Extractive resources, global volatility and Africa's growth prospects

Africa is endowed with an incredible amount of natural resources of which
the extractive sector is a key component. Unfortunately, however, the continent
is characterized by a paradox of plenty or resource curse, depicting a situation
of abundant resources that have not translated into economic growth and
prosperity for the population. The potential role of the extractive sector is
further affected by global volatilities. This article reviews the importance of
the extractive sector to selected African countries. It identifies sources of
global volatility that affect the sector and further attempts to establish the
factors that drive the volatility-growth nexus. We use panel data covering 18
selected African countries from 1970-2013 to explain the gross domestic
product (GDP) growth. Volatility persistence estimates are also calculated.
The article further examines the policy space that African governments might
consider to make the extractive sector play a major role in the development
of the continent. We find that the extractive sector makes a huge contribution
to GDP of the selected countries. The empirical evidence also indicates that
12 out of 18 countries find it difficult to adjust their economies back to
equilibrium when hit with volatility shocks or changes in the volatility of
GDP growth.