By Kester Kenn Klomegah
MOSCOW (IDN) – After the first Russia-Africa Summit in the Black Sea city Sochi on October 23-24, Russia and Africa have resolved to move from mere intentions to concrete actions in raising the current bilateral trade and investment to appreciably higher levels in the coming years.
As a first step, Russia plans to offer trade subsidies and investment guarantees as an emergency support for Russian companies to penetrate into African market, part of the strategy for strengthening economic ties between Russia and Africa, according to a report by the Ministry of Foreign Affairs.
The report noted further that Africa has huge natural resources still untapped, all kinds of emerging business opportunities and constantly growing consumer market due to the increasing population. It has currently become a new business field for global players.
“There was a lot of interesting and demanding work ahead, and perhaps, there is a need to pay attention to the experience of China, which provides its enterprises with state guarantees and subsidies, thus ensuring the ability of companies to work on a systematic and long-term basis,” Foreign Minister Sergey Lavrov said.
According to Lavrov, the Russian Foreign Ministry would continue to provide all-round support for initiatives aimed at strengthening relations between Russia and Africa. “Our African friends have spoken up for closer interaction with Russia and would welcome our companies on their markets. But much depends on the reciprocity of Russian businesses and their readiness to show initiative and ingenuity, as well as to offer quality goods and services,” he stressed.
He urged Russian entrepreneurs, both small and medium-sized, to race against other foreign players to get access to the African markets and its trading resources, be fearless of competition and rivalry but play with adequate caution to save Russia’s image in Africa.
“We find it important to estimate options for attracting small and medium-sized businesses to African markets. This segment of our cooperation is still insignificant. We will rely on the existing and strengthening foundation of Russian-African cooperation. This year we have significantly intensified political dialogue, cooperation between parliaments and civil societies,” Lavrov explained.
“This positive groundwork allows us to convert this into increasing trade, economic and investment exchanges, to expand banking cooperation, the implementation of mutually beneficial projects,” he underlined, and further underscored the fact that trade and economic relations have reached a new level, the first Russia-Africa summit would give a special impetus to these processes.
The former Special Presidential Representative to Africa, Professor Alexey Vasileyev, pointed out that the level and scope of Russian economic cooperation with Africa has doubled in recent years, “but unfortunately Russian-African cooperation is not in the top five of the foreign players in Africa”.
Speaking particularly about trade, Professor Vasileyev noted that not all African countries have signed agreements with Russia, for example, on the abolition of double taxation. He urged African countries to make trade choices that are in their best economic interests and further suggested that Russia should also consider the issue of removal of tariff and non-tariff restrictions on economic relations.
In order to increase trade, Russia has to improve its manufacturing base and Africa has to standardize its export products to compete in external markets. Russia has only few manufactured goods that could successfully compete with Western-made products in Africa.
The former Presidential Envoy believes that it is also necessary to create, for example, free trade areas. “But before creating them, we need information. And here, I am ready to reproach the Russian side, providing little or inadequate information to Africans about their capabilities, and on the other hand, reproach the African side, because when our business comes to Africa, they should know where they go, why and what they will get as a result,” Professor Vasileyev added.
Interestingly, there are few Russian traders in Africa and African exporters are not trading in Russia’s market, in both cases, due to multiple reasons including inadequate knowledge of trade procedures, rules and regulations as well as the existing market conditions, he said.
“The task before us, especially before the both parliaments, is to harmonize the norms of trade, contract and civil law. The parliamentarians of the two sides have the task to work together on a legislative framework that would be in the interests of both sides. This should be a matter of priority,” Professor Vasileyev concluded.
Russia is interested in new markets and external alliances more than ever before, while Africa also looks for ways toward economic growth in recent years. In this context, African countries need to think about the smart approaches, mechanisms, and tools to use for effective trade cooperation
With the current sanctions of the United States and Europe against Russia, there is massive opportunity for African producers to develop more effectively their trade relationships with Russia. Try to find answers to a few questions, for example, what are the key initiatives and competencies that can create a deeper strategic trade partnership between Russia and Africa?
In diplomacy, parties usually talk about mutual benefits. While Africans will benefit largely from Russia’s trade with the continent, taking into account the changing consumer landscape, it is deeply important for Africans, for example, to negotiate for trade preferences, tariff and tax relief) for their products to Russia and its neighboring republics. But this factor is often missed.
Nevertheless, African leaders have to take steps to explore two-way corporate business, begin looking at wide range of ways on promoting Africa and its business interests in the Russian Federation.
Quite recently, Dr. Gideon Shoo, Media Business Consultant based in Kilimanjaro Region in Tanzania, explained in an interview discussion with IDN that Russian companies need to prove their superiority in the business spheres and African governments have to make it easier for Russian companies to set up and operate in the continent.
“Russian financial institutions can offer credit support that will allow them to localize their production in Africa’s industrial zones, especially southern and eastern African regions that show some stability and have good investment and business incentives. In order to operate more effectively, Russians have to risk by investing, recognize the importance of cooperation on key investment issues and to work closely on the challenges and opportunities on the continent,” he added.
On the other hand, Dr. Shoo noted that Russia is, so far, a closed market to many African countries. It is difficult to access the Russian market. However, African countries have to look to new emerging markets for export products, make efforts to negotiate for access to these markets. This can be another aspect of the economic cooperation and great business opportunity for both regions.
Nearly all the experts have acknowledged here that import and export trade have been slow due to multiple reasons including inadequate knowledge of trade procedures, complicated certification procedures, expensive logistics, security and guarantee issues, rules and regulations as well as the existing market conditions.
By looking at and revising the rules and regulations, the situation about Russia’s presence in Africa and Africa’s presence in Russia could change. All that is necessary here is for Russia and Africa to make consistent efforts to look for new ways, practical efforts at removing existing obstacles that have impeded trade over the years.
Isabel dos Santos, the richest woman in Africa, according to Forbes, and the Russian daughter of former Angolan President Jose Eduardo dos Santos, believes that Russia has a vast potential in high technology and plans to invest in those sectors, she said in an interview with TASS, a Russian News Agency, on the sidelines of the Russia-Africa Summit.
She suggested that increasing cooperation between business communities of Russia and African countries help forge economic ties. “It is always better to bridge gaps first in business. When the two countries’ entrepreneurs join efforts and get ahead, it creates a favorable environment for the future growth,” she stressed. According to her, legal protection of investment is crucial, “since under those conditions any investor will be more willing to invest, for instance in Angola or in any other African country.”
“Some countries provide insurance for export loans, which creates conditions for investors. However, this practice does not exist between Russia and Africa yet,” Dos Santos said referring to the barriers hampering Russian companies’ more active presence in Africa. “But in case it existed, it would be easier for Russian companies to operate in Africa and to sell goods and services. It could give some guarantees and reduce risks for business.”
She is of the view that various venues should be used to gain a better understanding of the market. “For instance, a financial dimension. Should Russian and African banks collaborate more closely, it will create a database and a channel to exchange it,” she explained. Dos Santos is convinced that investment should come both ways – both from Russia to Africa and back, and further underlined the fact that Russia is abundant in talented people who are capable of developing a product “with a twist” that will be in demand “in specific markets.”
According to Senior Investment Adviser at the BCS Brokerage firm, Maxim Koyasan, when making plans to expand its influence on the African continent, Russia seeks political benefits rather than economic ones. By writing off debts, a country can make political gains and get profitable contracts for agricultural supplies and the exploitation of mineral resources. “African countries have already become an export market for Russia, and in light of the political instability in the African region and the constant regime-change, there are huge prospects for arms supplies,” the expert emphasized.
“Significantly expanding trade is a rather surmountable challenge,” head of the Center for Global and Strategic Studies at the Russian Academy of Sciences’ Institute for African Studies, Kirill Aleshin, told Kommersant Financial Daily newspaper. “It’s possible to increase the number of export destinations and expand the list of export goods,” he pointed out. According to Aleshin, in order to stimulate trade, Moscow should set up new trade missions in African countries and establish more intergovernmental commissions, as well as improve the image of African countries in Russia.
TeleTrade Chief Analyst, Pyotr Pushkarev, told Nezavisimaya Gazeta that Africa was not only a continent rich in natural resources but also a huge potential market. “To get an appropriate share of this market, it is not enough to export finished goods, one should establish local manufacturing facilities like others do. Given the low cost of local labor and most production processes, African countries may become a source of goods for us. Since manufacturing expenditures are low, a wide range of new and cheap goods of sufficient quality will be created,” the expert noted.
Some experts have offered both criticism and expert advice, often comparing Russia’s economic investment and influence on other foreign players. As Dane Erickson, a lecturer at the Graduate School of Public Affairs at the University of Colorado and formerly a visiting scholar at the Africa Studies Center at Beijing University, argues in an emailed interview with IDN that the reality is that China is among many international players that have increased their attention to Africa in recent years.
Largely due to Africa’s growing reputation as a region for commerce, over the past few years China, India, Japan, and the European Union all have hosted regional meetings similar to the U.S.-Africa Leaders’ Summit. Africa’s fractional share in global foreign direct investment (FDI) is on the rise, and trade between Africa and a multitude of nations is also increasing rapidly, according to Erickson.
Soviet Union and Africa had very close and, in many respects, allied relations with most of the African countries during the decolonization of Africa. For obvious reasons, the Soviet Union ceased to exist in 1991. As a result, Russia has to struggle through many internal and external difficulties. The past few years, it is still struggling to survive both the United States and European sanctions.
Amid a stagnating economy and after five years of Western sanctions, Moscow is looking for both allies and an opportunity to boost growth. Russia’s trade with Africa is less than half that of France with the continent, and 10 times less than that of China. In terms of arms sales, Russia leads the pack in Africa, and Moscow still has a long way to catch-up with many other foreign players there.
Nevertheless, Moscow plans to boost its presence in Africa and double its overall trade with countries of the region in the coming years. [IDN-InDepthNews – 07 November 2019]
Please click here for Kester Kenn Klomegah’s previous articles on IDN
https://indepthnews.net/kester_kenn_klomegah
Photo credit: Roscongress | Vyacheslav Viktorov
IDN is flagship agency of the International Press Syndicate.
facebook.com/IDN.GoingDeeper – twitter.com/InDepthNews