Unit 4: Primary Product Dependency

Copper mine in Kenya

Many lower-income developing nations still relying on specializing in and exporting low value added primary commodities. The prices of these goods can be volatile on world markets.

When prices fall, an economy will see a sharp reduction in export incomes, an adverse movement in their terms of trade, risks of a higher trade deficit and a danger that a nation will not be able to finance investment in education, healthcare and core infrastructure.

Here are some examples of export dependence for a selection of countries in Sub-Saharan Africa: The data shows the % of total exports in 2010:

1.Angola: 97% oil
2.Ghana: 39% gold, 26% oil, 17% cocoa
3.Kenya: 19% tea, 12% horticulture
4.Nigeria: 90% oil
5.Senegal: 11% fish, 11% phosphate
6.Tanzania: 37% gold
7.Uganda: 18% coffee
8.Zambia: 84% copper

Sub-Saharan Africa (SSA) is often cited as a region where primary sector dependence is very high. SSA’s share in global manufacturing trade remains extremely low.

Questions for discussion:

What are the advantages of focussing on one product?
What are the issues?
Is this the same for every primary product?

What has happened to the Terms of Trade over the last 20 years for SSA?