Africa and the Russia-Ukraine Conflict – Seizing the Opportunity in the Crisis

Invest now in green, inclusive and resilient economies for Africa to better weather the next crisis

The Russia-Ukraine crisis is derailing Africa’s slow recovery from COVID-19. A recent study by UNDP of the impact of the war in Ukraine on sustainable development in Africa shows that the effect of the crisis on Africa’s economies is complicated and diverse.

The real impact on each economy is related to the level of dependency on oil and gas exports or imports, tourism, imported grain and fertilizer, among others. There are clear long-term implications including a possible geopolitical realignment, social and economic instability and debt unsustainability. This will likely lead to widening inequality and deeper poverty.

The most visible impact of the war on Africa is the rising fuel and food prices, inflation and financial instability. The poorest are the hardest hit as a large proportion of their consumption expenditure is on food and transport.

Food insecurity is likely to last and have a negative impact on all aspects of human development from income to health and education.

The UN’s Global Crisis Response Group on food, energy and finance predicts a global cost of living crisis transmitted through rising food prices, rising energy prices and tightening financial conditions. A global response is required to stabilize commodity markets, address the rising cost of debt while increasing people and countries’ capacity to cope.

Prioritizing structural transformation that is green, inclusive and resilient will ensure that no one is left behind and Africa is better prepared for the next crisis.

Food and fuel insecurity driven by supply constraints

This rise in food and fuel insecurity is driven by supply constraints that go beyond the current crisis. In terms of food insecurity, there was a crisis before this crisis. It is rooted in climate variability, inadequate recovery of global and regional supply chains and low productivity.

Much of the Horn of Africa experienced inadequate rainfall in 2022, while some areas in West Africa and Southern Africa have experienced heavy rainfall and flooding.

Poor infrastructure means that a food surplus in one part of a country or the continent cannot reach areas where it is needed most.

Driven by low productivity from inadequate inputs and technology use, much of Africa’s agriculture is operating below capacity. Further, limited agro-processing and inadequate storage and strategic reserves lead to a high level of post-harvest loss and waste.

In Ghana, for example, Jetstream, run by a young woman, operates a supply chain management platform that reduces the cost and time associated with trade formalities, linking importers and exporters, financiers, and logistics companies. Focusing on short term solutions, an inadequate response

The current response to food and fuel-induced inflation has been less than sufficient to prevent longer term implications. Several countries with spare capacity are positioning to ramp up their production of oil and gas to meet market shortfalls.

However, short term thinking dominates, with an over-reliance on monetary policy instruments including interest rate hikes.

The decision by several countries to stop exporting food provides only a short-term solution. It does not consider the symbiotic nature of our economies and our common future. It penalizes producers who are unable to realize the full value of their production and deters investment in future production. Consumers and manufacturers will also be unable to access products and intermediary inputs from elsewhere as imports become prohibitively expensive.

Dealing with structural root causes is an opportunity to build long term resilience

Tackling the structural roots causes of these crises can provide an opportunity to build forward.

Prioritizing structural transformation that is green, inclusive and resilient will ensure that no one is left behind and Africa is better prepared for the next crisis.

Boosting green structural transformation will require strategic investment in long term financing for better economic and digital infrastructure and services, particularly in marginal and underserved areas. This is required to power productivity growth in core and emerging sectors that are often overlooked.

For instance, to address the root causes of poverty and inequality, we must invest in clean affordable energy, technology and financing specifically targeted at micro, small and medium enterprises engaged in fisheries, agriculture, small-scale mining, nature-based products and services such as tourism.

Inclusive structural transformation can be advanced through harnessing digital transformation to overcome the logistical challenges that leave many groups and geographical areas behind.

Innovative entrepreneurs across Africa are already demonstrating the power of digital to connect consumers, producers and businesses within and across countries.

African countries are fused together geographically and there are strong historic cultural ties that bind people together. Resilient structural transformation relies on cross-border collaboration and regional integration to reduce vulnerability and the impact of external price shocks on domestic economies.

For instance, regional strategic grain reserves and more efficient trade across Africa’s borders can help to mitigate the risk of food insecurity. It will help to make food and other goods more easily accessible and affordable.