Commodities back from the dead

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significant risk to economic stability.

The rebound in commodities is good news for commodity-dependent African countries. Sub-Saharan Africa, dubbed the new growth frontier not too long ago, registered only 1.5% growth in 2016. For South Africa, although it has diversified its economy to be less dependent on mining, the rebound “is still a big deal for us”, said Jammine.

A special focus in the World Bank report showed how the depressed commodity prices hit commodityexporting emerging and developing economies hard, slowing investment growth, which declined from 7.1% in 2010 to 1.6% in 2015.

“Investment weakness, both public and private, hinders a range of activity in commodity-exporting emerging market and developing economies,” said Ayhan Kose, the director of the World Bank’s development prospects group.

Some of it is about psychology, Jammine said. “We are still seen as a primary commodity producer and, even though gold now forms a small part of our exports, when the gold price increases, money seems to come back to South Africa.

The rand’s gains are a reversal of a trend seen a year ago, said Jammine. “People think the only reason the rand fell end of 2015 was because of Nenegate [when the finance minister was unexpectedly replaced with a little-known parliamentary back-bencher, which caused markets to plunge]. But it was also within a general bloodbath in commodity prices where capital flowed out of those countries seen to be commodity producers.”

But there is reason to remain cautious about commodity prices, Jammine warned. “If prices go too

“Prices for most commodities appear to have bottomed out last year and are on track to climb in 2017”

high, people stop buying. For example, there are many who believe the iron ore price, which rocketed over the past few months, is overdone now.”

The World Bank report singled out iron ore prices, which almost doubled in the year ended December, as having raced ahead of fundamentals. Although prices soared on strong steel demand in China, supply constraints and low stocks, prices softened into January, with China’s inventories rising and seasonal demand expected to weaken, the bank said.

Iron ore exports from the major producers rose to record levels in November and new low-cost capacity is expected to come on line this