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budget revenue, foreign investment and foreign exchange. Each of the sub-categories will need to address
specific policy issues. For example, in countries with strong growth and favourable export prices, fiscal
consolidation and the strengthening of fiscal buffers might be deemed appropriate. MICs may do the same
but the actions may need to be more gradual, while the LICs will need to concentrate on strengthening
domestic revenue bases by increasing public investment to mitigate any drop in foreign aid from donor
countries.
Where there are signs of growth this could be attributable to “(1) existing exported products that a country
could increase through improved productivity or product quality; (2) products that reflect a country’s
endowment strengths, but have not been exported in significant quantities; and (3) products that represent
downstream processing of existing export products” (USITC, 2005). Market diversification or increased
activity in existing markets can also account for such growth. Typically the accelerating demand for
natural resources including petroleum, timber, cotton, minerals and metals from China has benefitted
African countries exporting these products. While markets for raw agricultural commodities, minimally
processed products, and light industrial goods can be targeted to developing and emerging economies, the
high-value horticulture, floriculture, or organic agricultural products have typically targeted markets in
the European Union and the US. (USITC 2005)
While the overall value of exports may be low by international standards, the export sector’s contribution
to national development goals is significant in many Sub-Saharan countries. For example, it provides
employment to millions of Ugandans, where coffee employs more than 1.2 million people and supports
more than 6 million livelihoods and cotton employs an estimate of 0.8 million Ugandans, with 6 million
people depend on the sector for their livelihoods.
3.2.2. Interdependencies
Interdependencies are an outcome of spill-over effects generally from larger countries in the region and
the impact of their economies on smaller countries. The two largest economies in Sub-Saharan Africa,
Nigeria and South Africa, have a considerable bearing on other countries in the region. These spill-over
effects (developments in one country spilling over to others) take the form of trade in goods and services,
flows of capital, labour movements, remittance flows and financial sector interconnections.
South Africa is a large player in the region and plays an important role in the structure of sub-Saharan
African trade. There are also some institutional factors such as revenue sharing arrangements including
SACU (South African Customs Union) or WAEMU (West African Economic and Monetary Union). It
should be noted that although trade within the region is fairly modest as a proportion of total trade of
countries, the ratio of intra-regional trade to GDP has been rising sharply in the past decade. Improved
regional infrastructure, effective implementation of free trade agreements, lesser use of rules of origin,
and reduced non-tariff barriers, might augment this intra-regional phenomenon.
Nigeria offers a slightly different case study. It is a key export market for only a few neighbouring
countries but its financial linkages further afield are growing with the expansion of Nigerian banks.
Informal trade linkages in cereals and grains are significant. Well-organised trading networks enable easy
transfer from surplus to deficit zones, which can affect prices in the regions as only a small amount of this
trade is recorded in the merchandise trade data. Smuggled petroleum products from Nigeria constitute a
major source of fuel imports for countries like Cameroon. Part of the problem stems from the highly
subsidized fuel market in Nigeria where the gasoline price is approximately 50% lower than those in the
neighbouring countries. Re-export trade, for second hand cares, textiles, garments, rice and cigarettes
which are all highly taxed in Nigeria, are made available through ‘entrepot’ states.