding participation in the business structure of the Extractive industry remove the resource curse? This is a question everyone should be asking in a time when, apparently, almost everything else seems to have failed in the extractive industry. Multinationals have invested heavily in the sector in Africa; governments changed the legislation a number of times and undertook other reforms with the direct support of multinational financial institutions. African countries have opened their doors wide to investors by granting those incentives but, nothing changed. There is corruption everywhere, people starve and poverty continues to escalate. Wars and authoritarian regimes increase. Some scholars call it resource curse and defend people should stop exploiting oil, gold and diamonds in order to restore peace. Those who are moderate cry for more liberalization and advocate for the total withdrawal of the state from the sector living it for those who are efficient. Others raise the voice high campaigning for the nationalization or rather indigenisation of natural resources. The list could continue and the tension goes higher. This dissertation tries to respond to those concerns. It argues that the so called resource curse is a “myth”. It is a result of man’s behaviour and the absence of appropriate institutions and mechanisms for better management. It goes beyond by suggesting that the missing element in the process is the proper inclusion of the domestic private capital. Central to the argument is the conviction that, among other things, the involvement of nationals in the structure of the extractive industry will create the necessary capacity to demand the political elite to provide transparency and to adopt sound development policies that favour diversification. In that way the information asymmetry is reduced thus reducing the conflicts. Certainly for all to be effective the adoption of comprehensive and practical promotional instruments need to be established and operationalized if resource rich countries are to turn on the blessings that mineral resources can and should represent.