Africa’s reliance on imports for food, oil and financial support could be in for tougher times as Russia’s invasion of Ukraine further harms supply channels.
A UN experts’ briefing indicates that east and west Africa nations are heavily exposed to the increasing food prices after main global exporters Russia and Ukraine went to war.
The briefing released last week by the UN Task Team for Global Crisis Response Group was meant to determine how Russia’s invasion of Ukraine earlier in February was going to hurt global supply chains, as well as the access to food.
It however found out that Africa has most of the 36 countries labeled as most exposed to the price hikes of basic food like wheat, which both Russia and Ukraine sell the most to since it is cheapest.
RUSSIA AND UKRAINE IMPORTS
In eastern Africa, Tanzania, Burundi, DR Congo, Rwanda and Sudan are the most exposed. Similarly, Congo, Senegal and Burkina Faso will face the same predicament from other parts of the continent. This is because the countries buy over half of their wheat imports from Russia and Ukraine.
“On top of these food prices which affect all net food importing countries, some economies are also directly exposed through import dependence of wheat coming from Russia and Ukraine,” says the briefing titled “Global Impact of war in Ukraine on food, energy and finance systems: A three dimensional crisis.”
“This situation may worsen if countries react by closing food markets, setting off a domino effect of trade restrictions and export bans, with potentially catastrophic consequences.”
Since February 24 when Russia invaded Ukraine, a number of countries in the West have implemented sanctions, including banning Russian vessels from docking at their ports, removing Russian banks from the global financials settlement system and banning certain Russian exports.
Following this, the prices of wheat and maize, two biggest stable foods in Africa, have risen sharply globally. The two commodities had, in fact, seen price hikes during Covid-19, after supply chains broke down as borders were shut. But after the invasion, the two cereals have maintained a 30 percent rise.
The United Nations cautions that eastern Africa may be the worst hit in Africa. According to the Intergovernmental Authority on Development (Igad), at least 29 million people scattered in Kenya, Somalia, Ethiopia and South Sudan are facing famine-like situations.
These same nations are hosting communities that depend on aid programmes from the World Food Programme (WFP). Last week, the UN Food and Agriculture Organisation, for example, said up to six million people in Somalia are facing “extreme levels of food insecurity.”
The WFP relied on food imports into the region from Ukraine and Russia. Now even the WFP itself is facing a shortage of funds, and supplies.
“The funding we need to respond to a crisis of this magnitude has simply not come. We are all watching this tragedy unfold and our hands are tied,” said Etienne Peterschmitt, the FAO Representative in Somalia.
“I want to stress that it is not too late. Funding received today can still prevent the worst, but it has to come at scale and it has to come very soon,” he said.
Even when donors send in money, the problem may persist for the Horn because the war in Ukraine has caused disruptions for logistics.
“Port congestion remains a major contributor to elevated freight and strong market conditions in many shipping segments,” it says. As a result, firms now pay as much as $45,000 per day to charter container ships, three time the rates before Covid-19, and $15,000 more than at the peak of Covid-19.
Much as this alone may not stop the flow of goods, the airspace closures near Russia and the general security concerns for road transporters in Ukraine mean movement of critical commodities will be severely delayed.
These challenges may directly affect the eastern Africa region as it depends on Russian exports of fertilizer to tend to its crops. Russia and Belarus fertilizer exports account for 20 percent of the world supply, with China coming in at 11.2 percent, according to data gathered by the team.
The UN team adds that the region is still exposed for relying heavily on donor funds and external debts to finance programmes and importation of fuel. Globally, at least 1.7 billion people in 107 economies “are severely exposed” to at least one of the crisis indicators such as rising food prices, rising energy prices, and tightening financial conditions,” the document says.
For nations like Kenya and Uganda, who have to repay loans, they will now pay more as their currencies have depreciated. At the height of the Covid-19 pandemic, countries spent at least 16 percent of their exports to service debts.
With the current situation, some may even default as the exports market is not yet stable. The UN team predicts the debt problem may be worse than it was after the second World War.
“By comparison, after the Allied Powers restructured Germany’s debt in 1953, debt servicing payments never exceeded 3.4 percent of export revenues in any year,” it says.
“Countries classified as net-food importers by the UN have registered an above average increase in borrowing costs since the start of the conflict.”