Author : The BlackSummit Team
Date : April 27, 2023
For this week’s examination of the Day After, we begin with a look at the tragic fighting in Sudan, examining how forces at play since 2019 have resulted in the conflict seen today. From there, we pivot to examining the US commercial real estate market, which has shown signs of weakness in the post-Covid era as work-from-home trends reduce demand for office space. Our third topic deals with the increased competition between the US and China for critical natural resources in Africa, with both countries attempting to secure their supply chains for the energy transition. Last on the docket is an examination of how diesel prices in the US have demonstrated a slowdown in industrial demand, a sign of weakness for the global economy.
Sudan’s Crisis Risks Sparking a Regional Conflagration
Chris Ògúnmọ́dẹdé, World Politics Review.
Behind Chaos in Sudan is a Broader Global Power Struggle
Ishaan Tharoor, The Washington Post
Renewed fighting between the Sudanese army and the revolting Rapid Support Forces (RSF) paramilitary group has created a wave of refugees and thousands of casualties, with over 300 dead. The US had brokered a cease-fire on Tuesday, but the agreement was broken almost immediately as fresh fighting broke out in Khartoum. Fears abound of the crisis spilling outside of Sudan’s borders into the already-volatile Horn of Africa region, with analysts worried that neighbors such as Chad, Egypt, Eritrea, and Ethiopia may be pulled into the conflict. Though the warring groups had cooperated in the 2019 coup d’etat against former president Omar al-Bashir, the interim government formed by the delicate balance between the army and the RSF has been broken by a struggle for supremacy between the interim head of state, Gen. Abdel Fattah al-Burhan, and the leader of the RSF, Gen. Mohamed Hamdan Dagalo. The conflict has far-reaching geopolitical consequences – Emirati and Saudi financing has propped up the interim government with billions of dollars, Russia’s Wagner Group has reportedly developed ties with the RSF, and Sudanese fighters have been deployed to wars in Yemen and Libya. Tragically for Sudanese civilians, the conflict has all the makings of a civil war and shows few signs of slowing down.
Konrad Putzier, The Wall Street Journal
The commercial real estate bust currently underway is different than those that came before. Market forces have reappeared which have not converged since the 1970s – a cyclical market downturn combined with a surge in interest rates driving property values down. This time, it appears the pandemic is responsible as the large movement to work-from-home preferences has decreased the demand for office and retail space, as the office vacancy rate has reached a post-GFC high of 12.9%. These fundamental changes in the way people work may have driven real estate values to a lower baseline even after the cyclical forces fade. This is bad news for cities – which depend on property-tax revenue from commercial space – and banks whose collateral portfolios are heavy with real estate. Pension funds and asset managers are significant lenders and owners of commercial buildings, and their investments could be weighed down from this change for years to come.
China Holds Upper Hand in Battle with U.S. for Africa’s Energy
Robert Bociaga, Nikkei Asia
Christina Lu, Foreign Policy
Competition between the US and China is spurring an investments duel, with the energy sector working it diversify its supply chain. On investment, Chinese initiatives in the energy sector in Africa are outpacing the disbursals by the World Bank, with Chinese investment standing at $54 billion between 2018-2020 and the World Bank at $34 billion. The result is that China has become responsible for energy projects generating a total capacity of 10,000 MW, while US projects supply a capacity of only 1,000 MW. In response, the US has refocused on Africa with initiatives such as the 2020 Prosper Africa Initiative to boost energy investments and trade in Africa, as well as the US-Africa Energy Forum that brings government officials and energy executives together.
As for supply chain diversification, global competition between the two powers has spurred a renewed interest in diversifying supply of critical commodities and manufacturing capabilities within the green energy sector. As green energy demand is set to explode over the coming decades, a concern exists among the US and its allies regarding over-reliance on Chinese minerals and manufacturing capabilities. The US and its allies are therefore seeking to reorient global trade away from China to shore up supply lines. China currently dominates the processing and refining market for green energy minerals, controlling 77% of the world’s electric vehicle battery manufacturing capacity. In response, the US has pushed the Mineral Security Partnership among allies to strengthen commodities supply chains, while passing the Inflation Reduction Act in an attempt to reshore green energy manufacturing capabilities.
David Uberti & Bob Henderson, The Wall Street Journal
A nationwide freight slowdown has cut US diesel prices by half from last year’s record highs, raising concerns that parts of the world economy have begun to slow down. The trucking slowdown is largely demand-driven, as US warehouses remain overstocked and container imports from abroad slumped as much as 23% from the same period last year. While lower costs have proven beneficial to some industries, such as companies and farmers that use diesel-powered machinery, the decline in demand is flashing a warning signal for slowing industrial production. This trend that can be seen globally, as production dropped 5.4% between September and January. Still, the trend is in contravention of the wider economy, as unemployment remains low and the service sectors robust. It remains to be seen whether this slowdown will remain localized, or is a signal of a broader slowdown as the US and the global economy head for an economic downturn.