September 26, 2022

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Africa looks to buffer itself from the impacts of Russia’s invasion of Ukraine

African states and financial institutions are ramping up an economic response to disruptions caused by Russia’s invasion of Ukraine to insulate the continent, its people and markets from the aftershocks of the crisis that is wreaking havoc on the global economy and pushing up commodity prices.

Seth Onyango, bird story agency

The African Export-Import Bank (Afreximbank) has unlocked a 4 billion US dollars credit line to help the economies and businesses blunt the knock-on effect of the war, as the continent braces for a longer conflict.

Afreximbank approved the launch of the Ukraine Crisis Adjustment Trade Financing Programme for Africa (UKAFPA) on 31 March 2022, as states across the continent ponder a fiscal response to tame inflationary pressures.

UKAFPA is designed to help countries to meet immediate import price increases pending domestic demand adjustments and commodity export revenue stabilisation.

Professor Benedict Oramah, President and Chairman of the Board of Directors of Afreximbank is upbeat the initiative will help avert social anxiety and upheaval that may arise from looming food shortages and high costs of fertilizer petroleum products.

“Following African Union’s endorsement, Afreximbank shareholders approved a 6.5 billion US dollars General Capital Increase on 2021 to boost the capacity of the Bank to deliver on its mandate, deal with the Covid-19 pandemic, and support AfCFTA implementation,” he said.

“We must now add the consequences of the ongoing Ukraine crisis to the catalogue of emergencies a strong Afreximbank has to contend with. We are very grateful to member states and shareholders who have already paid in their subscriptions giving the Bank the flexibility to respond swiftly to prevailing challenges. I call upon those who have not acted to do so urgently as we will once again learn that in times of major crises we can only count on our own institutions to lead the way before others follow.”

States are also, not only protectively monitoring the situation in Ukraine but actively trying to nip its effects in the bud.

On March 15, Egypt’s President Abdel-Fattah al-Sisi directed the Egyptian armed forces to offer basic food commodities to the neediest at reduced prices in coordination with the Ministry of Supply and Internal Trade and the Tahya Misr (Long Live Egypt) Fund. 

And amid rising fuel prices and shrinking supply, Kenyan President Uhuru Kenyatta signed a supplementary budget for the fiscal year allocating an additional 250 million US dollars for the country’s fuel subsidy program.

With fuel shortages being experienced in Africa, the state of the art Dangote Refinery, by billionaire and President of Dangote Group, Aliko Dangote is expected to be a game-changer in a push to make Africa energy secure.

The refinery which has been under construction for the past decade is expected to commence processing of crude oil in the third quarter of 2022.

Upon completion, the 650,000 barrels per day, the world’s largest single refinery located in the Ibeju Lekki area of Lagos State will produce 50 million litres of Premium Motor Spirit (petrol) and 17 million litres of diesel daily. 

In South Africa, President Cyril Ramaphosa established a committee of to assess the impact that Russia’s attack on Ukraine will have on food and fuel prices.

According to International Food Policy Research Institute, the cessation or reduction of fertilizer imports from Russia — the Economic Community of West African States (ECOWAS) second-largest supplier with 12 per cent of the market—is a serious risk for West African farmers, but it is also an opportunity for regional suppliers.

“Nigeria has the capacity to substitute for the missing imports. The country has seen heavy investment in the fertilizer sector through Indorama Nigeria and the Dangote Group, taking advantage of its sizeable natural gas reserves,” the institute said.

“In addition, Morocco, which supplies one-third of the ECOWAS fertilizer market, recently invested 1 billion US dollars in Nigeria to build two phosphate plants (capacity of 1 million tons each).”

This comes as Nigeria, Angola, Tanzania and Senegal, sensing long-term opportunities from the Ukraine conflict, are planning to increase production, explorations of new untapped fields of oil or gas and find profitable markets for the precious metals necessary for electronics chips according to Daily Sabah.

On food imports, Egypt which heavily relies on wheat imports, purchasing around 80 per cent of its wheat from Russia and Ukraine is already seeking alternative suppliers.

Can fellow African states step in? According to the African Development Bank, as of 2020, Ethiopia was sub-Saharan Africa’s largest wheat producer, and with the market opening in Egypt, it may take advantage to boost production.

Other top wheat producers in Africa are South Africa, Sudan, Kenya, Tanzania, Nigeria, Zimbabwe and Zambia all of which could boost production to meet demand on the continent in subsequent planting seasons.

Last Wednesday, Tanzanian Prime Minister Kassim Majaliwa told parliament that the east African state is food self-sufficient by over 125 per cent.

Presenting the 2022/2023 financial year budget proposals for the Prime Minister’s Office, Majaliwa said Tanzania has a surplus of 3.8 million tons of food crops.

He told the House in the capital Dodoma that production of food crops in the 2020/2021 farming season was 18.6 million tons while demand for the country stood at 14.8 million tons, making a surplus of 3.8 million tons.

“The bumper harvests of food crops are attributed to good rainfall distribution in the 2020/2021 farming season, improved application of quality seeds and fertilizers, and a surge in agricultural extension services,” said Majaliwa.

Africa’s food exports have grown considerably over the past decade, with 50 out of 54 states recording considerable trade surpluses in agricultural commodity trade.

This finding, reported in a Brookings Institute report, also shows that just four countries are fueling the vast majority of the continent’s agro-food trade deficit.

The report flies in the face of reports on Africa that paint a picture of the continent as reliant on foreign food imports despite having the bulk of the world’s remaining unutilised arable land.

In their report, “Unpacking the misconceptions about Africa’s food imports”, Brookings disaggregated sub-Saharan Africa’s (SSA) agricultural trade performance by country and type − showing that only four countries in the region have a food trade deficit.

These are Nigeria, Angola, the Democratic Republic of the Congo (DRC), and Somalia − accounting for most of SSA’s net agricultural position as a net importer.

“These countries are almost fully responsible for the region’s net agricultural trade deficit… The rest of the countries in the region are net agricultural exporters. This is good news not only today but for Africa’s future economic growth through trade,” reads the report.

“Nigeria alone is a net agricultural importer of over 5 billion US dollars per year, while Angola, the DRC, and Somalia account for another 5 billion US dollars per year combined. The role of rising commodity prices is triggering food imports through the Dutch disease mechanisms as food imports in resource-rich countries jumped substantially during the 2007-2012 commodity price upswings, and subsequently fell back down.”

The African Development Bank (AfDB) had projected that Africa’s food imports would reach 90 billion US dollars by 2030.

However, according to Brookings, those forecasts were based on trends during 2000-2010 − the period when global food prices grew rapidly – and do not reflect the more recent 2011-2019 period during which the value of SSA’s food imports has remained relatively flat. According to Trade for Development News, Africa exported 62 billion US dollars in agricultural products in 2017. There is significant under-reporting of continental agro-food data, whether that relates to exports, or to the growth of local capacity.

bird story agency

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