Abstract

The main objective of the present analysis is to explore and quantify the contribution of agricultural exports to economic growth in Cameroon. It employs an extended generalized Cobb Douglas production function model, using food and agricultural organization data and World Bank Data from 1975 to 2009. All variables were non-stationary and of order I (1), so the Cointegration test was conducted for long-run equilibrium.

All the variables confirmed cointegration and as such the conventional vector error correction model was estimated using the Engle and Granger procedure. The findings of the study show that agricultural exports have a mixed effect on economic growth in Cameroon. Coffee export and banana export have a positive and significant relationship with economic growth.

On the other hand, cocoa export was found to have a negative and insignificant effect on economic growth. Base on our findings, it is recommended that policies aimed at increasing the productivity and quality of these cash crops should be implemented. Also, the additional value should be added to cocoa and coffee beans before exporting. When this is done, it will lead to a higher rate of economic growth in Cameroon. Keywords: Agricultural Export, Economic Growth, Integration, Vector Error Correction Model, Cameroon

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Historically, the word agriculture comes from two Latin words: “ager” meaning field and “cultura” meaning cultivation; agriculture is, therefore, the cultivation of fields. According to Bareja (2011), agriculture may be defined as the art and science of growing plants and other crops and the raising of animals for food, other human needs, or economic gain.

Agriculture began more than ten thousand years ago. The early development of agriculture may have involved first the management of wild grains and other useful plants by removing adjacent weeds, it is also possible later that a primitive tribe may have discovered a vigorous plant, the seeds were harvested for food but some were deliberately sown to ensure supply for the next season (went et al,1963).

Agriculture of the 20th century will be remembered for its scientific foundation and high crop yield (Jain, 2012). The scientific discoveries of this period led to the modernization of agriculture and the green revolution where modern and sophisticated farming tools were used alongside improved seeds and breeds which in turn gave rise to a tremendous increase in agricultural output.

These technological discoveries and innovations transform the relationship between agricultural input and output. The total factor productivity index reflects the changes in agricultural input and output and is measured using the index of aggregate input and aggregate output.

Total factor productivity growth is the difference between the growth of agricultural output and the growth of all agricultural inputs taken together, thus isolating changes in productivity from changes in overall use of inputs (Sun and Eldon, 2014).

The result of the study on how to promote agricultural productivity to achieve sustainable food security most efficiently in Asia and the Pacific (Chang et al, 2001) indicated that agricultural output growth has remained positive from 1961 to 1994 with only one exception, Japan, compared to a slow down during 1975 to 1987 in output and labor productivity growth in Australia and the United States.

 

Agriculture has played a huge role in human civilization. The majority of the world‟s population once practiced agriculture and a greater percentage of the world‟s population is involved in the agricultural sector than in other sectors.

Agriculture is the main base of life in every society and remains at the center of many developing countries. It is a major source of food livelihood to the citizens of these developing societies as such improving and increasing agricultural output is a crucial goal of government and developing agencies. Agricultural productivity measures the performance and provides a guide to the efficiency of the sector (Conradie et al, 2009).

According to the United States Department of Agriculture (1980) that agricultural productivity statistics are important to identify the source of economic growth, justify the appropriation of agricultural research funds, serve as an indicator of technical changes and justify price changes.

The most important economic activity in Africa during the colonial era was agriculture. Colonial masters required indigenes of African societies to produce agricultural products for exportation to their home countries to be used as raw materials by their industries. Africa‟s development during this period came essentially from agricultural exportation and a number of African countries ranked top global producers of tropical cash crops.

Agriculture was the main orientation of economic policymaking during the colonial era in Cameroon. Cameroon went through two faces of colonial administration: Germany (1884-1916) and Britain and France (1916-1960). The Germans interest during their colonial rule in Cameroon was basically to extract raw materials for their home industries.

They, therefore, laid emphasis on promoting plantation agriculture while discouraging peasant small-scale farmers. They acquired large concessions of land through the chiefs and had surplus labor by forcing the natives to work in their plantations.

The major plantation crops were cocoa, oil palm, bananas, tea, rubber, and tobacco and they discouraged individual natives from producing these crops. The “food economy” was however encouraged, that is, indigenes were encouraged to produce food crops to ensure surplus food for the whites in Cameroon and the plantation workers and also to keep prices low.

The Germans opened about 58 plantations in Cameroon. After the Germans were expelled by Britain and France, these new colonial powers first laid some emphasis on plantation agriculture but later on shifted their emphasis to peasant production and this was a basis for the rapid increase of exports during their term of rule.

The French and British opened a number of Agricultural institutions to provide extension and marketing services to farmers an example was the Secteurs de Modernization (SEM) in the French part of Cameroon which was technical and crop oriented, guidance and handling seed production, controlling pests and diseases and some processing activities the Societe Africaine de Prevoyance (SOAP) and the Caisse de Stabilization provided credit facilities and handled the market of the farmers export crops.

The British opened plantations such as the Commonwealth Development Corporation (CDC), Pamol, Elders, and Fyffes. Extension and marketing were carried out by the Development of Agriculture, cooperatives, community development, and the marketing board. The two phases of colonialism in Cameroon started the basis of development in the country. Roads, railways, schools, hospitals, and other important infrastructures were built in the country.

After Cameroon gained independence in 1961, the government anticipated that the private sector left alone will not be able to drive the country into development. The government, therefore, took charge of the existing agricultural corporations in the country by buying majority shares or nationalizing the whole corporation, this led to the establishment of large government parastatals.

This period was characterized by intensive government intervention and control of the economy. The country faced the Dutch Disease Syndrome a few years after the discovery of oil where all other sectors were ignored except the oil sector which attracted all of the government‟s attention but the revenue from oil exportation was not wisely managed. As a result of government mismanagement of the parastatals and the economy‟s resources, Cameroon faced a severe economic crisis in the late 1980s.

The government reacted to this crisis by launching the International Monetary Fund(IMF) and the World Bank Structural Adjustment Programs(SAP) and the Economic Recovery Program(ERP) which constituted conditions for receiving loans or international development aids and involved reducing government spending, dissolving parastatals, ending commodities and input subsidies, removing price controls, devaluing currencies and stimulating private sector investments.

Endowed with fertile lands and regular abundant rainfall in most regions, Cameroon produces a wide variety of agricultural products for both domestic consumption and exportation. The major cash crops produced in Cameroon include cocoa, coffee, banana, cotton, timber, and rubber.

The first three crops account for the lion‟s share of Cameroon‟s agricultural export earnings. Before 1978, it contributed 65% of total exports and 88% of agricultural export revenue, with 28% for cocoa, 55% for coffee, and 5% for cotton.

After 1978 their contribution declined slightly, to about 81% of agricultural export earnings, with cocoa contributing 29%, coffee 44%, and cotton 8%(Gbetnkom, 1996; BAD/FAD, 1992). However, since 1980, the performance of the agricultural sector in Cameroon has not only slowed down but has been highly variable. The collapse of export commodity prices, distorted macroeconomics and agricultural policies prevailing in the environment, world recession, and production bottlenecks acted negatively on output and export performance.

During that period, cocoa and coffee output declined at a rate of 1.13% and 4.9% per year, respectively. Banana was negligible in the export structure of the country from before independence up to 1975, with a contribution to total exports at 1.4%, compared with cocoa 25.4%, coffee 24.1%, and cotton 3.1%(BEAC, 1975). This brings us to the point of interest of this research which is to examine the contributions made by agricultural exports to economic growth in Cameroon.

The focal point would be on the export of a country‟s growth and development profile and partly because of data availability. The choice of these three products export is also due to budgetary constraints faced in the country. It makes it difficult for the government to implement a growth strategy on all the cash crops. Thus it will be wise for states to target certain cash crops that contribute most to their economic growth such as the aforementioned cash crops.

The agricultural sector stands as the backbone of the Cameroonian economy and its performance has profound implications on quality of life and development in the country. It is a source of livelihood to many households, especially in rural areas. Agriculture is a source of income and employment to about half the country‟s total workforce. t is a major contributor to foreign exchange earnings through the exportation of the aforementioned export crops produced in the country. It accounts for a significant share of Gross Domestic Products (GDP). Presently, it accounts for 23.1% of Cameroon‟s DP.

1.2 Statement of the problem

There is no country that is self-sufficient and in a state of autarky, one nation has to trade with many others to enjoy goods and services with a comparative disadvantage in its production. This is the case with Cameroon where a majority of her labor force is employed in the agricultural sector while few others are employed in the manufacturing and tertiary sectors.

With the large labor force and other favorable natural conditions, it gives her a comparative advantage in the specialization in agricultural products such as crude oil, and petroleum products, wood products, cocoa beans, aluminum, coffee, cotton, banana, etc. as exports to other countries like Spain, Italy, and United State, etc.

Cameroon has experienced an economic recovery from the exportation of agricultural products (cocoa, banana, coffee, cotton, timber) in several years. But this sector was seriously affected by a fall in world prices of primary products which led the country into a serious crisis in the late 1980s. This is basically from the fact that the country depends solely on the proceeds from this sector for the well-being of its nationals.

After the budgetary year of 1985 to 1986; Cameroon’s economy went into a serious recession where all economic indicators experienced a heavy drop in revenue from exportation. This drop affected petroleum as well as other primary products that were exported at the time. This drop was estimated at about 329billion FCFA this being 8.2% of the Gross Domestic Product (GDP). The economic sector even further worsens during 1986-1987 due to the persistent drop in the price of the main products exported (petroleum, coffee, cocoa, banana, cotton).

The economic growth rate was henceforth negative with the exchange rate dropping by half between the years of 1985 to 1988 (BEAC, 1989).

However, it is realized that from the time most agricultural exports in Cameroon have witnessed a substantial drop in revenue due to fluctuations in world prices. These products become less competitive as compared to manufacture goods bought from other countries thus leading to unfavorable terms of trade. This has strongly affected their share contribution to economic growth in the country.

It would be of interest to study the past and present trends of three of such produce: cocoa exports, banana exports, and coffee exports towards the economic growth of Cameroon. The focus of this research is to examine the contribution of agricultural exports to the economic growth of Cameroon with a case in point being cocoa, banana, and coffee exports.

These cash crops have a long historical base and revenue from them has been a strong force towards Cameroon‟s growth achievements. Thus, it is necessary to examine the impact of agricultural exportation on the economic growth of Cameroon.

This research work is intended to identify the impact of agricultural exports on the economic growth in Cameroon. It will also be of great interest to examine which one amongst them has a greater success story towards economic growth and development in Cameroon. This problem is transformed into the following research question: Specifically, what is the effect of each of the selected export of food and non-food agricultural products on economic growth in Cameroon?

1.3 Research Questions

Following the problem stated above, a number of questions could be raised and the interest of this research would be to find answers to the questions. The study is mainly to answer the question of: what are the impacts of agricultural export on the economic growth of Cameroon? More specifically, the research addresses the following questions:

1. To what extent does food exportation affect the economic growth of Cameroon?
2. What is the effect of nonfood exports on the economic growth of Cameroon?

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