LONDON: What have Ukraine, Sudan and Zimbabwe in common? At some stage in their recent history, they have all been dubbed “the breadbasket” either of the world, Europe or Africa!
In the case of Zimbabwe and Sudan that aspiration was never realised. Poor political governance transformed Sudan and Zimbabwe into dictatorships and pariah states, a status from which they have till today failed to extricate themselves.
Ukraine, however, astutely leveraged its vast Steppe demography after the collapse of the Soviet Union to become one of the largest producers and exporters of wheat, corn, barley and sunflower oil, in tandem with its Steppe neighbour Russia.
That Russian President Vladimir Putin’s ill-judged invasion of Ukraine which has left a trail of death, destruction and displacement in a mere three weeks, is threatening Ukraine’s very breadbasket status, is not a moot point.
Notwithstanding the loss of life and suffering, the global gatekeepers such as the OECD and the UN’s International Fund for Agricultural Development (IFAD) are warning about the economic fallout of the war.
If any leader thinks that their country is impervious to shocks in rising energy and food prices or the consequences are largely confined to Europe, ask the ordinary families in South Africa, Egypt, Lebanon and elsewhere of the real impacts of a sudden shortage of their staple foods and a dramatic rise in prices.
Food security keeps resurfacing thanks to the effects of climate change, natural disasters, plagues of pests, deforestation and soil erosion, opposition to genetically-modified seeds, battery farming of livestock, disease outbreaks and supply-chain disruption as in the Covid-19 pandemic.
The sight of empty food shelves in supermarkets, especially in the rich West, was as humbling as it was predictable.
Yet countries insist on sleepwalking into food security inertia because the issue is not a priority; is misunderstood and underestimated; becomes stalled in political infighting, procurement fraud and corruption; lacks a clear Agricultural and Land Reform Strategy; and is led by politicians who are out of their depth.
South Africa is no exception.
The true impact will become clear later as the disruption in supplies kick in and the data lag becomes apparent.
In South Africa, consumers like elsewhere are faced with rising prices.
According to Stats SA, inflation dipped to 5.7% in January 2022 from 5.9% in December 2021, mainly as a result of lower fuel prices.
In a mere few weeks, thanks to events in Ukraine, fuel prices have soared. The price of cooking oil in South Africa which increased by 5.2% to a 11-year high in January, has increased further. Food inflation increased to 5.7% in January, up from 5.5% in December 2021.
Developing countries have a lot to lose. Food systems inequality is as impactful as food import dependency, vaccine inequality and poverty and a host of other such metrics, which affect the lives of millions on a daily basis.
The OECD estimates global GDP growth will be more than 1% lower this year because of the Russo-Ukraine conflict, while inflation, already high at the start of 2022, could rise a further 2.5% on aggregate across the world.
OECD Secretary-General Mathias Cormann, warns “the commodity supply squeeze resulting from this war, is exacerbating supply chain disruptions brought on by the pandemic, which will likely weigh on consumers and business for some time to come. We need both sensible near-term and longer-term action”.
In emerging market economies, says the OECD, “steeper declines are projected for major commodity importers. Higher food and energy prices are expected to push up inflation more than in advanced economies. The threat of cereal shortages in particular underlines the need to ensure that trade keeps flowing”.
Flour shortages have already impacted Egypt, Lebanon and Somalia. Egypt imports 85% of its wheat and 73% of its sunflower oil from Ukraine. Prices have escalated and the spectre of food protests looms if the government fails to intervene to bring sanity to supplies and prices.
In Lebanon it is the same with the additional problem of lack of storage due to the 2020 blast at Beirut port that destroyed the country’s major grain silos.
Gilbert Houngbo, president of IFAD, is under no illusion about the impact on Africa and the Middle East: “We are seeing price hikes which could cause an escalation of hunger and poverty with dire implications for global stability.
“IFAD’s analysis shows that price increases in staple foods, fuel and fertiliser and other ripple effects of the conflict are having a dire impact on the poorest rural communities who cannot absorb the price rises of staple foods and farming inputs that will result from disruptions to global trade.”
The statistics of dependency on Russo-Ukranian food supplies are revealing. According to the OECD, Russia and Ukraine account for 30% of world wheat exports and 14% of world maize exports.
Ukraine accounts for 16% of global corn exports and 12% of wheat. Ukranian corn output has grown 140% in the past decade to reach 42 million tons in 2021, during which Ukraine produced 33m tons of wheat and 10m tons of barley. Ukraine is also the top exporter of sunflower oil in 2021 at 23m tons.
Forty percent of wheat and corn from Ukraine go to the Middle East and Africa, which are already grappling with hunger issues, and where further food shortages or price increases risk pushing millions more people into poverty.
Russia is also the world’s largest fertiliser producer. Even before the conflict, spikes in fertiliser prices last year contributed to a 30% rise in food prices.
The average percentage hike in prices from January 2022 has been staggering – 88% for wheat, 79% for fertilisers, 42% for maize, and 11% for gold, says the OECD.
This in addition to huge rises in the price of crude oil, gas and coal.
To think that a third of the world’s food is produced by the world’s poorest rural people!
* Parker is an economist and writer based in London