Primary commodity export and economic growth in sub sahara africa: evidence from panel data analysis

Matthew Ocran,Nicholas Biekpe

doi:10.4102/sajems.v11i4.282

Abstract

The paper sought to examine the impact of instability in primary commodity export earnings and the level of commodity dependence on economic growth in Sub Saharan Africa (SSA). Fixed effects panel data estimator was used in the empirical estimation. The findings of the study suggest that there is a negative relationship between instability in export earnings and economic growth. The results also indicate that the level of commodity dependence matter in determining economic growth in the region. The results of the paper have economic development policy implications for SSA economies and these are not farfetched. First, it appears the difficult growth experience of SSA is not solely due to instability in export receipts. The question of continued dependence on a narrow range of primary commodities is also matter of great importance.

Highlights

The role of primary commodities in economic performance in Sub Saharan Africa (SSA) is amply demonstrated by the high proportion of Gross Domestic Product (GDP) accounted for by the agricultural sector in most countries in the region
The results indicate that the level of commodity dependence matter in determining economic growth in the region
The paper sought to ascertain the effect of instability in primary commodity export earnings on economic growth in Sub Sahara Africa

Summary

Introduction

The role of primary commodities in economic performance in Sub Saharan Africa (SSA) is amply demonstrated by the high proportion of Gross Domestic Product (GDP) accounted for by the agricultural sector in most countries in the region. Average annual earnings over the period 1990-1999 from each country’s three major primary commodities, varied from a low of 4 per cent (Djibouti) to a high of 95 per cent (Botswana). More than half (52 per cent) of the 48 countries that constitute SSA obtain more than 60 per cent of their export earnings from only three commodities. Another 31 per cent derived between 30-59 per cent from their three leading primary commodities. The impact of decline in the price of cotton is usually most severe in Burkina Faso, Mali, Benin and Togo where cotton exports average 5-8 percent of GDP (IMF, 2005)

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Conclusion