Global surge in commodity prices: Mixed fortunes for SADC
By Tichaona Kurewa
Harare- The anticipated increase in commodity prices this year is good news to some sectors of SADC economies but a forecasted surge in fuel prices will drive up the cost of production since the region is a net importer, experts have warned.
According to the World Bank, prices for industrial commodities such as energy and metals appear to have bottomed out last year and are predicted to post strong gains in 2017.
Tightening supply and strengthening demand are behind this rebound in prices, which saw a steady decline since 2011.
Energy prices are projected to rise 26 percent this year from last year. Oil is anticipated to average $55 a barrel in 2017, a 29 percent increase from the year just ended.
Zimbabwe Farmers Union Executive Director, Paul Zakariya, contend that energy, especially fuel is a key driver for any economy and Southern African Development Community (SADC) is a net importer of fuel.
“The anticipated rise in crude oil prices will mean an increase in the cost of production. Many SADC countries are already uncompetitive when it comes to agricultural production hence the upward surge in crude oil prices makes SADC countries worse off when it comes to competitiveness.
“Although agricultural prices as a whole are expected to increase by 1%, the impact might not be significant due to increased cost of production,” Zakariya said.
The development, Zakariya said, might be beneficial to those countries that sorely rely on grain imports as a significant fall in grain prices is anticipated and will reduce government expenditure.
“The region will not benefit much from the slight increase in oil seeds prices.
“The 2016/17 regional seasonal forecast predicted normal to above rains hence increased crop production for 2016/17. However, the fall in grain prices will mean that the leading grain producers and exporters will most likely record a decline in revenue generated from exports,” he said.
He said to reap benefits and to remain competitive under the predicated environment the region need to improve on efficiencies so as to reduce the cost of production whilst increasing production and productivity.
“Members state should export value added and processed commodities to fetch better prices on the international market. It is also the time for member states to promote and facilitate intra trade,” Zakariya said.
“It is a wakeup call to SADC member states not to have economies entirely anchored on internationally traded commodities but to have diversified economies.
According to World Bank metal prices are seen registering an 11 percent rise this year, an upward revision from the 4 percent increase forecast in the previous outlook, which was released in October.
What would be the first price increase in six years is due to supply tightness, particularly for lead and zinc. Strong demand from China and advanced economies is also playing a role in driving prices higher. Commenting on the same issue Confederation of Zimbabwe Industries President, Busisa Moyo said concurred that there was likely to be an increase in production but also pointed out that there was hope.
“The increase in commodity price will certainly improve the liquidity crunch as commodities such as gold, platinum will be fetching more in 2017,”Moyo said.
Moyo said the anticipated increase in commodity price will also spur expansion in the mining sector
“Those who have cut in production will increase production,” he said.
Zimbabwe produces minerals such as gold, platinum and diamonds and the bulks of these are exported and they are a major source of foreign currency for the Southern African country.