1 The Case for Direct Distribution of Resource Revenues in Africa Shantayanan Devarajan and Marcelo Giugale 1 With the assistance of Hélène Ehrhart, Tuan Minh Le and Huong Mai Nguyen Abstract: Noting that Africa’s resource-rich countries have not translated their wealth into sustained economic growth and poverty reduction, this paper shows that by transferring a portion of resource-related government revenues uniformly and universally as direct payments to the population, some countries could increase both private consumption and the provision of public goods, and thereby reduce poverty and enhance social welfare. We make the case based on theoretical considerations and explore how these direct dividend payments would look in practice in a group of selected African countries. JEL Codes: H41, H5, I3, O10, O13, O15, Q3 Keywords: Africa, extractive industries, poverty, public goods, direct dividend transfers I. Introduction and Rationale The recent discoveries of oil, gas and minerals in, among others, Ghana, Uganda, Kenya, Tanzania and Mozambique represent a once-in-a-lifetime opportunity for the citizens of these countries to escape poverty and enjoy sustained economic growth. Inasmuch as the discoveries were triggered by a rise in international prices, Africa’s traditional resource-rich countries such as Angola, Gabon and Nigeria also have a chance to launch their economies to a higher level of development. Unfortunately, their track record has been disappointing. With the exception of Botswana, none of them has turned higher income from commodity extraction into sustained poverty reduction. While the reasons are many—the collapse of other tradable sectors, especially agriculture (Sachs and Warner [1995, 2001]), unfavorable exploitation contracts, and so on—the most striking fact is that fiscal revenues have not translated into effective public 1 Devarajan is Chief Economist of the Middle East and North Africa Region and Giugale is Director of Economic Policy and Poverty Reduction of the Africa Region, World Bank. Ehrhart is an economist with the Agence Française de Développement. Le is a Senior Economist in the World Bank’s Africa Region, where Nguyen is a Consultant. The views expressed are the authors’ own and not necessarily those of their affiliated institutions.