The devastating economic, trade and security impact of Russia’s war on Ukraine, which has disrupted global supply chains, markets and energy security, offers opportunities for SA to expand renewable energy, diversify agriculture and make military hardware for export.
The war has and will lead to an explosion in energy nationalism as countries try to ensure they have security of supply from diverse sources, rather than purchasing from one source or country as this risks shortages should an outside supplier go rogue, like Russia did.
Europe gets nearly 40% of its natural gas and 25% of its oil from Russia, giving the country a stranglehold over European economies. Countries in the region are now scrambling to find alternative sources.
This provides an opportunity for SA to expand its energy resources for local use and export. One of this country’s competitive advantages is that it can produce renewable energy, whether solar or wind, for both.
SA can become an exporter of green energy. However, the government will have to clear regulatory obstacles, such as preventing companies which generate renewable energy for their own consumption from channelling excess power into the Eskom grid. This prohibits them from providing power to other users.
Furthermore, the ANC government must allow private investment in renewable energy. Not doing so has undermined expansion of this industry.
For SA, the other lesson from this war is to diversify agriculture to replace products imported from abroad.
SA is also perfectly positioned to take advantage of green hydrogen, which could help bring carbon emissions to net zero.
Though SA has abundant renewable energy resources, we are behind countries such as Australia, Chile and Saudi Arabia in developing green hydrogen. Most hydrogen development here has been pushed by the mining sector and is very mine-specific.
Le Riche Burger from PwC rightly said: “Traditionally, South Africa has been a net importer of energy, especially in the liquid fuels and gaseous sector — development of the hydrogen production sector will be pivotal in cementing South Africa’s position as a net exporter of clean energy and major earner of foreign currency to our economy, but also to secure clean domestic energy supply that is de-risked from supply chain disruptions and currency devaluation.”
For SA, the other lesson from this war is to diversify agriculture to replace products imported from abroad. Russia and Ukraine combined produce 28% of the world’s wheat and 18% of its corn. Ukraine is the world’s largest exporter of sunflower oil, producing 45% of the global sunflower seed and safflower oil output, with Russia second, producing 23% of global output.
Ukraine produces 19% of the world’s rapeseed. Russia produces about 20% of the world’s barley and 14% of its fertilisers, which are crucial in agriculture. Russia’s war against Ukraine has disrupted the output and export of the agricultural products of both countries. SA imported R2.3bn in wheat, mixed grains and agricultural inputs such as fertiliser from Russia and Ukraine.
This country needs an industrial strategy to diversify its manufacturing and agricultural production to produce products it imports. SA will have to beef up port, road and rail efficiencies to help diversify exports and imports.
Germany will increase its spend on defence to more than 2% of its economic output, a policy shift prompted by Russia's invasion of Ukraine. This offers opportunities for South African state-owned arms manufacturers Denel and Armscor.
Before the war many countries used part of their defence budgets to combat Covid-19. In the post-war world, many will increase their military spend. A case in point is Germany, which will increase its spend on defence to more than 2% of its economic output, a policy shift prompted by Russia’s invasion of Ukraine.
This offers opportunities for South African state-owned arms manufacturers Denel and Armscor, which before the war were increasingly focused on the export market. They must aggressively focus on diversifying beyond their current niche market strategy to make their operations more efficient.
To support the diversification of SA’s exports, the government must pursue a diversified foreign policy which focuses on multiple world markets, rather than one — as is currently the case — based on ideology, past “struggle” alliances or friendships.
William Gumede is associate professor, School of Governance, University of the Witwatersrand and author of South Africa in Brics (Tafelberg).
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