While much is made of the commodities curse and too little of the potential, if correctly strategised, of the commodities blessing, a study by the United Nations Conference on Trade and Development (Unctad) has overdependence warning lights shining brightly on both the African and South American continents.
Unctad’s State of Commodity Dependence study defines a developing country as commodity dependent if its export revenues from national resources contribute more than 60% of its total export earnings.
Under that definition, it finds that two-thirds of all developing countries are commodity dependent, with one out of two African countries falling in this category.
South Africa is found to be bang on the 60% commodity dependence mark, with this country’s commodity exports being relatively flat at 13.5% to 13.4% of gross domestic product since 2009.
However, the Unctad study indicates that the dependence of South Africa on commodity exports is likely to rise rather than fall.
Alarmingly, the Unctad study also finds that the proportion of South Africa’s population below the level of minimum dietary energy consumption has risen from 16% in 1991 to 26% now.
Looking at the other end of the scale – the global market for commodities – in the last decade, eyes have invariably turned to China.
A recent study undertaken by Wood Mackenzie indicates that Chinese demand is likely to strengthen in the medium term as a result of its go-west strategy, which encourages coastal to inland flow of capital and people.
The go-west plan, says Wood Mackenzie, results in power genera- tion in China’s central and western regions rising 3 200 Terawatt hours (TWh) in 2015 to almost 9 600 TWh in 2035, a nigh triple advance, which far outpaces the coastal region’s generation growth in the same period, which is also set to double from under 3 000 TWh to 6 000 TWh.
As coal remains the dominant fuel, coal-fired power plants in central and western province areas will generate more power to feed demand-heavy coastal centres through long-distance power transmission grids.
Additionally, the west holds the bulk of renewable energy potential in hydropower, wind and solar.
Wood Mackenzie also expects shale gas production in mainly Sichuan, Shaanxi and Xinjiang to increase to 140-billion cubic metres by 2035.
Planned transport infrastructure will also likely open up new markets in Central Asia and facilitate energy imports into China via its western border.
Risks to this hoped-for Chinese ‘go-west’ demand growth could include slow progress in restructuring provincial government debt and introducing market pricing for gas and power, as well as water scarcity, which could put cost pressure on raw material preparation requirements like higher coal-washing costs.
But the expectation is that many of the risks will likely be mitigated by government support.