Dan Ukpabi
The ongoing war between Israel, Hamas, Hezbollah and by extension Iran and the middle East do have far reaching economic consequences for Africa.. Reviewing the aftermath of the Russian invasion of Ukraine and the sudden surge in cost of wheat and energy and this directly affecting the prices of various commodities in the African market is no more news.. and this has systematically continued.
Now a lot of uncertainty hovers around Israel’s move to retaliate against Iranian missiles attack on Israeli soil..as a result of Israeli assassination of Hassan Nasrallah Former secretary-general of Hezbollah being a fallout of Hamas gruesome attack on Israel October 7th 2023 in which over 1200 were murdered on Israeli soil..
Economic and market watchers understand that these are indeed challenging times for the world economic indices and especially the developing nations in the key area of energy..
African nations and businesses should stand guard but better still, do a recalibration of possible economic shock should there be an escalation of hostilities in the Middle East..
The question should be how best can businesses navigate the imminent foreseeable surge in energy and further spiral implications of this.
The economic implications for Africa due to the Russian-Ukraine war and the Israeli-Iranian conflict in the Middle East are far-reaching and complex.
Economic Impacts
- Food Security: Africa relies heavily on wheat imports from Russia and Ukraine, which could lead to shortages and price increases, particularly in countries with already strained food security like Lebanon ¹.
- Energy Prices: The conflict has led to rising oil and gas prices, affecting oil-poor countries like Lebanon, Palestine, Jordan, Yemen, and Tunisia, which may face economic difficulties and currency devaluation ¹.
- Inflation: Increased transport costs due to higher oil prices could lead to inflationary pressures, disrupting supply chains for essential goods and further unsettling fragile economies ¹.
Regional Vulnerabilities
- North African countries, especially Egypt, are vulnerable to economic shocks due to their dependence on Russian and Ukrainian wheat imports ¹.
- Sub-Saharan African countries may face indirect impacts due to global economic slowdown and trade disruptions.
- The Horn of Africa, already experiencing food insecurity, may face exacerbated humanitarian crises.
Potential Consequences
- Social unrest and conflict due to economic hardship and governments’ inability to address it.
- Reduced attention and funding for existing crises in the region, such as the Israeli Palestinian conflict, the Lebanese economic implosion, and the humanitarian catastrophe in Yemen ¹.
- Changes in regional alliances and diplomatic relationships, potentially reinforcing preexisting conflict dynamics.
Overall, the economic implications for Africa are significant, with potential consequences for food security, energy prices, inflation, and regional stability. - The economic implications of an Israeli retaliation against Iranian missiles on African countries would be significant. *Global Economic Impact*
- Trade Disruptions: Africa’s trade relationships with both Israel and Iran would be affected, potentially disrupting imports and exports, particularly in the agricultural and energy sectors ¹.
- Oil Price Hikes: An escalation in the conflict would lead to increased oil prices, affecting oil-importing African countries, which could result in higher production costs, reduced consumer spending, and potential inflation.
- Investment and Aid: The conflict might divert international attention and resources away from Africa, potentially reducing investment and aid flows into the continent.
Regional Vulnerabilities-
- North Africa: Countries like Egypt, with its significant trade ties to both Israel and Iran, would be particularly vulnerable to economic disruptions.
- Horn of Africa: Nations like Ethiopia and Eritrea, already facing economic challenges, might experience further instability and potential conflict spillover.
Potential Consequences
- Social unrest and conflict due to economic hardship and governments’ inability to address it.
- Reduced attention and funding for existing crises in the region, exacerbating humanitarian challenges. In the wake of the October 2024 Iranian strikes against Israel, the global economy is already facing uncertainty ¹. An Israeli retaliation would only exacerbate these concerns, with far-reaching implications for African economies.
Strengthening intra-African trade opportunities requires a multi-faceted approach. Here are key strategies:
Infrastructure Development
- Improve transportation networks (roads, railways, ports)
- Enhance logistics and supply chain efficiency
- Develop regional energy infrastructure
Trade Facilitation
1. Simplify customs procedures and reduce bureaucracy
2. Implement harmonized trade policies and regulations
3. Establish single windows for trade documentation
Regional Economic Communities (RECs)
- Strengthen RECs (e.g., ECOWAS, SADC, EAC)
- Enhance regional integration and cooperation
- Implement regional trade agreements
African Continental Free Trade Area (ACFTA)
1. Implement ACFTA to boost intra-African trade
2. Reduce tariffs and non-tariff barriers
3. Enhance trade in services and digital trade
Private Sector Engagement
- Encourage private sector investment in intra-African trade
- Support small and medium-sized enterprises (SMEs)
- Foster business-to-business relationships
Capacity Building
- Develop trade-related skills and expertise
- Enhance trade negotiation capacity
- Provide training on trade agreements and regulations
Financing Intra-African Trade
- Establish African Trade Finance Facility
- Provide access to affordable financing for traders
- Develop intra-African trade insurance products
Digital Trade
- Develop e-commerce platforms for intra-African trade
- Enhance digital payment systems
- Promote digital trade facilitation
Country-Specific Strategies
1. Identify and address country-specific trade barriers
2. Develop national trade policies and strategies
3. Enhance bilateral trade relationships
Regional Trade Agreements
- Tripartite Free Trade Area (TFTA)
- COMESA-EAC-SADC Free Trade Area
- ECOWAS Trade Liberalization Scheme
Institutions and Organizations
1. African Union (AU)
2. United Nations Economic Commission for Africa (UNECA)
3. African Development Bank (AfDB)
4. Regional Economic Communities (RECs)
Monitoring and Evaluation
1. Establish trade monitoring mechanisms
2. Track intra-African trade performance
3. Evaluate effectiveness of trade policies and agreements
Implementing these strategies will help strengthen intra-African trade opportunities, promote economic growth, and reduce poverty. Manufactured products are a crucial sector for Africa’s economic growth and development. Here are some key areas:
Priority Sectors:
- Textiles and Apparel
- Food Processing
- Pharmaceuticals
- Automotive Parts
- Electronics
- Construction Materials
- Chemicals
- Machinery and Equipment
Opportunities:
- Regional markets: ACFTA provides access to 1.3 billion consumers
- Global markets: Export-oriented manufacturing for global brands
- Local demand: Meeting domestic demand for goods
- Value addition: Moving up the value chain from raw materials to finished products
- Job creation: Manufacturing generates employment opportunities
Challenges:
1. Infrastructure constraints (energy, transportation, water)
2. Limited access to finance
3. Skills gap (technical, managerial)
4. Regulatory frameworks (tariffs, non-tariff barriers)
5. Competition from established markets (Asia, Europe)
Initiatives:
- African Industrialization Day (November 20)
- African Union’s Industrialization Strategy
- UNIDO’s Programme for Country Partnership (PCP)
- African Development Bank’s Industrialize Africa initiative
- Regional Economic Communities’ (RECs) industrialization plans
Key Players:
1. Governments (policies, regulations)
2. Private sector (investment, innovation)
3. Development partners (funding, technical assistance)
4. Research institutions (R&D, innovation)
5. Civil society organizations (advocacy, support)
Success Stories:
1. Ethiopia’s textile industry
2. South Africa’s automotive sector
3. Morocco’s aerospace industry
4. Kenya’s food processing sector
5. Egypt’s pharmaceutical industry
Future Outlook:
- Increased investment in manufacturing
- Improved regional integration
- Enhanced global competitiveness
- Growing demand for African products
- Job creation and economic growth
The deep truth remains that ONLY Africans can develop Africa through deliberate, practical and sustainable Intra African trade amongst the Nations of Africa both the big and small, the advantaged and the disadvantaged… this must strictly driven with one goal “Think Africa First”…
This, EXTEL Hunt Africa the pioneer trade facilitating Hub for Africa seeks to achieve with its vision”to facilitate intra African trade to reach 50% by the year 2030″