The biggest way in which the war in Ukraine has affected South Africa's the economy has been through the energy crisis. Other economic effects could still be avoided but only by a sheer stroke of luck, argues Nhlanhla Cyril Mbatha.
With around 200 000 people dead and about 600 people dying daily, Russia's war on Ukraine, which began a year ago, is only now reaching its most intense ground fighting.
The arguments put forward about why this is happening in 2022-'23 and the global responses to it have been varied. From Russia, the main argument initially centred around efforts to stamp out neo-Nazism in Ukraine.
The debate then shifted towards the threat posed by the North Atlantic Treaty Organisation's (NATO) expansion in countries sharing a border with Russia. These arguments have, however, been debunked by other geo-political events that took place in 2022. These include the joining of NATO by neighbouring Finland and Sweden.
Future destroyed
What is also more apparent now is that this war is Russia's contemporary national project. It is about advancing Russia's geo-political, economic and cultural identity interests. All these are driven by Russian President Vladimir Putin's perceived and imagined unfavourable global geo-power relations.
It has also become more evident that the war is not supported by most of Russia's younger generations. They argue that the war only destroys the future they desire.
Reactions to Putin's actions have also been divided on the continent. Ghana and Kenya have explicitly opposed the war. Eritrea, on the other hand, has supported it. And then there have been "fence-sitting" silent supporters, like South Africa, whose foreign policy position has not been neutral in practical terms.
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The government's failure to condemn the blatant violations of international protocols at United Nations' platforms and elsewhere and the failure to condemn the war crimes committed inside Ukraine amount to silent support for Russia's aggression.
But in evaluating the rationality of such a political strategy, we have had to answer historical, philosophical and socio-economic questions, at least with respect to what expected costs or benefits would be forthcoming for South African citizens from the position taken by this government.
African economies integrated
Market evidence might make economic evaluations somewhat easier than political assessments, given the economic sanctions imposed by many European Union (EU) and NATO member countries on Russia after the war began. But even the economic evaluation would not always be simple, especially because African economies have become more integrated across regional trading blocks.
The war began at the tail end of Covid-19 lockdowns, so its negative economic impacts would naturally run deeper by suppressing most of the economic recovery efforts after 2021.
The war effects would also be felt deeper on the whole continent than in South Africa, partly because before the pandemic and the war, other African countries' trade links with both Ukraine and Russia were much stronger than the links between the two countries at war and South Africa. For example, total imports from Russia to South Africa were only 10% of total imports to Sub-Saharan Africa. Imports from Ukraine to South Africa were much less at 2% of imports to Sub-Sahara Africa from the same country. So, the disruptions of trade flows of imported products from the warring countries would be felt more in other African countries than in South Africa.
Wheat grain import disruptions to African countries became a devastating case in point throughout 2022. But with economic difficulties felt throughout Europe, South Africa would carry a bigger economic burden because South Africa's total exports value to the EU was always almost half of the exports to the EU from other Sub-Saharan countries combined.
In this sense, the effects of the war would have a more significant negative impact on South African exporters (and associated workers) compared to the rest of the continent.
Impact of China's non-involvement
The redeeming feature for all African countries has been China's non (direct) involvement in the war. This is because China has become the biggest trading partner of the whole of Africa in the last 15 to 20 years.
Russia's trade value with Africa (at 1.5%) is almost insignificant relative to that of China. In fact, social and economic developments in China have become the most important for Africa's socio-economic well-being. It has been crucial for Africa that China stays clear of this conflict.
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Despite this, Russia's war on Ukraine has still had real negative impacts on Africa as a whole.
This has been the case not only with respect to wheat imports for Africa but also with other traded products for South Africa. After the war began, the value of South African exports to Russia dropped by more than 30%, while imports fell by just under 10%.
Nevertheless, with alternative markets such as the US, China and Germany, South African exports increased through trade diversion, although by a smaller margin compared to the Covid-19 recovery of 40% from 2020 to 2021. Outside traded products, global and regional markets were severely affected by sharp rises in gasoline prices. These were felt by every South African citizen from March to July 2022 especially. Consumer prices followed suit, increasing sharply from March right until December 2022.
Fortunately, European market adjustments brought some of these price increases under control from October 2022. In addition, the resilience of South Africa's economy ensured a mixed bag of indicators throughout the crises that included local electricity supply challenges and damaging floods in KwaZulu-Natal.
War's additional pressure on an already struggling economy
Even with energy and general consumer prices going up, South African consumers increased their spending slightly compared to 2021 levels, while consumer confidence remained negative. Spending through bad economic times, unfortunately, cemented high consumer debt to GDP levels. These increased sharply from early 2022 until July 2022.
The same applies to government debt to GDP levels, which stem from public spending levels that are higher than GDP growth levels. Against this economic background, the war has only put additional pressure on an already struggling economy and poor fiscus management.
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In sum, the biggest way in which the war has affected the country's economy has been through the energy crisis.
Other economic effects could still be avoided but only by a sheer stroke of luck. The insignificant size of trade links between South Africa and Russia is one of them. For the continent, China's strategy of steering clear of the conflict has been the biggest saving grace.
To have suffered relatively minimally compared to other countries on the African continent has not been the doing of South Africa's foreign policy. This is bad news for citizens who desperately need sound political and economic leadership.
It is, however, still fair to say that even if the government had vehemently condemned Russia's war, the economic effects would still have been the same. But given that most of this country's business is done with Europe, the US (and only recently with China), rationally, the South African government should be valuing more the economic well-being of citizens by aligning its foreign policy with its economic posture. Failing to condemn Russia does not do this.
What is even more important is that the country's constitutional democracy is founded on democratic values and respect for human life, which are owed to political and economic struggles for freedom and justice. Hence, the failure of government leaders to directly condemn the atrocities and war crimes committed by Russia displays the strongest forms of hypocrisy and political cowardice. Both these are morally bankrupt attributes. This occurring on the back of the country's mismanagement only implies the failure to govern by the current ANC leadership.
- Professor Nhlanhla Cyril Mbatha is director of the Rhodes Institute of Social and Economic Research.
Link to Article - https://www.news24.com/news24/opinions/fridaybriefing/nhlanhla-cyril-mbatha-sa-should-align-its-foreign-policy-with-its-economic-posture-heres-why-20230223-2