Russia’s Invasion Of Ukraine: A New Economic Crisis in Africa?
Updated Every Month
On 24th February 2022 Russia invaded its neighbour Ukraine. Not only has the conflict led to loss of life, destruction of property and business, it has immensely affected global trade in of which Russia and Ukraine are significant players in some areas. For instance, fifteen percent of global grain exports come from Ukraine, and 13% of fertiliser comes from Russia.
So what impact is this having on African countries? Some analysis has portrayed African countries as helpless victims of the war’s impacts that will suffer as a result of reduced exports of such goods from both Ukraine and Russia. In Kenya, for example, data from the national Agriculture and Food Authority shows that 90 per cent of wheat consumed in the country is imported from mainly Russia and Ukraine. Does this matter to prices on the shelf? Does it affect Kenyan incomes? The answer to this is not simple… For instance, the African region accounts for approximately 11% of global fertiliser exports, just behind Russia!
This month’s infographic takes this question of unmanageable economic impact and investigates further. We do this by asking questions such as what is the nature of trade links between African countries, Russia and Ukraine? How dependent are African countries on the import of goods such as wheat and fertiliser from these countries? Are prices for these goods at an all time high because of the war or because of gradual inflation? And how are African governments responding to the economic impacts of the war?
Our approach to answering these questions is threefold.
First, we provide some deeper analysis on the trade links African countries have with Russia and Ukraine, putting that in the context of actual African consumption patterns of goods such as wheat.
Second, we look at whether we are really seeing an ‘unprecedented’ increase in certain commodity prices as a result of the war, or whether prices have risen to such highs before this.
And finally, we analyse the actions that have been taken by African governments to counteract the impact of the war on their economies, which no other organisations we are aware of has collated data on to date.
We draw six conclusions from this analysis:
- Yes, the war affects and will continue to affect African countries, but we should be very cautious about overstating the impact the war is directly having on African countries, and certainly not to the same “alarmist” extent that other organisations have suggested. Africa’s marginalisation and diversity (e.g. in consumption patterns) means that countries can be cushioned from shocks to global markets, but in the context of other global challenges African countries are still grappling with (such as COVID-19), the war does – including through further inflationary effects – present new constraints on poverty reduction and development in African countries.
- There needs to be a deeper understanding of key commodities across the continent, and not a simplistic assumption that changes in trade for example will affect all African countries in the same way, affect all negatively, or indeed affect the African region in the same way that it will affect other parts of the world.
- African government can act (and are acting) by subsidising key commodity imports, and some can even subsidise exports such as fertiliser (ex. Morocco) and therefore benefit from increased prices.
- Many African countries will require short-term fiscal space to increase financial support to their citizens to deal with inflationary effects of the continuously rising commodity price increases.
- In the medium-term, many African countries need support and creative incentives to develop local production and more secure regional trade of products such as fertiliser, so as to lessen dependence on global imports. This will not be easy – Africa’s agricultural productivity has faced long-standing challenges such as climate, soil quality and other systemic issues.
- The need for humanitarian aid (where African governments are unable to act) was already there in countries before the Russia-Ukraine war – de to development and climate change issues that will remain unless addressed.
There is a sense that people assume a war such as this will inevitably deeply impact all of Africa. There is an image of Africans as being passive actors that are somehow incapable of responding to the impacts of war or other external shocks. The fact the African governments can react to these changes and deal in the same way that they were able to deal with the COVID-19 pandemic disproves this and shows the need for a deeper understanding. That said, the fact that to date only a handful of African countries are taking action now suggests – as it did with COVID-19 – significant fiscal challenges in being able to respond. Unlocking fiscal space is the key to enabling African governments to respond appropriately now, as all responsible governments should.
The rich and informative data behind this analysis is available below. Have a read, check out the graphics and numbers below, and do let us know what you conclude and what you’d like us to find out next time!
To find out how Development Reimagined can support you, your organisation or Government to review key economic response policies to the Russia/Ukraine war and other shocks please email the team at firstname.lastname@example.org.
Special thanks go to David Tinashe Nyagweta, Lauren Ashmore, Patrick Anam and Jing Cai for their work on the graphics, collecting/analysing the underlying data and this accompanying article.
The data was collated from a range of sources including: government websites and media reports, FAO data portals, ITC Trade Map and statista. Our methodology is entirely in-house, based on analysis of economic growth, trade data, food prices, inflation and other trends.
If you spot any gaps or have any enquiries, please send your feedback to us at email@example.com, we will aim to respond asap.