n African Renaissance - Decline of commodity prices and the South African economy

Volume 13, Issue 1-2
  • ISSN : 1744-2532
  • E-ISSN: 2516-5305


This chapter examines the upward and downward swings that characterize global commodity markets and prices; these phenomena have been regular occurrences over past decades and may continue far into the future, until at least, suitable substitutes are found for oil, gas and other non-renewable solid minerals. The sharp swings have been identified as one of the significant forces driving macroeconomic instability and the apparent inability of African countries in general to, on any sustained basis; efficaciously utilize the gains from export earnings in the last four to five decades - after political independence in most of the countries. But for Botswana and South Africa, the African countries whose foreign exchange earnings, and by implication, government revenue and fiscal space depend significantly on commodity export trade - Nigeria, Angola, Cameroon, Chad, Côte d'Ivoire, Equatorial Guinea (oil export dependent); Namibia, Zambia, Tanzania (Solid Minerals export dependent); Ghana, Cote D'Ivoire (Cocoa export dependent), etc. - have not done particularly well in terms of managing earnings from the extractive industry and agricultural products' exports. Hence the effects of the booms and bursts in global prices of primary commodities are easily transmitted in the form of declines in output (real GDP) and income, fall in external reserves, deficits in trade and current account balances, depreciation of national currencies, increases in public debts and budget deficits. Computed correlation matrix reveals rather strong relationship between these variables and the weighted indices of all commodity prices, oil price and metal price indices averaged over all sub-Saharan Africa (see UNDP RBA 2016). Available statistics from the UNDP, IMF, the World Bank, African Development Bank and other relevant sources, also reveal the extent of the importance of one or two commodities - high commodity concentration (monocultural nature of export trade) and low diversification - on autonomous foreign exchange earnings and by implication in many cases, government fiscal space, in a number of sub-Saharan African countries.

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