Assessing the Impact of Socio-Political Risk on Natural Resources in Africa

This chapter examines the link between social-political risk factors and natural resources of countries in Africa using a panel dataset of 30 African countries over a period of 22 years, 2000–2021. Employing a system generalised method of moments (Sys GMM), our results suggest that the aggregated risk (composite risk rating) negatively impacts natural resource rents. When the composite risk is decomposed into socio-political, financial, and economic risk factors, we find out that socio-political risk is the only risk factor that significantly impedes all the rents. We find government revenue to positively relate all rent variables. Moreover, our analysis confirms that other specific risk factors such as socio-economic conditions, internal conflict, risk for external liquidity, bureaucracy quality, and government stability impact rents differently depending on the classification. Socio-political factors are found to impact rents more compared to other risk factors, suggesting that most natural resource-rich countries must pay close attention to socio-political risk factors when drafting rent policies.