Russia-Ukranian war: Cushioning the effect on Africa
Russia’s war in Ukraine has disrupted Africa’s promising recovery from the COVID-19 pandemic by raising food and fuel prices, disrupting trade of goods and services, tightening the fiscal space, constraining green transitions and reducing the flow of development finance in the continent, according to United Nations Assistant Secretary-General, Ahunna Eziakonwa.
This, in no small way, has led to widened inequality and deeper poverty. The most visible impact of the war on Africa is the rising fuel and food prices, inflation and financial instability. The poorest are the hardest hit as a large proportion of their consumption expenditure is on food and transport.
The Russia-Ukraine war is having an outsized impact on the global supply chain, impeding the flow of goods, fueling dramatic cost increases and product shortages, and creating catastrophic food shortages around the world.
A food market on May 10, 2022, in Douala, Cameroon, where food inflation, exacerbated by Russia’s war in Ukraine, is causing hardship.
Speaking at the U.S. Institute of Peace on June 14, Eziakonwa, who serves as the U.N. Development Programme’s Assistant Administrator and Regional Director for Africa, said the war has put households, communities and countries across Africa in a “very precarious situation.”
Joseph Sany, Vice President of the Africa Center at USIP, said, “The critical question before us today is: How can African countries and their partners leverage their abundant resources and human capabilities to address the short-term impact of Russia’s invasion in Ukraine and advance their long-term development and security needs?”
“In other words,” he added, “How can Africa make the best out of this very, very bad situation?”
Prior to 2020, African countries were among the fastest growing in the world. The COVID-19 pandemic reversed decades of hard-won macroeconomic, socioeconomic and governance gains on the continent. For the first time in nearly three decades, Africa’s Human Development Index dropped. Millions of Africans lost their jobs; some 50 million were projected to be pushed into extreme poverty. Women and youths were hardest hit. Global trade disruptions constrained growth and many African countries suffered from a progressively shrinking fiscal space. The pandemic “worsened financial and societal inequalities in Africa,” she added.
In response to the pandemic, African countries put in place effective macroeconomic policies, made strategic investments and boosted COVID-19 vaccine production and rollout. “While multilateralism appeared to be shrinking in the rest of the world, it was expanding in Africa,” Eziakonwa hinted.
By the end of 2021, Africa exceeded expectations of a 3.7 per cent GDP growth, recording a 4.5 per cent growth and “showing its resilience and its muscle to bounce back,” she went further. “The recovery was fragile… but the continent appeared to be back on track” toward attaining the UN’s Sustainable Development Goals.
On February 24, Russia invaded Ukraine in an unprovoked act of aggression. The aftershocks of the ongoing war are being felt around the world, Africa inclusive.
While the level of trade between the African continent as a whole and Russia and Ukraine is insignificant, some African countries rely heavily on these two countries for critical imports, particularly wheat, fertilizers and steel. A disruption in these imports has adversely affected African countries.
The USIP Director of West Africa programmes, Oge Onubogu, USIP Senior Advisor Johnny Carson and U.N. Assistant Secretary-General, Ahunna Eziakonwa all discussed the impact of Russia’s war in Ukraine on African economies.
In 2021, for example, Kenya imported almost 30 per cent of its wheat from Russia and Ukraine. A supply disruption would affect the production of bread in Kenya, which Eziakonwa noted is the third most consumed food item in that country. In the area of wheat supply and price of bread, Nigeria too has its story to tell. Cameroon imported 44 per cent of its fertilizers from Russia in 2021. In West Africa, as earlier forecast by analysts, there is dire impact on crop yields which compromised food security due to the disruption in the supply of fertilizer. And similarly, 60 per cent of Ghana’s iron ore and steel imports come from Ukraine. As a result of the war, the construction industry in Ghana is facing significant challenges.
A combination of the pandemic and the war in Ukraine has reduced trade and taxation revenues of governments across Africa, even as countries are being forced to spend on social safety nets. “Countries are being asked to spend more with less coming in,” said Eziakonwa, adding that “fiscal and monetary responses of sub-Saharan African countries increased public indebtedness across Africa.”
Meanwhile, downgraded credit ratings have increased borrowing costs for African countries. UNDP research shows that “biased credit ratings could be costing six African countries $13 billion in additional interest rate payments,” according to Eziakonwa, noting that, “Africa is borrowing at a much higher cost than the rest of the world.”
According to her, one of the “most pernicious effects” of the war in Ukraine is “imported inflation.” She cited the examples of Tanzania, where overall inflation spiked by 34 per cent between February and April; Namibia, where transportation costs rose by 20 per cent between March and April; and Cameroon, where food prices increased by 26 per cent between February and March.
The war in Ukraine is a “clear and present danger to multilateralism,” Eziakonwa emphasised. Indication of this can be found in the fact that development projects are being postponed or canceled as some development partners are put off by the higher costs of projects while others are considering diverting funds to the humanitarian crisis caused by the war in Europe. There are also signs of Africa’s development being defunded. “It’s not the time to leave the continent behind,” Eziakonwa said, pointing out that there is need to have a better understanding that the relationship with Africa is a “partnership of purpose” and “not a relationship of charity.”
“An unwelcome tendency towards unilateralism and a return to Cold War dynamics would be devastating for Africa, and indeed for the world.” She warned, “A Cold War redux will certainly exacerbate the recent retreat of democratisation in parts of the continent where we have witnessed disruptive and unconstitutional political transitions.” It will also be discouraging for countries that “are trying to do the right thing,” she noted, while calling for an investment in “robust and meaningful multilateralism.” She also suggested derisking Africa’s investment ecosystem and proactively exploring the use of innovative financing mechanisms.
In the face of these challenges, a business as usual approach will not be enough. In the face of uncommon times demands, exceptional and extraordinary solutions will be required.
She highlighted three areas that should be prioritised by African countries and their partners.
Firstly, there is urgent need to reframe development finance and rethink the global finance architecture. “This must start by enhancing domestic resource mobilization,” so that Africa can retain a greater share of the value of its strategic mineral, agricultural and human resources. This can be achieved by reducing almost $90 billion in illicit flows from the continent by improving Africa’s tax effort, raising average tax to GDP ratios from the current 17.5 per cent to 24 per cent and eliminating unnecessary tax waivers for big business.
Eziakonwa suggested a consistent investment in resilience, the need to “shock proof” development and democracy. Pointing out that development is not a linear process and that various shocks can reverse gains, she said “progress without resilience is not sustainable.” Resilience can be achieved through initiatives that enable Africa to fully utilise its natural resource wealth, take advantage of planet-friendly financing mechanisms and focus on climate risk sensitive investing.
Africa and its development partners need to invest in food and fuel security, greater productive capacity, and higher value added manufacturing and exports, she advised.
Structural transformation and regional integration should be prioritised. Africa needs to harness digital technologies and promote free and fair competition globally, intensify support for regional integration and economic diversification and mobilise resources to fill critical gaps in technology, skills and infrastructure.
Africa needs to be more assertive about taking its rightful place in the world. Financial and global institutions should also understand that an investment in Africa’s well-being is an investment in the world’s well-being. What’s good for Africa is good for the world.
The African Continental Free Trade Area (AfCFTA), which was signed in March 2018, and came into force on January 1, 2021 has been described as possibly the most important pan-African agreement of the last decade. “It has the prospects and possibilities of really transforming economic relationships around the continent and transforming Africa’s economic and commercial relationships with the world,” Johnnie Carson said.
The AfCFTA provides an ideal framework for Africa to rationalise and harmonise tariffs, eliminate persistent non-tariff barriers and prioritise the uninhibited flow of trade and people among African countries. It could lift some 30 million Africans out of extreme poverty, increase income by $450 billion and more than double the size of the single Africa market to $6.7 trillion by the next decade. As a result, the world should rally behind the AfCFTA. The United States, Carson said, could support the AfCFTA just as it has supported the European Union, the world’s largest single market area.
If AfCFTA is well managed, it’s not just going to bring about an immediate respite to Africa, in response to the effect of the war in Ukraine, but on a long term plan, it will become the machinery for African socioeconomic greatness.
On a final note, the two parties involved in the crisis are enjoined to stop the war and embrace peace. The consequence is devastating, not only on Africa, but the entire world. Of course, the two warring nations are the hardest hit. Lives are being lost on daily basis, needlessly. There is food insecurity across the globe. There is environmental degradation, psychological and emotional trauma in the two territories, as well as colossal loss of resources that would take years to recover from.
At this point, the continent should go into research and begin to improvise to forestall further devastation. Africa needs to brace up so that the war will not take us years back.
