It is no secret that many developing countries are sitting on a 'gold mine', whether it be actual gold, or oil, or diamonds, copper or ore. It is also true that natural resource discovery is expected to grow significantly in the near future, especially in sub-Saharan Africa. What is confusing is why, with commodity prices increasing, and even tripling in sub-Saharan Africa between 1998-2008, these countries have not done better in transforming their riches into benefits for the social good.
This week, as the World Economic Forum in Africa kicks off, the Education for All Global Monitoring Report has released a new policy paper showing the untapped potential of oils and minerals for education in seventeen countries. The findings estimate that, by reaching international benchmarks for tax collection on mineral exports, and spending the recommended 20% of the additional revenue on education, these developing countries could raise an additional $5 billion to put children in school. This is not to be sniffed at; this money amounts to two-and-a-half times what these countries receive in aid. Translated into human cost, the funds could mean almost 12 million more children would be in school.
Digging deeper into each individual country's circumstances it is possible to see why, perhaps, this additional $5 billion is not being collected. In the Democratic Republic of the Congo, for example, the government receives less than 10% of the income from its minerals, with the remaining 90% going to extracting companies. In 2008, the country lost $450 million in revenue through a mix of bad management, corruption and insufficient taxation. This is a sum larger than the country's entire education budget, and is likely to be enough to send all of its out-of-school children to primary school.
Nigeria, in comparison, keeps almost three-quarters of the income from its oil, but isn't investing it wisely: UNESCO's statistics show the country accounts for almost one in five of the world's out of school children.
In other countries, natural resource revenue has often been used to finance armed conflict, such as the 'blood diamonds' that fuelled civil wars in Liberia and Sierra Leone. In the Democratic Republic of the Congo, high-value minerals such as coltan and tin ore, used in mobile phones, have also been used to provide armed militias responsible for human rights violations with a lucrative source of income.
These countries should look at others which have turned their riches into sustainable development for the future. Botswana, for example, has entered into an agreement with a private company, De Beers, where around half of diamond exports are translated into government revenue. The country has also consistently spent over 5% of its GNP on education since the mid-1970s. Today, it is one of the richest countries in Sub-Saharan Africa, and not only has it achieved universal primary education, but its secondary gross enrolment ratio stands at 82%, double the average for the continent.
Due to the vast sums of money in question, the natural resources extracting industry has been characterized by opacity, with contracts between states and companies often shrouded in secrecy. One key reason for the swell of campaigns pushing to put transparency on the agenda at the G8 is that it has considerable power to help turn the resources laying under the surface of Africa into huge transformative change for future generations. Liberia's willingness to sign up to EITI once the war had ended in 2003 was key to ensuring that revenue from its iron, ore, diamonds, gold, timber and rubber went to strengthen education and other social sectors and get the country back on course.
Taking all this into account, the potential gains for education on the back of recent discoveries of natural resources in sub-Saharan Africa are enormous. Several countries, including Ghana, Malawi, Uganda and Zambia could reach universal primary education without needing any more aid from donors. In just the 13 African countries the EFA Global Monitoring Report has analysed, the resources could fund schooling for 88% of their out of school children. In Uganda, for example, their recent oil discoveries will double the government's budget by 2016 which could, in turn, double the education budget and educate not just their primary aged children out of school, but also those of lower secondary school age who are not currently in school.
As plans for extending education are being even more ambitious, developing countries need more than ever to maximize sources of finance for education. The potential is too large to ignore.