Preamble
The United Nations Global Crisis Response Group on food, energy and finance systems (GCRG) in its June 2022 brief noted that about 1.6bn people across 94 countries are vulnerable to an aspect of global food, energy and financial crises; out of which 1.2bn are reported to live in geographies that are severely vulnerable to all three dimensions of the crises. While the global economy was being structured to assuage the adverse impacts of the measures taken to curtail the spread of COVID-19, the war in Ukraine has been projected as another major cause of the dwindling fortunes of economies of different countries across the globe. Similarly, The Organisation for Economic Cooperation and Development (OECD) during the same month maintained that the war will result in slower growth with higher inflation rates for world economies running into 2023, specifically owing to the increasing isolation of Russian and Ukrainian Economies from the World market. The GCRG brief also noted that the food price index (as determined by the Food and Agriculture Organisation) and the price of crude oil are at record level highs, while the prices of natural gas, fertilizers, interest rates and maritime trade are rising at alarming rates within a vicious cycle. Despite the global spread of these challenges, the impacts on Africa – South of the Sahara – is notably severe, with one out of every two Africans domiciled in the region vulnerable to all three dimensions of the crises. Based on the foregoing, the Africanist Scholars’ Forum explored the implications of the vicious cycle of the global economic crises on the African continent during its third quarterly meeting of the year which held on September 8, 2022.
Observations
We take cognisance of the conventional fact that the war in Ukraine has affected the commodity markets across the globe, specifically with the rise in prices of products that are supplied from Russia and Ukraine, including energy, wheat, seed oil, corn, palladium, nickel, coal, refined aluminium and fertilizers. According to statistics on Africa as of August 2022, the Sudanese economy is reported to have the highest rate of inflation, which is about 245%. Suffice to state that the country’s economy has been on the decline since the military took over the reins of power. Zimbabwe, with its history of economic crises has the second highest inflation rate of at about 90%, while Ethiopia is at the distant third (34.5%), Angola is fourth (23.9%) and Sierra Leone caps the top five (17.3 %). The entire continent is estimated to have an average inflation rate of 13.7% according to rankings by the International Monetary Fund (IMF).
We also noted that in addition to the war in Ukraine and COVID-19 pandemic, the changing climate has induced poor harvest seasons in the past few years, resulting in scarcity-induced inflation on the continent. This resonates with the economic impacts of climate change that has formed part of the nucleus of advocacy in advancing the quest for sustainability in this era. As of the third quarter of 2022, about 460 million Africans are reported to be living on less than 2 dollars a day. This is also reflective of the endemic nature of extreme poverty on the continent. Several countries on the continent are grappling with high rates of unemployment, rising debt profile, political instability (including the resurfacing of military coup culture), ethnic tensions (at times resulting in civil wars) and the challenges of violence and insecurity specifically intensified across the Sahel, Central and East Africa. In addition to the aforementioned, there is also a worrying trend of epileptic power supply which remains a major impediment for economic recovery and growth on the continent.
We also align with the view that the Ukrainian crisis has further heightened the economic instability in Europe, a major African trading partner, especially with negative supply shocks largely due to sanctions on Russia’s economy and humanitarian challenges. This has furthered the stress on the global supply chain that became pronounced by the US-China trade war and the lockdowns as public health measures in managing the spread of the coronavirus. In spite of these challenges, the IMF April forecast projected the African economy to enjoy some growth with the average GDP expanding by 3.9%; so far as the spread of COVID-19 and its impacts remain curtailed and there is revision of sanctions on Russia’s energy sector. Nonetheless, the rising costs of importing food and energy products in countries, which have been unable to independently convert their naturally-endowed raw materials to finished consumable products, reduces the chances of actualizing sustainable economic recovery and growth in the long-term.
Recommendations
African governments should consolidate the projected resilience of the continent’s economic sector through the display of strong political will to provide alternative supply chains amidst the challenge of rising commodity prices in the global market. This entails leveraging on technology to boost productive capacities and effective trade structures in enhancing efficiency in the economic sector.
African governments should also prioritize non-exploitative collaborations with financial institutions and other development partners to boost the economic expansion of their national economies. This would entail injection of funds to small and medium scale enterprises in ensuring an inclusive economic policy that will drive growth across different layers of the society. This should be the bedrock for driving relations within the African Continental Free Trade Area.
The interconnectedness of the global economy implies that countries must look out for each other, with stronger economies developing mutually beneficial developmental relationships with developing ones. While the proposed idea of ‘friend-shoring’ might be a short-term solution to extending market access within bilateral trade relations, the long-term goal should entail the embrace of non-adversarial solutions to managing tensions, including the ongoing crisis in Ukraine.