Ukraine crisis: What lessons for Africa?

Ukraine crisis: What lessons for Africa?
Ukraine crisis: What lessons for Africa?

Africa-Press – Cape verde. While discussing the impact of the crisis in Ukraine on development financing in Africa, continental economists on Saturday, May 14, concurred that there are potential opportunities arising from the crisis especially in the case of oil and gas producing countries.

This was during a side event on the margins of the 54th session of the Conference of African Ministers of Finance, Planning and Economic Development in Dakar, Senegal.

The expected outcomes of the event included highlighting opportunities and challenges of the Ukraine crisis for trade, industry and finance on the continent.

Eunice Kamwendo, a macroeconomist who is a Director of the UN Economic Commission for Africa’s southern Africa Bureau, highlighted some immediate impacts of the conflict ever since Russia’s invasion of Ukraine in late February.

The continent is now confronting a new food, fuel and fertilizer crisis reverberating across the world as the Ukraine crisis creates global trade and commodity disruptions.

Russia and Ukraine together account for 30 per cent of the global supply market for wheat and barley, one fifth of the global supply market for maize, and more than half of the world sunflower oil market.

Food prices are reported to be 34 per cent higher than this time last year. Crude oil prices increased by around 60 per cent while gas and fertiliser prices more than doubled.

Kamwendo and others considered how countries have, for the past two years, strived to address effects of the Covid-19 pandemic and rebuild their economies, with varying degrees of success and how the situation turned more complex to handle with the fallout from the crisis in Ukraine. Despite all these challenges, Kamwendo insisted that “we have to look at the other side of the coin: the opportunities.”

“We need to start looking at trade amongst ourselves. And we should have more countries producing fertilisers on our continent,” she pointed out during a panel discussion she participated in along with Mario Augusto Caetano Joao, Angola’s Minister of Economy and Planning, Amos Lugoloobi, Uganda’s State Minister for Planning, and Yamungu Kayandabila, Deputy Governor of Tanzania’s Central Bank, among others.

There are a lot of opportunities, Kamwendo later told The New Times, since there is huge demand for cereals and edible oils on the continent. Instead of importing them, she said, Africa can start producing them and fill the current gap.

Fertiliser prices are going up and making Africa jittery, Kamwendo added, noting that countries on the continent could also cut reliance on fertiliser imports by investing in their own fertiliser making plants.

Joseph Atta-Mensah, UNECA’s Principal Policy Advisor, told The New Times that what countries produce and export matter, and even more so in crisis times. The Ukraine crisis will produce gains and losses in Africa, he said, depending on what countries produce and export.

“Countries that are rich in oil and gas such as Angola and Algeria can gain in the short to medium term if they have the capacities to increase their exports of oil and gas to meet global supply shortfalls emanating from sanctions imposed on Russia,” Atta-Mensah said.

“How these countries manage their windfall oil and gas surplus revenues will be critical, especially as this provides another important opportunity to invest in strengthening the required human capital and productive capacities for resilient, competitive, and more diversified production and export structures.”

According to Atta-Mensah, countries that are food and oil-import dependent will be faced with rising import bills and a further deterioration in their inflation rates and current account balances, worsening debt sustainability for some.

He added: “The sanctions on Russia and the destruction of productive capacities in Ukraine could open up new sources of export and competitive advantages for some countries. The growth of sunflowers and their processing into sunflower oil is a case example.

The development of organic fertilizers for local and regional markets is another. Countries rich in metals and minerals can position themselves as alternative suppliers to Russia in global and regional value chains,” he said, giving the example of Tanzania supplying nickel in the global automotive industry.

It will require bold leadership

Asked if Africa has what it takes to actually take advantage of the Ukraine crisis, Kamwendo said: “It is yes, and no. Yes if there is political will to be able to do that. And the reverse is true.”

She added: “It really hinges on the political will. How committed are we as Africans to be able to take advantage of all the opportunities we see?” “It will require bold leadership,” Atta-Mensah told The New Times.

Angola’s Minister of Economy and Planning did not entirely refute that they could now be laughing to the bank as oil prices shot up. Joao explained that Luanda stopped overdependence on oil revenue and opted for diversification to avoid facing unforeseen problems in the future.

He said: “We are not moving away from oil but we are diversifying by increasing non oil sector activity. We, for example, never used to have local production of food as we do today. This is helping fight consumer price index variations.” Joao noted that the continent needs economic reforms that create more resilience and development.

According to Atta-Mensah, on the environmental front, the rise in oil and gas prices may create disincentives to switch towards alternative sources of energy in oil and gas-rich countries and accelerate instead investments in the carbon-intensive oil and gas sector while the reverse may prevail in oil-dependent countries.

He noted that the transition towards renewables may accelerate in some countries, should the rise in energy prices last. “The rise in the price of fertilizers as agricultural inputs, may harm small-scale farmers by generating losses in crop productivity but could introduce incentives to switch to local organic fertilizers benefiting the ecosystem,” Atta-Mensah said.

In Uganda, Lugoloobi noted, after cooking oil registered the highest price hike – 21 per cent – Kampala embarked on planting more palm oil, sunflowers and soya beans, to check the price pressure in the short and medium term. But he too, sounded realistic.

“Nobody knows when Covid-19 and the Ukraine crisis will end. We are, as countries, still exposed to the uncertainties. Therefore, governments in Africa need to move very quickly,” the Ugandan Minister observed, adding that countries must take advantage of the African Continental Free Trade Area (AfCFTA) agreement to build resilience.

“Due to the existing unfair global trade relations, African countries need to move fast, and work together.”

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