Posted on Wednesday, 23 September 2015 09:51

Commodities: That sinking feeling

By The Africa Report

Photos© Gwenn Dubourthoumieu for TARPlunging commodity prices are piling pressure on many African governments that are now scrambling to adjust budgets and find new sources of revenue.

The economic slowdown in China, which uses around 40% of the world's copper and 50% of its aluminium, forced down prices as demand dried up.

Africa's principal oil producers have been badly hit as the Organisation of Petroleum Exporting Countries kept production high to defend its market share against the fledgling shale industry in the United States (US).

Companies are cutting back on their investment budgets

Hopes of a price rebound were dealt a further blow in August when Iran, which has the world's fourth-largest proven oil reserves, announced it planned to double its oil exports after signing a deal to lift international sanctions in exchange for Tehran curbing its nuclear research programme.

Gold prices tumbled to a five-year low in August on the back of the strong US dollar and the prospect of interest-rate hikes from the US Federal Reserve.

For South Africa, the world's sixth-largest producer, the price drop pushes it ever closer to recession.

Companies are cutting back on their investment budgets and South Africa's AngloGold Ashanti announced in August that it will shift its strategy on projects in Mali if prices drop below $1,000 per ounce.

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