Eric Wainaina, a motorcycle taxi driver in Nairobi, Kenya, was already bracing for a loss in income when the rainy season hit in March, but the war on Iran, which erupted on 28 February, has also taken its toll.
Kenya is the latest in a series of African nations to experience the economic fallout caused by the United States and Israel’s assault on Iran, with rising energy prices leading to spiralling costs for businesses, small and large, across the continent.
Wainaina works six days a week, usually starting at 6:30am, to help support a wife and three children. Before the war, he would drive up to 180km a day, but now, due to rising energy costs, he covers only 90km, resulting in his monthly income dropping by half.
“We can’t work as much as we usually would because the price of petrol is so high,” he told Al Jazeera. Soaring energy prices have seen winners and losers on the African continent, with oil-rich nations enjoying huge windfalls, while resource-sparse nations are paying the price, resulting in mounting deficits and subsidy costs.
The crisis could see Kenya, which falls in the latter category, seek a loan of up to $600m from the World Bank, according to Bloomberg, as it attempts to shield its economy from the shocks of the global energy crisis. Fuel prices have already surged there, with the price of a litre of diesel rising during the war by 24 percent to about $1.60, with the higher cost of filling car and motorcycle tanks having a profound effect on Kenyans’ everyday lives.
“Normally, I’d get 20 to 30 customers a day, but now I’m getting fewer than 10,” said Wainaina. “Passengers can’t afford it anymore. I’ve had to significantly increase fares because of the rise in petrol prices and the wet season. Usually, I’d only charge slightly higher fares due to the heavy rain.”
If the situation doesn’t improve soon, Eric says he and his family might be forced to live on land inherited from his grandfather in the rural hinterlands of Kenya. He expects other relatives to do the same, even if it means making a new life in makeshift homes and a lower standard of living.
The Iran war has triggered what the International Energy Agency (IEA) describes as the most severe oil supply shock in history. Goldman Sachs estimates that the massive disruption of trade in the Strait of Hormuz, along with attacks on regional energy infrastructure, has reduced global oil production by 14.5 million barrels per day – equivalent to a 57 percent decline.
Despite being one of the world’s largest oil-producing regions – accounting for roughly 12 percent of global reserves – Africa still imports more than 70 percent of its refined fuel, according to the Africa Finance Corporation (AFC). This left many nations there, particularly those like Kenya with no or few biocarbon reserves, exposed to market volatility when the Iran war broke out.
Last month, the AFC warned that the continent is on course for an 86-million-tonne fuel shortfall by 2040, underscoring the widening gap between domestic production capacity and growing energy demands. Insufficient refining capacity is another of Africa’s biggest energy challenges.
Yet, Africa’s energy woes are not isolated to the continent but part of a wider trend affecting countries across the world, Amaka Anku, head of Eurasia Group’s Africa practice, told Al Jazeera. “When you have a global shock like this, it affects everyone. The media has this very narrow framing that Africa is going to be impacted the worst. However, rising inflation is hurting us all,” she said.
Nigeria, Africa’s largest oil producer and exporter, has benefitted from a surge in energy prices, boosting its export revenues. US investment firm Vanguard reported last month that Nigerian oil companies had earned a $4bn windfall from the rise in oil prices. However, Anku says Kenya is “quite exposed” to the economic fallout from the Middle East crisis, with the government already facing fiscal pressure ahead of next year’s general election.
Ebenezer Obadare, a senior fellow at the Council on Foreign Relations focusing on Africa, said that even if the US and Israeli war on Iran has caused financial hardship for some countries on the continent, many will maintain close ties with Washington due to the economic benefits from this relationship. “A massive shift by African countries towards other international partners seems highly unlikely, and it seems more probable that they will continue to weigh their options,” Obadare said.
Source: www.aljazeera.com