Abstract

This study examined the effect of Coffee Cultivation on the Economic Development of Cameroon for the Period 1980 – 2017. The specific objectives were to investigate the effect of Robusta coffee cultivation on GDP growth in Cameroon, to examine the effect of Arabica coffee cultivation on GDP growth in Cameroon and to make recommendations based on the results of the study.

This study was backed by Joseph Alois Schumpeter’s Theory of Economic Growth and Harrod-Domar Model of Growth. The model specifies economic development measured by gross domestic product as dependent on coffee cultivation proxy by Robusta coffee and Arabica coffee.

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 coffee cultivation has a significant positive impact on economic development. Both Robusta coffee and Arabica coffee have a significant effect on the GDP growth of the country.

The study demonstrates that increasing Coffee Cultivation 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 cultivation.

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 Cameroon still depend mostly on Agriculture for their growth and development, especially on agricultural exports commodities (Tambi, 1999; Nchare, 2007).

Agriculture plays a prominent role in the socio-economic development of most sub-Saharan African countries. African governments put agriculture at the top of their development priorities, given the fact that secondary and tertiary industry is limited and not fully developed. Notwithstanding this interest in the agricultural sector, agriculture is still widely seen as underperforming and practiced with the use of rudimentary tools (World Bank, 2007: Inter Academy Council, 2004). A complete re-orientation of economic policy is essential in these countries to promote economic growth to generate income and to reduce poverty (Godoy and Dewbre, 2010).

Understanding agriculture’s role has important implications for policy making. Dutt and Ros (2008) posit that one extreme view. Common place in the development literature of the 1950s is that the agricultural sector is simply a reservoir of unemployed or underemployed labor. As a result, low incomes and living standards from which people must eventually be moved by economic growth in the non-agricultural economy.

The extreme alternative view is that the agricultural sector itself must generate the growth that will eventually release labor and other resources (Dutt & Ros, ibid). The farm sector has likely of being the industrial and economic springboard from where a country’s development can take off (Ogen, 2007). Indeed, more often than not, agricultural activities have usually been concentrated in the less-developed rural areas where there is a critical need for transformation, redistribution, poverty alleviation and socioeconomic development (Stewart, 2000).

Agriculture is a main source of livelihood for Cameroonians and agricultural crops 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 coffee 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 coffee 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)

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, 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).

In Cameroon, the agricultural sector plays an essential role in the economy. It accounts for nearly a quarter of GDP and generates half of the revenue from non-oil exports. It employs around 60% of the working population (NIS, 2018). It is the main provider of employment, accounting for 46% of employment in 2019 (WDI, 2019) and represents almost 50% of exports (WDI, 2019).

Despite this substantial contribution to the economy, agricultural policy has remained stable in Cameroon, with public expenditure allocated to this sector remaining stagnant, with only about 4.5% of the state budget allocated on average each year (MINEPAT, 2016). It is in this context that Cameroon adopted in 2014 the National Agricultural Investment Plan (NAIP), which is a result of Cameroon’s adherence to the Comprehensive Africa Agriculture African Agriculture Development Programme (CAADP).

The objective of this national policy is to work towards improving the performance of the agricultural sector. In addition, the government, through Minepat2, has set up a framework of the Multi-Partner Committee (CMP) for the follow-up of the DSCE, which aims at coordinating ODA actions in Cameroon. Several bilateral and multilateral agencies are involved in supporting Cameroon’s agriculture.

These include the PIDMA financed by the World Bank, the PADMIR and the PEAJeunes, financed by IFAD, the ACEFA programme and the PMEA, financed by the AFD. The Bank’s involvement in the CMP-rural has made it possible to draw up a catalogue of interventions in agricultural value chains: World Bank (cassava, sorghum and maize), IFAD (onions), FAO (cassava), German Cooperation (cocoa, poultry and onions) and the European Union (coffee/cocoa and milk). The contribution of these different donors to Cameroonian agriculture is estimated at 890 million euros between 2014 and 2020.

Moreover, over the period from 2010 to 2020, the World Bank estimates an overall contribution of nearly CFAF 3,000 billion in terms of global ODA. The amount allocated to the agricultural sector is estimated at more than CFAF 900 billion, i.e., about 26% of the total aid received by the country. At the level of bilateral cooperation, several countries are also involved: France (SCAC/AFD), Netherlands (SNV), Spain (AECID), Canada (CIDA), Germany (KfW, GIZ), USA (USAID), Japan (JICA), South Korea (KOICA), etc.

According to a paper jointly published in 2007 by the Ministry of Agriculture and Rural Development (MINADER) and that of Fishery, Livestock and Animal Husbandry and Animal Husbandry (MINEPIA), in recent years, food production did not follow the rapid demographic increase, especially in the urban areas. For these ministries, food security has to be assured by an increase in the production of food stuff and other crops to substitute importation

The Government, faced with the effects of the financial crisis, has taken steps to boost production of commodities such as maize, rice, cassava, potato, oil palm and plantain for food crops, these measures aim at improving the commercialization of products through the construction of warehouses for conservation.

In 2009, the agricultural sector accounted for approximately 75.6% of the primary industry with 68.8% for food crops and 6.8 o for export crops. This sub-sector was increased by 8.3% compared to 2008, contributing 0.790 to growth actual primary sector (Institut National de la Statistique- Annuaire Statistique du Cameroun, 2010). Still in 2009, the Government through the MINADER implemented an emergency plan to increase agricultural production This sought to subsidize pesticides and fertilizers from 20o to 50 %, grant loans at low-interest rates, create five pools of farm machinery support up to 15% acquire about a hundred tractors and increase the capacity of processing storage, and packaging all in a bid to improve agricultural production.

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 agricultural 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 agricultural products, 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 contributed 2.2% to GDP growth. As a result, Agricultural investment was estimated at CFAF 930.5 billion (INS, 2019).

Moreover, the attitude of agricultural investment, the main factor of economic development and growth in all developing countries, has long been the concern of Economists and Policy makers. However, the prevailing relationship between the business environment and the success of firms justifies the challenge that must be taken up by authorities so that by 2035, Cameroon reaches its goal of being an emerging country, although the business climate of Cameroon continues to suffer from a heavy and complex institutional a regulatory environment, ranking 166th of 190 countries, according to 2019 Doing Business Ranking (DBR). (Bang et al., 2019). It is, therefore, necessary to assess the real impact that coffee cultivation has on the economic growth of Cameroon.

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