Business Day

Lesson in history as conflicts strain fuel, food and currency buffers

Early European ethnographers marvelled at the grain storage practices of pre-colonial Southern African communities.

One assistant staff surgeon in the British Army in the early 1800s, Nathaniel Morgan, marvelled at the stone-capped grain pits he encountered in the Eastern Cape. Intended for use in times of great need or special celebrations, these pits could accommodate about “two sacksful” of maize or millet.

Over a century later and a few wars on, nation after nation is now raiding its own stocks of fertiliser, oil or gas — reserves of the things we use and tend to take for granted but over whose supply we have little control in these times of belligerent bravado.

The International Energy Agency announced last week that it intends to crack its caverns open to manage the price risks from a likely scenario of crude prices breaching the $150 per barrel mark.

The Chinese authorities have banned the export of refined oil and fertiliser-blending material. The Ethiopian central bank has spent billions of its dollar reserves to defend its currency, and many others have raided the pantry to stabilise food supplies and prices.

Past crises of this sort may have little illustrative value, if any. Those who supported Israel in the Yom Kippur War saw not only runaway inflation but also the rapid end of the cheap energy paradigm of the post-war boom. The Iranian Revolution later saw crude prices rise from about

$16 a barrel in February 1979, when the revolution installed Ayatollah Khomeini, to nearly $40 a year later.

The spike in crude prices in 2008 was attributed to growing consumption in emerging markets and primarily speculative bets on crude production cutbacks. But the current crisis in the Middle East differs from these episodes in fundamental ways.

First, it is what French philosopher Georges Bataille characterised as a “chaos-creating” rather than “peace-delivering” war. It is a war that not only makes crucial regions uninhabitable or impassable but that, in the ensuing collapse, “strips the present of all its possibilities”. In doing so, it may be a war that calls not only for new ideas but also new forms of statecraft.

The current crisis may test, for example, whether raising lending rates on the demand side is able to counter the price effects of a supply shock arising from an effective “oil tax”, as fellow columnist Brian Kantor mentioned yesterday. Or whether relatively favourable commodity prices will do enough to offset rand weakness.

Second, the war will be an opportunity for South Africa to consider its own resilience in the face of external shocks. We are told we have a fortnight’s worth of product in the strategic fuel reserve, enough foreign exchange reserves to cover six months’ worth of imports, and a sourcing pattern for crude oil that focuses on Nigeria and Angola rather than the Middle East.

In addition to fuel and foreign exchange buffers, what other domains or “grain pits” are needed in this new age? An obvious one arises from the price risks of buying fertiliser-blend material and imported pharmaceutical products, which may require buffer or reserve capability in the future if the warlike mood of the powerful persists.

We are told we have a fortnight’s worth of product in the strategic fuel reserve, enough foreign exchange reserves to cover six months’ worth of imports, and a sourcing pattern for crude oil that focuses on Nigeria and Angola rather than the Middle East.

Third, our response should aim to avoid making inequality in South Africa worse as we build dykes and embankments before the water rises, to draw on Machiavelli. We need to ensure greater sacrifices from the affluent and meaningful protection of the wallets and pantries of the poor.

As Keynes suggested, war should not be “an excuse to postpone desirable reforms”. Rather, it should be “an opportunity for moving further than we have moved hitherto, towards reducing inequalities”.

In our preparations for what is likely headed our way, we require a grain pit of experience and principles that can weather the storms of a new and increasingly belligerent world. If not, we face collective ruin.

• Cawe is chief commissioner at the International Trade Administration Commission. He writes in his personal capacity.