Africa and the Ukraine crisis: Turning threats into opportunity
The Ukraine crisis may pose a threat to food security and living standards in Africa, but it could also provide incentives to boost intra-African trade. Those were the key messages from Hanan Morsy, Deputy Executive Secretary and Chief Economist at the United Nations Economic Commission for Africa (ECA), during a recent online presentation to over 100 UN officials from all over the continent. Many UN Resident Coordinators chimed in with observations from the field.
Ms. Morsy also highlighted the potentially disruptive effects of rising food and petroleum prices due to the war. Higher oil prices will likely affect citizens everywhere, though they could present a special opportunity for exporters. In light of higher energy and food prices, she called for stronger social and economic safety nets.
The growth rate of Africa’s gross domestic product (GDP) is projected to be reduced by 0.7% due to fallout from the war. Inflation is expected to rise by an extra 2.2%. This will likely increase both food insecurity and poverty. “Even before the Ukraine crisis, the COVID-19 pandemic had already led to the worst economic recession in half a century across Africa, with real GDP contracting by 3% in 2020,” Ms. Morsy noted.
“The COVID-19 pandemic reversed hard-won gains in poverty reduction in Africa, pushing 47 million people into extreme poverty, increasing the number of new poor by 55 million, and adding 46 million people to those at risk of hunger and undernourishment,” she added.
Ukraine and Russia are both leading global suppliers of agricultural commodities, fertilizers and energy. Together they account for over half of the world’s sunflower oil, one-third of wheat production, and one-fifth of maize, Ms. Morsy pointed out.
Global food prices reached a 14-year high in March, according to ECA figures. Oil prices have surged to their highest levels since 2008. Fertilizer prices have also skyrocketed.
Most African households spend the bulk of their income on food, to a greater extent than anywhere else in the world. Higher food prices are likely to decrease living standards and the quality of life. Measures should be taken to help the most vulnerable people weather the crisis, argued Ms. Morsy.
The recently launched African Continental Free Trade Area (AfCFTA) agreement could help countries adjust. They “should take full advantage” of AfCFTA to boost intra-region trade in agriculture and foodstuffs, industrial goods and services “to build resilience against external shocks and bring back on track Africa’s recovery from COVID-19,” Ms. Morsy said.
“Many of these products [currently imported from Ukraine and Russia] can be found in other African countries,” said Siaka Coulibaly, Resident Coordinator in Senegal. He called for structural reforms of agriculture to promote industrialization.
While the total amount of trade between the two warring countries and Africa is relatively low, “The issue here is the concentration,” Ms. Morsy said. “African imports from Russia and Ukraine are concentrated in a few products and countries.”
Ten African countries depend heavily on food imports, notably wheat and maize, from Ukraine and Russia, she said. They are: Egypt, Ethiopia, Kenya, Libya, Morocco, Nigeria, Senegal, South Africa, Sudan and Tunisia. “It’s important to remember that these 10 countries constitute half of the population of Africa and two-thirds of the continent’s GDP,” Ms. Morsy said. “Even though it’s just 10 countries, there are significant implications for Africa as a whole, including looming food security risks.”
Between 2018 and 2020, 80% of Egypt’s wheat imports came from Ukraine and Russia, according to Elena Panova, the Resident Coordinator for that country. In March, the government fixed prices for unsubsidized bread as an emergency response to a spike in inflation. Leaders introduced other measures to mitigate the economic impact of the war in Ukraine, including the allocation of US$148 million to cover 450,000 new families under the national social safety net programmes.
Food security is on the radar in Angola, noted Zahira Virani, the Resident Coordinator there. The southwestern provinces are living through the worst drought in four decades, affecting an estimated five million people, around 15% of the population, according to the World Food Programme. Despite a diversification drive to reduce dependence on food imports, the dollar amount of wheat from Russia increased from US$45 million in 2020 to US$65 million in last year.
The same factors that put pressure on household budgets will also affect the public sector, especially in the 43 African countries that net importers of energy and food. Countries will need to keep an eye on their current account balances. A handful of net energy exporters will reap the benefits of added revenues. They should use this windfall to boost resilience, Ms. Morsy suggested.
UN teams on the ground can use the lessons learned from the COVID-19 response to help governments build resilience and accelerate the recovery in response to the Ukraine crisis. The UN is well-placed to perform rapid assessments of the effects on the most vulnerable people and to continue to support social and economic reforms at the national level.
Written by Hiroyuki Saito, Regional Communications Officer for Africa, UN Department of Global Communications (DGC)/Development Coordination Office (DCO).