Understanding the Boom

This chapter sets out a framework for thinking about the challenges presented by a natural resource boom. A significant natural resource discovery creates excited expectations of near-future wealth. But the size of a boom is usually overestimated and the delay in receiving revenues is underestimated—each country that finds the opportunity of natural resources disappointing does so in its own way. The author takes stock of the sequencing, timing, and scale of the development of a natural resource endowment in a developing country; reviews the ‘resource curse’ literature; looks at benchmarks of scale and timing so as to put potential booms into the context of the challenges of economic development, growth, and structural change in Africa, including the role played by institutions. In concluding, the author details key challenges for a developing country managing a natural resource boom, and pulls together observations on policy.