It is no secret; the South African economy is under severe pressure. As inconvenient as it may be to leave home without electricity and then return home with no electricity; due to stage four, five or even six loadshedding, its impact is particularly felt due to slowed economic activity. 

Many businesses, without the capital to invest in alternative sources of electricity, remain idle during two-to-four-hour stints of loadshedding and are thus unable to sell or provide their services. This leads to reduced revenue, productivity and may lead to further job losses, further increasing unemployment, poverty and socio-economic inequality. 

These circumstances may have been tolerable if the geo-political, global landscape had not already been fraught with conflict and uncertainty. Adding to the uncertainty is the ongoing war between Ukraine and Russia which has had a massive negative impact on the global economy and more directly, on South Africa. 

The United Nations Development Programme (UNDP) released a Policy Brief during April 2022, titled, The Impact of the Ukraine War on the South African Economy. The policy brief links how the war impacts the South African economy: “With Russia being the world’s third-largest oil producer, second-largest natural gas producer and among the top five global producers of steel, nickel and aluminium, any significant reduction in energy supplies and metal shipments is highly likely to lead to soaring global prices for these commodities. For this reason, on the day the invasion began, financial markets around the world declined sharply, and the prices of oil, natural gas, metals and food commodities (especially grains) surged.”

The UNDP, in April, painted a stark outlook for the global economic growth, slowed economic growth that will particularly affect Sub-Sharan Africa: “The war carries significant risks to the global economy which was forecast to grow by 4.1% and 3.2% in 2022 and 2023, respectively. The moves in commodity prices and financial markets have seen since the outbreak of the war if sustained, could reduce global GDP growth by over 1% this year, and push global consumer price inflation by approximately 2.5%… For Sub-Saharan Africa (SSA) countries that had not yet fully recovered from the COVID-19 pandemic downturn, the Ukraine war will prolong SSA countries in recovering to their pre-crisis growth path. Higher food and energy prices are the most immediate source of risk to SSA countries and this will negatively impact poorer countries more.”

The UN provides further analysis of the impact the war has on the global economy. On the 1^st September 2022, the United Nations Department of Economic and Social Affairs (DESA) provided economic analysis: “Many developing countries are fighting an uphill battle to fully recover from the pandemic, with high inflation, rising borrowing costs and the slowdown in the major economies further hurting their growth prospects… In Africa, the slowing external demand from the European Union – its main trading partner, representing about 33 per cent of African exports – and waning monetary and fiscal support are constraining the recovery. Surging energy prices are benefiting oil-exporting countries, but net energy importers face rising pressures on current and fiscal accounts.”

According to PWC South Africa, we need to adapt economically for disruptions such as the war in the long-term. These adaptations however have the potential to negatively impact the South African economy: “South Africa’s economic growth rate is slowing to a long-term potential of 1.5% p.a. while the global trend is forecast at 2.6% p.a.. If these growth rates could be translated into the speed at which a car travels, South Africa would be driving at 60 km/h while the global average is driving above 100 km/h. Clearly, there are faster-growing markets (compared to the local economy) available to South African firms who are willing to look abroad. Offshore investment is nothing new for South African companies, and during the second quarter of 2022, the country recorded a record-high value of R222bn of outward merger and acquisition (M&A) deals. Dealmakers are adapting to a new business climate where inflationary pressures, rapidly rising interest rates, short-term volatility in financial markets, supply chain disruptions, and geopolitical tensions all appear to be developing into longer-term trends.”

There is a silver-lining to the dark clouds of war, with Biznewz.com reporting that: “Ukrainian food export is gradually easing, following months of the Russian blockade of Ukrainian seaports since 24 February 2022. Since 12 August 2022, five convoys of vessels have left with food. Under the Initiative on the Safe Transportation of Grain and Foodstuffs from Ukrainian Ports, signed on 22 July,…” This is an important development considering that the same article highlights that: “Approximately 12% of the continent’s [Africa’s] wheat imports came directly from Ukraine between 2018 -2020, so the mid to long term consequences are cause for concern, as ongoing food shortages will translate into elevated food costs and shortages.”

Admittedly, the current compounded economic woes we face in South Africa is not only due to the ongoing war between Ukraine and Russia, but much rather a combination of various factors worth more than a decade of troubles. From ongoing corruption and the amounts diverted from integral infrastructure development which would have built the economy, to inefficiencies, the global COVID-19 pandemic, incidents such as the July 2021 unrest in Kwa-Zulu Natal and Gauteng – which leave both international and local investors skittish about investing in South Africa – and our ongoing battles with reliable electricity supply; South Africa has suffered slow economic growth due to numerous factors. 

Global geo-political factors such as the current war in the Global North, which are beyond our control as a single nation in a tapestry of globalized economic interdependency, we should fortify our own economy against. We can only protect our economy against these regular, yet unpredictable economic shocks by creating an economy based on honesty, hard work, innovation and a reduction in economic inequality.

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