Africa's recent oil boom : are the same mistakes being made again? Investigating the effect of the recent surge in oil prices upon the prospects of long term development in Sub-Saharan Africa

Abstract

There has been as yet no empirical study that has undertaken to identify how Sub-Saharan African (SSA) states have allocated the wealth generated from the 21st century oil boom. The answer to this question may well determine whether Africa has any prospect of sustainable resource led development in the near future. This work is an empirical study into how oil states have allocated their wealth in the modern era, and whether there has been a divergence from the past. The main goal is to revise the common view (based as it is on the experiences of the 1970's and early 1980's) that increased levels of oil wealth serve only to undermine the prospect of long term economic growth within developing countries. I argue that improvements in the political environment have increased the possibility that the 21st century price rise has been used more productively than was the case thirty years ago. Thus the focus of this paper is to identify how oil states have improved their use of oil wealth in the recent era, and the factors that have brought this about. To achieve this end, I have created a set of variables that identifies the amount of oil wealth that has accrued to African governments (during the 21st century price rise) and the areas in which these funds have been allocated. I have also measured levels of political and social freedom to determine whether the political environment is one that has improved from the previous price hike period. My empirical findings display two clear results. Firstly, the political environment has improved significantly from the previous era, and secondly, the pattern of resource allocation has changed dramatically, to one that holds out a much greater prospect of positive long term economic growth. Based upon these results, it appears that SSA oil states have broken away from the negative effects associated with the resource curse and the previous oil bonanza.