Africa: How the Ukraine War Ends, and Implications for Africa

ANALYSIS
By Jakkie Cilliers

Four global scenarios capturing all reasonable outcomes show why rapprochement between the West and China is vital.

The war in Ukraine and the related intensified competition between the United States (US) and China loom over every international relations discussion. How might the war end, and how will these scenarios affect Africa?

Projections for the next 20 years by African Futures and Innovation at the Institute for Security Studies show that Africa’s economic growth is unlikely to deliver commensurate standard-of-living improvements. The prospects become even worse when the impact of the Ukraine conflict is considered.

Although Africa represents only 3% of the global economy, its large and poor population (17% of the world’s total) means the continent is deeply affected by the war that has already impacted food and fertiliser supplies and prices.

As fighting continues, resources will be diverted from Africa, including aid, investment and humanitarian relief. Already the International Monetary Fund and World Bank regularly revise their growth and poverty alleviation estimations downwards, referring to the potential of a lost decade.

Instead of heading towards a sustainable world in which Africa could flourish, lower global growth will hinder income advances and poverty reduction. Africa must grow rapidly to close the increasing gap in average incomes relative to the rest of the world. Chart 1 includes the history and a forecast of gross domestic product (GDP) per capita for Africa compared to the average for the rest of the world by 2043.

From 1963 to 2022, Africa’s economy rose at an average rate of 3.5%. Because it has a young and rapidly expanding population, the 3.5% translated into less than 1% average improvement in GDP per capita. Meanwhile, average economic growth rates in the rest of the world were slightly lower, at 3.3%, but lower population increases translated into more than double the GDP per capita growth rate.

The continent will suffer if current efforts to instrumentalise Africans in this divided world continue

The ISS’ Current Path forecast is that Africa’s economy will expand by a healthy 4.5% from 2024 to 2043 compared to a 2.3% average for the rest of the world. But because of rapid population expansions, 4.5% will translate into GDP per capita growth of only about 1.5% annually in Africa and marginally less in the rest of the world. The main reason is that while the continent’s population will expand by 2.2% annually, population growth will be below 0.5% in the rest of the world. The result is no catch-up.

Once we factor in the impact of the Ukraine war, the forecasts become more pessimistic.

Modelling up to 11 sectoral scenarios for each African country enables a projection of Africa’s development potential in four global scenarios. In an ideal Sustainable World, pursuing the Sustainable Development Goals sees Africa’s economy growing at 7.5% by 2043. This is admittedly an almost impossible target, considering that no nation, not even China, has achieved the annual rates this would require. The Ukraine conflict makes reaching a Sustainable World even more doubtful.

No one knows how the fighting will end, but scenarios help explore the implications of various alternatives. Three other global scenarios capture all reasonable long-term outcomes.

Chart 1: History and forecast of GDP per capita for Africa and the rest of the world, 1963 to 2043

Chart 2: Scenarios for how the war in Ukraine ends

(click on the charts for the full size images)

In a Growth World, countries focus on rapid improvements in income and returns on investment, eschewing environmental concerns. A Divided World, perhaps closest to the current trajectory, is characterised by global fracturing, populism, nationalism and a retreat from globalisation. In a World at War, competition between the West and China dominates the world economy, politics and relations – with violent outcomes. Africa suffers most in this scenario, shut out of any prospects for rapid development.

An African scenario complements each of these global scenarios, premised on the extent of regional economic integration and Africa’s relations with countries and regions such as China, the European Union (EU) and the US.

Chart 2 presents four ways the Ukraine conflict could end, associated with the four global scenarios above. In the Sustainable World, it culminates in a negotiated agreement brokered by China and others. Ukraine’s territory is restored to its pre-2014 borders, and it joins the EU but not the North Atlantic Treaty Organization (NATO). This is the best scenario for Africa and would cause the least disruption to its growth potential and development needs.

In the Divided World, a Republican US president ends military support for Ukraine. Europe partly fills the gap, but Ukraine’s war effort is weakened, resulting in a punishing stalemate. Germany leads in forcing Ukraine to negotiate. Ukraine cedes Crimea to Russia, but as a guarantee for its security, joins NATO and the EU.

The World at War comprises a series of overlapping violent conflicts. The Ukraine conflict morphs into one between NATO and Russia. With China’s support, Russia averts military and institutional collapse. While NATO is focused on Russia, China occupies Taiwan. India eventually confronts an assertive China as the two Asian giants collide. Suffering significant military losses in Europe and during efforts to defend Taiwan, the US turns inward and leaves NATO. Its great power stature is severely eroded.

In the Growth World, the fighting ends through Chinese/UN mediation. Ukraine loses Crimea and must accept neutrality, joining neither the EU nor NATO. The world moves on as growth in the global south accelerates. Russia becomes an economic vassal of China, increasingly concerned about the threat of encroachment in the East. International focus is on economic growth until the impact of climate change forces humanity to confront an even larger foe.

Fully implementing the AfCFTA can unlock more rapid growth than any other scenario

Our modelling suggests that even in the Sustainable World scenario, Africa would still have 127 million people living in extreme poverty by 2043. The World at War scenario is much bleaker, with almost 200 million Africans facing extreme poverty in 2043.

Africa has come a long way but will struggle to fully realise its potential. Since 1960s independence, African countries have gained less than other regions from globalisation and the associated expansion of trade, knowledge and financial flows. Eventually, the commodities boom, not the economic growth objectives in the Lagos Plan of Action (1980) or the Abuja Treaty (1991), changed Africa’s prospects.

From 1994 until 2008 (when the financial crisis hit), the continent experienced its most sustained growth. The average growth rate was 4.6% annually, and per capita income increased by 35%. However, high levels of inequality and rapid population growth meant the share of Africans living in extreme poverty decreased by only about five percentage points.

Africa needs global stability. It needs a rapprochement between the West and China, and it must take control over its growth agenda. The continent will suffer if current efforts to instrumentalise Africans in this divided world continue.

Africa needs debt relief, Chinese trade and investment, expanded relations with the EU, capital from the US and more trade with the rest of the global south. It needs an agricultural revolution to ensure food security and accelerate trade integration to provide a larger, more attractive domestic and foreign capital market. Fully implementing the African Continental Free Trade Area agreement can unlock more rapid growth than any other scenario.

Meanwhile, as the elephants fight, the grass suffers.

Jakkie Cilliers, Head, African Futures and Innovation, ISS Pretoria

Source: https://allafrica.com/stories/202304180286.html

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