What does the war in Ukraine mean for Africa?
Date 2022/2/27 10:47:21 | Topic: Africa
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As in the rest of the world, Russia’s invasion of Ukraine on February 24 is casting a long shadow across Africa.
Despite the geographical distance, there are important ties between Ukraine and Africa, including more than 8,000 Moroccans and 4,000 Nigerians studying in Ukraine and over $4 billion in exports from Ukraine to Africa.
Although some African countries may benefit from a shift in global markets away from Russia due to the crisis, the short-term potential impacts on economic livelihoods are worrying while the implications for pan-African solidarity and adherence to multilateralism increasingly uncertain.
BENEFITS FOR NATURAL RESOURCE EXPORTERS
A few countries are sensing long-term growth opportunities from the crisis. Specifically, Africa’s natural gas could reduce Europe’s dependence on Russian energy. For example, 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. Her nationalist predecessor, the late President John Magufuli, suspended talks with natural gas investors in 2019 to review the country’s production sharing agreement regime. Hassan, however, favors a more business-friendly approach and has revamped negotiations with energy companies in the hopes of attracting $30 billion in foreign investment to revive construction of offshore liquified natural gas projects in 2023.
Several other countries could similarly benefit from Europe’s energy diversification, including Senegal, where 40 trillion cubic feet of natural gas were discovered between 2014 and 2017 and where production is expected to start later this year. 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. Europe is likely to be a key financer, bolstered by the EU’s controversial decision in early February to label investments in natural gas as “green” energy.
Besides natural gas, further sanctions on Russia might benefit other natural resource exporters in the region. For instance, South Africa is, after Russia, the world’s second-biggest producer of palladium—a critical input into automobiles and electronics—and therefore could experience growing demand as a result of international sanctions placed on Russia. Similarly, as a major exporter of gold, the South African rand has been strengthening as a result of rising global prices for the precious metal.
HOUSEHOLD VULNERABILITY FROM FUEL, FERTILIZER, AND FOOD IMPACTS
Despite these possibilities, in the near term, the invasion of Ukraine could pose hardships for African households, the agricultural sector, and food security. The rising price of oil on global markets—induced by the crisis in Europe—will have direct impacts on the cost of transport. In fact, South Africa’s automobile association predicts that March will bring record-high fuel prices to that country. In Zambia, which agreed to cut fuel subsidies in order to adhere to post-pandemic debt negotiations with the International Monetary Fund (IMF), rising costs will make such reforms even more unpopular than they already were. Much to the disappointment of the IMF, last month, Nigeria already backed away from its plans to cut fuel subsidies after planned protests from labor unions and opposition parties.
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