Low commodity prices stunt trade growth

Plunging commodity prices
in some of Africa’s top
commodity producers are
affecting cross-border trade
because demand is drying up as
the current account balance of
countries goes into the red.
Warning lights will inf luence
decisions by shipping companies
and logistics operators to
continue with their expansion
to Africa, which a year ago was
seen by many as the world’s next
major growth point.
Imports likely to be most
affected include luxury goods,
mining and oil sector-related
equipment.
Among the sub-Saharan
countries most affected by
civil conf lict, the plummeting
price of oil and “waning global
demand for everything from
coffee to milk” are South
Africa, Kenya, Angola and
Ghana, according to a study by
Bloomberg Business.
Nigeria, with a predicted
shortfall on the balance of
payments of -1.2% of gross
domestic product will fare
better than South Africa with
an expected balance of trade
deficit of -4.46% – which is
only slightly higher than that
of one of the country’s top
export destinations, the United
Kingdom.
The UK’s trade deficit is
expected to be around -4.1%,
with exports being affected
by a relatively strong pound,
according to Bloomberg.
Kenya, seen as the engine for
economic growth in east Africa,
is expected to post a deficit of
-6.9%, followed by Angola on
-9.3% and Ghana on -9.5%.
With cross-border trade in
Africa still at relatively low
levels, the continent remains
dependent on markets beyond
its borders.
This has exposed countries
to the impact
of slowing
economic
growth in
China, which
has been
one of
the big
drivers of
Africa’s
economic
revival.
According
to a study
undertaken for
the International
Monetary Fund
(IMF) by Paolo
Mauro, there is a
direct correlation
between Chinese
economic growth and the
economies of the “top five
resource-rich sub-Saharan
African countries”.
They are South Africa, the
Republic of Congo, Equatorial
Guinea and the Democratic
Republic of Congo.
African governments have
the opportunity to convert a
threat into an opportunity by
refocusing on intra-African
cross-border trade.