Fixing Broken Links: Linking Extractive Sectors to Productive Value Chains
Extractive sectors have been at the core of many African countries’ economic landscape for decades. However, despite rich endowments, many countries have not been successful in using their resources to generate and stimulate long-term, sustainable and inclusive development outcomes. Although extractive sectors have contributed positively to foreign investment, revenue generation or foreign exchange earnings, much remains to be done to translate opportunities arising from the good economic performance into real, high-quality employment, business prospects for local entrepreneurs and more broadly, into a solid industrial base that can propel countries a step further, to attain a higher level of development.
One of the main challenges of resource-rich countries is therefore to promote sustainable structural transformation, away from the current enclaved structure, which instead, renders countries vulnerable, excessively and persistently dependent on commodity prices and external demand. To maximise on its good fortune derived from the windfall gains associated with the current commodity super-cycle and to minimize the risks of an eventual commodity price burst or depleting finite natural assets, Africa’s development strategies have to take a more transformative approach.
In particular, it is important to consolidate the growth performance by building strong economic fundamentals around productive sectors. This implies strategies to link up the extractive sectors with the rest of the economy, notably through the fiscal link, which can be used as a lever to unlock financial resources to the benefit of other productive sectors.