1<\/a>\u00a0<\/p>\nOur analysis showed that Senegal, Benin, Eritrea, Burkina Faso and Zambia could experience the greatest economic shocks from the current period of elevated oil prices, as measured by their baseline import cover ratios, projected drain on international reserves, and the incremental oil cost as a percentage of GDP.\u00a0<\/p>\n
Zimbabwe, for example, is a landlocked nation that imports all of its oil products. With oil prices rising from USD 70.69 per barrel at the end of January to\u00a0USD 85.41 per barrel as of 5 March, the country\u2019s annual import bill could rise by an estimated USD 195 million, according to our modelling, which assumes import volumes remain constant. Higher oil prices mean Zimbabwe risks depleting its international reserves, which were already low before the crisis, equating to less than one month of its total import bill.<\/p>\n
As is the case in other countries with low reserves relative to total imports, Zimbabwe may experience ongoing currency depreciation pressures.\u00a0<\/p>\n
If oil prices surge further to USD 100 per barrel, the risk to large economies becomes material as well. South Africa\u2019s oil product import bill could rise by USD 6.1 billion per year, should import volumes hold steady, implying a notable drain on reserves, which totalled USD 65.4 billion in 2024,\u00a0per the World Bank. (However, these calculations do not take into account the potential boost to reserves that would come from higher gold prices in nations that export bullion, including South Africa.)<\/p>\n
Under this high-price scenario of USD 100 per barrel, Sudan and Uganda would see their import cover decline to risky levels, which is\u00a0generally considered to be less than three months.\u00a0<\/p>\n
The nine countries in the region that are already in this high-risk category will see their import cover ratios decline towards zero, while others, including Tanzania and Cote d\u2019Ivoire, will drop near the threshold.\u00a0<\/p>\n
Rising import bills for oil products could lead to higher domestic inflation due to weakening currencies and increased costs for transport, food and other goods.<\/p>\n
Recent history supplies examples of what might happen. South Africa\u2019s annual inflation rate surged in the months after Russia invaded Ukraine and sent oil prices higher. Inflation\u00a0increased 2.1 percentage points\u00a0(from 5.7% to 7.8%) in just five months, with\u00a0food inflation reaching 10.1%\u00a0by July 2022, driven by grains, cooking oils, and fish and meat.<\/p>\n
This ultimately led to higher borrowing costs as well. To counter inflationary pressures, the country\u2019s central bank lifted interest rates\u00a0by 4.25 percentage points\u00a0in the 15 months after the Russia-Ukraine war began.\u00a0<\/p>\n
A similar scenario could play out if oil prices remain high during the current conflict in the Middle East. Traders already\u00a0expect that South Africa\u2019s interest rates will be raised\u00a0in the months ahead, whereas they had expected cuts before the war started. Further,\u00a0fuel prices are expected to rise dramatically\u00a0owing to the weaker South African rand and higher oil price.<\/p>\n
The combination of high inflation and high borrowing costs would be a blow to households and businesses across Sub-Saharan Africa, and emphasises the need for governments to reduce their reliance on volatile global fossil fuel markets.\u00a0<\/p>\n
While the region\u2019s risk exposure is currently dominated by oil imports, some countries plan to start purchasing large volumes of liquefied natural gas (LNG) as well, which could exacerbate future shocks. South Africa, for example, aims to develop\u00a0an LNG import terminal\u00a0and a\u00a0fleet of gas-fired power plants. This is despite\u00a0long lead times\u00a0and rising costs for gas turbines globally.<\/p>\n
This is an unnecessary risk, according to a recent analysis by Ember, which shows that solar, paired with battery storage,\u00a0outcompetes gas in sunny countries like South Africa, particularly when the fuel must be imported. The two technologies alone could feasibly cover 95% of the power requirements of the country\u2019s largest city, Johannesburg, per Ember\u2019s modelling.<\/p>\n
In January 2024, Ethiopia announced a ban on imports of vehicles powered by oil products to support the government\u2019s objective to\u00a0reduce its substantial fuel import bill. To promote electric vehicle purchases, Ethiopia offers tax exemptions and has worked to encourage local EV manufacturing.\u00a0<\/p>\n
EVs now account for\u00a0nearly 6% of all vehicles on the road\u00a0in the country, which is well above the global average of 4%.\u00a0<\/p>\n
Aside from reducing their exposure to global oil market dynamics by electrifying their transport networks, Sub-Saharan African nations can shield themselves from gas supply shocks by favouring renewable energy paired with battery storage over gas-fired power plants.<\/p>","protected":false},"excerpt":{"rendered":"
As a\u00a0net importer of oil products, Sub-Saharan Africa will not be immune from the fallout of the ongoing conflict in the Middle East. After US and Israel strikes killed Iran\u2019s Supreme Leader, Ali Khamenei, Iran responded by\u00a0closing the Strait of Hormuz\u00a0and launching strikes against major oil and gas infrastructure in\u00a0Saudi Arabia,\u00a0Qatar\u00a0and elsewhere.\u00a0 Iran is effectively […]<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-133580","post","type-post","status-publish","format-standard","hentry","category-uncategorized","entry"],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/chezaspin.com\/blog\/wp-json\/wp\/v2\/posts\/133580","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/chezaspin.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/chezaspin.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/chezaspin.com\/blog\/wp-json\/wp\/v2\/comments?post=133580"}],"version-history":[{"count":0,"href":"https:\/\/chezaspin.com\/blog\/wp-json\/wp\/v2\/posts\/133580\/revisions"}],"wp:attachment":[{"href":"https:\/\/chezaspin.com\/blog\/wp-json\/wp\/v2\/media?parent=133580"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/chezaspin.com\/blog\/wp-json\/wp\/v2\/categories?post=133580"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/chezaspin.com\/blog\/wp-json\/wp\/v2\/tags?post=133580"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}