Africa’s ‘economic dependecy syndrome’ diagnosed by Ukraine war

(Last Updated On: December 1, 2022)

MARTHA MAMOMBE

 

The ongoing war in Ukraine has had far and wide reaching consequences for African countries that rely on Russian and Ukrainian wheat, maize and fuel imports.

Multiple analysts said the disproportionate ripple effects of the war have hampered post Covid 19 pandemic efforts to resuscitate industry and commerce crippled by two years of subdued capacity utilisation.

Speaking in Parliament last week, the Minister of Finance and Economic Development, Mthuli Ncube said: “We are faced with a challenging global crisis emanating from the Russia-Ukraine conflict which erupted on 24 February 2022.

“This is in addition to our own historical challenges of sustained periods of economic imbalances, in particular, the twin deficits of fiscal and current account.”

Imported inflation, emanating from the adverse impact of the Russia-Ukraine war, has ravaged Zimbabwe economy. Zimbabwe’s annual inflation for the month of November is 255%.

African economies have also been ravaged. “The war in Ukraine has revealed Africa’s weakness. We have the biggest share of arable land compared to other continents but we still rely heavily on food imports from other parts of the world. One way that Africa can strengthen its resilience is to increase  budgeting and invest in agriculture both at government and private sector level.

“We need to increase regional food production and remove trade barriers between and among African countries. Equally we need renewable energy such as solar and wind and move away from imported fossil fuels,” Zanzibari Pan African political economist Ismail Jussa Ladhu said.

“If the African Continental Free Trade Agreement  was adopted, implemented and fully operationalised by member states, the burden of individual countries importing food and fuel would be reduced.

“There would be improved inter- and intra-regional collaboration, the efficient movement of people, goods and services would eliminate heavy taxing and duty, thereby removing trade and economic silos.

“Countries with more industrial capabilities would produce renewable energy for the rest of the continent while those with agricultural prowess would produce for those with limited production capacity.

“Sub-Saharan Africa would be co-dependent. Economic growth and cooperation would ultimately underwrite peace in the region. Smaller supplies and higher prices for food mean that the world’s poor could be forced to do without. Sharply rising commodity prices have been the most immediate economic impact of the Ukraine conflict.

“The war also threatens supplies of essential goods from Russia and Ukraine including food, energy and fertilizers,”  the World Trade Organisation director-general, Ngozi Okonjo Iweala  said.

Global trade was projected to be 4.7% at the start of 2022 by the World Economic Forum. After Russia invaded Ukraine, the figure was revised down to 3%. It is therefore important to examine what the projections, figures, studies and assertions mean for Zimbabwe.

The bread basket consisting of basic commodities; maize meal, bread, cooking oil, soap, washing powder, flour, sugar, salt, sugar beans, tea leaves has become out of the reach of 5.5m Zimbabweans.

Vulnerable households are unable to absorb the high cost of living as more and more salaries are eroded by inflation. Subsequently, buying power is diminished meaning the imminent festive season may be a somber one.

“The Ukraine crisis has affected Zimbabwe through what I call the three Fs, namely food, fuel and fertilizers.

“Government introduced tax waivers on fuel, without which fuel would be $2 a liter by now. Russia is under sanctions and it controls global production of ammonia gas which is used in the production of fertilizers.

“This means there is a shortage of ammonia gas supply creating demand. The price of ammonia gas has gone from $600 per metric tonne to $1 750 per metric tonne making fertilizer expensive in Zimbabwe.

“Grain has gone up by 50%. We are experiencing external shocks and imported inflation,” Gift Mugano, an economist and director at Africa Economic Development Strategies and professor of economics at Durban University of Technology said.

What the war in Ukraine means for Zimbabwe is that humanitarian aid budgets that were once earmarked for vulnerable communities will be reduced to attend to more pressing needs in Ukraine as millions of lives have been turned upside down.

It means that the government will have to dedicate more funding towards social welfare.

That is not the only area needing more, the struggling energy sector too needs more to mitigate power outages resulting from reduced power generation at the Hwange Power Plant and closure of Kariba Power Station.

Fuel too requires subsidies because the motoring and commuting public cannot dig any further into already shallow pockets to pay for transport.

“The conflict comes when most countries in Sub-Saharan have minimal policy space to counter the effects of the shock.

“This is likely to intensify socio-economic pressures, public debt vulnerability, and scarring from the pandemic that was already confronting millions of households and businesses.

 

 

 

 

 

 

 

 

 

 

“Record wheat prices are particularly concerning for a region that imports around 85% of its supplies, one-third of which comes from Russia or Ukraine,” reads part of the International Monetary Fund report.

Agriculture too is limping as both commercial and subsistence farmers express shock over the soaring prices of inputs especially fertilizers, irrigation deficiencies via erratic power supplies and ultimately high transportation costs for agricultural produce.

Only the consumer is left to bear the brunt of value chain costs.

“Central banks across the world have responded with conservative monetary policy interest rates, all that has resulted in the global economy entering into some form of recession.

Last year Zimbabwe’s economy was projected to grow by 7.8% and this year it is estimated to grow  by 4% while international institutions are projecting between 3% and 3.5% as a result of the crisis.

The Ukraine crisis has affected investment in Zimbabwe. There are heightened inflationary pressures and slower growth in the economy,” Prosper Chitambara, a development economist and policy advisor.

The International Monetary Fund representative Dhaneshwar Ghura, who recently visited Zimbabwe weighed in saying: “Uncertainty remains high, however, the outlook will depend on the evolution of external shocks, the policy stance, and implementation of inclusive growth-friendly policies.”

 

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