Genesis Analytics

Financial Services Mailer

9 December 2016

Dependence on commodity exports: where to from here?

Many African states remain heavily dependent on exporting a single commodity - whether
petroleum, aluminium, copper, diamonds, cocoa, cotton or tobacco - to drive economic growth and
development. Twenty-one of the largest economies in Sub-Saharan Africa are in high-export-
commodity-dependent (HECD) countries, in which hard-commodity exports account for more than
10% of GDP (Source: The Observatory of Economic Complexity, MIT, December 2016).

Based on the export composition of African economies, they can be broadly divided into three
groups: low-dependency countries, mixed-commodity (hard and soft commodities) HECD countries
and hard-commodity HECD countries. As we look towards 2017, how can we expect commodity
prices to perform and what are the prospects for these countries?

Hard-commodity HECD countries were the most severely hit by the decline in international
commodity prices after 2011, while low-dependency countries were more resilient. Somewhat
surprisingly, average economic growth in mixed-commodity HECD countries increased significantly
between the commodity boom and the bust that followed. The question, of course, is whether this
trend will continue.

In general, the prospects for 2017 are encouraging. Prices for both soft and hard commodities are
expected to improve over the next two years, which is set to improve the balance of payments
situation in most Sub-Saharan countries.

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