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

IMF Working Papers, February 1, 1994

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Agricultural commodities play a critical role in the growth of low-income countries.
A combination of factors has resulted in declining agricultural prices, forcing developing countries to increase export volumes to maintain export earnings.
Low growth in factor productivity in Africa, relative to competitors, caused declining export shares for African countries.
A broad-based smallholder strategy—focused on producing commodities in which a country enjoys comparative advantage—is central to benefiting from commodity development.
Effective commodity development requires productivity-enhancing innovations in both food and export commodities.
A stable price environment, availability of infrastructure, and access to credit are necessary complements to productivity improvements.
Achieving the required environment depends on partnership between government and private agents.

Declining agricultural prices: identified as a structural pressure necessitating higher export volumes.
Factor productivity gap: slow productivity growth in Africa relative to competitors undermines export performance.
Market and institutional conditions: price instability, limited infrastructure, and restricted access to credit constrain smallholder-based commodity development.
Comparative advantage orientation: emphasis on aligning smallholder production with commodities that reflect a country’s comparative advantage.

Support a broad-based smallholder strategy that targets commodities aligned with national comparative advantage.
Invest in productivity-enhancing innovations for both food crops and export commodities.
Promote a stable price environment to reduce income volatility for producers and exporters.
Expand availability of infrastructure to support production and market access.
Improve access to credit for smallholders and commodity producers.
Foster partnerships between government and private agents to coordinate investments, innovation diffusion, and market stabilization efforts.

Subjects: Agricultural commodities, Agricultural exports, Agricultural sector, Commodities, Economic sectors, Exports, International trade
Keywords: Africa, Agricultural commodities, Agricultural exports, Agricultural sector, Asia and Pacific, balance of payments, commodity option, commodity price, commodity producer, export commodity, Exports, maize price ratio, price distortion, price stabilization policy, price variability, price variability result, private sector, productivity gain, public goods, terms of trade, variability result, WP

IMF Working Paper by Uma J. Lele, James Jerome Gockowski, and Kofi Adu-Nyako (February 1, 1994).