RENT FROM NATURAL RESOURCES

RENT FROM NATURAL RESOURCES IN SUB-SAHARAN AFRICA 1
RENT FROM NATURAL RESOURCES IN SUB-SAHARAN AFRICA
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RENT FROM NATURAL RESOURCES IN SUB-SAHARAN AFRICA 2
Rent from Natural Resources in Sub-Saharan Africa
Sub-Saharan Africa is known for its rich natural resources. The rent obtained from these
sizable natural resources has a significant contribution to the overall GDP. The positive impact
of rent received from resource rent is affected by the prevalence of the Dutch disease in sub-
Saharan countries. Poor management of the exchange rate received from the resource rents also
contributes to the negative correlation between the resource rent and the GDP per capita (Pérez
and Claveria, 2020, p.101535). Besides, the positive correlation between resource rent and GDP
per capita significantly depends on the effective management of these natural resources. This is,
however, a challenge to most of the sub-Saharan-African countries. Most lack effective policies
to ensure effective management of this abundant resource which hence does not make a big
difference between them and resource-scarce countries. The rent obtained from natural resources
in sub-Saharan Africa according to Asamoah, Mensah, and Bondzie (2019, p.66) does not
translate into stronger economic performance and a higher standard of living. To improve the
impacts of the rent from the natural resources, the sub-Saharan African countries need to make
the right policy decisions in managing these natural resources. According to recent studies, most
of the sub-Saharan countries have lost opportunities for strong growth and economic
development. This is attributed to the volatility in resource prices. National politics have
significantly contributed to the poor performance of the macroeconomic (Oyinlola, Adedeji, and
Bolarinwa, 2020, p.88). This is due to the uneven distribution of the rent obtained from natural
resources. The rent obtained ends up being in the hands of a few hence low GDP growth rate
than expected. The study determines the impacts of rents from natural resources on real
exchange rates in sub-Saharan Africa.
Literature Review

RENT FROM NATURAL RESOURCES IN SUB-SAHARAN AFRICA 3
Sub-Saharan Africa has a higher rate of economic growth rate as compared to those of
the developing world. (Gylfason and Zoega, 2018, p.14) conducted a qualitative study based on a
case study to compare the rate of the economic growth rate of the sub-Saharan Africa countries
and those of the developing world. Their findings indicate that sub-Saharan Africa has had its
economic growth rate growing at a faster rate of approximately 4.6% since 1999-2010 as
compared to the economy of the rest of the developing countries. The sustained economic
growth rate and development of these countries have been on rising since 1999 due to the
availabilities of natural resources that provide opportunities for economic growth and
development. It is worth noting that the impact of the natural resources revenue in this region
remains mixed, despite this growth. (Ebeke and Etoundi, 2017, p.408) notes that Sub-Saharan
Africa continues to be the poorest part of the earth with its rich natural resources. Despite the
dismal benefit most of these resource reach countries obtain from natural resources, other
countries such as Australian and Canada benefit more from the rent they obtain from their rich
natural resources.
research has been developed to give the results and identify the mechanisms that
contribute to low economic growth rates in response to the poor development in these countries.
A qualitative study conducted by (Auty and Furlonge, 2019, p.23) to analyze the factors that
contribute to the low economic growth rates in Sub-Saharan Africa indicates sectors have an
imperative role in the overall economies of these countries. A sector can weaken economies'
development prospects if a sector exerts-economies of scale by learning or by activities.
(Barbier, 2018) notes that natural resources can be crowded out due to the investment in human
capital. He further argues that the rate of school enrollment becomes lower if such countries
engage more in the primary sector.

RENT FROM NATURAL RESOURCES IN SUB-SAHARAN AFRICA 4
The investment of the rent received from the natural resources on public education and
the health sector varies in Sub-Saharan Africa. (Badeeb, Lean, and Clark, 2017, p.5) conducted
an investigative study based on a case study to analyze the impacts of the rents from the natural
resources on social amenities such as public education and the health sector. Their findings
indicate that the share of GDP on public education and health varies in a different country within
the sub-Saharan region. Public education and health have the lowest share of GDP for the oil
exporters in SSA. Further findings show that the oil exporters had the lowest expenditure of DGP
on public education and health of about 3% followed by the non-resource rich low-income
countries spending about 6% of their natural resources on the two-sector from 2006-2009
(Elbadawi and Kaltani, 2016, p.44). However, according to their findings, the middle-income
countries had the highest expenditure of 8% on education and health.
Studies have been carried out to investigate the extent of resource exploitation that is
affected by the prevalence of the Dutch disease in these countries. (Ben-Salha, Dachraoui, and
Sebri, 2018, p.125) conducted a qualitative study to investigate the prevalence of Dutch disease
and its influence on the development of the economies in sub-Saharan Africa. Their findings
indicate that the presence of the Dutch disease in these regions has resulted in economic
imbalances. Their further findings indicate that the imbalances caused by the disease have been
detrimental to the economies of the individual countries evaluated. This is consistent with the
findings of (Calderón and Castillo Castro, 2019). (Canuto and Daoulas, 2019) found out that the
Dutch disease-free countries had double the per capita income than those with the disease.
The oil rents for the oil-dependent economies vary based on their exchange rate
management. Studies show that the low exchange rate received on oil rents in these countries has
been contributed by the weakness in natural resources and macroeconomic management and