Ukraine War Affecting African Economies

How is the war in Ukraine affecting African economies?

As the African continent recovers from the coronavirus pandemic’s impact, the unexpected Ukraine invasion by Russian forces on 24th February has brought about extensive consequences for the African economy. Countries may be affected because they are directly reliant on Russia and Ukraine’s resources or by a general increase in prices across all markets as supply decreases. 

Which sectors are being particularly affected? 

Africa is a large consumer of wheat; consumption is projected to reach 76.5 million tonnes by 2025, of which almost 64% is imported. As Ukraine is the world’s fourth-largest supplier of wheat and corn, there is a sudden and significant global shortage of cereals, resulting in a substantial increase in market prices. To make matters worse, Russia (another significant prominent exporter of cereal grains) is adding extra taxes to wheat supplies, which means an even higher price increase. In addition to the impact on the food industry, Russia is one of the largest global oil suppliers. However, they cannot sell their natural resources due to Western sanctions. This has created a massive deficit compared to the demand for energy which is driving up the market price.

Every stage of Africa’s food supply  

The war in Ukraine has far-reaching impacts on trade, damaging the supply of foodstuffs in Africa. Firstly, oil is at its highest point since 2014, which affects the price of transport, limiting the possibility of importing goods to and around the continent. Even for those countries producing their own food, Russia is the world’s biggest fertiliser supplier. At the start of the war, there was a sharp increase in the price of fertiliser due to tariffs. This has made it much more expensive for African farmers to grow crops, such as in Kenya, which imports most fertiliser from Russia. Due to the drop in supply and increase in price, some African countries are finding that they can no longer compete with more prosperous countries in the global market. African economies have not been immune to the worldwide trend of increased inflation this year, reducing their buying power.

Which countries in Africa will be most affected?

The north of Africa is experiencing the worst drought in decades, which has led to a reduced crop yield, and many countries in the region are reliant on food imports from outside o the continent. This is particularly true of Egypt, which imports 70% of its wheat from Ukraine and Russia; last month, the country had to ask the International Monetary Fund for a loan to support its economic program to counter the impact of the war in Ukraine. In addition, lands on the brink of famine (which the UN has identified as Madagascar, Ethiopia, South Sudan, Chad, Burkina Faso, and the Democratic Republic of Congo) will be disproportionately affected as aid agencies rely on cereal grains for famine relief. 

What is being done to solve these problems?

As the war in Ukraine stretches on with no end, national and international authorities are looking for ways to mitigate the consequences for global economies. It has been suggested that the war’s effect on oil prices may provoke countries to consider green alternatives at home, avoiding relying on unstable foreign powers. Moreover, the International Monetary Fund and World Bank have been called upon to avert the worst economic consequences through extensive aid packages. 

 

Esmé Layton

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