Towards a more equal distribution of value? A look into the extractive industry in Africa

The benefits that local populations receive from mining profits are extremely varied . Driven to act by international pressure, several states have turned to a more equal redistribution of that revenue, calling on external experts to help them transition to this new model.

If places such as Alaska or Norway have led the way in making changes to how revenues from exploitation of natural resources are distributed, other states still have work to do. The World Bank, who for a long time has viewed free markets as an effective way in itself to stem poverty, has revised its stance.

The extraction of natural resources raises a clear question: what roles do the states and mining companies play? How can we assure that the value created is distributed fairly? Juan Pablo Pérez Alfonso, the former Minister of Mines and Hydrocarbons of Venezuela, has underlined that while oil certainly generates revenue, it is also potentially a source of corruption and debt, which doesn’t necessarily bring profit to local populations. 

A proper management of natural resources needs to address three conditions: ‘budgetary transparency, budgetary policy based on clear regulations, and solid institutions for managing public finances’. Norway, Chile and Botswana are the leaders in this area. The implementation of a model redistribution system in Alaska is also relevant: ‘It is a conservative model with a relatively small dividend amounting to only 3 to 6% of Alaskans’ per capita income.

Just a share of Alaska’s oil revenue goes into the fund, and only the investment income from this fund is distributed – subject to a cap of 5% of the fund’s total market value. The fund is managed by the Alaska Department of Revenue, and strong checks and balances within the budget make it in many ways a model of transparency.’

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