Edited by Francis N. Botchway
Chapter 10: Commodity Agreements and Markets
Billy Melo Araujo 1 INTRODUCTION The term ‘commodity dependence’ is an integral part of any serious discussion relating to the economic development of Africa. Commodities are unprocessed raw materials originating from agricultural activities (coffee, cocoa, cotton, wheat, and so on) or extractive activities (hydrocarbons, minerals, metals, and so on). Their export constitutes the largest source of revenue in Africa, and in a number of countries three or four commodities represent the main source of export earnings, government revenue and employment. This means that African countries are particularly vulnerable to fluctuations in commodity prices. Sub-Saharan Africa’s share of global trade fell to 1.5 per cent in 2001 from a high of 6 per cent in 1980 and, excepting oil, the terms of trade in the primary commodities sector have been steadily declining for about 30 years.1 The commodity price boom which occurred between 2001 and 2008 as a result of global economic growth offered African countries only a brief reprieve from the general trend of decline in the commodity terms of trade. As a result of the recent financial crisis, the prices of major commodities such as oil, metals and food have fallen sharply since mid-2008. According to the World Bank’s Global Economic Prospects 2009, growth of the gross domestic product (GDP) of developing countries as a whole was expected to decline from 7.9 per cent in 2007 to 4.5 per cent in 2009, while growth in sub-Saharan Africa was projected to fall from 5.4 per cent in 2008 to 4.6...
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