Raw commodity exports limit Kenya growth

Base Titanium staff inspects minerals. FILE PHOTO | NMG 

By STELLAR MURUMBA

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Summary

• Kenya is among 16 Comesa bloc countries that are commodity export-dependent, translating into low levels of development and high poverty rates.
• Most of the developing countries dependent on exports or imports do not get better terms of trade in the medium term even when prices change.
• Policies such as expanding linkages of commodity sectors with the local economy and promoting inclusive growth through social protection, investing in human capital and pursuing transparent policies have been recommended.

Kenya is among 16 Common Market for Eastern and Southern Africa (Comesa) bloc countries that are commodity export-dependent, translating into low levels of development and high poverty rates.

The United Nations Conference on Trade and Development (Unctad) Commodities and Development Report 2017 says most of the developing countries dependent on exports or imports do not get better terms of trade in the medium term even when prices change.

The 16 countries include Burundi, DR Congo, Comoros, Djibouti, Eritrea, Ethiopia, Libya, Madagascar, Malawi, Rwanda, Seychelles, Sudan, Uganda, Zambia and Zimbabwe.

“The 16 Comesa countries have been named as commodity export-dependent deriving the bulk of their export earnings from primary commodities such as minerals, ores, metals, fuels, agricultural raw materials and food,” read the Unctad report presented to the Comesa secretariat last week.

“Egypt, Swaziland and Mauritius have diversified their economies and are not categorised as commodity export depended countries.” Kenya’s dependence on commodities in general has, however, reduced substantially in the last 10 years.

Earnings from exports were, for instance, valued at $3.621 billion (Sh362.1 billion) in 2014/15 or 5.9 per cent of Kenya’s Gross Domestic Product (GDP), down from 8.3 per cent of GDP a decade ago when earnings totalled Sh317.7 billion.

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The report says export commodity dependence may have potentially harmful impacts and affect all dimensions of sustainable development.

The report bases findings on the commodity price boom of 2003- 2011, which showed that strong commodity prices did not alter the long-term pattern of their terms of trade.

The terms of trade of economies that depend on primary commodities tend to deteriorate in the long run due to the cyclical decline of primary commodity prices relative to the prices of manufactured goods.

Policies such as expanding linkages of commodity sectors with the local economy and promoting inclusive growth through social protection, investing in human capital and pursuing transparent policies have been recommended.

“In view of this, Unctad has given different policy recommendations that countries should introduce in order to bring about holistic and inclusive development.”