Supply disruptions fueled by the Russia-Ukraine war along with a myriad of pre-existing factors, have affected the agriculture and mining businesses in Africa driving fertilizer and explosives prices to record high.
By Hillary Munedzi
It is all because of the high price of natural gas which comes from Russia which when converted into ammonia is used to produce ammonium nitrate, a key ingredient in fertilizers and explosives.
The mining industry relies heavily on explosives for extraction of ore.
In 2021, Russia was the world’s top exporter of nitrogen fertilizers and the second-largest supplier of both potassic and phosphorous fertilizers, according to the U.N. Food and Agriculture Organization.
The supply disruptions will affect Zimbabwe and other African countries that are facing persistent droughts due to climate change and this is a heavy blow to most African countries which are on the cusp of a financial revival from the pre pandemic days of COVID 19.
Russia has temporarily suspended outgoing trade, which will have a strong effect across global food markets since it accounts for 14% of global fertilizer exports.
‘’The major effect will be on pricing and the lead time to get raw materials into the country. Prices will be much higher so the country will need to increase the foreign currency it directs to fertilizer imports. Due to reduced availability and longer lead times production will need to take place much earlier than we traditionally do.
For example we need to start producing for the summer crop now so that we can meet the season.” said Dr Richard Dafana Managing director of Zimbabwe Fertilizer Company.
“I cannot give you price indications now because the market is still going up and there is no indication on where it will settle at. However, as a rough guide farmers should expect to pay double what they paid at this time last year, ”said Dr Dafana.
Zimbabwe demand for fertilizer in a normal and good farming season, is about 600 000 tonnes (both basal and top dressing ),of which 70% goes towards Government farming programmes and African countries have a massive reliance on food imports to supplement domestic production.
“Russia and Ukraine are major producers of wheat, barley ,maize and sunflower oil in the world.African countries imported agricultural products worth US$4 billion from Russia in 2020.About 90 percent of this was wheat ,and six percent was sunflower oil.
Major importing countries were Egypt ,which accounted for nearly half of the imports followed by Sudan ,Burkina Faso ,Tanzania ,Algeria, Kenya and South Africa. Zimbabwe imported 45 percent of its wheat requirements in 2021 from Russia.
Similarly, Ukraine exported $2.9 billion worth of agricultural products to the African continent in 2020.About 48 percent of this was wheat ,31 percent maize and the rest included sunflower oil ,barley and soybeans. So the war has an effect of disrupting trade in agriculture commodities and create food shortages on the continent, ”said Economist Victor Bhoroma.
The mining companies are in boom times but the big profits are being sliced by spiraling energy costs but recently the rising prices for the explosives used to blast into the rocks have risen caused by the war in Ukraine.
The price rises have added to a myriad of challenges since Zimbabwe want to reach a US$12 billion mining economy by 2023 but it seems to be a set back along with higher diesel cost ,energy and labor expenses ,narrowing their margins at a time the gold price is high due to the volatile global economy.
“Volatility of the global economy would buoy the price of gold as investors seek safe havens for their investments. Unfortunately ,the high price advantages would be off-set by some high input costs in the mining industry especially related to fuel and explosives.
The US$12 billion is a monetary number which is not supported by specific increases in production volume. When this number was coined, there wasn’t any anticipation of such price increases which we are experiencing at the moment.
This environment where some commodity prices are quite high like Nickel ,Palladium and gold accelerates a quicker attainment of the US$12 billion, said Mr Thomas Gono CEO of Golden Reef mining company.
