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We take a look at the state of commodity dependence report as published by UNCTAD. The question is whether South Africa is seen as a commodity-dependent country? While most will say yes, the fact that we export a large number of vehicles might show we not commodity dependent.
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What is a commodity dependent country and is South Africa one?
A country is commodity-dependent if commodities account for more than 60 per cent of its total merchandise exports (in value terms).
• In the period 2013–2017, 102 out of 189 countries (54 per cent) were commodity-dependent.
• In the period 2013–2017, 102 out of 189 countries (54 per cent) were commodity-dependent.
So while South Africa is not seen as a commodity dependent country based on the fact that less than 60% of its exports is made up by the exports of commodities its exports of commodities is still between 40% to 60% of its total exports. However the bulk of Sub-Saharan African countries are deemed to be commodity dependent. the pie chart below shows the distribution of commodity dependent countries by geographic region (for the years 2013 to 2017).
By region, 89 per cent of sub-Saharan African countries are commodity-dependent, compared to two thirds of the countries in the Middle East and North Africa, half of the countries in Latin America and the Caribbean, and half of the countries in East Asia and the Pacific. On the other hand, only a quarter of countries in South Asia and in Europe and the Central Asia region are considered commodity-dependent, while there are no commodity dependent countries in North America. The image below shows the distribution of commodity and non-commodity-dependent countries within each geographic region for the period 2013 to 2017
So while 89% of Sub-Saharan African countries are commodity dependent, 65% of middle eastern and north African countries are commodity dependent, while 25% of European and Central Asian countries are commodity dependent, while 0% of North American countries are commodity dependent. According to UNCTAD commodity dependence is almost exclusively a developing-country phenomenon.
"•Only 13 per cent of developed countries are commodity-dependent, compared with almost two thirds (64 per cent) of developing and transition economies.
• Commodity dependence is particularly concentrated in the least developed and most vulnerable country groups, as follows: 85 per cent of least developed countries (LDCs),1 81 per cent of landlocked developing countries (LLDCs), and 57 per cent of small island developing States (SIDS).
• Using the World Bank country classification by income groups, 91 per cent of low-income countries are dependent on their commodity exports, compared with less than one third of high-income countries."
The bar chart below shows that the bulk of commodity dependent countries are found to be least developed countries, landlocked developing countries and developing countries and transition economies
"•Only 13 per cent of developed countries are commodity-dependent, compared with almost two thirds (64 per cent) of developing and transition economies.
• Commodity dependence is particularly concentrated in the least developed and most vulnerable country groups, as follows: 85 per cent of least developed countries (LDCs),1 81 per cent of landlocked developing countries (LLDCs), and 57 per cent of small island developing States (SIDS).
• Using the World Bank country classification by income groups, 91 per cent of low-income countries are dependent on their commodity exports, compared with less than one third of high-income countries."
The bar chart below shows that the bulk of commodity dependent countries are found to be least developed countries, landlocked developing countries and developing countries and transition economies
According to UNCTAD the number of countries being seen as commodity dependent increased from 92 (1998-2002) to 102 (2013-2017). "The number of commodity-dependent countries increased from 92 in 1998–2002 to 102 in 2013–2017, but the number of countries dependent on the export of agricultural products declined from 50 to 37 between these two periods, while the number of mineral-dependent countries steadily rose, from 14 to 33, and the number of energy-dependent countries increased from 28 to 32. During the period 1998–2017, the dominant export product groups (agriculture, minerals, energy, or noncommodities) of 142 countries out of the 189 in the sample (75 per cent) remained unchanged."
The bar chart below shows the evolution of the number of commodity dependent countries by commodity group over time
The bar chart below shows the evolution of the number of commodity dependent countries by commodity group over time
As the bar chart shows there has been a strong increase in the number of countries that has become commodity dependent by virtue of their exports in minerals. In the 1998 to 2002 period only 14 countries were classified as commodity dependent due to their mineral exports, by 2013-2017 the number of countries have more than doubled to 33 countries which are seen as commodity dependent as minerals make up a large chunk of their overall exports. The fact that South Africa is not seen as a commodity dependent country is largely thanks to numerous vehicle manufacturing plants in South Africa which manufactures right hand drive vehicles and then exports these vehicles to Australia, the UK and back to Germany. But this does not mean that South Africa is not dependent on its commodities, as it is still very dependent on their commodity exports (as it makes up between 40% and 60% of total exports). And a large number of South Africa's unskilled and semi-skilled labour is absorbed by the massive number of mines (be it gold, platinum, coal or iron ore) currently operating in South Africa.
The issue for South Africa and its mines is that when commodity prices are high, these mines and SA in general tend to not gain as much as what they loose when commodity prices decline. This is indicative of rigid cost structures and less flexible operating environment (think restrictive labour laws, influence of unions on mines and its operations etc)
The issue for South Africa and its mines is that when commodity prices are high, these mines and SA in general tend to not gain as much as what they loose when commodity prices decline. This is indicative of rigid cost structures and less flexible operating environment (think restrictive labour laws, influence of unions on mines and its operations etc)