Russia - Africa: A New Alliance on the Cards?
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Russia - Africa: A New Alliance on the Cards?
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by Isaac Kwaku Fokuo Jr., Founder and Principal, Botho Emerging Markets Group, and Bathsheba Asati, Research Associate, Botho Emerging Markets Group
October 22, 2019
Almost three decades after the dissolution of the Soviet Union, Russia is making concerted attempts to revitalize former strategic connections in Africa that have since languished. While these efforts have recorded positive impact, Russia - Africa relations are still suboptimal. For instance, although in the past nine years trade between the two regions has quadrupled to $20.4 billion in 2018, the value of trade between Africa and China was over $170 billion for the same year. New and innovative strategies must be employed to amplify and cement economic and political relations between the two regions.
Almost three decades after the dissolution of the Soviet Union, Russia is making concerted attempts to revitalize former strategic connections in Africa that have since languished. While these efforts have recorded positive impact, Russia - Africa relations are still suboptimal. For instance, although in the past nine years trade between the two regions has quadrupled to $20.4 billion in 2018, the value of trade between Africa and China was over $170 billion for the same year. New and innovative strategies must be employed to amplify and cement economic and political relations between the two regions. Botho’s analysis shows that the answer lies in three key approaches: improved knowledge sharing between Russia and Africa, an increase in government to government efforts to lay the foundation for private sector collaboration, and creating avenues for the exchange of Russian and African cultures.
A Rich History to Build Upon
The Soviet Union played a pivotal role in independence movements around Africa. Additionally, it won the respect of many African countries by proposing the Declaration on Granting Independence to Colonial Countries and Peoples by the UN General Assembly in 1960. These relations that were formed during the independence movement subsequently deteriorated with the collapse of the Soviet Union.
The current chapter of Russia-Africa relations is shaped by Russia’s pivotal investments in energy, minerals, and strategic intergovernmental partnerships. Africa is key to Russia as a cost-efficient source of minerals, such as manganese and bauxite, which are very critical to its industries. It costs half as much for Russian companies to mine for resources in Africa compared with resource-rich parts of Russia, such as Siberia. The continent is also an important source of agricultural produce. Sanctions banning EU states and Turkey from exporting goods to Russia have been seen to have a positive effect on agricultural imports from Africa into Russia. In 2017, agricultural exports from Egypt to Russia grew by 30% while those from Morocco have grown by 10% since 2014.
Although natural resources, energy, and agriculture constitute an important part of Russia’s ties with Africa, a lot more could be done to unlock the full breadth of potential opportunities a partnership between the two regions presents.
Increased government relations to pave the way for private sector engagement
The potential for mutually beneficial partnerships between Russia and Africa extends beyond mining and agriculture to encompass a range of sectors, from technology to manufacturing. Africa’s business to business spending in manufacturing, for example, is projected to increase by 30% to reach $666.3 billion by 2030. With several countries, such as Kenya, Morocco, Rwanda, and more, enacting policies to support this sector, an increasing number of opportunities are likely to arise for Russian companies looking to enter this sector.
In order to optimize these and more opportunities, governments must step in to create a supportive environment for collaboration between the two regions. Focusing on Russia’s current low trade levels with Africa as an example, much more should be done to match the levels of other competitors on the continent. Currently, inadequate non-financial support measures exist on the continent to assist private sector companies seeking to engage in Russia - Africa trade. Russian trade missions only exist in four Africa countries, with just one in South Africa operating effectively in the Sub-Saharan region. In addition to this, challenges such as high import duties, information gaps, and complicated certification procedures have been cited as the major barriers to Russia-Africa trade. More deliberate and targeted interactions between Russia and Africa’s regional economic councils might address these challenges.
Business summits for knowledge exchange
Business summits, in addition to regional business councils, can serve as key platforms to facilitate stakeholder engagements between government leaders, business executives, and investors. This year, two notable Africa-focused conferences were set to be hosted in Russia. The first was the AfreximBank Annual General Meeting (AGM), which was successfully held in June. This was only the second time the bank hosted its AGM outside the continent after JSC Russia Export Center (REC) joined Afrexim Bank as a shareholder in 2018. The conference attracted over 1500 delegates from 81 countries. It also featured the signing of several agreements between AfreximBank and different stakeholders, including the Roscongress Foundation, Kolon World Investment, and Opaia SA, among others. The Russian government itself is also leveraging the power of such summits as shown by the first-ever Russia-Africa Summit, which is currently underway in Sochi this October.
The Afrexim AGM and the Russia-Africa Summit are noteworthy examples of Russia’s efforts to increase cooperation with the continent and enhance understanding of priority investment opportunities in both regions. More importantly, these meetings lay the foundation for amplified state-to-state cooperation. The Sochi Summit, for example, is expected to result in the signing of the Declaration of the first Russia–Africa Summit, thus laying the groundwork for long term partnerships.
Creating avenues for cultural exchange
Economic diplomacy should go beyond formal agreements to include cultural and educational exchange to build trust and goodwill at multiple levels.
By providing university scholarships, Russia has already made a step in the right direction. Currently, there are over 15,000 young Africans studying in Russia, with nearly 4,000 benefitting from governmental scholarships.
Establishing cultural centers across Africa is another avenue to enhance partnerships as other global powers from France to the UK and China have experienced. Russia, however, has experienced more stumbling blocks in unrolling its cultural diplomacy: the country’s cultural center in Nigeria is now closed, and a planned center in South Africa never got off the ground. This kind of soft power is not only important in project implementation, as local buy-in is integral to the success of any initiative, but cultural acclimatization can help bridge cultural divides in business negotiations.
India, for example, has made inroads in recent years in using its cultural cache from food to films to strengthen its ties with the continent. Its world-renown Bollywood films, for example, have been a successful conduit for Indian pop culture across Africa and other parts of the world. India has committed to providing 50,000 scholarships for African students between 2015 and 2020. Today, its bilateral trade with Africa is over $63 billion, up from $7.2 billion in 2001.
Conclusion
Given the increasing competition from a diverse pool of existing and potential partners, Russia-Africa partnerships in trade and investment must be accelerated. In rethinking the Russia-Africa engagement, it is essential to prioritise stronger government relations, leverage business summits and promote cultural and educational exchange. Information asymmetry around business practices, trade opportunities, and culture in both regions remains a barrier to more robust Russa-Africa partnerships. Deliberate measures must, therefore, be taken to increase channels of information exchange between these two regions through increased intergovernmental meetings, the establishment of joint business councils, and business forums to generate mutually-beneficial opportunities.
Russia’s reinvigorated interest in Africa has come at a time when Africa’s traditional partners, such as the US and the UK are retreating from the forefront of Africa’s trade and investment activities. As African countries have to contend with global volatility in various forms, they are increasingly turning towards relatively unconventional partnerships with countries, such as Russia. Revitalized relations between Russia and Africa are set to grow in coming years as global geo-political and commercial alliances further evolve.