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Wednesday, 07 November 2012 13:40

Russia: Returning to Africa with Business

MargelovAfricaForumBy Kester Kenn Klomegah*

ADDIS ABABA, Ethiopia, November 7, 2012 (Buziness Africa) - Russia's economic interest in Africa have been on the spotlight for discussions among political elites, in the business community, among academics and the general public, and from all indications, optimism has strongly taken the front seat despite many challenges.

The most significant positive feature in the policy is that Russia has moved away from its low-key strategy to a vigorous re-activatisation of relations, and is seriously showing its readiness to compete with other foreign players as the official authorities make relentless efforts toward sourcing for profitable businesses and strengthening economic cooperation with some African countries, according to views of policy experts and analysts interviewed for this story.


"First of all, the state needs to build a foreign policy that really reflects the practical interests of Russian business. There are some positive trends in this direction, but everything is being done very slowly. The effectiveness of Russia's new engagement in Africa has yet to be seen," said Dr. Alexandra A. Arkhangelskaya, Head of the Centre for Information and International Relations at the Institute for African Studies, Russian Academy of Sciences.


Many potential African exporters still have negative perceptions about Russia and its market often comparing it to export opportunities offered by the United States, Europe and China. Experts say Russia's market is still not completely open and business approaches are still not fully understandable for African exporters.


Thus, the demand for information and financial support to Russian business entering African markets is extremely high. Apparently, Russia has managed to move quite rapidly from the next stage of awareness of their interest on the African continent to concretize its work in this direction, she said.


In the assertive views of Arkhangelskaya, there are still a number of obstacles to the development of Russia-African relations. For example, a lack of knowledge of the Russian government and business structures on the actual situation, specific counterparts in Africa, and consequently, the poor awareness of Africans about the possibilities of Russian partners or vice versa.


According to surveys conducted, most of the African population has a positive image in relation to Russia, but the generation that has kept fond memories of the Soviet Union, is gradually disappearing. Today, in Africa there are two basic views on Russia that have developed, Russia as the successor to the Soviet Union and Russia as a country that has made a step back, Arkhangelskaya explained in her policy analysis.


It is noteworthy to say that Africa and Russia have had a long history of friendship dating back to the days when the Soviet Union has considerably assisted many African states to gain political independence.


However, during the 90s in the last century, Russia's relations with Africa shrank to a pitiful low. Russia still enjoys some support from many African countries but it is not taking full advantage of these large numbers of Soviet/Russian trained specialists to develop its relations further still.


Some countries, such as China and India, both very active players and members of BRICS, have moved in to fill the gap left by post-Soviet Russia.


For instance in July 2012, the Chinese President Hu Jintao speaking at the fifth China-Africa forum offered a new loan of $20 billion to Africa which doubles the amount Beijing agreed to lend to Africa at the last forum held in 2009. Currently, Russia's trade turnover with African countries stands at $4 billion dollars, Brazil $25 billion and India at $50 billion while China's trade turnover with these countries has reached $166 billion dollars.


According to official reports, China increased its financial contribution for the training of up to 30,000 African specialists in different fields under the "African Talents Program" and offered 18,000 government scholarships, and will build cultural and vocational skills training facilities in African countries.


The China-Africa Joint Research and Exchange Programme was also launched in Beijing and this programme has already held a series of events promoting exchanges between scholars and think tanks, such as the China-Africa Think Tanks Forum. Experts have noted that the exchanges between scholars and think tanks in China and Africa showed educational and cultural highlights in Sino-African relations as they promote mutual understanding between peoples on both sides.


Experts further believe the effective implementation of the commitments reflects distinctively the widening of "soft-power" channels in Sino-African cooperation. This year's conference examined and adopted the "Beijing Declaration" and "Beijing Action Plan (2013-2015) which now becomes China's policy agenda for the next two years. The FOCAC is a collective consultation and dialogue mechanism between China and African countries launched in 2000, the previous four ministerial conferences were held in Egypt, Beijing, Addis Ababa and Beijing, respectively.


Similarly, U.S., Britain, France and other players have reviewed their previous policy agenda for Africa. For example, in June, President Obama at the African Growth and Opportunity Act (AGOA) review conference launched a new US strategy aimed at sub-Saharan Africa with key objective of strengthening economic ties by seeking to improve an environment enabling trade and investment, enhancing economic governance, promoting regional integration and encouraging US companies to trade and invest in Africa.


Of course, Russia intends to intensify its cooperation with Africa as President Vladimir Putin pointed out in July, 2012 at a gathering of Russia's top diplomats and foreign representatives. "We continue on our course of expanding cooperation with Latin America and Africa," according to Putin, going on to explain further that "Just a few years ago we did not pay enough attention to this."


The Deputy Minister of Foreign Affairs of the Russian Federation, M.L. Bogdanov, has paid a number of visits to Africa especially Southern and Eastern Africa, and has also held series of meetings with African leaders and diplomats and the business community aimed at forging economic cooperation. These steps taken by M.L. Bogdanov have been complimented by the Special Presidential Representative to African Countries, Mikhail Margelov.


Now African delegations have started paying reciprocal working visits to Russia, the most recent being by a South African delegation headed by Maite Nkoana-Mashabane. In Moscow, key discussions were focused on a bilateral agenda, South Africa-Russia ties within the BRICS community and on the Durban summit slated for next March.


While still in Moscow, Nkoana-Mashabane took part in the 11th meeting of the Russian-South African Joint Intergovernmental Committee on Trade and Economic Cooperation as a co-chairman on November 13. The Russian delegation was headed by S.Ye. Donskoy, the Minister Environment and Natural Resources, who is the co-chairman of the Committee. The Russian Foreign Affairs Ministry called the visit of Nkoana-Mashabane to Moscow as "practical way to confirm the high level of a diverse Russian-South African partnership."


In mid-November, President Denis Sassou Nguesso of Congo also headed a delegation looking for Russian investment in its oil, gas, mining, farming, fishing and timber processing sectors.


In what will probably become one of the largest investment projects in southern Africa, The Russian oil company Rosneft is considering the construction of a 700-km (435-mile) oil pipeline from Mozambique to Zimbabwe, while LUKoil has expanded its operations from Ghana into Sierra Leone, both in the west Africa region. A few Russian companies are looking for a market niche in the southern and east African regions.


Zimbabwe and Russia signed a bilateral investment protection and promotion agreement on October 7, in a development that signals the strengthening of economic ties between the two countries. Russian businesspeople have expressed keen interest to invest in Zimbabwe's mining and energy sectors, according to official reports.


The African Union (AU) has offered its support to an idea of organizing a Russia-Africa business forum in 2013 proposed by Mikhail Margelov, a high-level business forum that will help drive Russia's business partnership in Africa.


While policy observers watch these new developments on the side of Africans and Russia's efforts of returning to Africa with viable projects, experts noted that information about these new developments and about Russian projects in Africa is still very scanty and sketchy in both Russian and foreign media alike.


"Russian media writes very little about Africa, what is going on there, what is social and political dynamics in different parts of continent. Media and NGOs should make greater efforts to increase the level of mutual information, which can stimulate interest in each other and lead to increased economic interaction as well," 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 me in an interview.


"To certain extend," Lukyanov argues "the intensification of non-political contacts may contribute to an increased interest. But in Russia's case, the main drivers of any cooperation are more traditional rather than political interests of the state and economic interest of big companies. Soft power has never been a strong side of Russian policy in its post-Soviet era."


But, this trend has to be changed. President Vladimir Putin has urged all his Russian ambassadors and diplomats to actively use new technologies to highlight success stories of the country and its activities, improve Russia's image and defend its interests abroad, according to a widely circulated Russian daily newspaper Kommersant, quoting an official who attended the meeting last July.


"It's not enough to just crow something once… We should explain our positions again and again, using various platforms and new media technologies, until they understand," the official, who spoke on conditions of anonymity, quoted Putin as saying.


Some experts say information about Russia is still not getting down to the African public and business circles, at least, according to Philip Kobina Baidoo Jnr, a seasoned policy researcher and analyst who contacted me by email and added that after the collapse of the Soviet era many people have not heard that Russia has an economic policy plan targeting specific sectors similar to that of the U.S. (African Growth and Opportunity Act) for Africa or the China's African Agenda usually drawn from the China-Africa forum directed at strengthening and diversifying cooperation in Africa.


"Anyway, as far as this policy is concerned, Russia has a formal economic policy for Africa, and quite significantly, attitude towards Africa has changed considerably after more than a decade absence from the continent after Soviet collapse, attitude toward trade and business both at the state and private levels has not changed," he suggested assertively.


Baidoo Jnr. further said that Russia is slow compared to Brazil, India and China of the BRIC bloc that are rather aggressive about deepening economic cooperation with Africa, but one major advantage is that Russia has huge oil reserves and natural resources, and is better placed to use a small part of the revenues to drive its foreign policies globally.


He recalled that back in 2008 when Russia announced a preferential tariff regime for developing countries which granted duty-free access for African products but African exporters either failed to take advantage of it or were unaware of the advantageous terms for boosting trade. That idea alone would get African producers to think about Russia as a possible business destination.


Analyzing the present market landscape of Africa, Russia can export its technology and compete on equal terms with China, India and other prominent players. On the other hand, Russia lacks the competitive advantage in terms of finished products which Africans obtain from Asian countries such as Japan and South Korea, according to Baidoo Jnr.


Of course, not all is bad. Russia's latest Lada cars are a wonderful piece of craftsmanship but unfortunately not many people are aware of the brand in Africa.


The Chinese have granted selective tariff-free holidays for some African countries. As it is already known, China and India are very dynamic, Brazil is also making a lot of inroads into Africa's economy. And that is exactly what some countries are doing, there is nothing better than to engage in pure mutually beneficial business.


Dr. Antipas Massawe, a Soviet trained graduate from Russian University of Peoples Friendship and now a Dar-es-Salaam based consulting strategist in mineral resources and industrial investment, said the fact that under communism the majority of Russians never interacted with the rest in the world vividly explains why Russia is not seen making efforts to overcome barriers to economic integration and join the rest in the world in a development partnership.


Russia has to come up with a required strategy to enable it enter into the global share of business opportunity in Africa with its huge African population.


He argues: "I'd say that Russian policies have to be focused on bidding for big roles in the economies of Africa and also to fully integrate in the global economic system. Like the Chinese, the Russians should formulate policies that can demonstrate their presence and bid for mutually beneficial economic projects available in African countries."


The Russian authorities need to come up with a coherent strategy and policies for Africa. For instance, in order to contribute to the development of Russia-African economic cooperation, Russian authorities can open its market to commodity exporters from the African continent, Massawe however suggested.


In his discussion, Alexander Fomenko, a Moscow based Russian political analyst and author of many articles, explained that after the fall of Soviet system, Russia as a country is not so keenly interested in securing raw materials supply, the Russian government's attitude towards African trade cannot be compared with the Chinese, French or Indian approach. And American globalism - political, military, economic one - cannot be compared with Russia'sEurasian Union ambitions. The absolute priority for Russia right now is the economic integration of the Eurasian territories of the former Soviet republics.


In addition, Fomenko said that "The Russian government is not against national business activity in Africa, it will be even glad to see Russian business success stories in Africa. But, it does not direct Russian business (and especially Russian banks) to Africa. In such a situation, we support the idea of Russian coming back to Africa, and we have to rely more on Russia's business interests and it's Kremlin strategic decisions."


In a similar argument, Mark N. Katz, Professor of Government and Politics at the Department of Public and International Affairs, George Mason University, says that Africa is rich in natural resources, China and India need resources. Therefore, it is not surprising that China and India have been active in Africa. Russia, by contrast, is also rich in resources. For the most part, Russia does not need Africa's resources.


The Russian gas giant, Gazprom, would like to acquire stakes in African gas (especially in Algeria, Libya, Egypt, and Nigeria). Otherwise, Russia simply doesn't have economic interests in Africa. And economics is central to Russian foreign policy at the moment, he added.


In oil and gas exploration, there are possible challenges in the economic area, but the fact that China has gone far with the signing of some agreements including in South Sudan, and France, UK and the U.S. are competing in this sphere in a similar manner.


He explained to Buziness Africa that Russia's interest to acquire stakes in oil and gas in Africa is not making significant headway because one of the problems Gazprom - and the Kremlin-linked Russian petroleum industry - suffers from is a lack of entrepreneurial spirit.


"This is very different from the cold war era when the U.S. and the USSR were competing for influence everywhere, including Africa. Back then, economic interests were not Moscow's main concern," Katz pointed out, concluding "but now that economic interests are one of Moscow's main concerns, Africa simply isn't that important for Russia. If anything, Russia and Africa are competitors in that both are natural resource exporters."


In May 2012, David H. Shinn, an Adjunct Professor at the Elliott School of International Affairs George, Washington University, in remarks at the Africa Center for Strategic Studies pointed out that efforts by emerging powers have intensified with African countries and "this situation presents opportunities for Africa, increased investment, aid and trade offer more competition and greater choice for African countries."


In his academic analysis, business has become the central focus for Russian authorities in Africa, but in recent years, China has taken the lead among the BRICS members by far as it has expanded into nearly all economic spheres on the continent and has provided low interest loans to a number of African countries. Still comparing China to other foreign players, Professor Shinn pointed out that China has also involved Africans in educational and youth programmes as well as the use of media and NGOs as instruments to push its soft power and people's diplomacy.


"Russia is returning to Africa with investments in the energy and mineral sectors, but not much else. Russia is less active in Africa economically than China, India or Brazil. And looking at all these players, Russia's investment, both private and state-owned companies, and aid are growing, but slowly," Shinn, who was a former U.S. ambassador to Ethiopia (1996-99) and Burkina Faso (1987-90), wrote in an email interview to Buziness Africa.


According to David H. Shinn and many policy experts, undoubtedly believe that Russia in its attempt to regain its influence, faces a keen competition as the diplomatic playing field in Africa has become much more crowded as a growing number of emerging nations have intensified their contacts with African countries.

***Kester Kenn Klomegah, a former editorial staff of The Moscow Times, 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.



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