Impact of Russo-Ukraine conflict on Zim economy

THIS month, researchers at Jotter working with Friedrich Naumann Foundation, conducted a study on the impact of the Russia-Ukraine conflict on various aspects including the economy on Zimbabwe. Below we publish part of the research report and key recommendations:

About 78% of the survey participants expressed that the crisis has led to disruption in Zimbabwe’s domestic economy. The Ministry of Finance and Economic Development revised the projected economic growth downwards from 5,5% to 4,6%. The downward revision is attributed to exogenous shocks such as the Russo-ukraine crisis and rising global inflation.

Increase in fuel pump prices

before the invasion of ukraine, diesel and petrol prices were pegged at $1,44 per litre, however due to increase in crude oil prices, fuel prices increased to $1,90 per litre. Zera has attributed these price hikes to global sanctions crippling Russia’s ability to export crude oil following its invasion of ukraine. Difficulties in exporting crude oil has invariably had multiple ripple effects because oil is a universal intermediary good that influences the costs of commodities and services, as well as transport costs.

Services interruption

Zimbabwe-based telecommunication companies use fuel generators to avoid network interruptions during times of power outages, whilst relying on foreign supplies to ensure uninterrupted service delivery yet charging their services in the fragile Zimbabwe dollar. This has led telecoms to hike broadband data tariffs in line with fuel cost and currency depreciation. The Postal & telecommunications Regulatory Authority of Zimbabwe (Potraz) projected price hikes to increase by 61% from September to November 2022. Price hikes in broadband data are expected to affect the internet penetration, threatening access to information and virtual trading

High rise of inflation

The country is a net importer of goods and services hence domestic prices have a huge foreign cost component making it highly prone to global fluctuations. As such, the rising global food and energy prices are resulting in imported inflation. A participant expressed that: “Inflation has reached a 40-year high period in the uSA and Eu, adding to the already high inflation rate in Zimbabwe. The presence of imported inflation is being caused by the procurement of commodities from countries with high rates of inflation”The country's runaway inflation fuelled by the war in ukraine and soaring commodity prices increased from 66,11% in February 2022 to 280% in october 2022, recording an increase of 218,89% eight months into the war.

Sectors affected

transportation: Increase in fuel import prices as well as fuel products and related purchasing costs has resulted in the subsequent rise of most major domestic goods as well as industrial products tourism: The number of tourists freely moving from Europe to Zimbabwe decreased due to widespread fears and uncertainties in airline travel prices. •Energy

regulation: Higher energy and fuel prices has resulted in high cost of living. The recent rise in public transport systems is directly attributed to the fluctuating prices in the crude oil and fuel prices

Health: The recent upset in geopolitics particularly between Russia and ukraine has exposed the inefficiencies of the Zimbabwe donor dependant public health system. Zimbabwe is a signatory of the Abuja declaration, however, it has been falling behind on its commitment to avail funds for the health sector and is dependent on donor aid to finance the health sector.

Regional analysis

An analysis of implications of the ukraine crisis in countries located within the

SADC region was conducted and findings are presented in the table above.

Significance anti-Russia vote

The majority of respondents identified a demonstration of allegiance and loyalty to Russia as the main significance of the anti-Russia vote. The reasons they specified as the root of this allegiance were varied and could be grouped into the following which are listed according to popularity:

•“Russia

Fear of retaliation from Russia

is a military state that priorities loyalty over diplomacy thus any act that seems to diverge with what it expects is declaration of war which many fear and are not prepared for.”Another respondent also added that, “There is a political risk for countries that vote against Russia as Russia has threatened to punish those who get involved [KII with ZNCC economist]

•Strategic move to keep in Russia’s good books It avoids creating sour relations with Russia”

A hope to benefit from the ongoing war “They are waiting to benefit from this in the long run.”

•A

belief that Russia is not solely to blame for the war. one respondent added that, “They saw that to some extent the conflict was caused by both sides and uN was supporting one side without looking into the pleas of Russia hence uN is inefficient and ineffective to some extent. This can probably be proved if a closer look is taken into matters the uN never addressed concerning the countries which abstained from the anti-Russia vote.”

Forty-three of the respondents also expressed that Zimbabwe abstained from the Anti-Russia vote because the Zimbabwean foreign policy is mainly centred on engagement and re-engagement with western and Eastern Europe. It can be noted that Zimbabwe taking a stance of being a friend to all and enemy to none avoids tainting her efforts as a small country to re-engage.other respondents expressed that abstaining from the vote was a strategic move by Zimbabwe to remain in good books with Russia because the country imports most of its core raw materials (wheat, fuel, gas, oil and ammonia) from Russia. This move is interpreted as an informed decision of declaring neutrality for future trade interests and political engagements.

Access to information

Participants were asked where they access news and updates on the crisis. Participants were also asked whether or not they get adequate, valid and reliable information from the mentioned platforms. The responses are recorded below

Participants who revealed that they do not access to credible and adequate information attributed it to limited access to internet sources that air news and updates and information biases, calling into question information brought about by war journalism in both countries. In an FGD, participants were quoted saying:

“Credible sources of information are there but access is largely dependent on internet penetration or access to DStV news channels. Local tv channels and radio stations barely talk about the crisis anymore”

other respondents expressed that they feel the information they get is adequate however not valid and reliable. Validity and reliability are compromised biases and propaganda. In an FGD, participants were quoted saying: “I don’t think the information I am getting is adequate because it is pro-west hence bound to have bias”

Another respondent expressed that: “Most news sources just want to attract listeners therefore they push conspiracy theories that keep us on their channels rather than the truth”

Another respondent added that “it is a prolonged propaganda war. Russia wants its home country to support the war and ukraine wants international support hence both sides are pushing its own narrative”

Survey participants were asked how often they access information (responses are recorded in fig1) and how often they use the internet to keep up to date with global news (responses recorded in fig2)

Recommendations

Key recommendations identified through the survey are listed below: Domestication of production manufacture of oils and fuels. According to the latest statistics released by the Zimbabwe National Statistics Agency (Zimstats), 19% (uS$133 million) of Zimbabwe’s monthly import bill goes to motor vehicles and the petrol and diesel to fuel them. Localised production is predicted to save scarce foreign currency and contribute to the country’s GDP

Exploring a wide range of fertilizers Zimbabwe currently imports ammonia from Russia which is utilized in the production of ammonium nitrate essential in improving crop yields. Ammonium Nitrate is an essential fertilizing compound, however there are other alternatives that can be explored such as the strengthening and capacitating local companies to produce indigenous fertilizers •Zimbabwe

Standardisation of one single currency

is currently a multi-currency state which utilizes up to five currencies (South African Rand, united States Dollar, Zambian Kwacha, Zimbabwean dollar and Pula from bostwana).

Multi-currency standardisation was identified as one of the main causes for unstable exchange rates and currency fluctuations. Standardisation of one currency has the potential to instil Investor confidence and improve the nation’s bargaining power in the international economy.

Amendment in the provisions of edu•cation

5.0

Survey participants expressed that although education 5.0 is quite extensive, it does not offer a wide range of practical and cutting edge programs which are relevant in the current era of technological innovation. The amendment would offer students a wide range of courses to study, preventing migration and brain drain Agro-based opportunities for Zimbabweans

The Russia-ukraine war presents opportunities specifically where the increase in food prices and reduction in oilseed production is concerned. There is an increased demand for crops that Zimbabwe can produce, such as groundnuts, sunflower, and soya beans, for processing into edible oils, with the by-product can be used as animal feed into other industries. The demand creates an opportunity for Zimbabwean youth to venture into agro-prenuership as they producing crops for export.

Conclusion

and

Youth perceptions on the Russo-ukraine crisis indicated perhaps forgotten effects of the crisis. besides economic, social and political negatives, individual lives were disrupted with career choices being forcibly changed, the chance for quality education taken away as well as freedom to migrate legally and peacefully.

Consequences of the crisis have not only affected Zimbabweans but have had negative effects in countries in the Sadc region as well.

Recommendations from the survey explore in detail the advantages of selfsufficiency and opportunities presented by the crisis that can be explored by Zimbabwean youth.

Forty- three percent of the respondents also expressed that Zimbabwe abstained from the Anti-Russia vote because the Zimbabwean foreign policy is mainly centred on engagement and re-engagement with western and Eastern Europe. It can be noted that Zimbabwe taking a stance of being a friend to all and enemy to none avoids tainting her efforts as a small country to re-engage.