One of my personal passions is trying to work out how to help developing countries, especially in my home continent of Africa, can help their people out of debilitating poverty. I believe it is possible. It is certainly desirable at all sorts of levels.
One of the possibilities that presents a huge opportunity to help developing countries take a quantum leap forward in wealth development is the fact that the majority of their commodity and resource wealth is most likely yet to be discovered. Put another way: “There’s gold in them hills”.
Here’s a pop quiz to prove my point. Imagine an average square mile of the earth’s surface. How much sub surface value is there in the earth below it? I’m talking about the sub soil resources, minerals, etc that can be extracted and commodotised. In the typical OECD country (and OECD countries account for a quarter of the earth’s surface), each square mile has about $ 300,000 of sub soil assets below it.
In Africa, what do you think that number is? Is it less or more?
Africa also accounts for about a quarter of the earth’s surface. But the value of subsoil assets below each quarter mile in Africa is actually $ 60,000.
Why? Does God hate Africa? That’s unlikely. It’s also, if you think about it, unlikely that there is such a differential. The figures I’ve quoted are actually for KNOWN sub soil assets. So, in developing countries it’s likely there are many more subsoil assets than are currently known. And what’s more, the OECD countries have been digging the stuff out for 200 years. So, we should expect to find significant resources in developing countries in the next decades.
With America, China and India all rushing to find new resources, there will be money and effort thrown at finding the resources. For example, Afghanistan just discovered about $ 2 trillion in new sub soil assets (as if they didn’t have enough problems already – or maybe, just maybe, the coalition forces knew about these assets before finding an excuse to invade and settle in the country?).
This is a massive new frontier in wealth development and commodities management in developing countries over the next decades. This has the potential to dwarf everything else in developing countries in terms of wealth creation.
If this does happen, it provides an unprecedented – and once off – opportunity to kick start the development of these countries. The opportunities exist in countries like Angola, for example, that has recently discovered significant oil deposits. There are huge dangers, though, if corruption, greed, crony capitalism and big corporates come in and plunder the resources. This requires wise leaders, active communities and new thinking from aid and development agencies. And ethical use of the resources that are discovered.
This will very likely be the biggest economic story of the next two decades. Watch this space.
Click here to listen to a 45 minute recording from the London School of Economics lecture series on policy questions in developing countries – the lecture that inspired my thinking on this topic. The lecturer was Prof Paul Collier, director of the Centre for the Study of African Economies (Oxford), and author of The Plundered Planet.
Graeme – this already is the biggest long term story in mining for the next century. The concerns that many of us that have the same vision as you do for the continent, is that the policy makers and political players that have control over these resources are not doing any better than their colonial forefathers, in terms of managing the long term viability and impact of these resources on their countries.
Short term (and sometimes personal) gains far outweigh the more “good steward” focussed or even philanthropic vision that some might have. We see daily stories of this, and while there are good people struggling to do something more focussed, more beneficial, more long-term, they are outweighed and out played by individuals and corporates who seek a different vision.
And when issues such as these are addressed within policy chambers and around Board room tables, it is too easy to fall into the paradigmatic dichotomy of “us” vs “them”; of “free enterprise” vs “nationalisation”; of “wealth” vs “exploitation”.
This is not simply and opportunity to kick start development – there is much to be done if we want the development to last longer than that in a gold rush frontier town.
Gordon
Gordon, I wanted to try and be upbeat about this story, but thanks for providing the absolutely essential piece of information I glossed over. I fear this could all end in tears. I truly, truly hope not!!
Graeme, I recently had a discussion with a business partner that does a lot of his business in Colombia, regarding the Colombian economy. He made an interesting comment that I thought is related to this article. (I was in the audience at GIBS last week, and you mentioned this article there.)
The Colombian government is starting to win their war against the drug cartels. The last of the large cartel leaders was arrested in the last year or so, and they are reclaiming large areas of the country that was under cartel control for many years. The effect of this can be seen in Central America and in Mexico, where the cartels are now gaining a foothold and setting up new operations. The important thing for Colombia is that the areas they are gaining access to are also the areas where the country’s gold, copper, gas and oil reserves are. These reserves are untapped and undeveloped. Any mining activities that will follow in Colombia in these areas will benefit from the latest technology and could therefore be more effective and less destructive than mining activities in other areasof the world. This could place Colombia in a very competitive position, economically and geographically. (or atleast that is what I thought).