Implications of the Ukraine Crisis: Food, Fuel, Fertilizer and Freight Prices in the Southern African Region (July 2022) – Angola

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SUMMARY

• The Southern Africa region is considered to be one of the regions most affected by the knock-on effects of the Ukrainian crisis; The WFP estimates the projected additional increase in acute food insecurity in the region due to the crisis at around 10 million people in absolute terms1.

• Although governments are trying to curb soaring food and fuel prices through various measures (e.g. fuel subsidies, commodity price caps,

etc.), all countries tracked in the region have seen a year-on-year (year-on-year) increase in the cost of their food baskets ranging from 5 to 200 percent. As the region is a net importer of cooking oils, all countries tracked also experienced a large YoY increase in cooking oil prices (10-400%), and almost all countries experienced a YoY increase annual cereal prices.

• In May 2022, the top 4 countries that experienced the largest year-on-year price increases for the top 3 food items (i.e. cereals, pulses and cooking oil) and basket food were Zimbabwe, Malawi, the Democratic Republic of Congo (DRC) and the Republic of Congo (ROC).

• High world oil prices have led to increased freight rates and high domestic prices at the pump; comparing pre-crisis rates to current rates, WFP ocean freight rates to the region from other regions have seen an increase of 10-40%. As the impact of high freight costs trickles down to retail prices slowly and peaks after 12 months, the inflationary impact of high freight costs will likely continue through 20222 . By contrast, the pass-through of high world oil prices to pump prices is much faster and prices in the region have soared; 9 countries tracked in the region have seen their domestic gasoline prices increase in the past year and for 7 of them this is the 2nd consecutive year of gasoline price increases .

• With the impact of high food prices already being felt across the region, soaring fertilizer prices are a major concern for the upcoming agricultural season. Various fertilizer export restrictions currently affect almost all countries in the region, and with tight supplies, prices have soared in domestic markets (e.g. Zimbabwe, Malawi, South Africa and Tanzania saw their prices double year-on-year). While countries like Malawi have pledged to maintain the same budget for their agri-input programs this year as last, with high international prices and a declining currency, affordability of fertilizer could pose a challenge. important to agricultural production this year.

• With the exception of Angola and Zambia, most countries in the region see their currencies depreciate against the dollar on an annual basis, with Zimbabwe and Malawi having recently experienced a significant month-on-month depreciation. the other ; as a result, countries face higher import bills and worsening trade imbalances. As countries have been deeply scarred by the impact of the COVID-10 pandemic, they are not in good fiscal space to absorb additional shocks, and balancing budgets is becoming increasingly difficult for many countries.

• The impact of the Ukrainian crisis is currently being felt mainly in terms of access to food; however, high fertilizer prices and the possibility of food export restrictions or bans could cause this to become a food availability issue. Everything depends on the upcoming agricultural season, and close monitoring of the impact of the global food crisis on the region will be necessary.

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