Russia’s war in Ukraine has disrupted Africa’s promising recovery from the COVID-19 pandemic by raising food and fuel prices, disrupting trade of goods and services, tightening the fiscal space, constraining green transitions and reducing the flow of development finance in the continent, said United Nations Assistant Secretary-General Ahunna Eziakonwa.
Speaking at the U.S. Institute of Peace on June 14, Eziakonwa, who serves as the U.N. Development Programme’s assistant administrator and regional director for Africa, said the war has put households, communities and countries across Africa in a “very precarious situation.”
Joseph Sany, vice president of the Africa Center at USIP, said: “The critical question before us today is: How can African countries and their partners leverage their abundant resources and human capabilities to address the short-term impact of Russia’s invasion in Ukraine and advance their long-term development and security needs?”
“In other words,” he added, “how can Africa make the best out of this very, very bad situation?”
The Pandemic’s Impact on Africa
Prior to 2020, African countries were among the fastest growing in the world. The COVID-19 pandemic reversed decades of hard-won macroeconomic, socioeconomic and governance gains on the continent. For the first time in nearly three decades, Africa’s Human Development Index dropped. Millions of Africans lost their jobs; some 50 million were projected to be pushed into extreme poverty. Women and youth were hardest hit. Global trade disruptions constrained growth and many African countries suffered from a progressively shrinking fiscal space, said Eziakonwa. The pandemic “worsened financial and societal inequalities in Africa,” she added.
In response to the pandemic, African countries put in place effective macroeconomic policies, made strategic investments and boosted COVID-19 vaccine production and rollout. “While multilateralism appeared to be shrinking in the rest of the world, it was expanding in Africa,” Eziakonwa said.
By the end of 2021, Africa exceeded expectations of a 3.7 percent GDP growth, recording a 4.5 percent growth and “showing its resilience and its muscle to bounce back,” Eziakonwa said. “The recovery was fragile … but the continent appeared to be back on track” toward attaining the U.N.’s Sustainable Development Goals, she added.
On February 24, Russia invaded Ukraine in an unprovoked act of aggression. The aftershocks of the ongoing war are being felt around the world, including in Africa.
War Disrupts Critical Imports
While the level of trade between the African continent as a whole and Russia and Ukraine is insignificant, some African countries rely heavily on these two countries for critical imports, particularly wheat, fertilizers and steel. A disruption in these imports could adversely impact African countries.
In 2021, for example, Kenya imported almost 30 percent of its wheat from Russia and Ukraine. A supply disruption would affect the production of bread in Kenya, which Eziakonwa noted is the third most consumed food item in that country. Cameroon imported 44 percent of its fertilizers from Russia in 2021. In West Africa, where planting season is starting, analysts fear that this disruption could have a dire impact on crop yields and compromise food security. And similarly, 60 percent of Ghana’s iron ore and steel imports come from Ukraine. As a result of the war, the construction industry in Ghana is likely to face significant challenges.
Government Revenues Impacted
A combination of the pandemic and the war in Ukraine has reduced trade and taxation revenues of governments across Africa, even as countries are being forced to spend on social safety nets. “Countries are being asked to spend more with less coming in,” said Eziakonwa, adding that “fiscal and monetary responses of sub-Saharan African countries increased public indebtedness across Africa.”
Meanwhile, downgraded credit ratings have increased borrowing costs for African countries. UNDP research shows that “biased credit ratings could be costing six African countries $13 billion in additional interest rate payments,” Eziakonwa said, adding: “Africa is borrowing at a much higher cost than the rest of the world.”
Eziakonwa said one of the “most pernicious effects” of the war in Ukraine is “imported inflation.” She cited the examples of Tanzania, where overall inflation spiked by 34 percent between February and April; Namibia, where transportation costs rose by 20 percent between March and April; and Cameroon, where food prices increased by 26 percent between February and March.
Warning of a Cold War Redux
The war in Ukraine is a “clear and present danger to multilateralism,” Eziakonwa said. Indication of this can be found in the fact that development projects are being postponed or canceled as some development partners are put off by the higher costs of projects while others are considering diverting funds to the humanitarian crisis caused by the war in Europe. There are also signs of Africa’s development being defunded. “It’s not the time to leave the continent behind,” Eziakonwa said, adding that there needs to be a greater understanding that the relationship with Africa is a “partnership of purpose” and “not a relationship of charity.”
Describing a turn toward a political lens through which to view development in Africa as a worrying trend, Eziakonwa said: “An unwelcome tendency towards unilateralism and a return to Cold War dynamics would be devastating for Africa, and indeed for the world.” She added: “A Cold War redux will certainly exacerbate the recent retreat of democratization in parts of the continent where we have witnessed disruptive and unconstitutional political transitions.” It will also be discouraging for countries that “are trying to do the right thing,” she said, while calling for an investment in “robust and meaningful multilateralism.” She also suggested derisking Africa’s investment ecosystem and proactively exploring the use of innovative financing mechanisms.
‘Uncommon Times Demand Exceptional and Extraordinary Solutions’
In the face of these challenges, a business as usual approach will not be enough, Eziakonwa said, adding: “uncommon times demand exceptional and extraordinary solutions.”
She highlighted three areas that should be prioritized by African countries and their partners:
- Reframe development finance and rethink the global finance architecture. “This must start by enhancing domestic resource mobilization” so that Africa can retain a greater share of the value of its strategic mineral, agricultural and human resources, she said. This can be achieved by reducing almost $90 billion in illicit flows from the continent by improving Africa’s tax effort, raising average tax to GDP ratios from the current 17.5 percent to 24 percent and eliminating unnecessary tax waivers for big business.
- Consistently invest in resilience. Eziakonwa spoke of the need to “shock proof” development and democracy. Pointing out that development is not a linear process and that various shocks can reverse gains, she said “progress without resilience is not sustainable.” Resilience can be achieved through initiatives that enable Africa to fully utilize its natural resource wealth, take advantage of planet-friendly financing mechanisms and focus on climate risk sensitive investing. Africa and its development partners need to invest in food and fuel security, greater productive capacity, and higher value added manufacturing and exports, Eziakonwa said.
- Prioritize structural transformation and regional integration. Eziakonwa said Africa needs to harness digital technologies and promote free and fair competition globally, intensify support for regional integration and economic diversification and mobilize resources to fill critical gaps in technology, skills and infrastructure.
Following her keynote remarks, Eziakonwa participated in a discussion with Johnnie Carson, senior advisor to the Africa Center at USIP. Oge Onubogu, director of West Africa programs at USIP, moderated the discussion.
Eziakonwa maintained that Africa needs to be more assertive about taking its rightful place in the world. Financial and global institutions should also understand that an investment in Africa’s well-being is an investment the world’s well-being. “What’s good for Africa is good for the world,” she said.
The Promise of the AfCFTA
The African Continental Free Trade Area (AfCFTA), which was signed in March 2018, came into force on January 1, 2021. Carson described the AfCFTA as possibly the most important pan-African agreement of the last decade. “It has the prospects and possibilities of really transforming economic relationships around the continent and transforming Africa’s economic and commercial relationships with the world,” he said.
The AfCFTA provides an ideal framework for Africa to rationalize and harmonize tariffs, eliminate persistent non-tariff barriers and prioritize the uninhibited flow of trade and people among African countries, Eziakonwa said. It could lift some 30 million Africans out of extreme poverty, increase income by $450 billion and more than double the size of the single Africa market to $6.7 trillion by the next decade, she said, adding that the world should rally behind the AfCFTA. The United States, Carson said, could support the AfCFTA just as it has backed the European Union, the world’s largest single market area.
Role for the United States
Onubogu contended that the United States needs to rethink and strengthen its strategic relationships with Africa. She asked Carson how the United States can better engage with African policymakers, businesses, civil society and the African diaspora around the world.
Carson replied the “relationship should be more comprehensive, more consistent, more energetic and more engaged.” It is important, he said, not just to have a broad diplomatic relationship with Africa but for the U.S. business community to also take a comprehensive and broad-based look at opportunities on the continent.
The United States “has always looked at Africa as a partner, but sometimes it has not taken that partnership as seriously and as committedly as it should be,” Carson admitted. He said the United States should look for and frame policies that encourage Africa’s successful integration. That means working more effectively with regional and subregional organizations like the African Union, the Economic Community of West African States and the Southern African Development Community. Further, he said, there is a need to build relationships at the city-to-city and state-to-state levels as well.
The United States should also look at strengthening commercial ties with Africa, said Carson. The creation of the U.S. International Development Finance Corporation has opened the possibility of U.S. government investment in African commercial business and development activities. “This is important as a partnership tool,” Carson explained.
Eziakonwa cited the need to create jobs for Africa’s large and educated youth population, describing this as “low-hanging fruit.”
“The African continent is facing uncommon and unprecedented exogenous shocks in the wake of COVID-19 and the war in Ukraine. It cannot deal with this alone,” said Eziakonwa. “Ensuring a speedy, inclusive and sustainable recovery across Africa needs all of us to come together to make it happen.”