How war in Ukraine will hurt African business

I am a fan of Richard Quest, the CNN business presenter. On Wednesday the 23rd of February 2022 he reported on the beginnings of war in Europe. The disbelief, sadness and astonishment stamped on his face symbolize the feelings of most of the western world.

In between the untold human sufferings that currently occur in Ukraine and the unbelievable scenes of bombs dropping out of the sky from Russian weaponry comes a realisation.

The war is real, and it will impact every person in some way including millions of Africans.

Steven Gruzd is tasked with breaking down the Ukraine-Russia war, the local entrepreneurial impact, and the future of the globe. Gruzd is an author and the Head of African Governance and Diplomacy Programme at the South African Institute of International Affairs.

“I think the West underestimated Putin.”

 

Gruzd speaks on behalf of millions caught off guard, during the build-up to the iasion there always seemed to be an air of doubt.

Why did the west underestimate Putin? The answer is rather simple, his words were not taken seriously and his actions seen as second page news.

“He has not been afraid to use force before, since the late 1990s to now, with Chechnya, Georgia, Syria and Crimea.”

Each invasion signalled Putin’sintention and tested the West’s stomach for war. After each invasion next to nothing was done, possibly encouraging the current invasion, says Gruzd.

Yet, in a world where actions speak louder than words, Putin’s words may have marked his true intention.

From his expansionist  manifesto, written in 2021, to his frightening speeches before and during the war; Putin spelled out his objectives.

”Putindenied that there is or was such a thing as Ukrainian nationalism. “

But as the West was shocked, the Russian elite may be equally shocked by western unity, sanctions, and a will to apply economic pressure on Russia.

“When itcame, I think the West’s reaction has been swift and much more united than I think Putin, thought.”

From intentional airline restrictions on Aeroflot to S&P500 companies such as Apple, Visa, Google, and Twitter blocking usage, to the SWIFT payment ban, the sanctions read like economic torture.

As Russia’s economy begins to buckle, the war and sanctions will hurt back home.

South African entrepreneurs and local businesses are facing an ever-changing world.
The conflict impacts the local business environment in several ways.

Primarily, soaring oil costs are the driver of concern. In 2008 ,the price per barrel of oil reached a high of $147- it is likely to go past that this week.
According to Barron’s, economists’studies indicate a recession would’ve followedin the absence of the housing market crash. Record high oil prices were a key contributor to a recession in the 1970s.

This trend indicates possible future economic pain as dinner table conversations revolve around higher prices at the pump.

Business’s will see demand decrease as consumers have less intention for travelling and less income to spend.

“Oil prices will result in consumers simply having less disposable income to buy the products from an entrepreneur or to use their services. “
More so, high oil prices and higher inflation impacts the margins of most businesses as they struggle to pass price increase to consumers.

The other major negative impact is one not easily measured, confidence. Even though the war is thousands of miles away, the images from newsrooms and social media feeds,impact consumers negatively.

That icky feeling filling everyone’s thoughts is not good for spending.

Then there is the other side of a murky coin. Russia and South Africa are the top PlatinumGroup Metal producing countries in the world. As Russian sanctions continue with the difficulty or inability to buy Russian PGMs leads to a demand-supplyhole which South Africa can fill.

The length of the conflict is anyone’s guess.

“As seen in Afghanistan winning the war is the easy part, but holding the country is the difficult part.”

However, when one looks beyond the current conflict, the same question asked before the invasion must be asked again, what is Putin’s intention?

“According to Putin, the collapse of the Soviet Union was the greatest tragedy of the 20th century. It seems that he wants to restore the glory of Russia, to recapture lost lands.”

The West have misread the end of the Cold War. After 1991, the world burst into the digital age of the World Wide Web and mass globalization.

 

Was the West drunk on the very victory leading to this moment of ignorance?

 

“They went from being a superpower to being what Obama disparagingly called a regional power. That really upset Russia because it has grand ambitions. “

 

If Putin is true to his word, his ambitions may not only be Ukraine but rather the entire USSR sphere of influence.

 

If Churchill was with us,  would he once again refer to an iron curtain clanking down across Europe?

“That men do not learn very much from the lessons of history is the most important of all the lessons of history,”wrote philosopher Aldous Huxley.

Sadly, so true.