Russia-Ukraine: a boon for Africa’s commodity exporters?
By Conrad Onyango, bird story agency
Oil-rich countries like Nigeria, Angola and Libya as well as Africa’s big cereal producers like South Africa, Namibia, Mozambique and Zimbabwe, look set to gain the most from anticipated spikes in commodity prices, as the Russian invasion of Ukraine begins to disrupt global supply chains.
Africa’s commodity-exporting countries are primed to benefit from the impact of the almost two-week-old invasion of Ukraine by Russia, according to experts.
Commodity prices including oil, gas, maize and wheat – top global exports for the two countries in conflict – have begun rising on fears over the impact of sanctions slapped on Russia.
Brent crude oil rose to $130 a barrel on March 8, 2022 as the price of natural gas began to skyrocket across Europe on war-induced disruption of global supply chains.
“African oil producers stand to benefit from higher oil prices as their fiscal positions are closely correlated to oil exports and the international oil price,” said Oxford Economics Africa analysts in their monthly highlights.
Nigeria, with an oil production capacity of 1.36 million barrels per day (bpd) will likely be the biggest beneficiary followed by Libya (1.17 million bpd) and Angola (1.14 million bpd).
Similar sentiments have also been echoed in the African Energy Chamber Q1 2022 Outlook, The State of African Energy that projects increased activities in oil and gas exploration would unlock the continent’s potential in meeting global energy demand and shore up foreign investments.
“Current trends within the oil and gas industry could lead to the establishment of new centres of geopolitical influence, a development that could see massive amounts of investment for exploration heading towards Africa,” stated Leoncio Amada Nze, president at African Energy Chamber CEMAC.
A total of nine high impact wells are in the drilling schedule for 2022 by a mixture of majors, independents and local exploration firms, according to the report.
The key exploration activities include drilling of Shell Plc’s high-profile well offshore that has already kicked off in Namibia, Italy’s Eni conducting exploration at its Mlima-1 wildcat block in Kenya and TotalEnergies’ exploration activities on the Venus prospect. TotalEnergies has already made a sizeable discovery of light oil with associated gas.
In 2023, the authors of the report says 10 additional high-impact wells will be drilled and the majority of them sited in unexplored basins in East and West Africa.
Delayed licensing rounds for exploration projects in countries such as Angola, Equatorial Guinea, Ghana, Gabon, and Congo due to Covid-19 experts expect will be finalised and announced in 2022.
Egypt which was on the list of countries that had opened a licensing round at the height of the pandemic has closed bidding and awarded eight oil and gas exploration blocks to a number of firms including Eni, BP, Apex International, Energean Egypt, United Energy, Sipetrol, and INA.
“Africa’s oil and gas potential remains hugely untapped and increasing investment in upstream exploration can unlock the continent’s full energy potential,” according to the Africa Energy Chamber.
The Oxford Economics Africa analysts also suggests that Africa’s major grain producing countries like South Africa, Namibia, Mozambique, and Zimbabwe stand to benefit from favourable terms of trade shocks resulting from anticipated higher prices of cereals.
Already the Food and Agriculture Organisation (FAO) had in September last year projected that Africa would break its five-year record by 6%, to produce 218 million tonnes of cereals in 2021.
FAO’s quarterly Global Crop Prospects and Food Situation forecasts that cereal production in Southern Africa countries would rise 22% above the 2016-2020 average, to 40.6 million tonnes.
In South Africa, production of maize and other cereals like wheat is seen reaching 19.5 million tonnes, a 24% growth above last five-year average, which FAO says will be the second-largest harvest recorded over the period.
In Zimbabwe, the maize harvest has also increased to an above-average level of 2.7 million tonnes, nearly tripling the 2020 output level, as sorghum and millet production soars in the country.
Maize harvests in Malawi and Zambia, are estimated at 4.1 million and 3.6 million tonnes respectively this year.
Even North African countries – that are highly dependent on cereal imports from Ukraine and Russia – recorded positive grain harvest prospects.
FAO projects North Africa’s cereal production to grow its 2020 yields by 13.2% to 39.3 million tonnes and 5.8% higher than its five-year average.
Morocco’s wheat production is estimated to nearly triple 2020’s drought-stricken harvest to about 7.2 million tonnes while Egypt will produce an average of 23.8 million tonnes – similar to the five-year average but slightly less than last year’s 24 million tonnes.
“The importance of African imports from Russia is not so much in the magnitude as it is in the make-up – some African countries, particularly those in North Africa are highly dependent on cereal imports from Russia and Ukraine,” said Oxford Economics Africa.
UN Comtrade data shows Egypt as a top destination for Russian wheat exports valued at $7.3 billion while the North African country imports wheat and maize valued at $2.3 billion each from Ukraine.
Morocco’s wheat imports from Ukraine are valued at $857.4 million.
Other African countries that import wheat from Russia include Sudan ($1.32 billion), Nigeria ($1.29 billion) and Tanzania ($596.4 million).
/bird story agency