Developing a Sustainable Economy in Cameroon

2 - Agricultural Export Supply Determinants in Cameroon's Economy

2 Agricultural Export Supply Determinants in Cameroon’s Economy Sunday Khan and Daniel Gbetnkom Background and Research Problem The agricultural sector plays a very important role in Cameroon’s economy, as is the case with many developing countries. Before Cameroon started exporting oil in 1978, the agricultural sector accounted for about 30 per cent of GDP and 80 per cent of total merchandise exports. The production and export of oil came from 1978 changed the whole economic situation. As early as four years after the start of oil exporting, in 1982, oil revenue already represented more than 41 per cent of all export earnings. By 1990, the share of agriculture in GDP had fallen to 24 per cent, and its contribution to export earnings had dropped to 53 per cent. Crude oil then replaced agriculture as the dominant foreign exchange earner and earned Cameroon about 300 billion CFA francs in 1991. Despite this dismal performance of the agricultural sector from the 1980s, especially in terms of exports, it remains relatively important in the Cameroonian economy. It employs about 75 per cent of the active labour force, and 85 per cent of the total population derive their livelihood from this sector. A large part of domestic food production is provided by the agricultural sector thus saving foreign exchange earnings that would have been spent importing foodstuffs. This implies that for a long time to come Cameroon will continue to depend on its agricultural sector. This is further amplified by the fact that the industrial sector remains weak and has not expanded. The strength of the agricultural sector derives principally from the export crop sub-sector, which is based on cocoa, coffee, cotton, timber, bananas, rubber, palm products and tobacco. The first three crops account for the lion’s share of agricultural export earnings. Before 1978, they made up 88 per cent of agricultural export revenue, distributed averagely as follows: 28 per cent for cocoa, 55 per cent for coffee and 5 per cent for cotton. Their contribution declined slightly after 1987 to 30 Developing a Sustainable Economy in Cameroon 81 per cent, with cocoa contributing 29 per cent, coffee 44 per cent and cotton 8 per cent (Gbetnkom 1996). As mentioned, the performance of the agricultural sector has been a matter of concern for some time. The traditional agricultural export crops of cocoa, coffee and cotton have fared relatively less well than those on which the economy has not relied for so long, such as bananas. If we consider first total export earnings as a ratio of GDP (see Fig. 2.1), we see that performance has not been stable over the study period, fluctuating generally between 13 and 21 per cent. Looking at the individual crops (Fig. 2.2), the share of earnings of GDP for bananas fell up to the late 1980s and then started rising to reach a maximum of about 0.82 per cent in 1993/94. It started declining again when the export quota system came into force. The ratio of export earnings for cocoa and coffee had a similar trend. The maximum ratios were reached in the late 1970s (5.13 and 6.37 per cent for cocoa and coffee respectively). The fall that followed continued (and even went below 1 per cent) until the 1994 devaluation and a fall in the share of crude oil (resulting from falling oil prices). It is therefore apparent that the stagnating and almost declining share of export earnings in Cameroon’s GDP was substantially owing to the falling revenue of cocoa and coffee. The picture is not markedly different when we examine the ratio of the export revenue of individual crops to that of total export revenue, as presented in Fig. 2.3. Figure 2.1: The Evolution of Export Earnings as a % of GDP (1971/72 - 1995/96) 0 5 1 0 1 5 2 0 2 5 7 2 7 4 7 6 7 8 8 0 8 2 8 4 8 6 8 8 9 0 9 2 9 4 9 6 % Source: Author's calculations. 31 Khan and Gbetnkom: Agricultural Export Supply Determinants in Cameroon’s Economy Figure 2.2: The Evolution of Coffee, Cacao and Banana Export Earnings as a % of GDP (1971/72 - 1995/96) 0.0 0.2 0.4 0.6 0.8 1.0 0 2 4 6 8 72 74 76 78 80 82 84 86...