Cultivating economic relations: Russia-Africa economic forum

Image: Getty, Mikhail Svetlov

Summitry between a major country and Africa have become fashionable in the 21st century. China, India, the EU and Japan all have such summits with the continent. Such events carry great political symbolism, they provide opportunities for business deals, and they also show the rest of the world the influence of the initiating country vis-à-vis its guests.

The first ever Russia-Africa summit held on 23-24 October was just that. It served to illustrate the continent’s importance to Russia and re-affirm fraternal ties – many of them dating to the Cold War era. Arguably the most important political dimension though was contained in the Declaration, which endorsed the ‘recognised principles and norms of international law and the UN Charter’, opposing the ‘practice of adopting unilateral measures and imposing approaches that undermine common interests of the international community in general’. The presence of over 40 heads of state or government in Sochi, the support for Russian perspectives on the global order (which are shared by most African states) and the related dig at the US’s behaviour in international affairs, all highlighted, not least to the West, that Russia has a wide network of friends.

Moreover, the Summit emphasised commercial relations with Africa, holding a two-day economic forum, which included business representatives from across Africa, and covered sectors ranging from nuclear technology and energy for development to housing construction, transport infrastructure, digital transformation and minerals.

For both Russia and African countries economic opportunities are top priorities. Russia’s economy has been affected by Western sanctions over Ukraine, while African economies are still largely suppliers of raw materials. However, Africa holds much promise for external actors as a growing market for consumer goods with an expanding middle class and a business environment that is not yet saturated by established global businesses. Last year African states also signed the Continental Free Trade Agreement, which will come into effect in June 2020 and create a market of 1.2bn people with a combined GDP of $2 trillion. The AfCFTA’s goal is to also contribute to Africa’s industrialisation through the development of regional value chains, which would increase Africa’s production of higher value products and reduce its dependency on exports of raw materials.

Russia and other countries such as China and India provide African states with an enormous opportunity to diversify their economic relations and reduce their dependence on the West. The fact that many of the emerging powers set no conditionalities is also an advantage and one which African leaders hold great store by. African countries don’t regard their relations with Russia or with other countries such as China as a zero-sum game. Relations with one or another such as the EU are not mutually exclusive. Nevertheless, trade relations between Russia and Africa have been very small ($20bn in 2018) compared to China’s (over $200bn). President Putin has indicated that two-way trade should double in the next 4-5 years.

Russia’s specialisation, given its own economic profile, has been in oil and gas, minerals and nuclear technology. The presence of its state-owned and private companies bears testimony to this. Many African countries are interested in exploring nuclear energy as they aim to diversify their energy mix, while also addressing the significant energy deficit faced by the continent, where some 620 million people do not have adequate access to clean, affordable and reliable electricity. Of course, while nuclear energy is one of Russia’s areas of expertise, it is also extremely costly and the appropriate financing models would need to be identified so as to avoid indebtedness of African economies.

Other areas of benefit to Africa would be nuclear science and technology more broadly including in the medical and agricultural field.

While not many deals were inked at the Forum, the many informal meetings among Russian and African businesses and chambers created the momentum to move from ‘contacts to contracts’ as the South African President Cyril Ramaphosa said. South Africa itself has set a target of attracting $100bn worth of investments over five years and is hoping for some of this to emanate from Russian companies, although on the matter of nuclear power, the president was clear that the country cannot afford the cost at this point, even though nuclear is still part of the planned energy mix.

In deepening economic cooperation and encouraging Russian companies to invest in Africa, both partners should consider ways of overcoming perceived risks by investors. For Russia’s part, what mechanisms could the state create to support private businesses to invest in Africa? For African states, reducing the costs of doing business and addressing perceived risks for foreign investors is another.

One aspect of the commercial relationship which has been very significant is Russian arms exports. Russia is the largest exporter of weapons to African countries. Care needs to taken to ensure that such exports do not contribute to exacerbating conflict, especially in Africa’s hot spots – North Africa and the Sahel, Central Africa and the Horn. In this new phase of the Russia-Africa relationship it is essential to work on economic cooperation that has a strong developmental dimension, taking into account the major challenge of this generation, climate change and its significant impact on developing economies, such as those of Africa.

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