Despite having higher GDP growth on average than those that are resource-scarce, Africa’s resource-rich economies fare poorly and therefore feature prominently in the bottom 20 in the Global Competitiveness Index (GCI) 2014–2015. The bottom 20 takes in several resource-rich African countries, including four oil-exporters (Angola 140th, Chad 143rd, Libya 126th, and Nigeria 127th) and six mineral exporters (Guinea 144th, Mali 128th, Mauritania 141st, Mozambique 133rd, Sierra Leone 138th, and Zimbabwe 124th), two of these mineral exporters (Guinea and Mauritania) being fragile states. The poor performance of resource-rich economies indicates that they have not been able to effectively channel their natural resource revenues to enhance their competitiveness. Indeed, although the resource-rich economies have had the opportunity to enhance their competitive prospects in the wake of commodity-price booms, the data show no notable improvement in their competitiveness and the chapter points to myriad remaining challenges.

The absence of solid institutions has left these economies open to corruption and rent-seeking, which negatively affects their overall competitiveness. More investment and maintenance of infrastructure are needed to reduce indirect costs to businesses and make them more competitive. The business environment would be more efficient with less bureaucracy and enhanced financial development. Overall, these countries have suffered from the “Dutch Disease” syndrome, with real exchange rate appreciations and wages increasingly driving out export and import-competing industries. Taking this into account, governments should support the development of the traded sector and non-natural-resource traded goods.

Currently the commodity price shocks present additional challenges that have magnified the macroeconomic vulnerabilities of these economies and undermined their ability to undertake competitiveness-enhancing investments. For oil-exporters, the recent oil price plunge of more than 50 percent between September 2014 and February 2015, tipping below US$50 per barrel in January 2015, has significantly reduced oil-rich countries’ revenues and magnified their macroeconomic vulnerabilities.¹ Other commodity exports have seen similar declines; for example, the price of iron ore dropped by 51 percent between January 2014 and February 2015. The resulting declines in revenues have deteriorated countries’ fiscal and external positions, with concomitant adverse consequences on government spending capacity, thereby limiting their ability to invest in competitiveness-enhancing programs.

Going forward, it will be imperative for these resource-rich countries to put in place the fundamentals for enhanced competitiveness and broad-based economic development. As argued by McKinsey, resource-rich countries “should reframe their economic strategies around three key imperatives: effectively developing their resource sector, capturing value from it, and transforming that value into long-term prosperity.”² This reframing will include building the resource sector’s institutions and governance, developing infrastructure, ensuring robust fiscal policy and competitiveness, supporting local content, deciding how to spend resource windfalls wisely, and transforming resource wealth into broader based economic development.