Commodities in Africa

Friday, August 28, 2015

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AFRICA is home to a tenth of the planet’s oil, a third of its mineral reserves and produces two-thirds of its diamonds. High prices may pep up the continent’s short-term economic growth, but scholars have long suspected that its plentiful natural resources also breed instability and violence.

Politicians and their cronies cannot resist skimming off some of the huge profits, the theory goes, which enrages those who are left out. Struggles over these wealths have played a part in many African troubles, from militias in the Democratic Republic of Congo to Sudanese civil wars. However, identifying a systematic link between natural resources and violence in Africa has proven tricky for economists, who must usually work with small or insufficiently detailed datasets.

A new paper from four academics at Swiss universities tries to get around the problems faced by previous studies.* For each year from 1997 to 2010, the authors gathered detailed data on the location of hundreds of mines and thousands of conflict events (including riots and violence against civilians) across Africa.

Then they divided the continent into 10,000 cells measuring half a degree of latitude and half a degree of longitude (about 55 km squared at the equator). All of this allowed them to analyse the effect of changes in the world price of 15 minerals on the areas in which that commodity is produced.

Over the period of the study, mineral prices more than doubled, thanks in particular to ravenous demand from China. Some commodities grew even more expensive: in 1997 an ounce of gold cost about $300, but by 2010 it was going for well over $1,000.

In some ways the continent benefited from the juicy prices. Thanks to strong commodity exports, from 1997 to 2010 sub-Saharan Africa’s economy grew at 5% a year. But the paper finds that dearer minerals also led to fiercer competition over mines, with shockingly violent consequences.

Had mineral prices remained at their levels from 1997, the paper calculates, over the subsequent 13 years the average African country would have seen 25% fewer violent events. Higher prices were responsible for 65% of the outbreaks that took place in South Africa. Even these results may be an underestimate, since the proceeds from mines in one area may have been used to fund conflicts in others.

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