Economics, Politics, and Ethics of Primary Commodity Development: How Can Poor Countries in Africa Benefit the Most?


WP/94/23-EA
Economics, Politics, and Ethics of Primary Commodity Development: How Can
Poor Countries in Africa Benefit the Most? by Uma Lele, James Gockowski,
and Kofi Adu-Nyako


In sub-Saharan Africa, as in most low-income countries, primary
commodities' exports are the major foreign exchange earners. In most cases
one or two commodities contribute the majority of export earnings. For
example, coffee in Burundi, Ethiopia, and Tanzania, cocoa in Ghana, tobacco
in Malawi, and cattle in Somalia each contributed over 50 percent of total
export earnings in 1985-86. The large share of primary commodities in
export earnings and their significant contribution to employment, income,
and government revenues imply that small percentage changes in the output or
prices of these major commodities can have large macroeconomic effects that
may determine the ultimate course of economic transformation.

In the 1980s, while Asian and, to a lesser extent Latin American
countries increased their agricultural export volumes, sub-Saharan African
countries' export volumes declined and, at best, stagnated. The loss of
sub-Saharan Africa's market share was a result of a lack of competitiveness
compounded by protectionist policies in the developed countries. Labor
productivity showed a slight decline in sub-Saharan Africa, in the 1980s,
although Latin America and Asia registered significant increases. Still
more striking, was the large jump in land productivity in Asia between 1980
and 1985 relative to Africa.

The limited but successful smallholder commodity development that has
occurred in Africa stresses the importance of high-quality, location-
specific research and extension, rural infrastructure, access to finance for
producers and processors, processing and marketing arrangements that take
into account scale economies in processing, and price incentives.
Developing countries also require competitive global markets and, where
appropriate, the scope to vertically integrate commodity processing
enterprises into these markets. This would benefit producers in developing
countries as well as consumers in industrial countries. Information is
critical for the development of a thriving export sector. These various
factors call for a pragmatic partnership of public and private institutions,
rather than an ideologically based preference for either sector. Consistent
long-term strategies are important for achieving economic diversification
and broadbased, sustained growth in the production of commodities. The
hitherto piecemeal approach that has been followed by countries influenced
by donor advice, has vacillated over the past two decades between import
substitution, export promotion, and diversification.