PREVIEW
Fertiliser shipments blocked in the Strait of Hormuz pose a graver threat than the oil price surge, as currencies weaken, and fuel subsidies are cut
African economies will slump on average by 0.2% if the United States-Israeli war against Iran lasts longer than six months, reckons a joint report by a group of Africa-focused bodies including the UN Development Programme (UNDP), Economic Commission for Africa (ECA) and the African Union (AU).
The paper, published on 2 April, is one of the first to assess the consequences of the war for Africa beyond higher oil prices (AC Vol 67 No 6, Another war, another bill for Africa). It warns that restrictions on the supply of fertiliser caused by blockades to the Strait of Hormuz could hit many African countries harder than the oil shock.
Many of the continent’s currencies have weakened significantly since the US/Israeli airstrikes began in late February, and the report warns that the economic effect could ‘quickly turn into a cost-of-living crisis across Africa through higher fuel and food prices, rising shipping and insurance costs, exchange rate pressures, and tighter fiscal conditions.’ The Middle East accounts for 15.8% of Africa’s imports and 10.9% of its exports.
Much of the analysis has focused on the wins for Africa’s oil producers, led by Angola and Nigeria but the reports show that effects may vary widely across the continent, confounding initial assessments. They point out that in East and Southern Africa, Mozambique could gain from speedier development of its LNG projects and increased traffic through the Port of Maputo, while Durban port in South Africa, Walvis Bay in Namibia, and Mauritius are benefiting from shipping rerouting around the Cape of Good Hope (AC Vol 67 No 7, Tinubu’s oil reforms hit a wall of old debts and new sabotage).
Kenya is ‘emerging as a logistics hub through Lamu Port and Nairobi’, adds the report, while Ethiopia is ‘benefiting from its role as the emergency air bridge linking Asia, Africa, and Europe through Ethiopian Airlines’. ‘These gains, however, are likely to be uneven and may not offset the wider inflationary, fiscal, and food-security pressures affecting the continent,’ it adds.
The first major challenge for non-oil producers in the form of fuel prices is already being seen. Tanzania announced a 30% fuel price hike on 2 April and others are under pressure to follow suit. In Kenya, ministers say that they have sufficient supply until mid-April, and are likely to offer higher fuel subsidies thereafter. African leaders have called for development partners and private to sector to assist with measures to stabilise fuel, food, and fertilizer supply. The European Commission has indicated that it will offer support but without defining how.
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