Maximizing the income from natural resources such as oil and minerals could provide an education to 86% out-of-school children and 42% of out-of-school adolescents in 17 developing countries, according to calculations by the EFA Global Monitoring Report team. Our new policy paper, ‘Turning the ‘resource curse’ into a blessing for education’, shows that these 17 countries could make huge progress on closing remaining education gaps before 2015 by managing their resource revenues better and devoting a significant share to sending children to school.
Several of the countries that are furthest away from achieving the Education for All goals are rich in oils and minerals. However, they have failed to generate enough revenue from their natural resources, have not managed them efficiently, have not struck beneficial deals with extractive companies or have not invested revenue in productive sectors like education. As a result they are losing out on funds which could help reach Education for All and bring sustainable change to their countries.
Released a few days before the World Economic Forum on Africa in Cape Town, our new policy paper shows the potential of these natural resources to raise funds for social good. In all 17 countries, total extra funding for education from well-managed natural resource revenue could reach US$5 billion a year – two and a half times the amount that these countries received in aid to education in 2010. Ten of the 17 countries, including Ghana, Tanzania, D.R. Congo and Zambia, would be able to use their additional funds to send all their children to school.
Here are a few examples of the revenue that natural resources could bring to education:
- In Uganda, following recent oil discoveries, the government’s total budget is set to almost double by 2016. This could lead to a doubling of the education budget and send all primary and lower secondary school-aged children to school.
- In the Lao People’s Democratic Republic, the value of copper and gold this year is expected to be worth more than double its value in 2008, enough to double their education budget and almost achieve universal primary education.
- The Democratic Republic of the Congo receives less than 10% of the income from its minerals with the remaining 90% going to extracting companies. Striking a better deal with these companies and keeping more as government revenue could likely send all of its children to primary school.
Many low income and middle income countries have been unprepared to deal with the sudden discovery of an oil field or ore deposits. As a result, their governments have often struck poor deals with multinational companies. Others have been unable to maintain a steady flow of revenue through good and lean years.
Many countries have mismanaged the natural resource revenue, either through corruption or misguided spending choices. It has also often been used to finance armed conflict, such as the ‘blood diamonds’ that fuelled civil wars in Liberia and Sierra Leone. To transform natural resources from a curse into a blessing, governments must maximize their revenue from extractive activities, manage them transparently and invest the wealth in sectors like education that will generate higher, equitable benefits for the population.
The current high prices for non-renewable commodities mean that potential revenue for governments from these resources is greater than ever. In the region furthest from reaching the EFA goals, sub-Saharan Africa, potential profit per capita from non-renewable natural resources tripled between 1998 and 2008. While commodity prices are vulnerable to economic crises such as that of 2008–2009, they have been following an overall upward trend. Of the 17 countries included in the analysis for the Policy Paper, 13 are in sub-Saharan Africa. Better management of their natural resource revenue, and allocating 20% of this to education, could mean that 9.4 million more children would be in school.
A first step towards translating natural resource wealth into development outcomes is for governments to obtain a fair share of the profit, whether they enter into partnerships with private companies or grant them concessions. Botswana has maximized revenue through a partnership: around half of its diamond exports translate into government revenue, compared with 20% on average for other mineral-rich countries. Not only has it achieved universal primary education but its secondary gross enrolment ratio stands at 82%, double the average for the continent. Brazilian President Dilma Rousseff has also recently announced a proposal to earmark all revenue from oil for education.
Transparency in the use of natural resources is vital to achieve the desired results. But the natural resources extracting industry has been characterized by opacity, with details of contracts between states and companies often shrouded in secrecy. Recently, however, the international community has been pushing for norms of transparency for resource extraction and revenue generation. At the time of writing our new paper, fourteen countries fully complied with its standard for ‘companies to publish what they pay and for governments to disclose what they receive’, and a further twenty-two countries had taken steps to adhere to them.
To encourage fair and productive use of natural resource revenue, our paper recommends that education advocates should concentrate on three fronts.
- First, they should support transparency and fair taxation measures, pushing all governments to comply with their standards.
- Second, they should get involved in national debates on the use of natural resource revenue, and make the case for education as a long-term investment essential to diversify the economy and avoid the resource curse.
- Third, each country should ensure that the recommended 20% of their national budget is allocated to education.