Seeds of Opportunity: The African Growth Series
April 2022 | Issue 4
In this week's issue, you will learn more about:
- Africa’s Reliance on Wheat Imports from Russia/Ukraine
- How privatising Angola’s Port of Lobito and the Benguela Railroad could increase international trade with the Democratic Republic of the Congo (DRC) and Zambia
- How South Africa stands to benefit as Russia’s war turbocharges the world’s addiction to coal
- Ghana's Economic Growth and Recovery
Africa’s Reliance on Wheat Imports from Russia/Ukraine
Russia and Ukraine account for more than 30% of global grain exports, with Russia alone supplying around 13% of global fertiliser and 11% of oil exports, while Ukraine supplies half of the world’s sunflower oil. The ongoing conflict between these two countries is causing a huge supply shock to the global food system, specifically for underdeveloped regions such as Africa. As many as 25 African countries, including many least developed countries, import more than one third of their wheat from the two countries, and 15 of them import over half.
Ukraine is expecting crop failures while Russia has imposed an export ban on wheat products until the end of June 2022, leading experts to predict increased food shortages and rising prices in Africa. But when one door closes, another opens. African countries need to reduce their reliance on imported products and promote local farming. Rwanda, which imports 64% of wheat and 14% of fertilizers from Russia is now promoting locally substitutes for wheat such as cassava and sweet potatoes to avoid a food crisis and bridge the gap. On the other side of the continent, Senegal is promoting the production and processing of local food stock like maize, millet and cow beans by increasing the annual agricultural budget by CFA 10 billion (US$ 16.4 million). Africa needs to improve its intercountry and intra country trade. The continent needs to protect its smallholder farmers and give them a greater say by enabling access to investment capital and new markets through agreements such as the African Continental Free Trade Area (AfCFTA). While the conflict will certainly be a major crisis, it needs to be a wake-up call for African countries o develop and strengthen their own markets and invest more in their own farmers and food sovereignty.
Gateway to Southern Africa
Privatising Angola’s Port of Lobito and the Benguela Railroad could increase international trade with the Democratic Republic of the Congo (DRC) and Zambia. The Democratic Republic of the Congo (DRC) held almost half the global cobalt reserves at 3.5 million tonnes in 2021. In 2020, this country extracted 66% of the global cobalt supply whilst its copper production increased by 12%. In the same year, Zambia's copper production increased by 13.6% and the country was ranked the seventh largest global high-grade copper producer. Copper contributes to more than 70% of the country's foreign exports. These and cobalt exports are likely to grow as an increase in global demand for the two minerals is pushed by the rush toward renewable energies and green technologies. Copper and cobalt are crucial for the computer manufacturing and international electric vehicle battery industries. The 'Lobito Corridor' is a 1300-kilometre long Benguela railway from the Atlantic port of Lobito to the mineral-rich and land-locked countries of the DRC and Zambia. It is crucial to help Southern Africa meet the increasing demand but it's currently not running at capacity. Hence the Angolan government has approved several regulatory and infrastructure reforms to attract more foreign investments, as well as allow the partial privatisation of terminal operations at the Port of Lobito and continue developing the Benguela railway.
South Africa stands to benefit as Russia’s war turbocharges the world’s addiction to coal
Since 2021, the global demand for coal has been on the rise amid natural gas shortages. Europe, in particular, faced an unprecedented demand for electricity as stores and factories reopened while natural gas was in limited supply. However, the invasion of Russia into Ukraine turbocharged the coal market, causing power producers to scramble for supply surging electricity prices. This, and sparked blackouts in various regions has propelled the world into a global energy crisis popularising coal, a less – expensive energy alternative.
According to the International Energy Agency, the world has generated more electricity from coal than ever before, with a 9% increase from 2020 (although the gain was low from 2020). In the USA, coal usage increased by 17%, and continued to rise in Asia, Africa and Latin America. In 2022, the total coal consumption is expected to rise by 2%, reaching a record high of 8 billion metric tonnes – and is likely to stay at this level until 2024. Countries such as Italy and Germany are now considering reopening their once decommissioned coal-fired power plants. While in the US, coal burning is in the midst of its biggest revival in a decade and China is reopening shuttered mines and planning new ones.
For South Africa, this has caused an increase in coal-laden ships embarking on a typically quiet route around the Cape of Good Hope towards Europe.
Ghana's Economic Growth and Recovery
The Ghanaian economy is on its path to recovery from the contraction it saw during the height of the pandemic in 2020. According to the Ghana Statistical Service, the economy saw a 5.4% growth in 2021, which is 0.4% higher than the government's target. The figure was also higher than predictions made by World Bank, IMF, and the Bretton Woods institutions. At the end of 2021, the Ghanaian economy was worth more than USD 60.61 billion (GH¢459.13 billion), up from the ~USD 51.74 billion (GH¢391.94 billion) in 2020. Growth was also seen in the non-Gross Domestic Product (GDP), up by 6.9%. The growth seen in the last year was driven in part by the expansions seen in the agricultural and services sectors, which along with the industry sector have been key value-adding sectors to GDP. The industry sector recorded a contraction in the 2021 period. In a recent announcement, the government's effort to increase the manufacturing sector's contribution was seen within the pharmaceutical sector. Construction will be underway in July of 2022 on the country's first vaccine manufacturing plant, an announcement made by the Presidential Vaccine Manufacturing Committee (PVMC). Through this facility, the country will join nations in Africa strategically positioning themselves for local Covid-19 vaccine manufacturing to aid the low vaccination rates on the continent.
To find out more about opportunities in Africa, please contact Lynne Martin.
