The Impact of the Russia-Ukraine War on the African Economy

The Impact of the Russia-Ukraine War on the African Economy‍

The ongoing conflict between Ukraine and Russia has had repercussions far beyond Europe. The two countries are major trading partners for many African nations, and their strained relations have crippled trade and raised concerns about the future of investment in the region. These implications will continue to affect Africa’s economy in the long-term and may even lead to changes in current foreign policy strategies of certain African nations. This article explains how the Ukraine-Russia conflict is affecting Africa’s economy, particularly for Ethiopia, Tanzania, Kenya, Ghana, and Nigeria. 

Russian-Ukraine Conflict’s Impact on Africa

The economic impact of the Russia- Ukrain  war is significant for Africa. The decline in the value of the Russian rubble has made it more expensive for African countries to import goods from Russia. Many countries have responded to this by replacing Russian imports with goods from other countries. For example, Ethiopia has replaced imports of Russian wheat with purchases from other major wheat producers such as Australia, Brazil, and the United States. Decreased Russian imports combined with increased import costs have slowed economic growth in African countries that rely heavily on Russia for trade. In particular, Tanzania and Nigeria have both reported significantly slower economic growth in the past few years. This is expected to continue for the near future, as the countries have yet to find new trade partners to replace Russian imports.

Russia and Ukraine, both often referred to as the world’s breadbasket, are major players in the export of wheat and sunflower to Africa. North Africa (Algeria, Egypt, Libya, Morocco, and Tunisia), Nigeria in West Africa, Ethiopia and Sudan in East Africa, and South Africa account for 80 per cent of wheat imports. Wheat consumption in Africa is projected to reach 76.5 million tonnes by 2025, of which 48.3 million tonnes or 63.4 per cent is projected to be imported outside of the Continent.

The sanctions imposed on Russia by Western countries will further exacerbate commercial flows between Russia and Africa due to the closure of vital port operations in the Black Sea. Russia is one of the world’s biggest exporters of fertilizers.

Concerns are growing that a worldwide shortage of fertilizer will lead to rising food prices, with knock-on effects for agricultural production and food security.

Russia is also the world’s third-largest oil producer behind the United States and Saudi Arabia. The disruption of oil prices on the world market is expected to lead to an increase in fuel prices and higher costs of food production.

Some regions, including the Horn of Africa and Sahel region, are at greater risk of food insecurity due to country-specific shocks, climate change, export restrictions, and stockpiling, especially if rising fertilizer and other energy-intensive input costs will negatively impact the next agricultural season as a result of the ongoing conflict.

Russia and Africa: The Effects of Western Sanctions

With the U.S., EU and other Western nations sanctioning Russia over its aggression against Ukraine, the impact of these measures on Russia’s relations with Africa must be considered because it is likely to have a long-term impact on Russia’s relations with Africa and what risks these developments pose for African countries which have close economic ties with Russia. These include Angola, Sudan and Zimbabwe.

What risks does Russia’s current situation pose for Africa?

If the sanctions are not lifted, and if Russia is unable to mitigate their impact, the Russian economy could suffer a major decline. If this happens, it is likely to have major implications for all of Russia’s relations with the U.S. and Western Europe, including its relations with Africa. If a major decline in the Russian economy leads to a reduction in investment in Africa, this could result in a decline in the economic activity of African companies which are heavily dependent on Russian companies. If the decline in the Russian economy leads to a reduction in demand for African commodities, this could result in lower prices for African exports and a decline in African export earnings.

Strategies for African countries in light of the above

If the sanctions remain in place, African countries which export commodities to Russia could be at risk. These include Angola, Sudan and Zimbabwe. If the Russian economy continues to decline, these countries could be hit by a reduction in demand for their commodities and by lower prices for these products. As a result, they may need to find other markets for their goods. – Angola: Angola is Russia’s third largest trading partner in Africa, and Russia is Angola’s third largest trading partner globally. If the sanctions remain in place, there is a risk that the Russian economy will decline, with corresponding consequences for the Angolan economy. If this happens, Angola’s exports of oil and other commodities could decline, which could have a significant impact on government revenues. If this happens, the Angolan government could face reduced capacity to finance its ambitious infrastructural development programme. – Sudan: Sudan is a major exporter of oil, gum, gold and other commodities, with most of these products being exported to Russia. The majority of Sudan’s exports to Russia are carried out by companies controlled by the state-owned National Oil Corporation. If the sanctions remain in place, the Russian economy could decline, with corresponding consequences for Sudan’s export earnings. If this happens, the Sudanese government’s capacity to implement infrastructure projects could be reduced. If this happens, Sudan could lose the opportunity to develop its economic potential by developing transport links between the Red Sea and Lake Chad. – Zimbabwe: Zimbabwe is a major exporter of tobacco, which is the country’s single most important export. Over three-quarters of Zimbabwe’s exports of tobacco are sold to Russia. If the sanctions remain in place, the Russian economy could decline, with corresponding consequences for Zimbabwe’s export earnings. If this happens, the Zimbabwean government’s capacity to pay for social programmes could be reduced. If this happens, Zimbabwe could lose the opportunity to diversify its exports away from the tobacco industry, which has been experiencing declining incomes in recent years.

The sanctions imposed by the U.S. and EU on Russia could have a significant impact on Russia’s relations with Africa, particularly if the Russian economy declines. If the sanctions remain in place, a decline in the Russian economy could result in lower demand for African commodities as well as a reduction in Russian investment in the region. If this happens, it could result in lower incomes for African commodity exporters and less investment in African infrastructure. For African countries which export commodities to Russia, it would be prudent to diversify their export markets as quickly as possible in case the sanctions remain in place or the Russian economy declines.

Ethiopia: A Major beneficiary of Russia-Kenya Trade Relations

Ethiopia has benefited significantly from increased trade between Russia and Kenya. In 2020, Kenya imported $1.6 billion worth of goods from Russia, up from $1.3 billion in 2019. Ethiopia has become a major exporter of agricultural products and has benefited greatly from this rise in trade between Russia and Kenya. Ethiopia’s major exports to Russia include coffee, tea, and flowers, while Kenya exports fish and flowers to Russia. The increase in trade between these countries has helped Ethiopia recover from losses during the decline in the Russian ruble. 

Tanzania: A Dependent on Ukrainian Goods

Tanzania has become almost completely dependent on the import of Ukrainian goods, particularly agricultural products such as wheat and other grains. Tanzania currently imports 90% of its wheat from Ukraine, and the ongoing conflict has created major disruptions in the supply of these products. The cost of importing these goods has also risen due to the decline in the value of the Russian ruble. However, Tanzania is currently working to diversify its supply of wheat from other countries. The decline in the Russian ruble has made it more expensive for Tanzania to import oil and natural gas, its two major sources of energy. Tanzania has responded by reducing the amount of oil it uses for electricity generation. This has impacted the country’s economy, particularly the East African region. East Africa relies heavily on hydroelectricity generated in Tanzania. The decline in hydroelectricity has caused power outages in Kenya and Uganda, among other countries. This has impacted businesses and the daily lives of many people in the region.

Kenya: Its Economy is at Risk Due to the Conflict

Kenya’s economy is at significant risk due to the Ukraine-Russia conflict. Kenya has been heavily dependent on imports from Russia, particularly of oil and natural gas. The decline in the value of the Russian ruble has made these imports more expensive, and Kenya has responded by reducing the amount of energy it uses for electricity generation. This has impacted the country’s economy and caused energy shortages throughout Kenya. Kenya’s economy is expected to continue to suffer from the decline in value of the Russian ruble, particularly since the conflict is unlikely to come to an end any time soon. This can be expected to have a significant impact on Kenya’s economy, which is already struggling due to rising inflation. 

Ghana: The Importance of Ukraine as a Trading Partner

The decline in the value of the Russian ruble has played a major role in Ghana’s mixed export earnings for the past few years. Ghana’s main exports to Russia include cocoa and petroleum products, while petroleum products and fertilizer are the country’s main imports from Russia. The decline in the value of the Russian ruble has made Ghana’s exports to Russia less valuable, while the cost of importing from Russia has increased. However, the decline in the value of the ruble has not had a significant impact on Ghana’s economy. This is due to the fact that Ghana does not depend on Russia for trade as much as other countries in the region.

 Nigeria: Currently Stable but at Risk in the Long Run

Nigeria’s economy has remained largely stable throughout the Ukraine-Russia conflict. Nigeria has not imported as much from Russia as other countries, and it has been able to replace Russian imports with goods from other countries. Nigeria currently imports only $3.7 million worth of goods from Russia, while it exports $29.8 million worth of goods to the country. However, Nigeria’s economy is at risk in the long run due to the decline in the value of the Russian ruble.

Conclusion

The ongoing war between Ukraine and Russia has had major economic repercussions for many African countries. The decline in the value of the Russian ruble has made it more expensive for African countries to import goods from Russia. The decline in trade between Russia and other major trading partners such as the U.S. has also led to slower economic growth in African countries that rely heavily on trade with Russia. The decline in trade between Russia and other countries has also hurt the economies of African countries that export goods to Russia. Although the conflict has not yet been resolved, it is important for African countries to diversify their trade partners to minimize the risk of future economic decline.

To avoid future food price shocks caused by rising oil and gas prices on the global market, African countries must improve their oil and gas production and exploration capability to fill any gaps that may occur as a result of supply chain disruption among the major global producers.

African countries that produce fuel and gas such as Algeria, Angola, Cameroon, Republic of Congo, Egypt, Equatorial Guinea, Libya, Mozambique, Nigeria, Senegal, Sudan, and Tanzania should explore boosting production and filling the gas and oil gap within the continent and beyond to alleviate fuel price shocks, which could contribute to lower food costs.

In addition, African governments should invest in or attract greater international investment in oil and gas exploration, particularly in countries where subterranean oil reserves are believed to exist but have yet to be explored.