Poverty Reduction or Poverty Exacerbation

World Bank Group Support for Extractive Industries in Africa

This report examines the World Bank Group's support for extractive industries (oil, gas, and mining) in Africa over the last 20 years in light of the World Bank's self-proclaimed mission of poverty reduction. It describes the obstacles to using extractive industries as a vehicle for poverty alleviation and sustainable development, and poses a series of research questions related to the role of the World Bank Group in extractive industries.

Poverty Reduction or ExacerbationThe exploitation of petroleum and mineral reserves has long been the predominant source of revenue for a number of resource-rich countries in sub- Saharan Africa. Sub-Saharan states such as Angola, Botswana, Sierra Leone, and Zambia are among the most mineral or oil dependent in the world, and the region as a whole is second only to the Middle East in its dependence on extractive industries for foreign exchange earnings.

While natural resource wealth may seem to hold potential for contributing positively to Africa's economic development, in practice it has been difficult to convert resource wealth into broad-based improvements in economic growth and human development. In fact, countries highly dependent on oil and mineral exports tend to grow more slowly, face lower living standards, and suffer higher levels of corruption and violence than resource-poor countries. In addition, oil, gas and mining projects can have significant negative economic, social, and environmental impacts on directly affected communities and ecosystems.

The World Bank justifies its support for extractive industries by claiming that the development of these sectors promotes economic growth and generates revenues for the government; facilitates job creation and technology transfer; and contributes to infrastructure improvements and the creation of downstream industries. However, empirical studies, real-world examples, and evaluations of the World Bank's performance indicate that such optimism may be misplaced. Indeed, the World Bank itself has produced little evidence to show that its extractive operations have contributed to poverty alleviation in sub-Saharan Africa. This report proposes a research agenda to clarify the costs and benefits of World Bank-supported extractive industries operations and to determine if support for oil, mining, and gas development is a poverty-reduction investment worthy of public funds.

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