Economic Crisis in Africa: Perspectives on Policy Responses

By Magnus Blomström; Mats Lundahl | Go to book overview

2

TRADE COMPRESSION AND ECONOMIC DECLINE IN SUB-SAHARAN AFRICA

1


Peter Svedberg

INTRODUCTION

For more than a century, from the 1870s to the 1970s, African exports grew rapidly and their share of developing country exports increased. In the 1970s export growth in Sub-Saharan Africa (SSA) petered out; during the 1980s there was a huge decline. Export earnings in current dollars fell from US $50 billion in 1980 to about $36 billion at the beginning of the 1990s. The whole of Sub-Saharan Africa, forty-five countries with almost 500 million inhabitants, now has export revenues less than half of those of Hong Kong, a nation of 6 million people (IMF(a) 1991).

There are two main schools of thought when it comes to explain the decline. One stresses factors that are ‘external’ to the individual African country: deteriorating barter terms of trade for primary commodities being the main issue. The other line of thought emphasizes ‘internal’ factors, that is, overvalued exchange rates and high taxes on exports. There are also diverging opinions on how the line of causation runs, that is, whether export failure caused economic stagnation or vice versa. What is indisputable, however, is that the decrease of real export earnings went hand in hand with an overall decline in economic activity in most SSA countries during the 1980s. The annual per capita rate of growth of the real domestic product for the region as a whole declined from 2 per cent in the 1950s and 1960s to less than 1 per cent in the 1970s. During the 1980s, there was an annual decline of 2.3 per cent in the region (UNCTAD 1990(a): Table 6.2). 2

The objective of this essay is threefold. The first is to assess the export performance of the SSA countries in the post-war era and the second is to analyse the causes of the export decline. The third is to investigate the possible links between the export decline, the consequential reduction of imports and the general decline in production and investment in the African economies.


AFRICA IN WORLD TRADE

In 1950 Sub-Saharan Africa had little more than 3 per cent of world exports (Table 2.1); this share declined somewhat over the next twenty years.

-21-

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