Shantayanan Devarajan and Marcelo Giugale
As the
Natural Resource Charter holds its third annual workshop
at Oxford on June 29-30, 2011, the combination of rising
commodity prices and falling costs of communication
technology presents Africa with an unprecedented
opportunity to reduce poverty and fight corruption at
the same time. The continent is experiencing a commodity
boom. The bonanza is likely to continue prices are
expected to stay high until 2015 at least. It may even
get larger through new discoveries. This causes a triple
problem for the regions governments. First, their
currencies are appreciating, something that is making
the other sectors of the economy manufacturing, in
particular unable to compete with imports. Second, the
risk of environmental damage associated with extracting
natural resources is growing. And third, the
opportunities for corruption and waste are multiplying
not just in the granting of exploration and exploitation
permits, but also in the use of the revenues from
resource extraction. Except for Botswana, the track
record of Africas mineral and hydrocarbon exporters is
sobering.
While
Africa's central banks are
today better equipped to deal with currency
appreciation, and its civil society more alert to
environmental hazards, the institutions that control
graft are not strong. They must be improved. This,
however, will take time. Is there a short-cut to better
accountability in the management of natural
resources? Yes, there is: direct transfers of resource
dividends to citizens.
Some 35
African countries already transfer cash directly to
their poorwhether through smart cards, debit cards,
cell-phones, or in person. This is getting cheaper and
safer. The coverage of banking and cellular telephone
services is expanding rapidly. So is biometric
identification with mobile devices. Logistically, there
is nothing that prevents governments from transferring a
portionor even allof the income from natural resources
directly to each and every citizen, not just the
poor. This kind of direct dividend payment is of course
not new Alaska has been practicing it since the early
1980s.
Why
would giving people a share of commodity revenues help
avoid, let alone reduce, corruption? Because if you know
you are getting a portion of the oil revenues,
you will surely be interested in the total amount
not to mention in what the government does with its
share. You will now want to know that the company that
explores, exploits and exports your country's
oil is competent and transparent otherwise you lose
money. You may even care less about whether that
company is public or private, as long as the best
possible operator is in charge. You will not support
politicians who interfere with the process. In brief,
you will hold government to account more.
Optimally, one would means-test the dividend transfers,
that is, one would give more to those who are
poorer. But that could be an insurmountable political
and practical road-block. A uniform and universal
transferthe same amount to every citizen would anyway
be progressive, because it will help the poor
more than the rich. If governments were to give up a
tenth of their resource revenues, the typical dividend
may amount to $100 per person per yearpeanuts if you are
rich, but a life-saver if you live on less than two
dollars a day, as most Africans do. And since the
transfer goes directly to the individual, it may give a
boost to groups that are regularly discriminated
against, especially women.
As a
possible additional benefit, direct dividend transfers
could help national unity. In countries where regional,
ethnic or religious differences make it difficult to
agree on how to share natural wealth a problem that is
sadly common in Africathe idea that everyone gets at
least a bit of the riches, personally, individually,
regardless of location, ethnicity or faith, just for
being a citizen of the country, may be a useful source
of national identity.
But if
the resource money goes straight to the people, how will
governments pay for public goods such as vaccinations,
primary schooling, or defense? Two possibilities. One
is to transfer all the resource revenues to the
citizens, and then tax them. After all, this is how
resource-less economies pay for public spending and why
their taxpayers are keen to monitor it. The other
possibility is to transfer only a portion of the
commodity revenues. Either way, direct dividend payments
could be funded by governments cutting back on the more
inefficient and inequitable transfers that resource-rich
countries already makelike tax breaks, fuel subsidies,
and jobs in the civil-service and that are regularly
captured by the connected and the wealthy. In other
words, dividend transfers and fiscal integrity can go
together.
Finally, will this kind of transfers weaken public
institutions by by-passing them? On the contrary, giving
people a direct stake in their countrys riches can buy
time, and goodwill, for the slow-but-necessary
construction of better governance institutions.
As
first published on www.guardian.co.uk/global-development
