Russia’s aggression in Ukraine has had far-reaching consequences beyond the front lines. Empirical data shows that Egyptian enterprises exporting agricultural produce have lost a big part of their revenues because of the war. According to researchers, it may create food price inflation and even jeopardise food security.

Over the past two decades, Russian and Ukrainian demand for imported food commodities has grown. This has offered opportunities for many African countries to export fresh fruit and vegetables. Egypt, Kenya and Morocco, in particular, increased their shares of the Russian and Ukrainian markets. But then came the war. Ports were closed and demand fell for agri-food imports from African countries.

In a newly published peer-reviewed article External link, opens in new window., researchers examine the perceived risks and observed the impacts of the war on 450 small and medium-sized agri-food enterprises in Egypt.

Not all of those enterprises export to Russia or Ukraine, but they still face indirect consequences from the war. For instance, agri-food production often needs fertilizers. Russia is the top producer of natural gas. which is an important component of the ammonia and urea used in the fertilizer industry. The war has inflated the price on fertilizers, which affects the Egyptian agricultural firms. Instability in foreign exchange rates is another factor in the increased expense.

“We found that the war has posed an additional disruption to agri-food value chains in Africa, occurring at a time when many of these chains were still contending with the consequences of the Covid-19 pandemic”, notes Assem Abu Hatab, a development economist at the Nordic Africa Institute.

The research shows that in the early months of the war, 75 percent of the 450 companies lost a significant proportion of their revenues.

Agri-food companies in Egypt operate in a difficult economic environment, with limited access to capital, inadequate infrastructure and regulatory complexities. In addition, how well Egyptian agricultural enterprises perform, or even their survival, depend on global market prices and trade agreements. These factors make them vulnerable to external shocks, such as the global Covid-19 pandemic or, in this case, the war in Ukraine. Therefore, Abu Hatab explains, a sudden reduction in revenue could have severe consequences for these companies.

Several enterprises have been forced to lay off staff. Export-oriented companies, unlike those which serve the domestic market, have a greater number of skilled staff who were specially trained by the companies. That is now a lost investment.

Small and medium-sized agri-food enterprises are an important link in the food sector supply chain for low- and middle-income countries. When that link is broken, it jeopardises food security and livelihoods.

“When African producers and exporters, without adequate storage facilities and with limited scope to switch markets, now find themselves with commodities they cannot export it will likely have an effect on livelihoods and food security”, Abu Hatab points out.

TEXT: Johan Sävström