Understanding Russia-African Economic Cooperation

Feature Article Understanding Russia-African Economic Cooperation

Low enthusiasm and inadequate knowledge of current market changes are key factors affecting economic cooperation between Russia and African countries, but experts have repeatedly suggested that this trend can be reversed if both African governments and Russian authorities get down to serious dialogue with concrete business agenda.

In an interview, Themba Mhlongo, Head of Programmes at the Southern Africa Trust, thinks that Africa should not expect higher trade flows with Russia simply because Africa has not engaged Russia .

Mhlongo told Buziness Africa that "there is no Africa-Russia Dialogue or mechanism for dialoguing with Russia , and also, on the other hand, Russia has not been as aggressive as China in pursuing opportunities in Africa because Russia has natural resources and markets in Eastern Europe , South West Asia. Russian exports to Africa might be dominated by machinery and (military) equipment (which serves their interest well)."

He suggested that Africa must engage all BRICS members equally including Brazil and Russia in order to build alliances and open trade opportunities including finance and investment opportunities. Also African countries must not seem to show preferences in their foreign policy in favour of Western Europe if they want to benefit from trade relations with Russia . They must learn to be neutral!

Mhlongo suspects that Africa still holds an old view about Russia being a communist state and less technologically developed or unsophisticated compared to Western Europe . But, Russia never colonized Africa and therefore there are no colonial ties between the two.

"If you look at African trade flows to Europe they reflect colonial ties most of the time. However, modern Russia is now one of the important emerging market countries and a member of BRICS. The Russian society is also closed and orientation is towards Western Europe in particular the United States (probably as a result of the period of bi-polar global power system that existed before). Although Russia exports to Africa but rarely sets up businesses. The language (or culture in general) could be one of the barriers to the development of trade relations with Russia ," he pointed out.

He proposed that both Africa and Russia can initiate a dialogue in the form of Africa-Russia summit to explore economic opportunities between them. However, there are also other avenues to engage each other through the BRICS bloc or through bilateral diplomatic channels. Russia has embassies in Africa and African countries have diplomatic representation in Russia . Africa may have to pay special attention to cultural issues and try to understand Russia in this ever changing environment and find an entry point to engage Russia .

Last December, the first Russia-Africa business forum under the chairmanship of Ethiopian President, Meles Zenawi, that aimed at reviewing the previous performance, and identifying potential spheres for strengthening bilateral economic cooperation between Russia and African countries was held in Addis Ababa , capital of Ethiopia .

The forum was initiated by the governments of Russia and Ethiopia , and the New African Initiative (NAI) - a nonprofit partnership organization. The main organizers were OAO Gazprombank, the Russian Chamber of Commerce and Industry, and the Coordinating Committee for economic cooperation with sub-Saharan African countries.

According to Russian Foreign Ministry, the African delegation to the forum included President of Equatorial Guinea and Chairman of the African Union Teodoro Obiang Nguema Mbasogo, Chairman of the Commission of the African Union, Jean Ping, as well as African ambassadors of countries accredited in Addis Ababa .

Special Presidential Representative for Cooperation with African countries and a Senator at the Federation Council, Mikhail Margelov, and a number of other Russian high-level officials took part in the forum at the state level from the Russian side. The event involved some 30 major Russian companies, their African business partners, and representatives of government and political circles from several African countries.

Russian companies are highly interested in the development of natural resources deposits in Africa . Russian companies want to develop deposits of rare metals, including cobalt and chromium ores, and uranium fields. The companies are also interested in diamond and platinum metals production in African states.

"Africa is a prospective region for Russian mining companies and Russia can offer technological products in the military, geological exploration and energy spheres. There are also prospects for sales of our metallurgical and machine-building products in Africa ," Margelov said at the Russia-Africa business forum.

"Russia''s participation in oil and gas production is important as well since Africa will provide up to one quarter of the world''s oil output soon," he said, adding that Russia faced competition with U.S., EU, Chinese and Indian companies as well as with corporations from the Arabi Peninsula in the region.

"We must use our competitive advantages as we excel competitors under quality-price ratio in some industries. We still have knowledge of prospecting, production and transportation of natural resources, while in the political sphere we are neutral compared with the cold war period," Margelov added.

Dr. Xiao Yuhua, Research fellow, Institute of African Studies, Zhejiang Normal University, China, and Visiting Scholar, Addis Ababa University, Ethiopia, told Buziness Africa that the rapidly rising portfolio of China in Africa''s economy and the strengthening relations between China and most African countries have on the one hand brought in an inspiration of alternative development partners and paths for African governments and business community.

According to him, the trade volume between China and Africa reached $160 billion in 2011; China ''s accumulated investment in Africa amounted to $400 billion by the end of 2011, of which $14.7 billion are foreign direct investment. At the same time, Africa has become China ''s second largest oil supplier, the second largest market for China ''s engineering contracting and the fourth largest destination for China ''s outbound investment.

Now, Africa and China will hold the fifth Ministerial Conference of the China-Africa Cooperation Forum (FOCAC) in May-June 2012.

Fyodor Lukyanov, a senior member of the Council on Foreign and Defense Policy and Editor-in-Chief of the Russia in Global Affairs journal – the most authoritative source of expertise on Russian foreign policy and global developments – told Buziness Africa that Chinese strategy in Africa is about to get access to resources, vitally important for Chinese development. To achieve this, Beijing use all leverage, including soft power, technical and economic assistance, political support to leaders of particular countries (be it Zimbabwe''s Mugabe or Sudan''s Bashir).

" Russia has not similar need to gain African resources, so there is no motivation to develop such a comprehensive approach. We can identify many aspects of Chinese experience which would be useful to learn, but looking realistically I don't think Russia will ever do it," Lukyanov said.

Interestingly, Lukyanov explained to Buziness Africa that Africa disappeared from the screen of Russian foreign policy after collapse of Soviet Union for several reasons. Soviet activities in Africa were due to logic of the Cold War, when two superpowers clashed across the globe to expand and strengthen their influence. And Africa with its huge human and resource potential was one of main battlefields.

He said that this situation was not very good for African countries politically, because they were vulnerable to different cataclysms with foreign instigation, but economically many states could benefit from this situation. Soviet Union, for example, spent a lot of money for many kinds of assistance to gain support for Soviet communist system in Africa .

Catherine Grant, Programme Head Economic Diplomacy at the South African Institute for International Affairs (SAIIA), an institution that provides analysis, promotes dialogue and contributes to African policy making in a dynamic global context, told Buziness Africa in an interview from Johannesburg, South Africa: "The trading links between Africa and the US are well-established and American Growth and Opportunities Act (AGOA) has been able to build on those through offering preferences for some products. There are additional challenges with regards to Russia , such as the language and unfamiliarity with the culture. And, I think it is not so much that Russia is perceived as not open for business but traders are unsure of how to get into the Russian market."

She, however, suggested the following points with regards to increasing trade and economic cooperation between Russia and African countries: to increase trade, Russia could consider offering preferential market access to products from African countries. This has been done by China and other trading partners. It would be mutually beneficial if the preferences were given on products that Russia does not produce itself. Reduced tariffs would bring down the costs for Russian consumers.

As far back in June 2009, Namibian President Hifikepunye Pohamba suggested to Medvedev to consider opening Russia ''s market for African produce and services, - a proposal that has still not been raised for serious discussion in Moscow . On the other hand, Medvedev said Russia would also like to see "a considerable share of Russian companies on the African market," and that many foreign companies, particularly from the U.S. and China , are currently operating in Africa .

James Shikwati, founder/director of Inter Region Economic Network (IREN) and CEO of The African Executive Magazine in Nairobi, Kenya, told Buziness Africa that Africans, given a well-planned marketing strategy on the part of Russia, will exercise their free market power of choice and pick Russian manufactured equipment that will serve their interest and purpose, but still it is up to Russians to do their homework well before introducing their products in African markets. He added that Russians should also remember that they have a lot more to do to wipe out the stigma of the cold war that led to the new African generation to grow up viewing Russia negatively.

Another Expert, Inessa Hadjivayanis thinks that giving some sort of priority in providing a fair market for African goods, products and services in Russian market will be viewed as very useful tool in strengthening economic cooperation. Unfortunately though, Africa is not exactly a strong producer, so they would rather need assistance in developing manufacturing industries in order to have sufficient goods to export and that can actually bridge gaps between Africa and Russia''s economic and political relations.

Large investments, similar to the Chinese, would help to bridge the economic and political gap between Russia and the African continent. Russia is very much involved in educating and/or training professionals who are playing key roles in the economy of Africa .

UN official urges stronger business ties between Russia and Africa . A senior United Nations official urged Russia to strengthen trade and investment ties with African countries and further appealed to the continent to seek opportunities for technology transfers from Russia .

"We want our friends, including from Russia , to come to Africa to do business to create wealth and jobs for the people," said Kandeh Yumkella, the Director-General of the UN Industrial Development Organization (UNIDO), in a video address to participants attending a conference on relations between Russia and Africa in Moscow .

"This is about a new business relationship and a new business model of partnership, a win-win situation with both sides benefiting," Yumkella told the delegates. He said Africa was in need of partners ready to help the continent create wealth.

"I want to say to my African brothers and sisters: Don''t come to Russia asking for aid, come to Russia to ask Russia to do business with you. Aid alone cannot change any nation. It is determination, competitiveness and technology transfer that can bring the necessary changes," he added.

Yumkella said many African doctors, engineers and other professionals had in the past benefited from training in Russia , adding that he was glad to see Moscow working to strengthen that partnership again after almost two decades. He, however, cautioned that for business to come to Africa , countries in the continent needed "good governance, clear, transparent political systems, and good policies so that investments will be safe."

Sergey Katyrin, President of the Coordination Committee for Economic Cooperation with Countries of Sub-Saharan Africa, noted recently at a meeting that development of business cooperation with countries of Sub-Saharan Africa was an important vector of the Russian Chamber of Trade and Commerce''s international activities and a promising destination of foreign-economy cooperation for the business community.

In the last several years, Africa has been in the focus of growing interest.

In the past year, four business missions of Russian companies'' delegations to a number of African countries were organized under the auspices of this committee, and new business trips are being planned to take place in 2012. But, in order to operate efficiently in the African market, objective information on potentials of both sides is required, and the work being done by the coordination committee serves the aim of obtaining such information.

The growing interest in cooperation is evidenced by in the Russian statistics: within 9 months of the past year the turnover of trade with countries of the region became 1.6 times as high. This is a positive trend, although in terms of absolute figures Russia lags far behind China , India , EC and USA .

Katyrin added: "We, however, have such advantage as the Africans'' sustained confidence in Russia . Setting up of institutes for development promotion, - for example, such as the Export Credit and Investments Insurance Agency, which are being formed through active participation of Vnesheconombank - is an important factor conducive to further expansion of Russian-African Relations."

Professor Adams Bodomo, Africa Programmes Director at the School of Humanities, University of Hong Kong, China, told TV channel Russia Today (RT) in an interview that out of the five BRICS countries, China''s the definite economic leader, so are the five members really on equal terms and on the issue of economically troubled western countries still giving "aid" to African and Asian countries he pointed out that the Indian economist, Jayati Ghosh, has added her voice to criticism about western countries still continuing to give "aid" to African and Asian countries as a way of controlling these countries and perpetrating their neo-colonial acts of aggression against us the citizens of these countries.

He further said that an African economist, Dambisi Moyo, has already argued against western "aid" in her book titled "Dead Aid". But solution to this criminal act of economically troubled western countries still giving aid is not to just criticize them.

He suggested that people should also blame the neo-colonially minded governments in these African and Asian countries who continue to receive the "aid".

"The people of Africa and Asia should punish their governments for colluding with the West by not returning them to office at elections. If western countries want to remain relevant in the development paths of African and Asian countries in this era of globalization they should stop these politics of aid conditionalities and start engaging in serious investment relations with Africa and Asia - as China, Brazil, and Russia are doing in Africa," Bodomo concluded assertively.

*Kester Kenn Klomegah, a former editorial staff of The Moscow Times, is a keen foreign policy observer and an independent researcher on China 's and Russia 's policy in Africa . In 2004 and 2009, he won the Golden Word Prize for series of analytical articles highlighting Russia 's economic cooperation with African countries.