H I G H L I G H T S
• UKRAINE WAR’S ECONOMIC FALLOUT
• LOCAL RESPONSES
• EUROPE LOOKS TO AFRICAN GAS
• POLITICS AND UKRAINE WAR
• RUSSIAN MILITARY STEPS
• MINING AND MOZAMBIQUE
• VAX PLANT TO CLOSE
• BITCOIN WARNING
• NOT SO JOLLY ROGERS
• E-COMMERCE OF BLOOD
• TOOZE ON AFRICA
UKRAINE WAR’S ECONOMIC FALLOUT
The economic repercussions of the Russian invasion of Ukraine has put paid to hopes for a robust African economic recovery. With the Covid-19 pandemic receding, the International Monetary Fund had raised its economic growth projection for the continent from 3.75% to 4.5%. However, in the IMF’s April 28th estimate, the forecast was lowered to 3.8% as food, fuel and trade disruptions caused by the war worsened already existing financial and political problems. The IMF’s inflation projections for 2022 and 2023 are 12.2% and 9.6% respectively—the first time since 2008 that regional average inflation will reach such high levels.
The war’s effects are being transmitted first through higher food prices, particularly damaging for Africa where 40% of consumer spending is tied to food. The continent also imports large amounts of food items, for example, 85% of its wheat. Prices for basic food staples have jumped 40% above the five-year average in Burkina Faso, Liberia, Mali, Mauritania, Niger, Nigeria, Sierra Leone, and Togo.
Then there are fuel prices. The jump in oil prices is expected to increase Africa’s oil import bill by $ 19 billion and impact transport and consumer prices. Oil-importing fragile states will be hit hardest, with fiscal balances expected to deteriorate by around 0.8% of gross domestic product compared to October 2021’s forecast. Half of Africa’s low-income countries will face major financial distress. Some commentators warn that parts of Africa will face economic conditions similar to those that triggered the popular uprisings known as the Arab Spring.
The Democratic Republic of Congo, Nigeria, Ethiopia, South Sudan, Somalia, Sudan, Niger and Kenya will be among the 12 worst affected countries by the rise in food prices and disruption in agricultural supplies caused by the Ukraine war, according to the Global Report on Food Crises 2022 report. Each of these countries has over three million people who were already facing acute food shortages. Congo and Nigeria have the largest number, 25.9 and 19.5 million respectively, and Kenya, with 3.4 million people in that category, the least. “Given the repercussions of the war in Ukraine on global food, energy and fertiliser prices and supplies, the situation could get worse in years to come,” said the report.
A consortium of African airlines will try and negotiate better prices and ensure supplies of aviation fuel over the next 12 months, said African Airlines Association Secretary-General Abderahmane Berthe in the Kenyan capital, Nairobi. “We are in the last round of negotiations, the process will end in June.” The joint actions will begin in July. The group includes South African Airways and Kenya Airways. Aviation fuel prices now constitute 30% of the operating costs of most African airlines, up from 20% before the present fuel price crisis. The move followed a May 7th announcement by domestic Nigerian airlines that they would suspend all local flights because of rising fuel prices. The Nigerian government, consumer groups and some investors persuaded the airlines to continue flying.
The African Trade Exchange (ATEX) has been launched by a number of multilateral financial institutions to help countries to procure basic commodities whose supply has been affected by the Ukraine war. The commodity trading platform is designed to help ease price increases in agricultural inputs and food items, notably fertilizers and cereals. The platform was developed by the African Export-Import Bank, African Development Bank, African Continental Free Trade Area Secretariat and the United Nations Economic Commission for Africa.
Angola’s state-owned diamond miner Endiama has indicated that because sanctions have disrupted the supply of Russian mining parts and machinery its diamond output could fall by almost one-third. Endiama, which has exclusive rights to diamond mining in Angola, says its production could fall from a forecast 13.8 million carats to 10.05 million carats this year. The company still expects revenues of $ 1.42 billion this year, and recently signed contracts with Rio Tinto to explore the new Chiri mine.
EUROPE LOOKS TO AFRICAN GAS
European governments have started to look to Africa for energy alternatives to Russia. Italy signed natural gas development agreements with Angola and Democratic Republic of Congo as part of an attempt to diversify its gas sources away from Russia. The agreement with Angola is expected to bring an additional 1.5 billion cubic metres of gas a year to Italy, the one with the Congo 5 billion cubic meters. Italian Foreign Minister Luigi Di Maio said, “We do not want to depend on Russian gas any longer, because economic dependence must not become political subjection.” He said diversification was proving easier and faster than expected.
Newly-elected German Chancellor Olaf Scholz kicked off a three-nation African tour in May with the first country, Senegal, in his sights as an alternative natural gas source to Russia. Germany is especially interested in the Greater Tortue Ahmeyim (GTA) gas field owned by Mauritania and Senegal. BP, the British energy company that is leading the gas field’s development, estimates the field holds up to 15 trillion cubic feet of natural gas. GTA is expected to start production as early as 2023 following delays caused by the Covid pandemic and will increase Senegal’s LNG production to 2.5 million metric tonnes a year. The GTA project will cost $4.8 billion to fully develop. Senegalese President Mack Sall has publicly complained that the West’s emphasis on green energy has made it difficult for his country to raise the capital to fully exploit its offshore gas resources, estimated at 40 trillion cubic feet. Scholz sees an opportunity for Germany to help Senegal and wean itself off of Russian gas. He will also visit Niger and South Africa on the tour.
POLITICS AND UKRAINE WAR
African governments took a variety of voting positions when the United Nations General Assembly first took up a March 2 resolution criticizing the Russian invasion of Ukraine. Twenty-eight African countries voted in favour of the resolution, 17 took a stance similar to India’s and abstained, one voted against, eight did not participate in the vote. Most of the countries that voted in favour cited Russia’s clear-cut aggression and violation of sovereignty. The Kenyan representative at the UN, Martin Kimani, noted that “Kenya, and almost every African country, was birthed by the ending of empire. Our borders were not of our own drawing.” Thus it was imperative that such borders not be challenged. The abstentions were more varied. A number cited a desire to be neutral. Uganda, as the incoming chair of the Nonaligned Movement, said it could not take sides. Others, including South Africa, complained that the resolution made mediation and diplomacy more difficult. Eritrea, a close military ally of Russia, was the sole African country to oppose the resolution. Ethiopia, with long historical ties to the Soviet Union and good ties with Moscow, preferred to simply be absent.
African journalists and public intellectuals in their debates about the war, expressed a sense of unhappiness at the imperialist overtones of Russia’s military action but also cynicism about the West’s lack of outrage and strength of response to bloodier conflicts in Africa and the developing world. An on-the-ground report by the Washington Post tried to explain why many individual Africans were enthusiastically, if passively, pro-Vladimir Putin and anti-Ukrainian. It pointed to pervasive Russian influence in social media and the propagation of claims that local African conflicts and violence were the fault of the West and that Russia was a source of protection.
The Russian embassy in Ethiopia had to deny rumours it was recruiting local mercenaries to fight in Ukraine. Hundreds of Ethiopians, many of them unemployed soldiers, lined up outside the embassy for days in hopes of being hired. The Russian embassy claimed the queues were Ethiopians who had come to express solidarity. When interviewed, many said they had come because of reports Russian was hiring soldiers to send to Ukraine.
Ukrainian President Volodymyr Zelensky has repeatedly requested, so far unsuccessfully, that he be allowed to address the African Union. The organization’s commission chairperson mentioned this in a tweet: “I received a call from Ukraine Foreign Minister Dmytro Kuleba. He renewed a request from President Zelensky to address the African Union Heads of State.” Zelensky had earlier lobbied with the Senegalese president and African Union chairperson, Macky Sall, about addressing the African leadership.
RUSSIAN MILITARY STEPS
Despite developments in Ukraine, Cameroonian Defence Minister Joseph Beti Assomo and his Russian counterpart Sergei Choigou released a five-year defence agreement signed in mid-April. The 13-page document is non-specific, but mentions the exchange of information in the field of international defence and security policy, military education, military hydrography and medicine. Cameroon was among the African countries that declined to condemn Moscow at the UN over the Ukraine invasion. Cameroon and Russia signed an earlier agreement in 2015 regarding the supply of weapons and military training.
The Russian mercenary army, Wagner Group, continues to play a major role in Moscow’s efforts to whittle away at French military influence in West and Central Africa, even though some Wagner units have been deployed to the Ukraine. Russia is having its best success in Mali where a new military government, despite facing problems from Islamicist insurgents, is slowly replacing a French-European military force with Wagner fighters. In the most recent episode of this struggle for influence, the French army says it has filmed Russian mercenaries burying bodies near a Malian military base with the purpose of falsely accusing France’s departing forces of leaving behind mass graves. The video, filmed with a drone, shows what appear to be white soldiers covering bodies with sand near the Gossi base in northern Mali. Unverified Twitter accounts had already begun accusing French troops of atrocities. This has led to questions about whether the Wagner fighters committed civilian massacres of their own and were trying to blame then on France. The Russian push has its own perils. One Malian jihadist militia, Group to Support Islam and Muslims, claimed to have captured a Wagner soldier following skirmishes in the Segou region of Mali.
MINING AND MOZAMBIQUE
Around 500 of the 5300-strong workforce of Moatize coal mine in central Mozambique owned by Vulcan Mining, a subsidiary of the Jindal Group, have been on strike since early May. The workers are demanding compensation from Vulcan after it purchased the mine from the Brazilian firm Vale in December last year. “There was no destruction or vandalism of company or private equipment. However, the strike did not follow the legal procedures, because the striking workers did not deliver a prior notice,” Vulcan said in a statement issued in mid-May. The company gave no assessment of the financial loss the strike was imposing at a time when world coal prices are at a record high. The Jindal Group operates a second mine in the same Tete province in Chirodzi.
The Jindal Group bought Moatize coal mine and the 912 km long Nacala Logistics Corridor that runs from Malawi to the Mozambican coast for $ 270 million last year. Vale will continue to receive royalties from the mine for 10 years assuming certain coal production levels are reached. The price was a huge step-down from the near-billion dollar price being bandied around a few years ago and reflected the desire of Vale to move towards low carbon mining. The mine has an estimated 914 million metric tonnes of coal reserves and presently produces about 5-6 million tonnes a year. Jindal’s purchase continues the expansion of India’s economic footprint in northern Mozambique and parallels the investment by Indian state-owned energy firms in an LNG terminal close by. Japan is assisting India in developing the Nacala port as part of a joint aid programme in Africa.
South African President Cyril Ramaphosa extended the deployment of the South African National Defence Force in Mozambique for a year, at a cost of $ 180 million, as part of a regional military response to the Islamicist insurgency in northern Mozambique. This is the longest extension of the deployment by Ramaphosa. He initially deployed 1495 South African troops in July last year. This was extended by three months in October and then again in December. In March, he extended the deployment by one month. In June 2021, a Southern African Development Community extraordinary summit held in Maputo, approved a regional mission to assist Mozambique, called the SADC Mission in Mozambique (SAMIM). The initial deployment was until October 2021 and was largely manned by South African and Rwandan soldiers. Rwanda’s Defence and Military spokesperson, Colonel Ronald Rwivanga, on May 1st showcased the Rwandan military’s successes under SAMIM by showing how it had been able to restore normalcy in the Macomia district in northern Mozambique. He cited how hundreds of locals who had been taken captive by the insurgents, who swear allegiance to the Islamic State, has been rescued and would soon be returned to their homes.
The European Union Council in April increased assistance to the Mozambican Armed Forces under the European Peace Facility by €45 million. This brings overall EPF support for Mozambique in tackling the insurgents to €89 million.
In a major accomplishment for Mozambique, the International Monetary Fund ended a six-year suspension and approved financial assistance for the country in May. The suspension followed one of the worst cases of financial irregularity in Africa. Mozambique was found to have more than $2.7 billion of undisclosed state debts. The money had been borrowed to set up a sophisticated tuna industry, complete with trawlers and military patrol boats, but was allegedly diverted to corrupt officials. The son of Mozambique’s ex-president and 18 others went on trial last year over the “tuna bonds” affair. The IMF board on Monday approved a three-year $456 million aid payment that will support economic recovery and help reduce public debt. “This programme…also opens the window of opportunities for funding by other partners,” Prime Minister Max Tonela said.
VAX PLANT TO CLOSE
Opened with much fanfare a few months ago, Africa’s first Covid-19 vaccine factory may close down in several weeks for lack of orders. South African firm Aspen Pharmacare had changed one of its plants so it could produce 200 million doses a year of the one-shot Janssen vaccine. “It was widely hailed as…a game-changer for the continent. But it has not been followed up with orders. We have not received any orders from the big multilateral agencies,” Stavros Nicolaou, senior executive at Aspen Pharmacare. The company complained it has received no orders from any government, not even from the United Nations-backed Covax programme designed to provide vaccines to the developing world. The company plans to have the plant now produce anaesthetics. Africa continues to lag behind the rest of the world in terms of Covid vaccination with only 15% of its adult population fully vaccinated as of March. In its weekly report released in early May, the World Health Organisation said cases had risen by 12% in Africa, one of only two cases where Covid cases are still rising.
The Bank of Central African States, headquartered in the Cameroons, has urged the Central African Republic to annul a law that made cryptocurrency Bitcoin legal tender. El Salvador is the only other country in the world to have taken a similar step. The bank warned that the law, passed in April, breached its rules and could affect monetary stability in the region. Bitcoin’s status as legal tender would lead it to compete with the Central African Franc, the regional currency which is backed by France. The bank said the Central African Republic seemed to want a currency beyond the bank’s control. It warned that Bitcoin’s legal status would endanger monetary stability in the six-member Central African Economic and Monetary Community which also includes Cameroon, Chad, Gabon, Equatorial Guinea, and the Republic of Congo. With internet penetration of only 4%, the Central African Republic is unlikely to see much Bitcoin use in the wider population but there are fears it would make the country a centre for criminal and terrorist finance given cryptocurrencies relative opaqueness to government tracking.
NOT SO JOLLY ROGERS
Piracy off the West African coast declined by half, year on year, in 2021. Nonetheless, the region still remains the world’s largest concentration of piracy and maritime crime. Maritime risk company Dryad Global, in its annual report for 2021-22, stated that “the precipitous decline in piracy throughout West Africa in 2021 saw overall incidents of piracy and maritime crime decline by 56% compared to 2020. Incidents of actual and attempted attacks and vessels being fired upon dropped by more than 85%. The number of vessels boarded throughout the region fell by 54%. Incidents of vessels being boarded, and crews kidnapped declined by 60%.” But the onshore drivers of piracy remain unaltered, the report said. Additionally, a number of countries like Denmark which had deployed warships to help fight the pirates have sent their ships home because of the Ukraine war.
E-COMMERCE OF BLOOD
Nigerian medical worker Temie Giwa-Tubosun, traumatized by the death of a baby after a mother’s difficult labour and problems with the birth of her own son, formed an NGO in 2012 to educate Nigerians about blood donations and helping distribute blood across the country. Four years later, this had evolved into LifeBank, a distribution business that uses data and technology to get urgent blood supplies to hospitals. Initially, it relied on dispatch riders but is now a sophisticated digital medical distribution company with handles blood, oxygen, plasma, vaccines and more. LifeBank works with over 150 accredited blood banks and serves over 600 hospitals. It recently expanded into Kenya and is eyeing Ethiopia. Giwa-Tubosun believes her organisation has saved over 100,000 lives.
TOOZE ON AFRICA
Adam Tooze, a popular economics commentator and professor at Columbia University in the US, has written an article in Foreign Policy with a summary in his blog arguing that even more than Asia, the continent of the future is Africa. His argument is largely based on demographics and continental size. “Once you realize it’s scale, there is no global trend as dramatic today as the revolution in Africa’s demography,” he writes. Drawing from a number of studies he foresees a world with somewhere between 9 and 11 billion total population with close to 4 billion of those people living in Africa. “That means that by 2100 the African share of global population will likely be between 35 and 40 percent.” Africans already number as much as India and in the coming decades will come to nearly match Asia in population while dwarfing the Americas and Europe. This preponderance, he argues, will place the second largest continent firmly in the driver’s seat of history.
The previous issues of Africa Digest are available here: LINK
(The views expressed are personal)