This keynote paper from the Collaborative Africa Budget Reform Initiative (CABRI) investigates extractive industries and their linkages with the rest of the economy. The discovery of natural resources does not necessarily lead to higher economic growth - and even if it does, this does not necessarily translate into better human development outcomes. A country’s natural resource exploitation can become an ‘enclave economy’, disconnected from the rest of the national economy, making macroeconomic indicators look better, but without creating jobs or broad-based prosperity. To avoid this, linkages between the extractives sector and the rest of the economy need to be strengthened. This requires policy, legislative and regulatory frameworks that are not only pro-growth but also pro-development - mobilising human, financial and technical resources, often through public-private collaboration, to enable other economic sectors to leverage opportunities created by a growing extractives sector.
The development of backward linkages from the mining sector, i.e. the provision of inputs to mine operations, has been explored by a number of companies and countries. These linkages have ranged from very local community focused procurement (such as food and simple clothing items) to more sophisticated high value added items (such as capital machinery and equipment). Case studies for Angola, Botswana, Ghana, South Africa and Zambia have documented the emergence of linkages from the mining sector and local economies; some actively led by mining companies, others by governments and still others evolving through market forces over a period of time. To understand the processes through which such backward linkages develop, BGR commissioned a study to gain an understanding of the procurement practices of mining companies and the environment which informs these processes, in the southern African region. The study, conducted during the June to October 2015 period, focused on Madagascar, Mozambique, South Africa and Zambia.