Resources Policy 38 (2013) 549–557

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Resources Policy
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The forgotten resource curse: South Africa's poor experience

with mineral extraction
Ainsley D. Elbra n
The University of Sydney, Australia

art ic l e i nf o a b s t r a c t

Article history: Studies of the resource curse as it affects African states abound, yet few deal specifically with the
Received 7 May 2013 experiences of South Africa. The inability of countries to convert natural resource wealth into income and
Received in revised form improved development measures remains highly pertinent and is especially apparent in Africa's largest
16 September 2013
economy. This paper takes a unique approach to study the resource curse by comparing South Africa's
Accepted 17 September 2013
political economy with the existing resource curse literature. Using data from international organisa-
tions, studies of poverty and qualitative evidence this paper examines South Africa's experience with
JEL classification: mineral extraction. It is found that South Africa has experienced many of the symptoms outlined in the
I32 resource curse literature including relatively slow GDP growth, gross inequalities, entrenched poverty
O55
and the creation of a rentier state. Overall, it is concluded that South Africa has failed to benefit from
L72
natural resource wealth and can be classified as a resource cursed state. Not only has mineral wealth
Q32
failed to benefit much of South Africa's population, sections of society have actually been harmed
Keywords: through the process of mineral extraction. This paper is the first to examine South Africa in light of the
South Africa current resource curse literature and to conclude that the state far more closely resembles its sub-
Natural resources Saharan African neighbours than its upper-middle income peers.
Poverty & 2013 Elsevier Ltd. All rights reserved.
Inequality
Development

Introduction
The paradoxical outcome, by which it is argued that natural
resource wealth is in fact a curse, not a blessing, is known in the
literature as the resource curse (Auty, 1993; Sachs and Warner,
1995). Discussions of this paradox usually focus on the poorest
countries in the world, where despite decades of mineral extrac-
tion or oil drilling, there exists entrenched poverty. While elites
are able to capture the benefits of this wealth, those who make up
the remainder of the population are negatively affected by the
presence of natural resources. The resource curse literature has
been widely applied to sub-Saharan Africa, where this phenom-
enon is highly evident in countries such as Chad, Nigeria, Angola
and the Democratic Republic of Congo (see Le Billon, 2001; Pegg,
2009; Sala-i-Martin and Subramanian, 2003; Shaxson, 2005).
Conversely many middle income and upper income countries,
such as Australia and Canada, appear to have escaped this curse as
a mineral wealth has provided sound welfare systems, infrastruc-
ture and economic growth for most in society.
Studies of the resource curse as it affects African states abound,
yet none deal specifically with the experiences of South Africa. Nor
n
Tel.: þ 61 410528684.
E-mail address: Ainsley.Elbra@sydney.edu.au
does the country appear in the studies of countries seen to have
“escaped” the curse – principally Botswana (see Auty, 2001; Pegg,
2010; Poteete, 2009). Instead South Africa is often simply ignored.
This paper argues that the experience of natural resource extrac-
tion in South Africa resembles that of its sub-Saharan neighbours
with mineral wealth having failed significant parts of the country's
population. Specifically, the gross inequalities that remain in South
African society have left a large portion of the population, mainly
characterised by race and geographical location, significantly
worse off (Leibbrandt et al., 2010). Descriptions that rely on South
Africa's upper-middle income status and industrialised economy
are far too narrow to classify the country as having avoided
negative outcomes from mineral extraction.
The unique political economy of South Africa, as outlined by
Seekings and Nattrass (2002), has led to worsening inequality
post-Apartheid and an entrenched working class whose interests
are best served through policy that fails to absorb the vast
numbers of unemployed. Seekings and Nattrass (2002) highlight
the structural power of the working class, trade unions and firms,
who combined have contributed to government policy which
creates a gap between labour market insiders and outsiders. For
these authors, post-Apartheid South Africa has been characterised
by opportunities for skilled workers and disadvantage for the
unskilled or unemployed.

0301-4207/$ - see front matter & 2013 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.resourpol.2013.09.004
550 A.D. Elbra / Resources Policy 38 (2013) 549–557
This paper argues that according to the most basic definition of
the resource curse, South Africa should be the focus of case study
research into the resource curse. Furthermore, examining more
nuanced definitions, and cited symptoms, there is little doubt that
South Africa can be classified as a resource cursed country. The
country's economic performance lags behind its non-resource rich
peers and while GDP per capita is in line with other middle-
income countries its growth has been slower. Additionally, mea-
sures such as economic wealth per capita mask the vast and well-
documented inequalities facing South African society (Leibbrandt
et al., 2010). Even with minor gains in GDP growth, poverty
appears stubbornly entrenched. Finally, the negative socio-
political effects of resource endowment noted in the literature
remain prevalent in South Africa, including; corruption, a loss of
natural capital, disaffection in mining communities, mine-related
violence and the increasing application of military expenditure to
the control of domestic law and order.
Utilising a framework based on the existing resource curse
literature and the political economy model presented by Seekings
and Nattrass (2002), this paper tests the experiences of South
Africa against measures and symptoms said to be indicative of the
resource curse. It is found that in many aspects South Africa suffers
from the same symptoms as other resource cursed states across
the continent. Principally, the majority of the country's citizens are
not benefiting from South Africa's mineral riches and in some
cases are even harmed through the extraction process. Conse-
quently, this paper makes the case that South Africa does indeed
suffer from the resource curse as it is defined in the literature.
Defining the resource curse
Juan Pablo Pérez Alfonso, co-founder of OPEC and the former
Venezuelan minister for Mines and Minerals, expressed frustration
at the paradoxical outcomes his country experienced with oil
extraction, labelling it “the devil's excrement” (Karl, 1997). His
counter-intuitive description of Venezuela's experience with nat-
ural resource extraction reflects the raft of problems faced by
resource rich countries – known as the resource curse.
The term “resource curse” has gained popular acceptance since
the publication of Richard Auty's work, Sustaining Development in
Mineral Economies: The Resource Curse Thesis (Auty, 1993). While
Auty was the first author to explicitly name this counter-intuitive
outcome, Gelb (1988) had previously noted that oil windfalls led to
sub-optimal outcomes in developing states. The term is now used
widely, both inside and outside of academia and although the
prevalence of the resource curse is hotly debated, a common
definition can be located. Using a combination of the two key
authors, Auty (1993) and Sachs and Warner (1995), the resource
curse can be defined as the paradox by which mineral-rich states
fail to keep pace, economically, with their non-mineral-rich peers.
Of the advocates of the existence of the resource curse, Sachs and
Warner are perhaps the most ardent. Their seminal 1995 study,
which included 97 countries, showed that over a period of 19 years
countries they defined as “mineral rich” saw slow economic
growth relative to their non-mineral rich peers.
Other authors have since built on this definition suggesting that
lower economic growth leads to sub-optimal outcomes for the
citizens of mineral rich states, particularly in the provision of health
care and education and access to essential services.
In studies since, a number of additional symptoms of the resource
curse have been highlighted. Leite and Weidmann (1999) attributed
lagging economic growth to the increased prevalence of corruption
in mineral rich states. Later work by Auty (2001) expanded on his
original research to suggest that the resource curse could be seen in
per capita incomes, which grew 2–3 times greater between 1960
and 1990 in non-mineral rich countries. Collier and Hoeffler (2004)
argue that in countries where primary commodities make up more
than 33 per cent of total exports there is a greater chance of civil
conflict occurring. Humphreys (2005) suggests that in mineral rich
countries military-spend is between 2 and 10 times that of non-
mineral rich countries, even in the absence of conflict. All of these
authors contribute to a more nuanced understanding of what
constitutes a “resource cursed” state. Lower economic growth, more
prevalent corruption, a lack of social services and the increased
likelihood of violence are endemic of the paradoxical outcomes
associated with natural resources.
The resource curse operates through several economic and socio-
political channels. The discovery of minerals and the resulting influx of
hard currency often leads to Dutch Disease. Dutch Disease is defined
as an increase in the value of mineral exports leading to an apprecia-
tion in the real exchange rate through the inflow of foreign currency,
making non-mineral exports uncompetitive and locally produced
goods expensive relative to imports. The effects are worsened by a
shift in labour and capital away from traditional sectors of manufac-
turing and agriculture to the more lucrative mining sector. It is through
this shift that important positive externalities such as learning-by-
doing and technology spillovers from manufacturing are also lost
(Wick and Bulte, 2009). In addition, the economies of mineral-rich
states are forced to deal with significant volatility in government
revenues and balance of payment issues that can make budgeting
difficult (Shaxson, 2005). Lastly, the presence of mineral rents is said to
lead to the creation of rentier states, where there are increased
opportunities for corruption, myopic spending, weakening of institu-
tions aimed at ensuring checks and balances and even the increased
likelihood of civil conflict.
It should be noted, however, that the resource curse scholarship
remains deeply contested, with scholars questioning the deterministic
nature of these paradoxical outcomes. Using development indicators
rather than GDP to examine the impacts of mining, Davis (1995)
suggests the resource curse may be an exception rather than the rule.
Eggert (2001) agrees that the resource curse is not deterministic and
instead depends on the management of resources in a given country.
Sala-i-Martin and Subramanian (2003) analysis of Nigeria's experience
with oil suggests that the resource curse operates through poor quality
institutions, if this mechanism is rectified, they argue the resource
curse ceases to exist. While the debate centres on whether or not the
resource curse is deterministic, or whether it exists at all times in all
places, this paper takes the view shared by Rosser (2006, p. 7) that
natural resource abundance “increases the likelihood that countries
will experience negative economic, political and social outcomes”.
Rosser (2006, p. 7) notes that this view is now “widely accepted by
researchers and officials at the major international financial institu-
tions”. Further, countries rich in minerals or oil are likely to experience
some or all of the outcomes associated with the resource curse. Gelb's
revised thesis, which suggests that the resource curse is not determi-
nistic, but rather a “strong recurrent tendency”, lends support to this
approach (Gelb and Grasmann, 2008, p. 88). Based on this definition of
the resource curse, this paper will argues that South Africa has clearly
not benefited from mineral extraction in the same manner that
Australia, Canada or even Botswana have. Embracing Stiglitz's (2007)
suggestion, that resource rich states are often “rich countries with poor
people” we edge closer to defining South Africa as resource cursed.
In cases, such as South Africa, closer attention needs to be paid to the
negative outcomes from resource extraction as they affect particular
groups in.
Where is South Africa in the existing literature?
Studies of resource cursed states often refer to the vast number of
sub-Saharan African states considered to be suffering negative
 A.D. Elbra / Resources Policy 38 (2013) 549–557
consequences from natural resource endowments. However, omitted
from most lists are Botswana and South Africa. While the exclusion of
Botswana is countered through a number of studies that have
suggested South Africa's neighbour may have escaped the resource
curse, little evidence is provided for South Africa's omission. Instead it
is assumed that an upper-middle income, industrialised state with a
sophisticated financial system simply does not fit the criteria of a
resource cursed country.
Amongst the large body of resource curse the literature lies a
number of studies which address the specific experiences of
African states. For example, Auty (1994) includes Zambia in his
study on “newly industrialising” countries. Mehlum et al. (2006)
list references to Nigeria, Zambia, Sierra Leone and Angola in their
study which aims to improve on Sachs and Warner's earlier
analysis. Acemoglu et al. (2004) discuss the Democratic Republic
of the Congo in their analysis. Sala-i-Martin and Subramanian
(2003) detail Nigeria's poor experience with oil extraction. While
Pegg (2009) analyses the Chad–Cameroon oil pipeline – a failed
World Bank mega-project through which Chad emerged as a
classic example of a rentier state. Many sub-Saharan African
countries have been the focus of research on the resource curse,
yet South Africa has thus far failed to appear in such analysis. Nor
does South Africa feature in the studies of cases of resource curse
“avoidance” – such as Botswana. While the reasons for Botswana's
positive experience with mineral extraction have been thoroughly
reviewed in the literature (see Auty, 2001; Pegg, 2010;
Poteete, 2009), it remains that little analysis exists on the link
between natural resource dependency and poverty in Africa's largest
economy.
The conclusion that South Africa has suffered from the resource
curse is contrary to much of the state rhetoric which has
historically advocated a strong South Africa built on mining
wealth. Optimistic governments have repeatedly suggested that
mining has the potential to not only contribute directly to the
country's wealth, but also boost employment and output in
upstream and downstream sectors. However, Stilwell et al.
(2000) find that the premise on which South Africa's 1998
Minerals and Mining White Paper is based on namely, “that
mining industries have the capacity to generate wealth and
employment on a large scale” is in fact false (Republic of South
Africa, 1998). The authors instead suggest that linkages between
mining and other industries remain weak and that multipliers
from mining are similar to other industries (Stilwell et al., 2000).
A history of South Africa's mineral wealth
Prior to classifying a state as resource cursed, the scale of the
country's resource wealth, or resource reliance, must be first
determined. According to the Chamber of Mines, South Africa
ranks amongst the world's largest producers of diamonds, flur-
ospar, gold, manganese ore, titanium and platinum group metals
in addition to possessing the world's largest known reserves of
gold, platinum group metals, manganese ore, and chrome ore
(Chamber of Mines of South Africa, 2012; U.S. Department of the
Interior, 2012).
Not only does South Africa possess huge reserves of natural
resources, but this sector represents a significant portion of the
country's economic output. Most definitions of resource-rich
states rely on a measure of resource reliance, rather than a
measure of stock wealth, which is much more difficult to calculate
accurately. As such, in order to determine if a state is resource
cursed, the level of reliance on natural resources must be first
determined. Davis (1995) adopts a definition of “mineral-based
economies” as those where natural resource exports contribute
more than 40 per cent of total exports and where mining's
551
contribution to GDP is greater than 8–10 per cent of total GDP.
Alternatively, the IMF defines resource dependency as either
government revenue from resources or mining's share of exports
greater than 25 per cent of the respective totals, averaged over the past
5 years (International Monetary Fund, 2007). In 2011 South Africa's
mining sector contributed 8.8 per cent of GDP (Chamber of Mines of
South Africa, 2012) while in the previous year mineral exports made
up of 48 per cent of total exports, classifying South Africa as resource
reliant, according to the IMF as well as Davis’s more conservative
estimate (U.S. Department of the Interior, 2012).
Mining's history in South Africa dates back to 1870 when gold
was first discovered in Limpopo Province (Sorensen, 2011). In 1886
the discovery of the world's largest banket (a gold-bearing con-
glomerate found in South Africa) saw the industry expand at a
rapid rate, although growth rates paused during the Boer War
which lasted from 1899 to 1902 (Sorensen, 2011). At the end of
Apartheid-era rule in 1994, mining, and business in general, was
concentrated in the hands of a small group of companies. Anglo
American controlled 43 per cent of the Johannesburg Stock
Exchange, and the top five groups of companies controlled 84
per cent through a complex web of cross holdings. With the fall of
the Apartheid regime South Africa's mining industry experienced
significant changes, culminating in the 2002 introduction of the
Mineral and Petroleum Resources Development Act (Act No. 28 or
2002). The Act was introduced in order to re-direct the benefits of
South Africa's minerals to the broader population (Sorensen,
2012).
A key feature of South Africa's post-Apartheid rule has been the
implementation of the Broad Based Black Economic Empower-
ment (BBBEE) Act and associated schemes. Alongside measures
aimed at a greater inclusion for other minority groups left behind
during Apartheid rule, for example white women, BBBEE drew
attention to the limited role played by black South Africans in the
greater economy, especially the ownership of business. In 2003 the
BBBEE set up a scorecard that was compulsory for large compa-
nies, and voluntary for small to medium enterprises, and was
aimed at quantifying the goals around broader black inclusion. The
BBBEE scorecard has led to mixed results. The Johannesburg Stock
Exchange (JSE) publishes an annual BEE report that in 2012 noted
that black South Africans hold at least 21 per cent of the top 100
companies listed on the JSE (Johannesburg Stock Exchange, 2012).
However, these facts relate only to companies listed on the JSE and
exclude large mining firms who have listings elsewhere globally
but operations in South Africa. Since the introduction of the BEE
programme, many of the larger conglomerates the previously
controlled capital and stock markets have been broken up, with
parts sold to BEE consortiums. Anglo American, for example, was
split up with parts of the company hived off to BEE consortiums
and the head office relocated to London (Nattrass, 2004).
Throughout the colonial, Apartheid and post-Apartheid peri-
ods, South Africa has relied heavily on its mining sector for
growth, a reliance that remains today despite the economy's
industrialised nature. The next section will show that these riches
are not translating into wealth for the majority of the population
who continue to experience outcomes more commonly associated
with the resource curse as it affects low-income states. While
South Africa is located in sub-Saharan Africa comparisons with
neighbouring states are not a reasonable measure of the country's
progress. The size of the South African economy and its indus-
trialised nature suggest that it is more suited to comparisons to
other upper-middle income countries. This method of comparison
has been adopted in this paper and is also used by the World Bank,
throughout its publications on South Africa. However, in order to
show that South Africa far more closely resembles resource cursed,
low-income countries such as many of those in sub-Saharan Africa,
comparisons within the region are also used for effect. The
552 A.D. Elbra / Resources Policy 38 (2013) 549–557

next section develops a framework which allows a comparison upper-middle income countries, and at first appear to exclude
between South Africa's mineral extraction experience and the South Africa as a resource cursed state. However, examining GDP
resource curse literature. per capita growth since the end of Apartheid, it is found that South
African GDP per capita has been growing slower than other upper-
middle income peers and countries within the sub-Saharan
Is South Africa resource cursed? African region. In fact, South Africa's GDP per capita growth rate
is more than 2 times slower than its peers, aligning with Auty's
The most fundamental, and widely accepted, definition of the condition of a resource cursed state. GDP per capita growth has
resource curse remains the one outlined in Sachs and Warner's been slow despite the government's attempts at stimulating the
1995 work, namely that mineral rich states experience slower economy through its “High Productivity Now” programme, which
economic growth than their non-mineral rich peers. This criterion Nattrass (2001) notes which has only benefited a small number of
is present in the case of South Africa, whose economic growth rate capitalists and highly skilled workers while at the same time has
has been historically lower than other upper-middle income done little to absorb excess labour in the economy (Table 1).
countries. Since the end of Apartheid rule in 1994, South Africa's While South Africa's GDP per capita is almost three times that
economic growth has averaged 3.26 per cent compared to 4.72 per of the average of its sub-Saharan neighbours, its distribution
cent for sub-Saharan Africa and 4.18 per cent for middle income reflects a sizeable portion of the country's citizens whose liveli-
countries, indicating not only is the country that is lagging behind hoods are not dissimilar to those in low-income African states
its peers, but also it is behind the regional average (World Bank,
2013). Fig. 1 demonstrates this slower growth while Fig. 2 shows Table 1
the South Africa's slow GDP growth relative to other emerging South Africa’s GDP per capita growth relative to its peers.
World Bank (2013).
economies. South Africa meets the most basic criteria set out in
the resource curse literature, that resource rich states will experi- Country/region GDP per capita in 2011 GDP per capita growth
ence slower economic growth than their non-resource rich peers. (current $US) (1994–2011) (%)
Other economic criteria for measuring the presence of the
resource curse include Auty's (2001) finding that GDP per capita South Africa $8070 1.56
Sub-Saharan Africa $2699 2.17
growth in mineral rich states is 2–3 times slower than in non- Upper-middle $8165 3.15
mineral rich states. South Africa's GDP per capita figures reflect income countries
a country whose wealth is on par with its peers in other

10

8
GDP growth (%)

0
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
-2 Year
-4

Upper middle income Sub-Saharan Africa (all income levels) South Africa
Fig. 1. GDP growth (annual %).
World Bank (2013).
GDP as % of OECD Average

80
70
60
50
40
30
20
10 2011
0 2000
China
Poland

Malaysia

Brazil

India

Indonesia
Chile

Thailand
Turkey
Argentina
Slovak Republic

Russia

South Africa

Fig. 2. Emerging Economies GDP as % of OECD Average (constant 2005 PPP's).

OECD (2013).
 A.D. Elbra / Resources Policy 38 (2013) 549–557
80
70
60
50
40
30
20
10
0
1993 1998 2003
Fig. 3. Income Share by Population.
World Bank (2013).
(World Bank, 2013). The World Bank estimates that South Africa's
unemployment rate is 24 per cent, while youth unemployment sits
at 48 per cent (World Bank, 2013). Such high unemployment
highlights the fact that measures such as GDP per capita fail to
acknowledge the large portion of South African society that has
not benefited from resource extraction and the associated eco-
nomic growth, and instead sits outside the formal economy.
Nattrass (2004) notes that the largest single problem facing South
Africa is its stubbornly high unemployment rate. The growing
middle class (comprising of teachers, nurses, white collar workers,
public servants and the urban industrial working class) uses its
semi-privileged position to resist changes to the taxation system
and labour market which would “steer the economy down a more
labour-absorbing growth path” (Seekings and Nattrass, 2002, p. 4).
Furthermore, unlike other middle-income countries, specifically
those in Latin America, there is little in the way of an informal
economy to act as a safety net for those consistently denied
employment in the formal economy (Nattrass, 2004). Missing
from commonly accepted definitions of the resource curse is an
acknowledgement that growth without improvements in equality
may well be no growth at all for the poorest in society. According
to Davis (1995) South Africa, along with Brazil, has persistent
income inequality that is masked by the measure of GDP per capita
– as seen here. Instead, Davis employs human development
indicators, suggesting that the United Nations Development Pro-
gramme index which aims to measure the ability of people to live
long and healthy lives while interacting with their community is a
superior measure of any potential benefit from mining (UNDP in
Davis, 1995). The UNDP is largely focused on the attainment of the
Millennium Development Goals by 2015, of which South Africa is
likely to achieve only 3 of the 8 in total. South Africa's develop-
ment progress is hampered by its inability to alleviate poverty, or
to improve infant mortality, maternal health and HIV/AIDS and
tuberculosis infection rates (Statistics South Africa, 2012).
South Africa's extreme income inequality is consistent with the
experience of neighbouring states. The Southern African region's
economies (consisting of South Africa, Namibia, Botswana, Swazi-
land and Lesotho) is characterised by relatively high per capita
income (when compared to continental Africa), extremely high-
income inequality and low income/poverty elasticities (Thorbecke,
2013). This inequality is recognisable in the fact that while South
Africa's GDP per capita remains on par with other upper middle
income countries, 31 per cent of the population subsist on less
than $2 per day (World Bank, 2013). Since the fall of the Apartheid
regime in 1994 levels of inequality have worsened, and although
racial inequality has decreased since this time due to the emer-
gence of a black middle class, even at a macro-level poverty
alleviation is hampered by gross inequalities. Thorbecke (2013)
finds that South Africa suffers from one of the highest levels of
inequality amongst the 27 sub-Saharan African economies in his
553
Income share held by
lowest 10%
Income share held by
lowest 20%
Income share held by
highest 20%
Income share held by
highest 10%
2008
study (after Comoros, Angola and Botswana). Other studies have
shown that South Africa consistently ranks amongst the most
unequal societies in the world (Leibbrandt et al., 2010) (Fig. 3).1
Of the many studies on post-Apartheid poverty in South Africa
the clearest observation is the differential in poverty levels
amongst racial groups (Hoogeveen and Özler, 2006). Gradín
(2013) notes that per capita incomes of the largest racial group,
those of African descent who make up 80 per cent of South Africa's
population, is one-eighth that of the average white South African's
income. While human development measures improved some-
what for South Africa's poor following the end of Apartheid, the
differential between racial groups remains stark. As of 2008, 30 per
cent of South Africans of African descent inhabited traditional or
informal dwellings while two-thirds lacked piped water compared to
0.5 per cent and 5.5 per cent of whites relatively (Gradín, 2013).
Poverty in South Africa is largely defined along racial lines, with the
poorest groups in society made up predominately by those of African
descent. However, the wealthiest groups in society are increasingly of
mixed race with the emergence of an “increasingly multi-racial upper
class or elite” (Seekings and Nattrass, 2002, p. 2).
Table 2 shows the high incidence of poverty in South Africa
relative to other upper-middle income countries. Only China has
comparable percentages of citizens living on less than $1.25 and
$2.00 per day. After China, South Africa's poverty rates at both
income levels are close to twice that of the nearest middle-income
country, suggesting not only does South Africa suffer from extre-
mely high instances of poverty but also that these are incongruent
with the rates experienced in countries with comparable levels of
wealth.
Table 3 shows that while South Africa's GDP per capita has grown
over the past two decades, poverty is highly entrenched. Compared to
other sub-Saharan African countries, South Africa was one of the few
countries to pair GDP growth with growth in the percentages of
people living on less than both $1.25 and $2.50 per day, suggesting
that GDP growth was not directed to effective pro-poor policies and
failed to lead to poverty alleviation. Of 23 sub-Saharan African
countries included in Fosu's (2011) study, only South Africa, Tanzania
and Zambia saw GDP growth paired with an increasing incidence of
poverty at both levels over the same period. If South Africa's poverty
reduction is measured against other upper-middle income countries
the results are similar. Only Columbia, and sanctions-affected Iran, also
experienced increases in poverty at both $1.25 and $2.50 levels despite
seeing GDP per capita growth over the past two decades (Fosu, 2011).
1
There is no one comparable survey of Gini coefficients across states for one
given year. Instead this paper relies on the most recent calculations from the World
Bank which ranks South Africa (2009) as the most unequal country in the world.
Other studies see rank South Africa as the 2nd most unequal behind neighbouring
Namibia.
554 A.D. Elbra / Resources Policy 38 (2013) 549–557

Table 2 Table 3
Percentage of population living in poverty – upper middle income countries (latest GDP per capita, $1.25 and $2.50 poverty level growth rates early-mid 1990s to 2011.
data available for each country 2007–2012). Fosu (2011).
Data sourced from World Bank (2013).
Country GDP per capita $1.25 poverty rate $2.50 poverty rate
Country Poverty headcount Poverty headcount growth growth growth
ratio at $1.25 per day ratio at $2.00 per
PPP ( per cent of day PPP (per cent of Burkina Faso 3.182 (2.557) (0.251)
population) population) Burundi (2.532) (0.252) (0.091)
Cameroon 1.694 (9.001) (3.598)
Argentina 0.92 1.87 CAR (0.699) (2.823) (0.585)
Azerbaijan 0.43 2.81 Cote D’Ivoire (0.145) 1.448 (0.799)
Belarus 0.1 0.19 Ethiopia 2.706 (4.384) (0.329)
Bosnia and 0.04 0.19 Ghana 2.211 (3.802) (1.934)
Herzegovina Guinea 1.585 (0.722) 0.367
Brazil 6.14 10.82 Guinea- (2.205) 7.174 2.170
Bulgaria 0 0.41 Bissau
Chile 1.35 2.72 Kenya 0.340 (3.364) (2.337)
China 13.06 29.79 Lesotho 2.503 (1.313) 0.728
Colombia 8.16 15.82 Madagascar 0.126 (0.554) 0.193
Costa Rica 3.12 5.97 Mali 2.879 (4.292) (0.971)
Dominican Republic 2.24 9.88 Mauritania 0.995 (2.012) (1.784)
Ecuador 4.61 10.59 Mozambique 4.813 (1.422) (0.299)
Jordan 0.12 1.59 Niger (0.139) (1.555) (0.417)
Kazakhstan 0.11 1.12 Nigeria 1.743 (0.882) (0.260)
Latvia 0.14 0.37 Senegal 1.778 (4.359) (1.676)
Lithuania 0.16 0.44 South Africa 1.434 4.019 0.870
Macedonia, FYR 0 5.91 Swaziland 1.046 (3.725) (1.051)
Malaysia 0 2.27 Tanzania 2.546 2.204 0.346
Mexico 1.15 5.19 Uganda 3.580 (2.475) (0.982)
Montenegro 0.12 0.3 Zambia 0.980 0.439 0.046
Panama 6.56 13.8
Peru 4.91 12.74
Romania 0.41 1.67
Russian Federation 0 0.05 (World Bank, 2013). The under-5 mortality rate in South Africa,
Serbia 0.26 0.74
while having fallen from 97 per 1000 births to 47 in 2011, remains
Seychelles 0.25 1.84
South Africa 13.77 31.33 stubbornly high (World Bank, 2013). The figure of 47 deaths per
Thailand 0.37 4.58 1000 live births is far removed from the MDG target of 20 (by
Turkey 0 4.16 2015) and is more than twice that of the upper-middle income
Uruguay 0.2 1.18 group average, in line instead with countries such as Namibia (42)
Population below $1.25/$2 a day is the percentage of the population living on less
and Rwanda (54) (World Bank, 2013). Maternal mortality also is in
than $1.25/$2.00 a day at 2005 international prices. line with other low-income states with 300 deaths per 1000 births
far in excess from the MDG goal of 38 and the upper-middle
income average of 73 (World Bank, 2013). Access to anti-retroviral
drugs is below that of the MDG targets, while tuberculosis remains
prevalent and death rates remain unchanged from their 2001
Fosu (2011) notes that for the 80 countries he studied, at both levels (Statistics South Africa, 2012). Living conditions for poor
the $1.25 and $2.50 poverty levels increases in income (as opposed South Africans remain reminiscent of low-income countries with
to reductions in inequality) were almost 100 per cent responsible almost 14 per cent of urban dwellers living in slums, as defined by
for poverty reduction. Where countries suffered, instead, from the UNDP (Statistics South Africa, 2012). The failure of South Africa
worsening poverty, negative income growth was responsible for to translate the modest economic growth into poverty alleviation
74 per cent and 85 per cent of the increase in poverty overall. The and improved development outcomes is indicative of a resource
case of South Africa is an anomaly. While the country experienced curse.2
worsening poverty, in the form of an increased percentage of the In addition to the economic effects of mineral extraction, and
population living under $1.25 and $2.50 per day, more than 50 per the inability for resource wealth to alleviate poverty, South Africa
cent of this was attributable to worsening inequality rather than suffers from many incarnations of the rentier state outlined in the
falling incomes (Fosu, 2011). Tables 2 and 3 show that inequality in literature. Leite and Weidmann (1999) suggest that economic
South Africa severely hampers the ability of economic growth to growth in resource-rich countries is hampered by a higher
alleviate poverty. Instead, despite economic growth poverty con- prevalence of corruption. The ability of resource rents to be
tinues to worsen – a situation virtually unique to South Africa. captured by a small elite leads to an economy focused on the
High instances of poverty, as described above, have led to poor maintenance of power and weakening of institutions, rather than
development outcomes, with much of the population resembling
the profile of citizens of low-income countries. South Africa's high
2
inequality and extreme poverty are likely to prevent the country Ross (2003) argues that mineral dependence aggravates poverty through the
following mechanisms. Firstly, commodity prices are more volatile than the prices
from achieving all eight of the Millennium Development Goals.
of manufactured goods, therefore economies that are dependent on mineral
Specifically, poverty, maternal health, child mortality and eradica- exports are more likely to face economic shocks. This volatility disproportionately
tion of HIV/AIDS and tuberculosis targets are unlikely to be affects the poor as they are unable to guard against shocks. Secondly, mining
achieved before the 2015 deadline. Life expectancy in South Africa produces substantial rents for governments or investors but usually employs few
fell from 61 years in 2001 to 58 years in 2007 (Statistics South workers thereby increasing inequality. Thirdly, mineral extraction which results in
slower growth disproportionately hurts the poor. Fourthly, linkages between
Africa, 2012). This is due to the high incidence of HIV/AIDS mining and the rest of the economy are usually weak. Mining employs few workers
prevalent in South Africa relative to South Africa's middle- and in the absence of upstream or downstream industries provides little unskilled
income peers, whose life expectancy on average is 72 years or semi-skilled employment.
 A.D. Elbra / Resources Policy 38 (2013) 549–557
the direction of effort towards efficient production. South Africa is
no exception to this. Transparency International's most recent data
suggests that corruption levels are rising in South Africa. Over the
past four surveys the country's score has fallen from 5.1 in 2007 to
4.1 in 2011 (where 10 is the least corrupt and 0 the most corrupt).
In the most recent Afrobarometer survey 25 per cent of South
Africans named corruption as one of the most important three
things which their government should be addressing (Wielders,
2013). In the same survey corruption ranked above HIV/AIDS and
poverty as one of the top five priority issues which citizens felt
needed to be addressed by their government (Wielders, 2013).
Given the low level of successful prosecution in South African
corruption case indexes such as Transparency International's, which
measure perceptions of graft, are more reliable indicators of South
Africa's illegal economy. Robinson and Brummer (2006) argue that
corruption has been at the heart of every major scandal to plague
South African politics since 1994. Serious allegations of corruption
have been levelled at many politicians, although most have been
dismissed from court based on the incomplete evidence or the
conclusion that allegations were politically motivated. South Africa's
defence industry was recently plagued by a number of allegations of
corruption related to the purchases under its US$6.4 billion Strategic
Defence Procurement (SDP) programme. Additionally, financial deal-
ings in the gold mining sector have recently become the subject of a
US SEC investigation (Dolan and Stoddard, 2013). The Institute of
Security Studies (ISS) notes that it is not only politicians who are
benefiting from corrupt practices in the mining industry (Standing,
2007). Mining companies have been complicit in graft and rent-
seeking as they are keen to maintain their essential social licence to
operate (Dashwood, 2007). The ISS notes that mining firms are paying
local community leaders to oversee the relocation of their commu-
nities away from land designated for mining (Standing, 2007). These
kinds of payments are open to graft and abuse from both sides with
mining companies accused of deliberately dividing mining commu-
nities by selecting individuals likely to be appeased by payments, in
order to hasten the process and to appear to have met the demands of
local stakeholders. Corruption, graft and abuse of power have led
companies, including those involved in mining, to either move off-
shore or participate in corrupt practices in order to gain access to
mining leases, licences and those in charge of granting such permits
(Nattrass, 2004). The growing number of corruption scandals and the
abuse of state power by elites have led to a loss of international
confidence in South Africa and are indicative of the negative outcomes
associated with mineral extraction.
Recent grievances within South African mining regions reflect
dissatisfaction with the distribution of mineral rents. Ross (2007)
suggests that inequalities such as those seen between mining
regions and non-mining regions, as well as between mine workers
and mining companies in South Africa, are reflective of a resource
cursed state. South Africa has, in recent times, been afflicted by an
increasing number of industrial action incidents. 2012 saw the
highest number of strikes since 1994, with many striking miners
citing their living conditions at the mines as rationale for their
action. Violence at the Lonmin mining company's Marikana
platinum mine in August 2012, which resulted in 44 deaths, was
a reflection of disaffection between the mine owners and workers
who felt disadvantaged by the distribution of the mine's wealth.
In the case of the Marikana strike many workers noted that they
had been forced from their homes in the Eastern Cape by the lure
of mine work, only to be housed in poor conditions without
potable water or basic sanitation (Denselow, 2012). One miner told
the BBC that the striking miners were seeking “a decent salary for
hard work deep underground” (Plaut, 2012). The miners were
specifically seeking an increase in their wage from ZAR4000–5000
to ZAR12,500 per month – an increase reflective of both perceived
inequalities in pay as well as efforts to seek a fairer distribution of
555
mine profits (Plaut, 2012). The workers' dissatisfaction is in line
with the prevailing literature – namely that gaps between work-
ers’ real and expected income are likely to lead to tensions (Ross,
2007). Furthermore tension is likely to be exacerbated where
citizens have weak links with the central government, where there
are distinct ethnic identities and where police or the military have
been particularly pro-active – three factors which were all present
at the Marikana strike. The mood amongst the miners and
surrounding communities points to significant discontent with
mining companies, the government and a perceived inefficient
distribution of mineral rents.
The resource curse literature suggests that states rich in natural
resources are more likely to commit greater amounts to military
expenditure, regardless of the presence of conflict (Humphreys,
2005). While South Africa's military expenditure is the largest in
sub-Saharan Africa, its size relative to GDP (1.2 per cent) and
steady decline since the end of Apartheid at first glance suggest
the country lacks the symptoms outlined in the literature (Perlo-
Freeman et al., 2012). While South Africa's military spend has
dropped since relations with its neighbours improved, post-Apart-
heid, it remains commensurate to South Africa's size and role in
the region which includes commitments to African Union peace
missions (of which by 2010 it had participated in three out of four)
and United Nations operations on the continent and abroad.
In addition to these sanctioned forces, recent reports suggest South
African troops were involved in training Central African Republic
troops and defending South African business assets during the
subsequent April 2013 coup in that country (Potgieter et al., 2013).
While overall military spending in South Africa has been falling, the
allocation of military resources suggests that South Africa may more
closely resemble cases outlined in the resource curse literature.
Increasingly, the South African National Defence Force (SANDF) is
being used to fill the void in domestic law and order. This trend was
most evident during the 2012 mine strikes that swept South Africa.
In addition to questions over the army's use in resolving civil unrest,
the SANDF has also been the subject of serious corruption allegations.
It has also been suggested that the funds directed to military
procurement could be far better spent addressing gaps in develop-
ment outcomes mentioned earlier in this paper (Perlo-Freeman et al.,
2012). While the level of military spending in South Africa fails to
meet the framework of a resource cursed state, as offered by the
literature, the increasing reliance on the army to keep domestic law
and order resembles resource cursed states in the region. As noted by
the Stockholm International Peace Research Institute (SPIRI), “South
Africa is not insulated from the poor military budgeting, procurement
and oversight practices and mismanagement of resources associated
with many African countries” suggesting that the problems afflicting
resource rich countries elsewhere on the continent have not evaded
South Africa (Perlo-Freeman et al., 2012, p. 179).
Lastly, the sustainability of mining's contribution to economic
growth has also been questioned. Blignaut and Hassan (2002) argue
that existing accounts do not consider the loss of natural capital from
mining, whilst highlighting the contribution to national income.
In applying “weak sustainability” analysis to the case of South Africa
they conclude that it is not possible to classify the mining sector as
either sustainable or unstainable (Blignaut and Hassan, 2001). How-
ever, their later work suggests that the neighbouring states of
Botswana and Namibia have collected a larger portion of mineral
rents compared to South Africa (Blignaut et al., 2003).
Conclusion
As outlined, many of South Africa's citizens are yet to benefit from
their country's natural resource wealth – and in the cases of those
directly affected by mine violence or poor working conditions they
556 A.D. Elbra / Resources Policy 38 (2013) 549–557
have in fact been harmed. Using Sachs and Warner's original definition
South Africa has been shown to suffer from the effects of the resource
curse. Economic growth has been slower than other upper-middle
income countries and lags behind that of the largely low income or
lower-middle income countries of sub-Saharan Africa. Employing the
political economy model developed by Seekings and Nattrass (2002) it
is evident that Apartheid era institutions have remained in place and
now favour the country's elites and middle class – both of which are
increasingly multi-racial. This has resulted in a widening of inequality
between the lower classes, still predominately made up of black South
Africans, the creation of labour insiders and outsiders and the
continued resistance to labour market or taxation reforms which
could steer the economy on a labour absorbing path. The evidence
presented in this paper concurs with Seekings and Nattrass's conclu-
sion that until the structural power of capital and the middle class is
offset, inequality and unemployment are likely to remain, if not
worsen.
This paper has provided a more nuanced picture of the manner
in which even this modest economic growth is failing to reach the
poor in society. South Africa's poverty rate is amongst the highest
in the upper-middle income bracket while the level of inequality
experienced by South Africans is amongst the highest in the world
– possibly only surpassed by Namibia. When economic growth has
occurred poverty rates have risen, suggesting that these harsh
inequalities must be rectified before South African society will see
the benefits of mineral led growth. In a socio-political sense the
resource curse exists. Corruption is a persistent problem, which
appears to be worsening over time. Miners, unhappy with their
working conditions and failing to perceive equitable returns from
dangerous work in profitable mines, have initiated industrial
action. This industrial action has unfortunately been violent,
leading to the deaths of 44 mine workers and police. Lastly, while
South Africa's defence spending has steadily fallen, it has been
increasingly diverted to the maintenance of law and order in
domestic society and comes at the opportunity cost of improved
social services to the poor.
Much of this description is incongruent with an upper-middle
income industrialised country. Instead, the experiences of many
South Africans are closer to that of their sub-Saharan African
neighbours. The South African resource curse is evident yet it
remains understudied in the literature. Instead, the focus is on
other African countries such as the DRC, Angola and Zambia, in the
mistaken assumption that South Africa has escaped the resource
curse. As this paper has shown many of the problems afflicting
other states in the region continue to affect South African citizens.
South Africa's mineral wealth has failed to alleviate poverty, or
improve the livelihoods of most of its citizens, instead the country
faces many of the issues confronting other resource cursed states
in the region.
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