The United Nations Conference on Trade and Development (UNCTAD), in its rapid assessment of the war in Ukraine, forecasts an alarming situation for developing countries, especially for African countries.
The report released on Wednesday looks at countries directly exposed to the war waged by Russia because it will eventually lead to food shortages, a recipe for civil unrest. Countries affected by the war are mainly North African and East African economies, as well as a few countries already struggling with internal conflicts and precarious food security situation The risk of civil unrest, food shortages, and inflation-induced recessions cannot be discounted, particularly given the fragile state of the global economy and the developing world as a result of the Covid-19 pandemic,” the report said.
Russia and Ukraine are big factors in what UNCTAD calls the two “fundamental Fs” of commodity markets – food and fuel.
“A key area of concern is the two fundamental “Fs” of commodity markets: food and fuels. The Russian Federation and Ukraine are global players in agrifood markets. Together, the countries represent 53% of the share of global trade in sunflower oil and seeds and 27% of the share of global trade in wheat,” the organization highlighted.
For Zimbabwe, a country that experienced devastating civil unrest in January 2019 when the government put in place a 130% fuel price increase, price increases are a bad idea.
As such, since the war began, President Emmerson Mnangagwa, has blocked three fuel price increases. This was done through a reduction in fuel taxes.
“There is no need for panic. I have already directed the Ministry of Energy and Power Development to review and reduce duty and surcharges on fuel so the pump prices of petrol and diesel remain manageable,” he said.
This week, Botswana’s central bank governor Moses Pelaelo said geopolitical tension in Ukraine already presents a possible increase in international commodity prices beyond current forecasts.
UNCTAD added that the cost of local food production in African and developing countries will likely go up because, “the Russian Federation is also a major global supplier of chemical products – including fertilizers, as well as metals and wood products.”
In this context, and considering country-specific shocks, climate change, export restrictions, and stockpiling, there might be a potential for food insecurity crises in some regions, especially if increased costs of fertilizers and other energy-intensive inputs negatively impact the next agricultural season.
Latest UNCTAD statistics reveal that Africa imports 44% of its wheat from both Ukraine, 12 percent, and Russia, 32 percent.
“Wheat markets are a case in point. In 2018–2020, Africa imported $3.7 billion in wheat, 32% of total African wheat imports, from the Russian Federation and another $1.4 billion from Ukraine, 12% of total African wheat imports,” the report says.
Almost half of Africa relies on wheat imports from both Ukraine and Russia, therefore, price increases are inevitable.