Summary of WP/92/55

“The Export Performance of Sub-Saharan Africa, 1970-90: A Survey” by Roy C. Baban and Joshua E, Greene

The economies of sub-Saharan Africa have lagged significantly behind those of most other developing countries, and the region’s poor export performance is a major reason. Total export earnings in 1990 were nearly 20 percent below their nominal level in 1980. Moreover, the “real” value of sub-Saharan African export earnings, measured relative to import unit costs, fell by more than 35 percent between 1980 and 1990. Whereas nominal exports and export volumes from other developing countries rose significantly over this period, the share of developing country exports coming from sub-Saharan Africa fell from 8.5 percent in 1980 to 5.0 percent in 1990.

Although the region has experienced a considerable fall in its terms of trade since 1980, sluggish growth in export volumes attributable to poor domestic policies appears to have been particularly responsible for its weak export performance. Overvalued exchange rates, declining real producer prices, and the failure to maintain and modernize infrastructure have discouraged the maintenance and expansion of existing production facilities. These factors, poor investment codes, and difficult regulatory environments have also discouraged investment from abroad and the transfer of new technology. As a result, sub-Saharan Africa has lagged behind other regions in diversifying its exports and penetrating new markets. Because of preferential trade agreements and the region’s concentration in exporting primary, non-fuel commodities, it does not appear to have been significantly hurt by protectionism. At the same time, international responses to the region’s export problems have been limited, reflecting the ineffectiveness of international commodity agreements and the limited support available from multilateral facilities, such as the IMF’s compensatory and contingency financing facility and the European Community’s STABEX and SYSMIN arrangements.

The outlook for sub-Saharan African exports is uncertain. Because of low income elasticities, global demand for the primary, non-fuel commodities that comprise the bulk of the region’s exports is expected to rise slowly, on the order of only 1-2 percent a year. For similar reasons, real export prices of these commodities are not expected to show much improvement over the next decade. Although the region could augment growth by diversifying exports toward more rapidly expanding markets in Asia, high cost levels may make it hard to compete effectively with nearby producers of primary commodities. Thus, sub-Saharan Africa’s best chance for export growth may lie in augmenting its so-called nontraditional exports, such as floriculture, off-season fruits and vegetables, and light manufactures. Studies indicate considerable untapped demand for these products in the region’s traditional markets in Western Europe, which a few countries, notably Kenya and Mauritius, have begun to fill. However, the success of diversification will depend on the region’s ability to penetrate marketing networks and supply consistently high-quality and competitively priced items. This is likely to require further structural reforms in many sub-Saharan African countries to create a more attractive investment climate.