The United Nations Economic Commission for Africa has projected that commodity markets in Africa are expected to remain volatile in the coming months, following the persistence of COVID-19 challenges in the supply chain and other global economic pressures.
While addressing African finance ministers on Tuesday at the UNECA Price Watch session, Stephen Karingi, director of regional integration and trade division at UNECA, said African economies remain largely dependent on primary commodities exports.
“Although the commodity sector in most African economies is a significant source of national revenues, high dependence on the sector means high vulnerability to the vagaries of international markets and volatile prices passed on to local markets,” Karingi said.
The session, which was titled “Commodity prices amid COVID-19: prospects and policy implications for African economies”, also revealed commodities markets in Africa reacted strongly to COVID-19 in early 2020 owing to restrictions, economic slowdown and an uncertain outlook. From mid-2020, a significant rebound in commodities prices brought them above their pre COVID-19 levels, with short term volatilities partly supported by expansive macroeconomic policies.
“High commodity dependence is associated with lower human development indicators across the developing world. Limited diversification and reliance on commodities sectors are detrimental to long-term development in resource-rich countries,” Karingi said.
Oliver Chinganya, a director at UNECA, noted while the macroeconomic effects are well known, the trends of commodity prices and their influence on the revenue of African countries require delving into deeper analysis to have a good grasp of the situation.
“The recent commodity price movement raises questions on critical points economic policies should consider both in the current situation as well as for longer term perspectives. Over the last twenty months COVID-19 has exposed the vulnerability of African economies to global shocks and high dependence to remote world markets,” Chinganya said.
He added this has led to disruptions in supply chains and slowdowns in economic activities worldwide, which to some extent have affected the price of several commodities on the continent since the outbreak.