Keynote Remarks, Virtual CEOs Dialogue on Lessons for Business from the Ukraine Crisis

Thank the meeting organizers, the UN Global Compact Network Kenya (GCNK) and the Nation Media Group (NMG), for convening this dialogue on 'Doing Business in Troubled Global Times'.

Acknowledge that this dialogue is taking place at a critical time when Kenya's private sector can still be proactive in the exploration of solutions to the various global challenges which have emerged because of the conflict in Ukraine.

Explain that as the situation in Ukraine continues to unfold, Kenya has found herself front and centre as an elected member of the United Nations Security Council (UNSC). As a member of the Council, Kenya has continuously drawn attention to the conflict's implications on the global economy, including on food and energy prices.

Emphasize that development gains are already being reversed and this is happening just as the African continent was gradually recovering from the COVID-19 pandemic. The crisis in Ukraine has now threatened that progress in Africa and other parts of the world, thus adversely affecting efforts to achieve the 2030 Agenda and the 17 Sustainable Development Goals.

Recognize that the UN Secretary-General has announced the establishment of a Global Crisis Response Group on Food, Energy and Finance (GCRG) in the UN Secretariat to coordinate the global response to the worldwide impacts of the crisis in Ukraine, an important initiative aimed at protecting people and countries who are now even more vulnerable because of the conflict.

The GCRG will consist of: champions at Heads of State/Government chaired by the UN Secretary-General; an interagency Steering Committee led by the Deputy Secretary-General; and a Task Team coordinated by Rebeca Grynspan, Secretary-General of UNCTAD.

Highlight that the impact of the conflict on developing countries, including African countries, is linked to the crucial role Ukraine and Russia have in global food, energy, fertilizer markets.

In 2020 the two countries represented: 27% of the share of global trade in wheat (44% of total African wheat imports); 53% of the share of global trade in sunflower oil; and Russia and Ukraine also represent 20% of maize and 32% of barley in the global market. Russia is also the second largest oil exporter, and largest natural gas exporter in the world; and Russia and Belarus account for more than 20% of the global fertilizer market.

As a result, the UN has already found that developing countries are grappling with record inflation, rising interest rates and debt burdens which is compounded by skyrocketing food, energy, and fertilizer prices. Global supply chains have also been disrupted with significant cost increases and delays in the transportation of imported goods.

The impact of the sanctions imposed on Russia has translated to: the FAO Food Price Index averaging 159.3 points in March 2022, the highest level since its inception in 1990 (2019 level – 95.1 points); the growing risk of social and political instability worldwide due to rising food prices, of which the Arab Spring is an example of the correlation between rising food prices and social and political stability; several countries now faced with unprecedented political and socioeconomic challenges including Sri Lanka, Kazakhstan, Pakistan, and Peru; and 107 economies identified as having maximum exposure to food, energy, and finance risks, with 41 in Africa, 28 in Latin America and 31 in Asia — of which 69 have severe exposure: 25 in Africa, 19 in Latin America and 9 in Asia.

Many of these countries import wheat from Russia and Ukraine. There has been a 19.7% rise in global wheat prices since the start of the conflict. A similar picture can be seen with fertilizers — for instance, Brazil will only have fertilizer until October. These economies are not only affected by supply but also the conflict's effect on supply chains. Since December 2021 oil prices have also drastically increased, resulting in global fuel shortages. The effects on food prices and impact on trade has led to an expected increase of 13.1 million people undernourished because of the war.

Debt servicing costs are also on the rise for developing countries — especially richer middle-income countries with access to debt markets: less than 5% for high middle-income, 6.5-7% for middle middle-income, and 7.5-8% for low-income countries. Chartered container ships are at a 10-year record, and transport costs directly feed inflation, on top of the continuing effects of COVID.

Recommendations: open markets; no hoarding; the need for flexibility and speed during the spring meetings of the IMF and World Bank, including consideration of grants to those experiencing distress. The IMF should also ensure an increase in the rapid credit facility, a freezing of surcharges, an increase of the resilience and sustainable trust backed up with relevant reforms, support for the recycling of special drawing rights, and that countries requesting support are not negatively rated for doing so by credit rating agencies. It is also extremely important for the Ukrainian harvest in July to be shipped to the world.