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Opinion: The economic impact of the Russia-Ukraine crisis

07 March 2022 | Story Sanet Madonsela | Photo supplied

SanetMadonsela_web read more — Sanet Madonsela is a PhD Candidate in the Centre for Gender and Africa Studies. She is also the Chairperson of the South African Association of Political Science's Emerging Scholars Research Committee and the Projects and Events Coordinator for the International Association for Political Science Students

Opinion article by Sanet Madonsela, PhD Candidate in the Centre for Gender and Africa Studies, University of the Free State.

On the 24 February 2022 the world woke up to the news of Russia announcing its’ “special military operation” to “demilitarise” and “deNazify” Ukraine. This announcement was followed by a sophisticated, all-out attack by land and air. As Russia began its invasion, the rest of the world watched in anguish, contemplating the unavoidable international political and economic implications.

There are competing views as to why Russia invaded Ukraine. Some argue that the attacks were based on Ukraine’s desire to join NATO, while others link the invasion to the Minsk agreements. The Minsk agreements are two treaties signed in 2014 and 2015 aimed at ending the war in Donbass. To provide a bit of context one needs to go back to 2014.

Resolution to recognise Donetsk and Lugansk

Moscow was angered that its candidate lost Ukraine’s presidential mantle in elections in 2014. This resulted in Donetsk and Luhansk announcing their autonomy from Kiev. In September of that year the government of Kiev and the separatist leaders agreed to a 12-point ceasefire called Minsk I. Despite the signing of the agreement, the fighting continued resulting in Russia, Ukraine and the Special Monitoring Mission of the Organisation for Security and Co-operation in Europe (OSCE) signing Minsk II. The agreement called on Ukraine to control the state border, constitutional reform and decentralisation. Despite an election held in 2018 in the eastern regions, the US and the EU have refused to recognise the legitimacy of the vote, thus, violating the agreement. The OSCE has reported significant daily increases in ceasefire violations in the affected areas since February 2014. While the US is not a signatory, it has expressed the importance of implementing the agreement. Instead of accepting the existing agreement, Ukraine allegedly never implemented its provision thereby incensing Moscow as well as ethnic Russians in Ukraine.

On 16 February 2022, the Russian parliament adopted a resolution requesting Putin to recognise Donetsk and Lugansk. This agreement was signed on 21 February 2022 and followed by a request to deploy armed forces. Inevitably the conflict dynamics have escalated.

While some believe themselves to be immune to the conflict, economists warn that it will have far-reaching global consequences as armed conflict tends to disrupt supply chains and increase the price of food and gas. They predict a further increase in oil prices per barrel as Russia is the world’s largest natural gas exporter and the second largest exporter of crude oil. This is important as oil prices directly impact transportation, logistics, and air freights. On Thursday, 24 February, global oil prices past $105 per barrel warranting these predictions. In addition, Russia is the world’s largest supplier of palladium, a material used by automakers for catalytic converters and to clean car exhaust fumes, a delay which would affect auto production. It is worth noting that Ukraine is a major provider of wheat, corn, and barley. A lack of yellow maize, or even a slowdown in production, could result in an increase of meat prices.

Exports and sanctions

Combined, Russia and Ukraine export more than a third of the world’s wheat and 20% of its maize. They also account for 80% of global sunflower oil exports. They supply all major international buyers, as well as many emerging markets. In 2020, 90% of the African continent’s $4 billion agricultural imports from Russia were wheat and 6% sunflower oil. South Africa does not produce enough wheat and is heavily reliant on imports from these countries. It imported more than 30% of its wheat from these two countries over the past five years.

Western states have announced a coordinated series of sanctions aimed at Russian elites; however, critics warn that they may be ineffective as the country’s economy is large enough to absorb even the most severe sanctions. Its central bank has more than $630 billon in foreign reserves and gold. Its sovereign wealth accounts for an additional $190 billion. Russian debt accounts for a mere 20% of its gross domestic product (GDP).

The European Commission’s president, Ursula Von der Leyen, states that the bloc would target Russia’s energy sector by preventing European companies from providing Russia with the technology needed to upgrade its refineries. The US Department of Treasury has committed itself to prevent Russia’s state-owned Gazprom from raising money to fund its projects in the US. It is worth noting that Russia and Ukraine’s imports and exports to the US account for less than 1%, while Europe and Russia are interdependent. The EU needs Russian gas, while Russia needs the EU’s money. Some warn that the EU’s decision could be detrimental as it receives over a third of its natural gas from Russia. This is used for home heating and energy generation. These fears were intensified when the natural gas price in Europe increased by 62% on 24 February. It is believed that Russia has been preparing for economic isolation for years and that it could better absorb the sanctions than Europe’s ability to reduce its dependence on Russia’s oil, gas, and coal. Despite all these, Gazprom announced that its gas exports to Europe were continuing as normal.

While the world watches with bated breath as the conflict rages there are some promising signs. Russian and Ukrainian delegates are currently meeting on the border with Belarus to start a dialogue and Ukraine’s President Volodymyr Zelenskyy has called on Israel to serve as a mediator between himself and Russian President Vladimir Putin. Let us pray that reason prevails.

News Archive

UFS to investigate implementation of quality-monitoring system for SA food industry

2006-02-07

Some of the guests who attended the workshop were from the left Prof James du Preez (Chairperson: Department of Biotechnology at the UFS); Prof Lodewyk Kock (Head: South African Fryer Oil Initiative (SAFOI) at the UFS)); Mrs Ina Wilken (Chairperson: South African National Consumer Union (SANCU)); Prof Herman van Schalkwyk (Dean: Faculty of Natural and Agricultural Sciences at the UFS) and Mr Joe Hanekom (Managing Director of Agri Inspec).
Photo: Stephen Collet

UFS to investigate implementation of quality-monitoring system for SA food industry

The University of the Free State (UFS) will be investigating the implementation of a quality-monitoring service for the South African food industry.

This was decided during a workshop to discuss the external quality monitoring in the edible oil industry of South Africa, which was recently held at the UFS.

Major role players in the fast-food sector like Nando's, Spur, Captain
Dorego's, King Pie Holdings, Black Steer Holdings, etc and various oil
distributors like Felda Bridge Africa, Refill Oils, PSS Oils and Ilanga Oils attended
the workshop. Also present was Mrs Ina Wilken, Chairperson of the South African National Consumer Union (SANCU) and key-note speaker of this workshop. She represented the consumer.

These role players all pledged their support to the implementation of this quality- monitoring system for the whole food industry.

The decision to implement this system follows the various malpractices reported in the press and on TV concerning food adulteration (eg the recent Sudan Red Scare), misrepresentation (eg olive oil scandal exposed in 2001) and the misuse of edible frying oils by the fast-food sector.

“One of the basic rights of consumers is the right to safe food. Consumers must be protected against foods and food production processes which are hazardous to their health. Sufficient guarantee of the safety of all food products and food production processes should be implemented. It does not help to have adequate food standards and legislation and there is no manpower to do the necessary investigation or monitoring,” said Mrs Wilken.

The South African Fryer Oil Initiative (SAFOI), under the auspices of the UFS Department of Microbial, Biochemical and Food Biotechnology, currently monitors edible oils in the food industry and makes a seal of quality available to food distributors.

“Last week’s decision to implement the quality-monitoring system implies that we will now be involving also other departments in the UFS Faculty of Natural and Agricultural Sciences who are involved in various aspects of the food chain in an endeavor to implement this quality monitoring system,” said Prof Herman van Schalkwyk, Dean: Faculty of Natural and Agricultural Sciences at the UFS and one of the main speakers at the workshop.

Prof van Schalkwyk said that the main aim of such a system will be to improve the competitiveness of the South African food industry. “It is clear that the role players attending the workshop are serious about consumer service and that they agree that fraudulent practice should be monitored and corrected as far as possible. Although some of the food outlets have the capacity to monitor the quality of their food, it may not seem to the consumer that this is an objective process. The proposed external monitoring system would counteract this perception amongst consumers,” said Prof van Schalkwyk.

The workshop was also attended by representatives from SAFOI and Agri Inspec, a forensic investigation company collaborating with inter-state and government structures to combat fraud and international trade irregularities.

Agri Inspec has been working closely with SAFOI for a number of years to test the content of edible oils and fats. “Extensive monitoring and control actions have been executed in the edible oil industry during the past four years to ensure that the content and labeling of oil products are correct. Four years ago almost 90% of the samples taken indicated that the content differed from what is indicated on the label. This has changed and the test results currently show that 90% of the products tested are in order. However, to maintain this quality standard, it is necessary that quality monitoring and educational campaigns are continuously performed,” said Mr Joe Hanekom, Managing Director of Agri Inspec.

“The seal of quality presented by SAFOI should also be extended to include all the smaller oil containers used by households,” Mrs Wilken said.

The SAFOI seal of quality is currently displayed mainly on some oil brands packed in bigger 20 liter containers, which include sunflower oil, cottonseed oil, palm oil etc which are used by restaurants and fast food outlets. “Any oil type is eligible to display the seal when meeting certain standards of authenticity. In order to display the seal, the distributor must send a sample of each oil batch they receive from the manufacturer to SAFOI for testing for authenticity, ie that the container’s content matches the oil type described on the label. This is again double checked by Agri Inspec, which also draws samples countrywide from these certified brands from the end-user (restaurant or fast food outlets). If in breach, the seal must be removed from the faulty containers,” said Prof Lodewyk Kock, Head of SAFOI.

“It should however be taken into account that oils without a seal of quality from the UFS can still be of high quality and authentic. Other external laboratories equipped to perform effective authenticity tests may also be used in this respect,” said Prof Kock.

“It is also important to realise that any oil type of quality such as sunflower oil, cottonseed oil, palm oil etc can be used with great success in well controlled frying processes,” he said.

Further discussions will also be held with the Department of Health, the SA National Consumer Union and Agri Inspec to determine priority areas and to develop the most effective low-cost monitoring system.

More information on the UFS oil seal of quality and oil use can be obtained at www.uovs.ac.za/myoilguide

Media release
Issued by: Lacea Loader
Media Representative
Tel: (051) 401-2584
Cell: 083 645 2454
E-mail: loaderl.stg@mail.uovs.ac.za
6 February 2006

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