The Ukraine Effect

Although we are on the other side of the world from the Russia-Ukraine conflict, there will be fallouts for Africa from the war for some time and for decades to come. At present one of the most immediate effects has been the disruption of logistics, and in particular of global shipping and air cargo. Some shipping has been tied up in the Black Sea, but the main concern is that Ukrainian sailors contribute a considerable number to the world’s merchant navy. As they leave to defend their country, sea-cargo shipping becomes undermanned and contributes to the increasing costs and supply chain issues. Already there is a crisis with over 400,000 seamen of all nationalities trapped around the world by COVID restrictions according to the WTO. Air cargo is affected both by the rising cost of fuel and bans on overflying Russia and the conflict region. As it is 2 of the continent’s biggest carriers – South African Airways and Kenya Airways – are already under financial stress. A sharp hike in fuel costs will not help their financial woes.

The long-term effects will most probably be felt first in the availability of basic foods, like wheat. Russia and Ukraine are world leaders in the production of basic foodstuffs like wheat, barley, potatoes, corn, etc. Previously Ukraine was the principal supplier of these crops to the Middle East. Disruption of that supply will disturb the political balances of an already troubled region. Ukraine exported US$2.9 billion worth of agricultural products to the African continent in 2020. For Russia, the control of those food supplies would be of major strategic importance, but all will depend on whether the war is completed before the Spring planting season or continues to be waged for months to come. The longer the conflict, the greater competition for these basic foodstuffs, and the higher the prices will go.

For the ecommerce business in Africa, expect fuel costs to continue to increase and new challenges for supply chains for products from overseas suppliers. E-Merchants need to factor in these novel issues carefully to continue to provide products at competitive prices to customers. During the 2008 market crash, in the USA and Europe ecommerce continued to grow despite inflation because the leaders (like Amazon) understood the need to market the right products at the right price to consumers who were suffering from inflationary pressures on their wallets. At the time, I badly misread the economic shift, however, today I realise that we in ecommerce need to reconsider our marketing and procurement strategies very carefully to shield our businesses from the inflationary shock which is already evident in the global market.