Despite the geographical distance, many African countries are beginning to feel the impact of supply chain disruptions, scarcity of certain agricultural products, increase in demand causing inflation in the price of food resulting from the Russian-Ukraine crisis. Essentially, this is happening because Russia and Ukraine are key players in the global commodities market and there is significant trade of agricultural products between Africa, Russia, and Ukraine. Majority of the wheat supplies in Africa come from Russia, in fact, African countries such as Egypt, Sudan, Nigeria, Tanzania, Algeria, Kenya, and South Africa imported agricultural products worth $4 billion from Russia in 2020.
According to a recent report by African Business, ‘wheat imports account for roughly half of Africa’s $4.5bn trade with Ukraine, and for about 90% of the continent’s $4bn trade with Russia.’ ‘Over 65% of Senegal’s wheat imports come from Russia and Ukraine, and a number of bakers and consumers in Dakar told African Business they are bracing for supply shortages and increased costs in the months ahead. At the same time, East Africa gets 90% of its imported wheat from Russia and Ukraine’.
Similarly, the sanctions placed on Russia due to the crisis, have pushed the price of oil to over $100 per barrel, the highest level in eight years. Though this should have opened an opportunity for African oil producers like Nigeria, Angola, Libya, and Algeria to increase revenue from crude oil exports, a lack of refineries in Africa means these countries have to pay more for imported fuels.
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However, like most wars, some African countries are already beginning to find global trade opportunities that can boost their nation’s economy in the crisis. For instance, Algeria, one of the largest producers of natural gas and Europe’s third-largest gas supplier, followed by Egypt, may experience an increase in demand from Europe reducing Europe’s dependency on Russia. Italy and Algeria are already discussing ways to increase gas supplies.
In a recent report from Africa in Focus, ‘Tanzania’s president, Samia Suluhu Hassan, stated in an interview on the sidelines of the European Union (EU)-African Union (AU) summit in mid-February that the tensions in Ukraine are generating growing interest in the country’s gas reserves, which are the sixth largest in Africa. Nigeria, already a supplier of liquified natural gas (LNG) to several European countries, is also embarking with Niger and Algeria on the Trans-Saharan Gas Pipeline to increase exports of natural gas to European markets. On February 16, the three countries signed an agreement to develop the pipeline, estimated to cost $13 billion.
In the same vein, South Africa, one of the leading producers of palladium in the world producing up to 70 metric tons in 2020 used in catalytic converters for vehicle exhaust systems will experience higher demand from automotive companies positively impacting South Africa’s economy.
For Africa and many African businesses, the war presents a window of opportunity for businesses to look for ways to increase their production capacity, export volume to Europe, and source new trade opportunities to meet global demands.
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