Overall market risk: The East African economies are currently facing a precarious situation due to a range of external risks. These risks include a global economic slowdown, an escalation of regional conflicts, a decrease in external financing, and the upward trajectory of global food and energy prices. In comparison to other sub-Saharan African countries and historical levels, inflation in the largest East African economies has remained relatively moderate. Nevertheless, these countries are witnessing an increase in inflation in the aftermath of the pandemic, primarily due to external shocks. Some countries are also grappling with inflationary pressures stemming from domestic factors. A notable example is Ethiopia, where inflation has experienced a significant surge over the past few years. While the conflict in Tigray has exacerbated this issue, inflation has been a major policy concern in the country since the early 2000s. The rising prices are a cause for concern in the region, especially given the high levels of poverty and inequality, as well as the limited social protection systems in place.
Reliefweb reports that the current strong El Niño event, which is expected to peak in late 2023 and then gradually fade by mid-2024, will bring both positive and negative consequences for acute food insecurity worldwide. Typically, El Niño leads to reduced rainfall in Southern Africa and increased rainfall in eastern East Africa. The adverse effects of decreased rainfall and higher temperatures on farming output, food costs, and water, sanitation, and hygiene (WASH) services are most worrying in regions of Southern Africa that are susceptible to drought. Meanwhile, the concerns in the eastern Horn of Africa are centered on the impacts of heavy rains and flooding on agricultural production, transportation infrastructure, market access, and WASH services, particularly in riverine and low-lying areas.
In the fertilizer space, fertilizer prices have continued to drop. This decline can be attributed to the reduced costs of raw material inputs like natural gas, urea, and ammonia. The global economy has been able to adapt to the disruptions caused by the war by seeking alternative sources for natural gas and other materials, and also by constructing new production facilities worldwide.
Availability and Affordability: In East Africa, fertilizer demand is slowly picking up as the short rain season starts. In Kenya, no fertilizer shortage has been reported. As of September, fertilizer importation into the country stood at approximately 650K metric tons. This is in line with the average annual importation. Shipments of DAP and NPK 17 17 17 have also been reported with an ETA of mid-September. In Tanzania, 550K metric tons have so far been imported into the country. Shipments of DAP and other NPK products are in the process for shipment end of September.
Ethiopia’s EABC recently cancelled its 2022/23 urea tender for 981K metric tons and is now seeking 200K metric tons for the same. This means they are now facing limited options and uncompetitive prices due to similar deadline and delivery timeframe as the Indian tender. One Acre Fund in Rwanda is in the process of procuring Urea. In Zambia, manufacturers and suppliers have continued to steadily build up their stock positions for Urea, and D Compound as well as for other blends of fertilizers for the upcoming main farming season. It is also reported that the Government has awarded its tender of 120K metric tons of Urea to multiple small and medium-sized companies. In South Africa, importations of urea, potash and phosphates have been 50% lower compared to previous years.
Distribution: No major issues have been reported at the ports and border posts in most countries. Importation of fertilizer through the countries’ ports and borders is unaffected and in-country movement experiencing no disruptions.