Natural Wealth and Economic Growth: The Case of Sub-Saharan Africa
Resource abundant developing countries, although endowed with a unique mechanism to sustain high growth levels and sustain convergence toward higher income levels, are faced with a challenge: succumbing to fateful inner political workings that tend to lead to a natural resource curse; or transforming natural endowments into the pillar of a diversified investment portfolio, by achieving the right balance between the different national wealth components necessary for maximizing the blessing from the natural resource buck: Intangible Capital, Produced Capital and Natural Capital. The catalyst of the development process is Intangible Capital with a high quality of governance at its center, which enables expenditures in institutional, domestic capability and human capital building in an effort to maximize local development of public and private sector capacities. A business and investment environment conducive to local technological learning will facilitate the transition up the income ladder. This note approaches the relationship between natural wealth and economic growth, using the case of Sub-Sahara African economies as an illustration. Delving into recent World Bank reports, it highlights how a sustained positive correlation between natural capital and GDP growth happens through the transformation of the former into other forms of assets: produced capital, human capital and other intangible assets. Governance features and the quality of macroeconomic policies are of the essence for such a benign trajectory to take place.