Malawi has an abundance of natural resources, ranging from minerals, fertile soils, fresh water, and abundant fauna and flora diversity that illustrates a rich and abundant nation. These resources, if optimally utilized would unleash the country’s potential. However, it can be argued that resource abundance creates an illusion of economic growth. It is mostly construed that economies raise solely on an abundant resource base, nonetheless, it is also possible that resource abundance has no significant impact on economic growth, in the absence of other complementary factors. Abundance of resources on its own cannot move a country from poverty to prosperity. macro-economic conditions such as low inflation rates, higher foreign exchange reserves, higher inflows of Foreign Direct Investment (FDI), low budget deficits, high investment and income and resource allocation and equality.
The discovery of oil in Lake Malawi, for example holds great promise for Malawi. With an economy dependent on agriculture and one of the world's lowest GDP per capita, oil wealth could revolutionize the fortunes of Malawi's economy. At the same time, however, the experiences of some other resource rich nations on the continent point to a different possible ending, courtesy of the so-called 'resource curse' whereby instead of contributing to a stronger economy and prosperous society, valuable assets facilitates the rise of institutionalized corruption and environmental catastrophe while the general populace is left in the same, if not greater, poverty as before.
Many oil, gas and mineral rich countries have failed to reach their full potential as a result of their natural resource wealth. In general, they are more authoritarian, more prone to conflict, and less economically stable than countries without these resources. An example of Nigeria and the Democratic republic of Congo who despite their rich resources have not yielded intended economic growth. This therefore clearly illustrates that an illusion of prosperity roams around in countries that perceive resource abundance as prosperity. This creates a situations known as a paradox of plenty which means the failure of resource-rich countries to benefit fully from their natural resource wealth, and for governments in these countries to respond effectively to public welfare needs.
Clearing the illusion of abundance in Malawi
Malawi can learn from countries that have managed to effectively harness their resources
towards economic development and growth. Botswana sets a good example. There are distinct characteristics among countries that managed to use their natural resources effectively, such as;
Natural resource good governance: According to extractive experts, economists and political analysts, one of the most important measure to put in place is good natural resource governance. As far as the use of resources is concerned, issues of transparency around the allocation of licenses and revenues needs to be ensured. Without it, revenues realized from natural resources fall to a limited few, prolific politicians and business tycoons, leaving the marginalized and the poor poorer. Therefore it is ideal for the citizenry to hold their government accountable over resource exploration and must be ensured a stable source of income from such endeavors. “Distinct examples of failed natural resource governance can be drawn from the exploration of Uranium in Karonga and Oil exploration in Lake Malawi where the citizenry remains elusive on contractual issues” Distinct examples of failed natural resource governance can be drawn from the exploration of Uranium in Karonga and Oil exploration in Lake Malawi where the citizenry remains elusive on contractual issues. If indeed Malawi is to attain SDG 1, natural resource exploration must follow good governance principals such as transparency and accountability.
Investment in other productive areas of the economy: The booming of the natural resource exploration sector has a tendency of chocking other sectors of the economy such as agriculture and export oriented manufacturing by particularly causing inflation or exchange rate appreciation and shifting labor and capital from the non-resource sector to the resource sector. This effect known as the Dutch Disease heavily affects the poor who can’t cope with the ever changing macro-economic environment. Without proper coping mechanism, a country despite having rich resource base continues to be impoverished. To remedy this, government needs to heavily invest in other sector from the revenue realized from these natural resources to generate non-resource sector growth. Infrastructure investments in the industrial sector, transportations, agriculture and electricity.
Striking balance between export of raw materials and manufacturing of extracted natural resources: Deliberate efforts need to be put in place to ensure that countries do not exclusively export raw materials without any form of value addition or manufacturing of finished products. In most scenarios, only a small share of the production value of the resource stays in the country and this increases net import of finished products thus overburden the economy and impoverishing citizens. Enhancing Public-Private Partnerships can render investments in the manufacturing and processing industry. It is the role of both state and non-state players to enhance partnerships in development endeavors. SDG 17 promotes partnerships in achieving all SDGs, thus efficient use of natural resources requires joint efforts to eradicate poverty.
Strong institutional development: weak institutional development in countries creates room for corruption, looting of revenues accrued from natural resource extraction and embezzlement of public funds. To ensure that the abundance of resources benefits the country, strong regulatory institutions need to be put in place and already existing institutions strengthened. This creates checks and ensures institutions are accountable and oblige to exploration rules.
Above all, Malawi should wisely use it rich natural resource base. Abundant fresh waters that flow in rivers and lakes can prudently be used to irrigate crops to reduce poverty and hunger. Rich minerals base such as coal, uranium, bauxite natural gas can be channeled to kick start the economy into an economic growth trajectory and with proper deals being struck, reduced corruption and embezzlement of public funds, the mining industry holds huge potentials. Consequently, if such resource resources are not prudently utilized, the currently can be in a situation economists describe as resource curse where resources are there to spar production but a country cant utilize them towards economic growth.
The sustainable development goals offers hope and direction as far as poverty eradication is concerned. SDG 1(No poverty), 2 ( Zero Hunger), 3 (Good health and well-being), 4 (quality education) can be achieved if we ensure that resource and assets including human assets, natural assets, physical assets, financial assets and social assets are harnessed and channeled towards pulling out people from ultra-poverty. If properly executed, SDGs offer a road for economic development that ensures efficient use of resources, equitable access and distribution to resources and inclusiveness of the marginalized. This if embedded into a nations agenda, it offers a way out of poverty and direction towards obtaining zero poverty and hunger.