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.