Africa: Russia Strategizes African Market

The second plenary session at the 2019 Russia-Africa Summit at the Sirius Park of Science and Art in Sochi, Russia, 24 October 2019.

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 a special meeting report released by the Ministry of Foreign Affairs.

The report indicated that the Ministry's Business Council had discussed a wide range of issues on promoting Russia and Russian businesses' interests in Africa. Noting 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, Foreign Minister Sergey Lavrov said at the Ministry's Business Council meeting held July 16 in Moscow. He added "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."

According to Lavrov, the Russian Foreign Ministry would continue to provide all-round support for initiatives aimed at strengthen 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 said at the meeting.

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," he stated.

"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.

Lavrov further underscored the fact that trade and economic relations have reached a new level, and "the first ever Russia-Africa summit, which is to be held in October in Sochi, would give a special impetus to these processes."

The first Russia-Africa summit scheduled to take place in Sochi on October 24 and will be co-chaired by President of Russia Vladimir Putin and President of Egypt Abdel Fattah el-Sisi, who currently chairs the African Union.

In June, Moscow hosted a shareholder meeting of the African Export-Import Bank, as well as the Russia-Africa Economic Conference. Early July, the Russia-Africa Parliamentary Conference was held as part of the International Development of Parliamentarianism Forum, which took place in Moscow.

During the special session on Russia-Africa held July 3, 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, 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," Vasileyev told the gathering of parliamentarians.

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 pointed out.

"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," Vasileyev concluded.

Meanwhile, there is possibility that a memorandum on cooperation between the Eurasian Economic Commission and the African Union will be signed in the near future. This memorandum will bring Russian-African trade and economic cooperation to a higher level and will accelerate the growth of bilateral trade. The Eurasian consumer market, especially the growing middle-class, could be good for African exporters.

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, according to a new analytical handbook on Russia-Africa published by Modern Diplomacy ahead of Russia-Africa Summit in October.

With the current sanctions of the United States and Europe against Russia, there is this 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 practice of 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 and business directors 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, contained in the published geopolitical handbook on Russia-Africa.

Whether Moscow will move from mere intentions to concrete actions, with commitment and consistency, remains largely to be seen in the subsequent years, according to policy experts and observers who monitor developments between Russia and Africa. According to official reports, Russia has a positive dynamics of trade with Africa, its trade exceeded US$20 billion in 2018. *KesterKennKlomegah writes frequently about Russia-Africa and the BRICS.


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