Commodity Prospects and Growth in Africa

The paper provides a survey for African countries on the historical trends in commodity prices, recent trends in international trade, and the major determinants of international prices of primary commodities; the paper further examines he African experience with changes in commodity prices. A theoretical discussion on the impact of trade shocks on economic performance is combined with the actual African experience with the shocks. The paper also provides an outlook for the most important categories of the commodities. Given the fact that Africa depends predominantly on the export of primary commodities, the trends of the international prices of these product greatly affect the continent's economic performance. This paper shows that international prices of primary commodities declined considerably in the last five decades. The implied adverse terms of trade change, coupled with the decline of Africa's share in international markets for primary products, has meant that export revenues decreased, and economic growth and balance of payments worsened for may African countries, particularly in the last decade. With the projected improved prospects for dcommodity prices, the paper outlines policy recommendations which African governments may adopt. These include passing the price increases to producers during trade shocks, improve efficiency in production, processing, and marketing, research, and development of rural infrastructure. In the long-run, the paper emphasizes the importance of structural changes in African economies by diversifying into more dynamic lines of activity, including manufacturing and services.