Book Club

The Chair read for you : Richesses de la nature et pauvreté des nations de J.Azizi, P-N.Giraud, T.Ollivier et P-H.Tamokoue Kamga [🇫🇷]

Published on 17 December 2018

In the economic literature, reference is often made to the “natural resource curse”. It refers to a situation where a country rich in natural resources is trapped in a vicious circle of underdevelopment. In many of these countries, the lack of public services and the capture of rents by the elite are at the root of several armed conflicts whose ultimate aim is to control the resource. This is why the issue of the natural resource curse in developing countries remains a topical one and is of great interest to both international development actors and the academic world.

The book Richesses de la nature et pauvreté des nations Essai sur la malédiction de la rente minière et pétrolière en Afrique [1] addresses all the problems inherent in the extractive sectors in developing countries. The authors (Jamal Azizi, Pierre-Noël Giraud, Timothée Ollivier and Paul-Hervé Tamokoue Kamga) begin by defining key concepts, for example the rent, which is nothing more than the difference between the market price of a raw material and the cost of its extraction.

This annuity is called Ricardian because it is intrinsically linked to the respective qualities of the deposits. Then, the sulphurous issue of rent sharing between multinationals and local governments is analysed by showing the advantages and limitations of the different rent sharing schemes.

The authors show that the asymmetry of information between multinationals and governments, combined with the low level of qualification of administrative staff, very often leads to the signing of unequal contracts. These contracts generally remain very unfavourable to the producing country.

The Extractive Industries Transparency Initiative (EITI) and the Kimberley Process, aimed at promoting transparency in the extractive industries and the non-marketing of so-called “blood diamonds” respectively, are analysed in the book. In addition, the authors propose a relevant diagnosis of the different uses made of annuities by governments and also raise the question of intergenerational equity in pension sharing.

In addition, the authors carry out a taxonomy of rentier states. They distinguish three categories. The “virtuous annuitant states” in which the annuity is used to maintain the incomes of future generations at a higher level (investment in human capital, diversification of the economy). In “stable annuitant states”, the public authorities ensure the circulation of the annuity in society in such a way that almost the entire population is satisfied in order to guarantee a certain political and social stability. Finally, the “decomposing rentier state” is symptomatic of the natural resource curse. These states are in a self-sustaining dynamic of the poverty trap.

In addition, before proceeding to an econometric analysis of the natural resource curse in developing countries, an inventory of theoretical and empirical work since the seminal paper of Sachs and Warner (1995) is proposed. With regard to empirical analysis, estimates show that countries highly dependent on natural resources have an agricultural sector characterized by a glaring lack of investment. This explains the high dependence of these countries on imports to satisfy their demand for food products.

The authors focus on case studies from selected African countries for which mining tax data are available. The lesson to be learned from this analysis is that there is a variation of tax regimes and that the income accruing to the producing country depends intrinsically on the tax framework in place.

Finally, this collective book differs from other books on the natural resource curse in two ways: first, it is written in such a way that it is accessible to non-specialist readers; and second, the case studies provide valuable information on the complexity of pension sharing regimes between operators and governments.

[1] Presses des mines, Paris, 2016, 250 pages, 29€. [🇫🇷]