The reality of natural resource curse hypothesis in the Tanzanian mineral sector: do institutional quality and foreign direct investment matter?

This study examines the causal relationship between mineral resource abundance and economic growth in Tanzania using a selected set of World Development Indicators (WDI) and World Governance Indicators (WGI) extracted from the World Bank database from 1990 to 2018. The study uses mineral rents, gross domestic product (GDP) growth, foreign direct investment (FDI), and institutional quality as variables for analysis. The unit root test shows that economic growth, mineral abundance, FDI, and institutional quality are stationary at the first difference. However, Johansen’s cointegration test indicates the absence of a long-run relationship among the variables. The causality test results show that mineral rents have a positive but insignificant effect on GDP growth. The results do not provide sufficient evidence to confirm that mineral abundance is a blessing in Tanzania. Likewise, institutional quality had an insignificant causal effect on mineral rents, economic growth, or foreign direct investment. On the other hand, FDI had a statistically significant positive causal effect on mineral rents and GDP growth. Therefore, development stakeholders in mineral-rich developing countries should focus on attracting foreign investments for efficient mineral resource extraction and sustainable economic growth.