By Dr Mustafa Mheta
Russia’s full-scale invasion of Ukraine, the fallout of the war and unprecedented sanctions on Moscow are shaking global supply chains and financial markets.
With Russia a major producer of commodities such as oil, gas, aluminium, palladium, nickel, wheat and corn, sanctions and market concerns about the war’s disruption on supply chains have caused commodity prices to soar.
Surging commodity prices will create winners and losers across Africa and the world. On the economic side, it’s going to be a mix of fortunes, depending on how deep some African countries’ economies have been doing business with Russia and Ukraine.
The fact that Russia and Ukraine provide 25% of the world’s grain supply may indirectly lead Africa, as one of their largest customers, into food insecurity.
On the continent, the countries most vulnerable to the conflict are those which import a large share of the wheat they consume, like Egypt. African countries that import most of their oil from Russia, such as Kenya, will feel the impact more. However, there are other countries in Africa that export to Russia that stand to benefit a lot from the war.
Countries such as Nigeria and Angola will be the biggest winners as the supply-induced commodity price boom that began last year will be prolonged because of the war. Some economists are of the opinion that Africa will be affected in various ways.
The most pronounced will be via the surge in global commodity prices, particularly for oil and wheat.
Sanctions and supply chain disruptions will drive up commodities prices and, in turn, inflation, causing spiralling crude oil and cereals prices for governments and consumers. Heightened energy prices will be felt most severely in rocketing transport and utilities costs, including electricity, gas and other fuels like kerosene and paraffin.
With Russia and Ukraine accounting for around 30% of global wheat exports, and Ukraine accounting for 15% of corn exports, disruption to supply due to sanctions and the war will push up the prices of wheat and corn, and of cereals in general. Most of the wheat consumed in Africa is imported.
We should expect Africa’s biggest wheat consumers to be the most affected, particularly if they import most of what they consume. The countries that consume mostly corn, which are mainly in southern Africa, tend to grow most of their corn, so the effect on inflation of higher prices will probably be smaller.
Since economics go hand in hand with politics, this could also spill over to the political side and cause irreparable damage to some African leaders. There is a likelihood of some political casualties emanating from this war in certain African countries. Some leaders may not be voted back into power because of this.
People in Africa tend to interpret what is happening on the ground economically in political terms. A hungry nation might not correctly interpret what is happening economically on the ground and blame it on the Russia/Ukraine war. It may be misconstrued and the blame apportioned to corruption on the part of the leadership.
Furthermore, on the political front, Africa will be divided into two blocks, as it was during the past Cold War (the US versus the USSR). There will be certain African countries that will align themselves with Western countries (the US and EU) and others with Eastern countries (Russia and China).
One can argue that this could be the beginning of a post-modern Cold War between the East and West. Its most dramatic playground might as well be Africa. The AU will have to display good leadership if we are to avoid the main pitfalls ahead.
We can only pray for good and wise leadership to appear on the scene in Africa, to steer the continent clear and never to take sides with any of the two sides of superpowers. If ever there was a time when organisations like the non-aligned movement were needed, it is now. Aluta continua!
* Mheta is a senior researcher and the head of Africa Desk Media Review Network SA.