The crisis in Ukraine means that food prices will see more spikes, not just in SA, but across Africa

Food price inflation in Africa is likely to intensify across the continent in the coming months, due to the strong weighting of food between 30% and 50% in the CPI basket, coupled with forecasts that global food prices they will follow an upward trajectory in the second quarter of the year. Many African countries are heavily dependent on Russia and Ukraine for grain imports, and supply disruptions due to the Russian invasion are forcing governments to find alternative suppliers. While some countries are introducing incentives for farmers to increase production, others are introducing subsidies and price controls to limit these staggering increases …

Food price inflation in Africa is likely to intensify across the continent in the coming months, due to the strong weighting of food between 30% and 50% in the CPI basket, coupled with forecasts that global food prices they will follow an upward trajectory in the second quarter of the year.

Many African countries are heavily dependent on Russia and Ukraine for grain imports, and supply disruptions due to the Russian invasion are forcing governments to find alternative suppliers. While some countries are introducing incentives for farmers to increase production, others are introducing subsidies and price controls to limit the passing on of these rising prices to consumers.

According to the Oxford Economics Africa research group, these measures could mitigate the blow, but many African countries will find it nearly impossible to escape rising global food price inflation, while efforts to ensure food stability will also impact national budgets. and medium-term fiscal consolidation objectives.

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Serious shortages if the supply is completely interrupted

Most countries will face severe wheat shortages and food price inflation if imports from Russia and Ukraine are cut completely.

However, says Oxford Economics, given that Russian wheat exports are not expected to stop completely, countries that rely more on Ukrainian wheat will be worse off as port closures complicate trade.

The group says wheat shortages and rising wheat costs could cause countries to consider other types of wheat. As wheat is a staple in many North African countries, demand for wheat is expected to remain inelastic, but in the more price-sensitive Sub-Saharan African (SSA) countries, where rice and wheat are staples, consumers may turn to rice as a cheaper alternative.

Corn is also a staple in many poorer SSA households, but in this case higher costs could also cause a shift to cheaper traditional starches. The group also points out that soaring fertilizer prices and a heavy reliance on Russia for fertilizer imports also pose a serious challenge.

While the Russia-Ukraine war is set to have serious implications for grain supply and food stability in Africa, and it is difficult to fully estimate the magnitude of the impact, but the USDA’s updated annual reports on grains and feed for Egypt, Nigeria, Morocco, Kenya, South Africa, Tunisia, Tanzania and Ghana suggest that Egypt, Nigeria and Tanzania would be the hardest hit if imports from Russia and Ukraine were to stop completely.

Even Kenya, South Africa, Tunisia and Ghana would not be able to meet their internal grain consumption needs if that happened. African grain importers are unlikely to be completely cut off from Russia, as African countries have not been included in the Russian list of “hostile countries” and have not been directly affected by Russia’s export bans.

However, Ukrainian imports are more complicated.

Although the country’s granaries are overflowing, seaports are closed and African countries, including Tunisia, Morocco, Nigeria, Tanzania and Egypt, where Ukrainian wheat imports account for between 15% and 50% of total wheat imports, they will be worse off.

READ ALSO: Small-scale farmers in SA must be protected from the effects of the Russia-Ukraine conflict

National production and political initiatives

Domestic production and political initiatives will also determine the size of the grain deficit and food price inflation. The Egyptian government, for example, has provided incentives, such as subsidized fertilizers, to local farmers to increase national grain production if they sell at least 90% of their grain production to the government.

In southern Africa, the area harvested in Tanzania is expected to decrease as planting was delayed due to poor rainfall conditions earlier this year, while wheat crops in Tanzania and Kenya are expected to be suppressed from improper application of fertilizers due to the high prices of fertilizers.

South Africa hopes to increase its acreage, but rising input costs, especially fertilizers, will discourage farmers, says Oxford Economics.

Many African countries rely on Russia for fertilizer imports and will be subject to supply disruptions and payment problems.

Kenya also wants to subsidize 114 billion tons of fertilizer, while the Tanzanian Fertilizer Regulatory Authority (TFRA) issued target prices for different fertilizer types in March.

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alternative suppliers

Governments are also looking for alternative suppliers. Egypt, the world’s largest importer of wheat, recently reached an agreement to import around one million tons of wheat from India, but that’s not enough to replace the two or three million tons of wheat imported annually from Ukraine. .

Egypt has also returned to the global wheat market to buy more wheat, with the majority coming from France, Bulgaria and Russia. Argentina and Brazil are also offering attractive alternatives after experiencing bumper crops of wheat, with Brazil exporting the most to Morocco and Argentina exporting to Kenya, Algeria, Morocco and Nigeria.

READ ALSO: Ukraine has been a fallout: SA exposed mainly with imports of wheat, not with corn

Alternative types of cereals

Oxford Economics also believes that the rising cost of wheat and its impact on food price inflation may facilitate the transition to other types of grains, such as rice, although this is unlikely to happen in countries where wheat is a food. base.

Inelastic demand for wheat will force governments to seek alternative wheat suppliers or risk social stability, as has been demonstrated in the past with bread prices becoming a politically sensitive issue in countries like Egypt.

In countries like Nigeria and Tanzania, where rice consumption exceeds wheat consumption, rice could be a viable alternative. However, corn is the staple grain in many SSA families, including Nigeria, South Africa, Ghana, and Kenya, as well as an important source of animal feed.

The group warns that although corn is largely produced domestically, it is not shielded from rising fertilizer prices.

The energy costs associated with cooking corn are also higher than other grains and therefore consumers in Ghana may turn to cheaper traditional starches such as plantains, cassava, yams, coco-yams and sweet potatoes.

Potatoes have also become increasingly popular in urban areas of Kenya, and the price of corn can also drive them away from corn.

Oxford Economics also points out that despite governments’ efforts to limit the pass-through of rising commodity prices to consumers, most countries in the analysis were unable to escape the inflationary pressures of soaring food prices. global since the beginning of the war.