Effects of Gobal Primary Commodity Market Disruption on Growth and Poverty in Southern Africa
1. TRADE IN TIMES OF COVID-19 PANDEMIC:
EFFECTS OF GLOBAL PRIMARY COMMODITY MARKET
DISRUPTION ON GROWTH AND POVERTY IN SOUTHERN AFRICA
Ismael FOFANA
Director, Department of Capacity & Deployment
AKADEMIYA2063 Webinar on November 12, 2020
5. Why assessing the effects of global primary commodity market disruption?
• The COVD-19 pandemic affects African
economies through several channels including,
Global market disruption and the change in
the international price of primary
commodities
• The COVID-19 pandemic has driven most
primary commodity prices down in 2020.
• Heavy contribution of primary commodities in the
export basket of Southern African countries.
6. The COVID-19 pandemic has driven most primary commodity prices down in 2020
-50
-40
-30
-20
-10
0
10
20
Coal,Australia
Crudeoil,avg
Naturalgas,Europe
Naturalgas,US
NaturalgasLNG,Japan
Cocoa
Coffee,Arabica
Coffee,Robusta
Tea,auctions(3),average
Coconutoil
Groundnutoil
Palmoil
Soybeanmeal
Soybeanoil
Soybeans
Barley
Maize
Rice,Thailand,5%
Wheat,US,HRW
Bananas,US
Meat,beef
Meat,chicken
Oranges
Shrimp,Mexico
Sugar,World
Logs,Cameroon
Logs,Malaysia
Sawnwood,Malaysia
CottonAIndex
Rubber,Malaysian
Tobacco
DAP
Phosphaterock
Potassiumchloride
TSP
Urea,E.Europe,bulk
Aluminum
Copper
Ironore
Lead
Nickel
Tin
Zinc
Gold
Silver
Platinum
Changes in predicted prices in 2020 for primary commodities prices between April 2020 and October 2019 forecast
7. Heavy contribution of primary commodities in countries exports
96 94 94 93
87 87
81
59
32
8
Angola
Botswana
Mozambique
Zimbabwe
Zambia
Namibia
Malawi
SouthAfrica
Eswatini
Lesotho
55
51 49 49 46
40 40 39
33 32
Angola
Botswana
Mozambique
Zimbabwe
Zambia
Namibia
Malawi
SouthAfrica
Eswatini
Lesotho
Primary commodities imports, share of total importsPrimary commodities exports, share of total exports
8. Objective
Assess the effects of the change in the international
commodity price of primary commodities and global
market disruptions on
• Economic growth
• Poverty (Income)
Case studies from Southern Africa
Angola, Botswana, Eswatini, Lesotho, Malawi,
Mozambique, Namibia, South Africa, Zambia,
and Zimbabwe
10. Analytical Framework
• Simulation models (Akademiya2063 / ReSAKSS)
Single-Country CGE Models
Micro-Simulation Models
• Primary commodity price predictions (World Bank)
Commodity Markets Outlook: October 2019 and April 2020
• Statistics on international trade (United Nations)
Import and export data (2019/2018)
11. Scenarios
Changes in the international price of
primary commodities (Price Shocks)
Disruption of global trade conditions and
international market access (Trade Shocks)
12. Scenarios (Cont’d)
2019 price estimates
2020 price forecasts
Baseline (or BaU) scenario
Price forecasts for the year 2020 in October 2019
COVID scenario
Price forecasts for the year 2020 in April 2020
Changes in the international price of primary commodities
13. Primary commodity price scenario based on the composition of the basket of
primary commodities exported and imported by each country
Changes in predicted Prices for Top Ten Primary
Commodities Exported by MalawiShare of Top Ten Primary Commodities in Malawi’s Total Exports,
in 2017
14. Share of Top Ten Primary Commodities in Malawi’s Total Imports,
in 2017
Changes in predicted Prices for Top Ten Primary
Commodities Imported by Malawi
Primary commodity price scenario based on the composition of the basket of
primary commodities exported and imported by each country (Cont’d)
14
-37.5
-13.2
-4.1
-12.9
-1.7
3.9
-14.5
-7.8 -9.6
2.3
Petroleumoils
Fertilisers,nitrogen
Wheatandmeslin
Fertilisers,mixed
Unmanufacturedtobacco
Flat-rolledproductsofiron
Structures
Maize(corn)
Pneumatictyres,ofrubber
Soya-beanoil
15. Declined International Price of Export Commodities
Angola -35.7
Zambia -13.7
Mozambique -10.4
Lesotho -6.5
Zimbabwe -4.7
South Africa -4.1
Malawi -2.3
Namibia -0.9
Botswana 7.5
Eswatini 8.0
17. Zimbabwe -25.8
South Africa -22.2
Zambia -21.0
Eswatini -18.4
Mozambique -18.4
Lesotho -18.3
Angola -16.4
Namibia -15.6
Malawi -15.5
Botswana -5.8
Declined International Price of Import Commodities
18. Impact of the world price changes on individual economies depends on the
contribution of primary commodities in countries external trade
Percentage point change in export and import weighted average prices,
COVID scenario compared to the baseline scenario
-35
-30
-25
-20
-15
-10
-5
0
5
10
Angola
Zambia
Mozambique
Zimbabwe
SouthAfrica
Malawi
Namibia
Lesotho
Eswatini
Botswana
Export Price Index Import Price Index
A B CC
27. Key findings
• Decline in the international price of primary commodities traded
by Southern African countries.
• Negative effects on economic growth in several Southern African
countries - Angola, Botswana, Malawi, Zambia, and Zimbabwe.
• Negative effects on poverty in several Southern African countries
– Angola, Eswatini, Malawi, Mozambique, and Zambia.
• Increase in rural poverty more than urban poverty in Southern
Africa.
28. Policy Options
• Protect vulnerable populations
• Support the rural economy
• Diversify the external trade
29. Policy Options
Protect rural and urban populations
• Scale social protection schemes
Support the rural economy
• Increase public agricultural investments
• Accelerate the implementation of policies for agriculture
30. Policy Options
Export diversification
• More agricultural and food commodities and other high value-
added commodities in the export basket.
Import diversification
• More primary commodities (input used) in the import basket