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Forum for the Future of Aid

Southern Voices for Change in the International Aid System Project

The Forum on the Future of Aid is an online community dedicated to research and opinions about how the international aid system currently works and where it should go next

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Managing Commodity Booms in Sub-Saharan Africa

African Economic Research Consortium

Current booms in commodities of importance to African economies bring into sharp focus the importance of managing such booms effectively, so that they are neither panacea nor curse, but major inflows of resources with potential to promote sustainable development and poverty reduction. AERC researchers have recently been investigating how best to manage commodity booms to maximize this contribution to the economy. Discussions by the ninth Senior Policy Seminar were organized around the following seven themes:
• Lessons of international experience
• Africa’s management of previous oil booms
• Strategies for managing the current oil boom
• Africa’s management of previous solid mineral booms
• Strategies for managing the current solid mineral booms
• Africa’s management of previous agricultural commodity booms
• Strategies for managing the current agricultural commodity boom

Welcoming the participants, Cameroon’s Minister of State, Augustin Kodock, indicated how timely the subject was for most African governments, and particularly Cameroon. He expressed a wish for strong policy recommendations to come out of the seminar, including strategies to keep Africa’s commodity prices at the highest possible levels. In the official opening address, the Prime Minister of Cameroon, Ephraim Inoni, commended African researchers and policy makers as fully capable of analysing issues, rather than solely relying on lessons from other continents transmitted by international experts. He stressed the importance of the seminar’s focus on the impact of commodity booms on government revenues and expenditures. He hoped that the deliberations would improve the future management of resulting budget surpluses and the planning of long-term expenditures to avoid the “boom and bust” cycles of past commodity price volatility. This would help keep Africa on a path of steady development.

Policy recommendations arising from the ensuing discussions were to:
• Turn general declarations of support for agriculture into detailed commodity-specific strategies with adequate budgets.
• Promote microfinance as one way to assist farmers.
• Strengthen agricultural research institutes for improved technology, research and development, as well as extension services.
• Analyse the potential for intra-African commodity trade, as well as the impact of the Africa-Caribbean-Pacific/European Union (ACP-EU) economic partnership agreements and any potential Doha Round based liberalization.
• Assess the structure of agricultural production more closely – that is, under what circumstances do large farmers, small farmers and agricultural labourers gain?

Countries have different political and economic contexts so options will vary. However, they can choose from among the following:
• Encouraging farmers to diversify into other crops and non-farm activities, and to save and invest their earnings during boom times.
• Promoting national economic diversification into manufacturing, value added and use of by-products by investing boom revenues.
• Establishing stabilization funds and buffer stocks, in addition to investing boom revenues in infrastructure to support farmers – rural roads, electricity, irrigation, extension, technology and research.
• Rethinking and restructuring marketing boards so that they can retain their regulatory role and provide support services to the farmers, plus developing effective systems to improve farmers’ access to reliable, accurate and timely market information.
• Encouraging joint ventures between countries for value adding activities,especially within regional trade blocs.

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