Implications of the Russia-Ukraine conflict on Africa: between risks and opportunities
1 March 2022
Russia’s invasion of Ukraine has already had far-reaching human, economic and diplomatic consequences. The implications of this conflict on Africa are only starting to emerge, but could be wide-ranging. We identified 5 key dynamics worth monitoring.
One of the immediate consequences of the Russia’s invasion of Ukraine was a jump in oil prices above USD 100/barrel. Amid the volatile political environment, oil prices will continue to rise caused by potential supply disruptions. In Africa as elsewhere, energy-importing markets will come under particularly strong pressure in terms of inflationary risks, straining state coffers and putting additional risk on consumer sentiment. Some countries such as Nigeria will seek to mitigate the impact by maintaining fuel subsidies. Meanwhile, African currencies are already under pressure as the dollar nears a two-year-high. Last Thursday morning, the rand traded at 15.28 against the dollar, around 0.9 percent higher than its closing level on the previous days. Nigerian naira, Ghanaian Cedi and Zambian Kwacha will follow suit. Price spikes will add to already high inflationary pressures across Africa, where 12 countries already record a two-digit inflation.
Impact on food supplies
The disruption of food deliveries from Russia and Ukraine, which together supply 30% of wheat consumed in Africa, will have a direct impact on African economies. Northern Africa is heavily dependent on cereal imports from Ukraine and Russia. Egypt imports 85% of its grain consumption from Russia and the remaining 15% from Ukraine. Kenya, Sudan, Nigeria, Tanzania, Algeria and South Africa also import a significant share (10-40%) of their food supply from Russia. Some of these countries are already facing acute food insecurity due to sharply rising food prices, poor rainfall and drought. With likely disruptions to the planting season, the impact on food supplies could be felt throughout 2022.This causes concerns of an 'Arab Spring' scenario, where food shortages and high food costs triggered social unrest. These shortages will however incite African states to diversify their wheat suppliers, a strategy already adopted by Morocco, Tunisia and Ethiopia, to the benefit of Australia, the world's 4th largest wheat exporter, which is seeking to gain market share in North Africa. A positive scenario could see these African countries seize this opportunity to accelerate reforms and investments to achieve food self-sufficiency.
Given Russia’s push in Africa in the past few years, the conflict will shake up multilateral and bilateral relations with the continent. The outlook remains uncertain, as it is yet too early to tell whether this will end up in a new Cold War where Africa is seen as a vehicle through which each bloc will seek to assert its influence. If it is maintained, the Russia-Africa summit, scheduled for this November, will be an indicator of Russia’s clout on the continent. Gabon, Ghana and Kenya were the first African countries to officially condemned Russia’s invasion of Ukraine, although they did not announce any sanctions. In a statement published on 24 February, the African Union called the two countries “to establish an immediate ceasefire and to open political negotiations without delay”. Officials in Egypt, Algeria, Mali, Nigeria and Namibia have reacted to the conflict but have refrained from condemning Russia. In Libya, Mali, the Central African Republic and Sudan, a partial departure of the Russian paramilitary group Wagner is credible, while some have reportedly already been dispatched to Kiev to support the Russian army. Ethiopia, Nigeria and Mali, which have recently signed agreements to strengthen their military cooperation with Russia, will certainly come under diplomatic pressure to cancel these agreements. The underlying risk is that the Russian-Ukraine crisis will divert attention from conflicts in Mozambique, Ethiopia and in the Sahel, which could affect access to aid and military support.
Investment dynamics: opportunities in gas and mining?
Uncertainty over the duration of the conflict, its spillover effects – particularly on energy and commodity prices – and its outcome, will stoke market volatility and incite investors to move to safe-haven assets. This is already reflected in the price of gold, which recorded a 3% in the past days, boosted by higher demand. In the medium-term, geopolitical tensions could boost interest in Africa’s natural gas and related infrastructure, driven by Europe’s desire to secure its energy supply, 40% of which is currently provided by Russia. Algeria, which supplies 11% of Europe's gas needs, has already offered to bring in an additional 10 billion cubic metres by increasing its production. The European Commission began to review its position on the exploitation of African natural gas at the last Europe-Africa summit, which is now seen as a strategic resource for the climate transition. Several large-scale liquefied natural gas projects are already underway in Mozambique and in Senegal and Mauritania. The exploitation of new fields and the construction of gas pipelines should accelerate. Egypt, Morocco, Nigeria and Tanzania are particularly well-placed to reap the benefits of this with their gas reserves.
On the mining front, bauxite and aluminium prices are already soaring, a welcome boost for Guinea. Copper, nickel, palladium, among others, are also expected to follow an upward trend due to the vast reserves held by Russian companies. Mining operations across the continent could be slowed or even suspended due to the sanctions imposed on Russia. For Guinea, Angola, Zambia or Zimbabwe, where the largest Russian mining companies are present, the loss of foreign exchange earnings could be significant, at least temporarily.
Russia will seek to expand its sphere of influence on social media and traditional media, where it is already very active. In Mali and Chad, pro-Russian demonstrations have already taken place in recent days. If tensions in Europe increase, attempts to influence African internet users will multiply. They will target political figures and state institutions, but also foreign companies and civil society advocates. The (dis)information campaigns are part of a struggle for influence between the major world powers. For several years now, Russian campaigns in Mali, Sudan and the Central African Republic have been characterized by the dissemination of pro-Kremlin and anti-Western, especially anti-French, narratives, often supporting interventions led by the Wagner Group. In recent elections in Zimbabwe and Mozambique, where Russia is accused of meddling, disinformation and propaganda campaigns have been a mainstay of Russian strategy. The Russian-Ukrainian conflict will reinforce these struggles for influence and push each actor to use their media and cyber arsenal to win the information battle. To defend themselves against these disinformation campaigns, companies and governments will have to step up their efforts to protect their reputation and increase their presence in the media landscape.