Many Africans are finding it hard to make ends meet as food and fuel prices keep rising, creating a cost-of-living crisis that could hamper the continent’s economic recovery.
The crisis is caused by a combination of factors, such as the global increase in oil prices, the COVID-19 pandemic, the effects of climate change, and domestic inflation and currency pressures. Some of the most affected countries are Nigeria, South Africa, and Kenya, among Africa’s largest economies and oil consumers.
Nigeria, which is Africa’s most populous country and biggest oil producer, saw its annual inflation rate soar to a staggering 25.8% in August 2023, the highest level in 18 years.
This surge in inflation was triggered by the government’s decision to remove petrol subsidies and exchange controls, which aimed to ease the pressure on its dwindling foreign reserves. However, these measures have backfired, as they have led to a sharp rise in the prices of petrol, electricity, food, and other essential services, affecting the ability of many Nigerians to meet their daily needs.
South Africa, Africa’s most industrialized country and second-largest oil consumer, is also facing its own challenges. The country has seen significant increases in petrol and diesel prices, mainly driven by the rising international oil prices.
These prices have increased since August due to reduced output by major oil-producing countries. The high fuel prices have added to the economic woes of South Africans, who are already dealing with rising prices of staple goods, low growth, high unemployment, and frequent power cuts.
Kenya, which is East Africa’s largest economy and third-largest oil consumer, is also feeling the pinch. The country witnessed a record high in fuel prices on September 15, following a revision by the energy regulator.
The retail price of a liter of petrol soared to over 200 Kenyan shillings ($1.36), adding to the existing cost-of-living crisis characterized by rising prices of basic goods, new taxes, and a weakening shilling.
The cost-of-living crisis is affecting not only individual households but also the continent’s overall economic performance and outlook.
The World Bank recently reported a slowdown in economic growth in Sub-Saharan Africa from 4.1% in 2021 to 3.6% in 2022, with projections pointing to a further decline to 3.1% in 2023. This deceleration is attributed to several factors, including the persistent sluggishness of the global economy, high but declining inflation rates, and challenging domestic and external financial conditions amid rising debt levels.
The cost-of-living crisis also threatens the continent’s food security and social stability, as millions of people face hunger, poverty, and violence.
According to the UN Food and Agriculture Organization (FAO), over 282 million people in Africa face acute food insecurity, which means they cannot meet their basic needs.
The FAO said multiple shocks and stressors, such as conflict, displacement, climate change, pests, and diseases, drive this situation. The FAO also warned that the situation could worsen in the coming months due to the impact of Covid-19 on livelihoods and markets.
The cost-of-living crisis also undermines investor confidence and sentiment in the continent, dampening the market uncertainty and volatility.
According to the African Development Bank (AfDB), foreign direct investment inflows into Africa declined by 16% from $47 billion in 2019 to $40 billion in 2020. The AfDB said this decline was mainly due to the COVID-19 pandemic and its negative effects on economic activity and investment decisions.
The AfDB also said that some countries experienced additional challenges like political instability, security threats, and exchange rate fluctuations.
The cost-of-living crisis requires urgent action from various stakeholders, such as governments, donors, businesses, and civil society organizations, to address its causes and consequences.
Source: Business InsiderÂ
