Overall market risk: Africa’s economic expansion is anticipated to decelerate this year, with a partial recovery expected in 2024, according to the African Development Bank (AfDB). The bank has revised its GDP projections downward for the continent, attributing the slowdown to political instability, subdued global economic growth, and elevated interest rates. The latest report indicates a decline in real GDP growth from 4% in 2022 to 3.4% this year, with a subsequent increase to 3.8% projected for 2024. The enduring impacts of the COVID-19 pandemic, coupled with rising food and energy prices resulting from Russia’s invasion of Ukraine in 2022, have impeded Africa’s initial robust post-pandemic economic recovery.
Additionally, political unrest across the continent, sluggish global demand affecting exports, monetary policy tightening, and heightened borrowing costs have compounded these challenges. Since early 2022, many African nations have faced restricted access to international debt markets due to exorbitant interest rates, prompting Ethiopia to express its intent to restructure its sole overseas bond. The growth forecast for East Africa has been revised downward by 0.7% to 3.4%, influenced by the civil war in Sudan and the financial pressure on Kenya to repay or refinance a $2 billion bond maturing in June 2024. Southern Africa is projected to exhibit the continent’s slowest growth in 2023, at 1.6%, primarily due to persistent power cuts constraining output in South Africa, the region’s largest economy. Notably, countries not heavily reliant on commodity exports are anticipated to experience comparatively higher economic growth, offsetting the decline expected in commodity-exporting nations. Main factors affecting fertilizer markets for the reporting month were mostly Macro-economic in nature with many countries experiencing significant currency devaluation against the dollar essentially meaning imports have to come at much more cost. The cost of credit was also another issue reported across, multiple regions.
Availability and Affordability: In the East Africa region where short rain season has just completed in some countries and continues in others, fertilizer demand has begun slowing down with the exception of countries like Ethiopia whose main importation window is in full swing. In the southern region, 2023/2024 cropping season has begun and fertilizer demand is high in countries like Zambia and Zimbabwe.
In Kenya, between January and November 2023, about 700,000MT of fertilizer has been imported into the country in both subsidy and private markets (67%/33%)). During the ongoing short rain season, various importers are actively importing fertilizer to ensure availability. While the overall import numbers of fertilizers have not declined, a significant portion (67%) of the imported fertilizers in the country were directly procured through government bodies like NCPB and KNTC. This has seen an outcry from the private sector who feel like they are being crowded out of business.
In Ethiopia, the Ethiopian shipping and logistic services enterprise (ESLSE) is in the process of shipping fertilizers for 2023/24 cropping season. In Malawi, the November stock report from Fertilizer Association of Malawi for NPK and Urea states that in country stocks are 70,771MT, and 149,265MT in port. There are fears of shortage and unaffordability because of forex issues and devaluation of Malawian Kwacha. In Zimbabwe, retail outlets are facing a shortage of fertilizers as farmers are reluctant to borrow at the revised concessionary interest rate of 75%, and fertilizer manufacturers and distributors are constrained by high-interest rates and liquidity issues.
Distribution: The El Niño conditions prevalent in many parts of the Eastern Africa region have caused extensive damage to infrastructure and crops, disrupting transportation in several areas. Beira Port had to halt vessel berthing twice due to strong winds and rainfall. The port is anticipated to experience heightened congestion due to an increased number of export vessels. The early onset of the rainy season, usually spanning from December to March, has exacerbated congestion in vessel berthing, resulting in delays of up to 40 days and escalated demurrage costs. Cargo rail services to Kenya’s Mombasa port have resumed following flood-induced damage to a section of the track. The Durban port in South Africa continues to grapple with inefficiencies, marked by a backlog of over 60 vessels carrying thousands of containers outside the port due to adverse weather conditions and aging equipment.