EFFECTS OF AGRICULTURAL EXPORTS ON CAMEROONS ECONOMIC GROWTH

ABSTRACT
This study identifies the impact of agricultural export on the economic growth of Cameroon. The research questions which was used to evaluate this study were: what is the effect of cocoa exportation on GDP growth; what is the effect of coffee exportation on GDP growth; what is the effect of rubber exportation on GDP growth.

The objectives of this study were to analyse the effect of agricultural export on economic growth; to investigate the effect of cocoa exportation on GDP growth; to examine the effect of coffee exportation on GDP growth and to assess the effect of rubber exportation on GDP growth in Cameroon.

The study was analysed under the following hypotheses: Agricultural exports do not affect economic growth, that is the hypotheses were stated in the null form. The method used to analyse the data was the OLS technique (that is ordinary Least Square Techniques) and the three products which were used were Cocoa, Coffee and Rubber.

In the end, it was found that agricultural export affects the economic growth of Cameroon positively. It was also discovered that the GDP grows through export earnings from crops such as cocoa coffee and rubber.

Although agricultural export is a benefit to the economy of Cameroon, not much has been done by the government to improve.

So it is recommended that the government of Cameroon encourages the development of the agricultural sector through infrastructural development which will hence increase agricultural export.

CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF STUDY

Countries in the world are either considered to be developed or underdeveloped. Both economies can trace the origin of development and growth of their economies from Agriculture. Developing nations of today like the case of Cameroon still depend mostly on Agriculture for their growth and development, especially on agricultural exports commodities (Tambi,1999; Nchare,2007).

 Export is a function of international trade whereby goods produced in one country are shipped to another country for future sales or trade. Agriculture is the cultivation of crops and the rearing of animals either for home consumption or for commercial purposes.

Agricultural exports can therefore be said to be the sales of agricultural products across international boundaries. According to Prof. John Ndebbio, economic growth is an increase in a country’s output of goods and services over some time. That is a continuous increase in a country’s Gross Domestic Product (GDP) over time.

There is an increasing interest in the relationship between export and economic growth. Theoretically, it has been argued that a change in export rates could change the output. Export growth, therefore, is often considered to be the main determinant of the production and employment growth of an economy which is shown in Gross Domestic Product (GDP) growth (Ramos, 2001)

Agriculture is the main source of livelihood for Cameroonians and agricultural exports are a major source of foreign exchange earnings for most African countries, Asian and South American developing countries and even for the major European and American economic powers. It should be noted that in the world today, the United State of America is the principal exporter of agricultural products, followed by the Netherlands, France, Germany, Brazil, Belgium and Italy. This, therefore, emphasizes the fact that the exportation of agricultural products is very vital to every economy whether big or small.

In Africa before the Colonial era, agriculture was mainly rudimentary and agricultural products were essentially for home consumption. It was only during the colonial period, with the arrival that agricultural export crops like cocoa, coffee, cotton, tobacco etc became prominent in the African continent. These agricultural cash crops were mainly exported to Europe where they served as raw material for the European growing industries.

In Africa today, agriculture is the backbone of most economies and covers a greater percentage of gross domestic product (Awokuse, 2008). Agriculture in Sub Saharan Africa generates at least 30% of gross domestic product, 40% of exports and over 70% of employment (Steiner, UNEP). This further stresses the role of agriculture in the economy of Africa. In Cameroon, the main agricultural export crops are cocoa, (in which Cameroon is the 5^th largest producer) coffee and cotton. Before 1978, these three made up to 50% of the country’s total export (Gbetnkom, 1996, bad/FAD, 1996). Millet, cassava, sorghum, rice etc are also produced, both for home consumption and exports around the Central African Region. Agriculture was the sole engine for growth and foreign exchange earnings for Cameroon until the late 1970s when oil became the primary engine for growth and the main source of foreign exchange earnings.

The most important cash crops are; cocoa, coffee, cotton, bananas, rubber, palm oil and kernels and peanuts. The main food crops are; plantains, cassava, corn, millet, and sugarcane. Palm oil has shown signs of strength, but the product is not marketed internationally and the sector was reorganized and privatized in1987. Similarly, rubber output has grown despite Asian competition. Cameroon is among the world’s largest producers; 13000tons of cocoa beans were produced in 2004. Two types of coffee; Robusta and Arabica are grown. Production was 60000tons in 2004.

About 8500 hectares (210000 acres) are allocated to cotton plantations. Some cotton is exported, while the rest is processed by local textile plants. Total cotton output was 1090000tons in 2004.

Bananas are grown mainly in the Southwest Region; 2004 estimated production was 630000tons. The output of rubber also grown in the South West was 54,892tons in 2004 (INS, 2010).

Estimated production in 2004 of palm kennel and oil was 64000 and 1200000tons respectively. For peanuts (in the shell) the figure was 200000tons. Small amounts of tobacco, tea and pineapples are also grown. Estimated food production in 2004 was as follows; sugarcane, 1450000tons, cassava, 1950000tons, sorghum, 550000tons, corn 750000tons, yams 265000tons, sweet potatoes 175000tons, potatoes 135000tons, dry beans 95000 and rice 62000tons (INS 2010)

However, agricultural export has not been all smooth for Cameroon. In 1986, a serious economic crisis struck the country due to changes in the world commodity market. The value of agricultural produce fell and government subsidies on agriculture were completely removed and most agricultural projects collapsed.

Poverty increased in rural areas as a result thousands had to receive aids. Also, cheaper produce from countries like China out-competed local products. This dismal performance led donor organizations to shift their investments to different areas that could increase wellbeing.

However, reports from the world development report 2008 of the World Bank show that growth in agriculture contributes more to poverty reduction and growth than any other sector (Meijerrink and Roza).

Since agricultural exports make up a large percentage of Cameroon’s total export, thereby earning much of the foreign exchange for the country and also creating a great deal of employment for the country and contributes to the monetary growth in GDP, it is, therefore, necessary to assess the real impact that agricultural exports have on the economic growth of Cameroon.

1.2. PROBLEM STATEMENT

In Cameroon like in most developing countries, the great majority of human resources are devoted to the agricultural sector in one way or the other. There is evidence that unfavourable domestic terms of trade for agricultural products and the declining output are the principal contribution to the low-level performance of Cameroon’s traditional export (Gbetnkom and Kham, 2002), leading to several macroeconomic unbalances such as budget deficits, the balance of payment deficits and debt problem. This is vital because of the greater the percentage of Cameroon’s agricultural export, mostly to America.

Given this, and also bearing in mind that foreign exchange earned from the exportation of agricultural products go a long way in the determination of the country’s GDP, it, therefore, means that low agricultural yield implies lower GDP through lower exchange earnings. It is worth noting that cocoa, coffee and cotton are the most vital agricultural export crops in Cameroon and account for over 50% of the country’s total export (Gbetnkom, 1996).

Also, given the fact that a great deal of Cameroon’s active population is involved in the agricultural sector and make they’re living out of agriculture, it, therefore, implies that the better the agricultural sector does the more the employment, the more the aggregate spending on consumption, the more the tax contributions and therefore the more the rate of economic growth. It is therefore clear that agriculture in general and agricultural exports are a major support to the Cameroonian economic growth. The question, therefore, remains how to urgently increase the rate of agricultural growth and agricultural export and to ensure that such growth is sustainable.

In this light, the government of Cameroon and foreign bodies through foreign direct investments and aids have done much in the domain of infrastructural development such as the construction of roads for example( the Kumba-Mamfe road development road), ensuring improvements through the provision of ploughing machines,  provision of loans to farmers at low-interest rates through the bank of small and medium-size enterprises, organizing  Agro-Pastoral shows such the Ebolowa Agro-pastoral show, A shows where farmers exchange ideas and win prizes for outstanding performance. Despite all these, the Cameroon economy remains below expectation.

It is based on this that this study sets out to provide answers to the following research questions;

1. Does cocoa export have an effect on the GDP of Cameroon?

2. To what extent does coffee export affects the GDP of Cameroon?

3. What is the effect of rubber exports on the GDP of Cameroon?

1.3 OBJECTIVES OF THE STUDY

The main objective of the study is to analyze the role of agriculture export on the economic growth of Cameroon. The specific objectives are to;

• Investigate the effect of cocoa exportation on GDP growth in Cameroon

• Examine the effect of coffee exportation on GDP growth in Cameroon

• Determine the effect of rubber exportation on GDP growth in Cameroon

1.4 RESEARCH HYPOTHESIS

2. Cocoa exports have no significant effect on the GDP of Cameroon.
3. Coffee exports have no significant effect on the GDP of Cameroon.
4. Rubber exports have no significant effect on the GDP of Cameroon.