The Next Commodity Boom and African Development

ECONOMICS

ThE NExT COMMOdITy BOOM

Abundant Mineral Resources

Africa experienced accelerated economic growth from 2002 to 2008 as a result of a commodities boom in the global economy during that period. According to World Bank data, the average annual growth was at 6%.That growth came to a halt due to the 2008 financial crisis which was followed by the world-wide economic recession in 2009. As a result of the global recession, commodity prices fell sharply and growth in Africa declined to 1.1% in 2009.

By Victor Luvhengo

Unlocking Africa’s resources to transform economies and reduce poverty. This inability to set proper institutional priorities will definitely lead to a failure to capitalise on the future commodity price booms. This should be an issue of concern among African policy-makers, and the quest to urgently find solutions should be pursued without hesitation. The global economy is recovering and commodity markets will rise again. Prospects for how growth in the four biggest emerging markets – Brazil, Russia, India and China (BRIC) – will help pull global growth remain very positive. According to the 2010 International Monetary Fund’s Global Economic Outlook report, Brazil will grow by 5.5%, Russia by 4%, India by 8.8% and China by 10%. This growth will once again push upward demand for commodities. Africa and other commodity-rich economies could soon again derive the benefit of rising commodity prices. By 2011 all the commodity prices are expected to reach their pre-crisis era levels. For Africa to reap the benefits of the next boom, the continent has to start putting proper structures in place to harvest the commodity windfall. For this to happen, there are a number of policy considerations that the continent has to examine. Of the highest priorities that African policy-makers should reconsider are: regulatory frameworks, diversification, natural resource funds and better partnerships. Regulatory Frameworks First, it is crucial to set the right...