Abstract

This study examined the effect of cocoa export on the economic growth of Cameroon for the period 1980-2017. The specific objectives were to investigate the effect of forastero cocoa export on GDP growth in Cameroon, to examine the effect of amelonado cocoa export on GDP growth in Cameroon and to determine the effect of cundeamor cocoa export on GDP growth in Cameroon.

This study was backed by Joseph Alois Schumpeter’s Theory of Economic Growth and Harrod-Domar Model of Growth. The model specifies economic growth measured by gross domestic product as dependent on cocoa export proxy by forastero cocoa, amelonado cocoa and cundeamor cocoa export. Annual time series data from World Bank 1980-2017 was sourced using secondary data. A multiple regression model was specified using ordinary least squared estimation technique.

Results show that cocoa export has a significant positive impact on economic growth. Both forastero cocoa, amelonado cocoa and cundeamor cocoa export have a significant effect on the economic growth of the country. The study demonstrates that increasing cocoa export reaps the static and dynamic benefits, stimulating rapid national economic growth.

The study therefore recommends that the government of Cameroon should encourage the development of the agricultural sector through infrastructural development which will hence increase agricultural export. The study further recommends that the government of Cameroon should support farmers to improve the productivity of the current production tools through technology transfer and help them to increase the output of plantations by training them on good agronomic practices and also providing them with farm inputs at a subsidized rate.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Countries in the world are either considered to be developed or underdeveloped. Both economies can trace their origin of development and growth to 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 Gerald and Budwin (2011), economic growth accompanied by changes or decline in agriculture share of the GDP and a corresponding increase in the share of such sectors industry, manufacturing, power, utilities, construction and commercial will lead to development. Gerald and Budwin went further in their definition of economic growth as a process whereby the real national income is on the increase over a period of time.

The word “process” in this definition involves the transformation of the economy through some changes, including the production function and transferring from one sector of the economy to another. In other words, the need to be a reduction in the contribution that agriculture gives to the GDP, while increasing the industrial share.

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 output. Export growth, therefore, is often considered to be a main determinant of the production and employment growth of an economy which is shown in Gross Domestic Product (GDP) growth (Ramos, 2001)

Agriculture is a 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 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 (FAO, 2017).

A panoramic view of supply and demand shows that the global cocoa supply is highly dependent on African, South American and now Asian countries. The supply is abundant, often leading to a supply-demand imbalance (confers a law of supply and demand of J.B. Say), causing a structural weakening of prices prejudicial to most producers. Indeed, world cocoa production since the 20th century has been growing at a rate of around 2% to 2.5% and reached 1.5 million tonnes in 1964. Today, it exceeds 2 million tonnes, of which Africa alone accounts for nearly 66% (Mossu, 1990). The major producing countries are: Côte d’Ivoire, Ghana, Indonesia, Cameroon and Nigeria (FAO et al., 2007).

Total world production comes from three production basins: The Gulf of Guinea (Cote d’Ivoire, Ghana, Nigeria, Cameroon, etc.), with total production hovering around 70%; South America, Central America and the Caribbean (Brazil, Ecuador, Peru, etc.), with total output hovering around 16%; South Asia and Oceania (Indonesia, Malaysia, Papua New Guinea, etc.) with total production around 18% (FAO, 2017)

The link between primary export growth and economic growth has received a lot of attention in the export-led growth literature, with many findings supporting the fact that growth in export results to economic growth. Some of these studies include those of Levin and Raut (1997); Boame (1998); Ekanayake (1999); Chemeda (2001); Abou-Stait (2005); Dawson (2005); Aurangzeb (2006) and Kalu and Okojie (2009) and Sanjuan-Lopez and Dawson (2010). Gilbert et al. (2013) also support the export-led growth phenomenon for some agricultural commodities. However, the study by Faridi (2012) refutes the export-led growth strategy.

It has been discovered so far that scientific studies on primary exports and growth have concentrated on timber, coffee, banana, rubber and other exports like oil, with the neglect of cocoa exports. Studies which concentrate on the link between cocoa exports and economic growth are relatively absent in the literature, probably because timber is considered more as a natural resource than an agricultural commodity.

This study therefore bridges an important gap in empirical literature. In terms of the analytical methods, most of these studies have adopted the cointegration and error correction modelling approach, Granger causality, vector autoregression and impulse response function. These techniques are sound because of their ability to estimate the long run and short run situation, test for the direction of causality between variables and determine effects on the explained variable when a shock is introduced in to the system. The present study adopts the cointegration and error correction modelling approach, not just for the sake of estimating the long and short run situation but because the resource is renewable and it would be very important to consider its long run implications on economic growth.

Cocoa exports have contributed to the growth of most economies in the World. In France for instance, round cocoa exports contributed on average about $252 million to the country’s yearly total export revenue between 1970 and 2012. Similarly, in Japan and United Kingdom, average annual contributions of total cocoa to export revenue were approximately $4.5 million and $252 million respectively (Estimated by Authors from the Food and Agricultural Organization (FAO, 2014).

The contribution of cocoa to the economic growth of Malaysia has been significant. In 2010, it contributed 3.7 of the GDP and 3.2% of the country’s total merchandize exports. Cocoa contributed an estimated $7.4 billion to Malaysia’s total export and between 1% and 2% to GDP in 2011 (Harun, 2012). In Gabon and Democratic Republic of Congo, cocoa contributed an annual average of about $193 million and $27 million to total export revenue and consequently GDP between 1970 and 2012 respectively(Estimated by Authors from FAO (2014). Gabon’s cocoa sector contributed 0.3% in GDP in 2011 (African Economic Outlook, 2012).

Cocoa production makes up approximately6% of Ghana’s GDP. It provides around 12% of foreign exchange between 1990 and 2000 (Lebedys, 2004). Cocoa emerged as a main export commodity in Cameroon in the late1980s. Agriculture was the main source of economic growth from the early 1960’s to 1977, where it employed about 80% of the labour force, provided 85% of exports and contributing about 34% to GDP. Annual real GDP averaged 4.8% within this period. From 1978 to 1985, economic growth was realized from oil production, with growth rates as high as 12% (Amin, 2002). Averagely, oil rents as share of GDP were about 13% within this period (World Development Indicators, 2014).

In 1986, economic crisis set in because of the fall in the world market prices of its main agricultural exports and poor economic policies. As a result, oil rents as a share of GDP fell to about 7% from 1986 to 1989 (WDI, 2014). Due to structural adjustment policies of the late 1980s, Cameroon needed to broaden its narrow export base in order to secure a favourable balance of trade.

And since revenues from oil exports were declining, cocoa was now regarded as a foreign earner that could support the economy. The contribution of cocoa to GDP therefore increased steadily from about 3.5% in 1989 (Atyi, 1998) to 6.7% in 1995 and finally reached 12% of GDP in 2000 (Ekoko, 1999; Brown and Schreckenberg, 2001; Siebock, 2002). During the 1994/95 fiscal year, the need to service the external debt and create employment to the increasing population of the country was a driving force for cocoa harvesting in Cameroon (Siebock, 2002).

Cameroon has a foreign market for cocoa in Europe, Asia, America and other parts of Africa. In 1970, the volume of total round cocoa exported was estimated at about 511,200 m3. This added about $15 million to export revenue, representing about 1.3% of GDP. In 1980, export of all cocoa contributed about $113 million to export revenue and 1.7% to GDP. The shares of exported round wood to GDP in 1990, 2000, 2010 and 2012 are 1.6%, 1.1%, 1.1% and 0.9% respectively.

In 2012, the export quantity was estimated at about 514068 m3, with a corresponding export value of about $214 million. Averagely, annual exports of cocoa stood at about 634 m3 for the period, with a monetary value of approximately $106 million, which represents about 1.2% of GDP over 1980-2014. From the above statistics, it is observed that the contribution of cocoa exports to GDP is decreasing in value over the years, despite rising quantities exported.

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 of that agricultural export crops like cocoa, coffee, cotton, tobacco, etc became prominent in the African continent. These agricultural crops were mainly exported to Europe where they served as raw material for the European growing industries (Amin, A.A 2002)

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 to the economy of Africa.

In Cameroon, the main agricultural export crops are cocoa, (in which Cameroon is the 5th largest producer), coffee and cotton. Before 1978, these three made up to 50% of the country’s total export (Gbetnkom, 1996). Millet, cassava, sorghum, rice, etc are also produced, both for home consumption and for exports around the Central African Region. In fact, 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 (INS, 2017).

The most important cash crops are; cocoa, coffee, cotton, bananas, rubber, palm oil and kennels 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 in spite of Asian competition. Cameroon is among the world’s largest producers; 13,000tons of cocoa beans were produced in 2004. Two types of coffee; Robusta and Arabica are grown.

Production was 60,000tons in 2004. About 8500 hectares (21,0000 acres) are allocated to cotton plantations. Some cotton is exported, while the rest is processes by local textile plants. Total cotton output was 1090000tons in 2004. Bananas are grown mainly in the Southwest Region; 2004 estimated production was 630,000tons. 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 200,000tons. Small amounts of tobacco, tea and pineapples are also grown. Estimated food production in 2004 was as follows; sugarcane, 1450000tons, cassava, 1,950,000tons, sorghum, 550,000tons, corn 750,000tons, yams 265,000tons, sweet potatoes 175,000tons, potatoes 135,000tons, dry beans 95,000 and rice 62,000tons (INS, 2010)

The attention paid to the agricultural sector shows that it contributes 22.9% to the GDP and employs 62% of the active population, represents 23% of agricultural exports (MINADER, 2015). The main export products from Cameroon are coffee, cotton, cocoa, bananas, rubber, etc. Between 2002 and 2008, cocoa production (beans and derivatives) increased from 170 thousand tonnes to 190 miles and exports from 153.2 miles to 165.2 thousand tonnes (MINADER, 2010). National coffee production between 2012 and 2013 was 16,142 tonnes less than 58% of the previous year.

This underperformance led the government to set up in 2014 a recovery plan for coffee and cocoa. Cotton production stood at 240 thousand tonnes in 2013/2014 compared to 210 thousand tonnes in 2012/2013 (MINADER, 2015). The overall perennial crop sectors experienced a slight improvement in their production despite some reasons that explain stagnation. it is worth highlighting, among other things, the instability and the strong downward trend in prices on export markets, the weak negotiating power of planters vis-à-vis buyers and the new opportunities offered by the national market for food products.

In most African countries, agricultural sector has an evident input towards the Economic growth of the Nations. Among the levels of economic growth, the debate on the contribution of agriculture on economic growth in African countries is a great concern. For instance, the Cameroonian agricultural sector investment is one of the main actors in the Cameroonian economic development and growth.

In recent years the level of agricultural investment in Cameroon is up 70% in 2019 compared to same period in 2018. This increase together with gross fixed capital formation contributed 1.2% to GDP growth. Similarly, it contributes 2.2% to GDP growth. As a result, Agricultural investment is estimated at CFAF 930.5 billion (INS, 2019).

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