Addressing debt while bolstering agriculture, energy access and continental trade could ease burden on struggling economies
In today's interconnected world, shots fired in one corner of the globe create ripple effects in other, seemingly far, places. One year since the Russian invasion of Ukraine, African countries, although physically miles away, have not been spared its aftershocks.
While much can be said about the political and policy intricacies surrounding the conflict, the real and palpable impact on the lives of many ordinary Africans is equally unsettling.
Against a backdrop of soaring food and energy prices and the shrinking basket of global economic cooperation financing, African countries are also contending with how to position themselves within the significant shifts in international energy policies, even as they are approached by various partners who are also grappling with the energy access implications for their own citizens.
In 2020, 15 African countries imported over 50 per cent of their wheat products from the Russian Federation or Ukraine. Six of these countries (Eritrea, Egypt, Benin, Sudan, Djibouti, and Tanzania) imported over 70 per cent of their wheat from the region.
The global energy crisis
The 2022 World Economic Outlook paints a stark picture of the state of global energy, stating that it is "delivering a shock of unprecedented breadth and complexity."
This strain comes as African economies are still trying to emerge from the impacts of the COVID-19 pandemic, for which they did not have enough resources to cushion themselves.
By mid- 2022, global energy prices soared to a three-decade high, and natural gas price costs edged over 300 Euros per megawatt-hour. These high costs for natural gas have come down significantly by February 2023, to less than $100 per megawatt-hour, owing to relatively warm winter temperatures in the northern hemisphere.
European governments largely shielded their citizens from these price shocks by spending over $640 billion on energy subsidies, regulating retail prices, and supporting businesses. African governments, on the other hand, did not have the fiscal space to protect consumers with such wide-scale, much-needed measures to counter rising energy prices.
In addition to pressures from fluctuations in exchange rates, and high commodities prices, inflation reached double digits in 40 per cent of African countries. Moreover, seven African countries are in debt distress as of January 2023, and 14 more are at high risk of debt distress, which makes them unable to implement meaningful countermeasures.
As a result, African households, who, according to the IMF, already spend over 50 per cent of their overall consumption on food and energy, felt the significant impact of the high conflict-induced global energy prices, along with their indirect effects on the cost of transportation and consumer goods.
Food items take up about 42 per cent of African household consumption, reaching as high as 60 per cent in countries affected by conflict and insecurity. In France and the United States, food items represent 13 per cent and 6 per cent of household consumption, respectively, notes the United Nations.
The global energy crisis also created policy reversals, with many countries now pursuing natural gas and other fossil fuel projects to meet their energy needs.
Natural gas is also getting more traction as a "green investment", a pivot from the pledges made at the COP26 global climate talks in Glasgow in November 2021 to curtail development financing for natural gas projects.
For African countries, this has meant a renewed interest in and fast-tracking of natural gas and liquified natural gas (LNG) projects, but mainly for export to Europe and others outside the continent.
While this may spell more investments in the energy sector on the continent, the benefit may not necessarily result in energy access for Africans themselves. Instead, this risks further perpetuating commodities-based economies, stunting the continent's own industrialization ambitions.
Shocks to Africa's food systems
While Africa has over 65 per cent of the world's uncultivated land, it is a net food importer, and as such, has been severely impacted by the rise of global food prices, resulting in increased food insecurity.
According to the IMF, staple food prices in Africa "surged by an average 23.9 per cent in 2020-22--the most since the 2008 global financial crisis."
This has devastating implications for many Africans, where food items occupy the largest share in many household consumption baskets. Food items take up about 42 per cent of African household consumption, reaching as high as 60 per cent in countries affected by conflict and insecurity. In France and the United States, food items represent 13 per cent and 6 per cent of household consumption, respectively, notes the United Nations.
According to the African Development Bank (AfDB), African countries spend over $75 billion to import over 100 million metric tons of cereals annually. In 2020, 15 African countries imported over 50 per cent of their wheat products from the Russian Federation or Ukraine. Six of these countries (Eritrea, Egypt, Benin, Sudan, Djibouti, and Tanzania) imported over 70 per cent of their wheat from the region.
The AfDB notes that the Russian invasion of Ukraine triggered a shortage of about 30 million tons of grains on the continent, along with a sharp increase in cost.
The UN's 2023 World Economic Situations and Prospects Report shows that Africa already had the highest prevalence of food insecurity globally in 2020 with 26 per cent facing severe food insecurity and 60 percent of the population affected by moderate or severe food insecurity according to the Food and Agriculture Organization (FAO).
Looking ahead to the 2023-2024 growing season, the price and availability of fertilizers for farmers in Africa will determine how the continent will counter widespread food insecurity. According to the World Bank, Africa's food production is already hampered due to low fertilizer usage, with "an average fertilizer application rate of 22 kilograms per hectare, compared to a world average that is seven times higher (146 kilograms per hectare).
During the 'Dakar 2 Summit on Feeding Africa: Food Sovereignty and Resilience' held during 25-27 January 2023, the AfDB reported that this number rose sharply in 2022, with Africans now representing one-third (about 300 million people) of the global population that is currently facing hunger and food insecurity.
Fertilizer costs
Supply chain disruptions of primary farm inputs, including fertilizer imports from Russia, Ukraine, and Belarus, further threatened Africa's food security. The World Food Programme (WFP) reported that global fertilizer prices have risen by 199 per cent since May 2020, with prices for fertilizers more than doubling in Kenya, Uganda, and Tanzania in 2022.
The WFP notes that "while this is partly a consequence of the war in Ukraine, prices of food, fuel, and fertilizers had already reached record highs by the end of 2021." The "Black Sea Grain Initiative," brokered by the United Nations and Türkiye and signed in July 2022, has eased some of the "fertilizer crunch" by allowing the movement of fertilizer exports from Ukraine to the rest of the world.
Looking ahead to the 2023-2024 growing season, the price and availability of fertilizers for farmers in Africa will determine how the continent will counter widespread food insecurity.
According to the World Bank, Africa's food production is already hampered due to low fertilizer usage, with "an average fertilizer application rate of 22 kilograms per hectare, compared to a world average that is seven times higher (146 kilograms per hectare)".
The Bank estimates that fertilizer exports from major African suppliers, namely Ukraine, Russia, and Belarus, which remain disrupted, will impact Africa's food production and exacerbate food security throughout 2023.
Moreover, the World Bank notes that other fertilizer producers are banning exports of these critical inputs to protect their own farmers, leaving African farmers without many options.
Conclusion
As the world reflects on the various shocks created by the year-long conflict, Africans must grapple with the short-term inadvertent threats to their economies, food systems, and well-being. Indeed, UN Secretary-General, Antonio Guterres, speaking at the Global Food Security Call to Action in May 2022, warned, "If we do not feed people, we feed conflict."
In his opening remarks at the summit, President Macky Sall of Senegal remarked, "From the farm to the plate, we need full food sovereignty, and we must increase land under cultivation and market access to enhance cross-border trade.
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With some decisive leadership, there are some strategies that can ease the burden on struggling economies:
- For example, re-allocating the $100 billion IMF Special Drawing Rights to support African countries and restructuring both private and public debt would give these countries the fiscal space to weather the crisis.
- There is also a ray of hope in countering the long-term impacts of the conflict. The most strategic one is the political will of African governments to refocus on agriculture.
At the Dakar 2 Summit, many African Heads of State and Government were keen to bolster public spending on agriculture to build a self-sufficient and resilient African food system.
In his opening remarks at the summit, President Macky Sall of Senegal remarked, "From the farm to the plate, we need full food sovereignty, and we must increase land under cultivation and market access to enhance cross-border trade."
- Indeed, implementing the African Continental Free Trade Area (AfCFTA), which promises efficient cross-border trade, would allow the seamless movement of the approximately 30 million metric tonsof fertilizer that Africa produces each year. This production is twice the amount of fertilizer that the continent currently consumes.
- Similarly, the AfDB plans to invest $ 10 billion "to make Africa the world's breadbasket." Such an investment can go a long way in replicating technological solutions, such as Ethiopia's use of heat-resistant crops to boost its wheat surpluses. The country plans to be a wheat exporter to other African countries in 2023.
- On the energy side, accelerating sustainable, reliable, and affordable energy access, be it for industrial development, employment for the continent's youth, or ensuring its food security, everything invariably lies in Africa having a balanced energy mix.
The series of interlocking challenges these past few years have made one issue very clear. Africans must have a unified stance to avoid yet another cycle of commodities-based exploitation of the continent's energy resources, and work to ensure Africa's universal energy access.
Bitsat Yohannes-Kassahunis Cluster Lead, Energy and Climate, at the UN Office of the Special Adviser on Africa (OSAA).
