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Mineral and energy resources as a factor in development

Iron ore mine in South Africa

The extractive sector can contribute to a country’s economic development. After all, a well-managed extractive sector enables government revenues to be generated that benefit the entire population. At the same time it encourages the building of infrastructure and paves the way for new jobs and training places to be created, especially in supply and processing industries. In parallel with this, the development of secondary economic sectors is also fostered, creating a foundation for sustainable economic growth. This is where the significance of the extractive sector for development policy lies.

A growing number of developing countries have set themselves the goal of increasing the benefit they gain from their own natural resource wealth. However, it is only possible to generate government revenues from the extractive sector and put them to effective use if the appropriate conditions are in place, or can be created. Weak state institutions and legal frameworks, corruption and a failure to involve civil society in decision-making processes can thwart the positive effects of the extractive sector, potentially leading to human rights infringements, environmental problems and adverse social effects for the local population.

Comprehensive mainstreaming of sustainability strategies in extractive resources policy is therefore hugely important. First and foremost this means focusing on good governance, capable (financial) institutions and transparency, as well as fighting corruption. Ecological and social impacts also need to be taken into consideration. Good cooperation between state institutions and the private sector is also key to establishing an effective extractive sector. State institutions must be able to steer and monitor the extractive sector to ensure that extractive companies comply with legal provisions and pay their taxes and levies on time. These measures have the simultaneous effect of improving the investment climate, thus facilitating the emergence or strengthening of processing industries within the country.

The great challenge for governments is to develop balanced and holistic approaches, and to put them into practice. The potential of the extractive sector can then unfold as a driver of national economic and social development.

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