Russia starts a new chapter in Africa

Visitors examine Kalashnikov weapons during the Russia-Africa Economic Forum Exhibition on the sidelines of the Russia-Africa Summit and Economic Forum in the Black sea resort of Sochi, Russia, 24 October 2019. The Russia-Africa Summit and Economic Forum took place on 23-24 October 2019. EPA-EFE/SERGEI CHIRIKOV / POOL

By Peter Fabricius

29 Oct 2019

The first Russia-Africa summit in Sochi showed there’s lots of potential but also much ignorance to overcome before Russia can catch up with other major partners of the continent.

There was plenty of nostalgia at the first Russia-Africa summit last week for the Soviet Union’s support to African countries – including extensive military hardware and training – in their anti-colonial struggles.

And weapons were still quite evident at the summit in the Black Sea resort city of Sochi. A MiG fighter jet was on display in front of the convention centre and quite a few Russian arms companies were marketing their wares at the exhibition which accompanied the economic forum parallel to the summit.

Any African government purchasing those weapons would of course no longer be directing them at colonial armies but more likely violent jihadi extremists in the Sahel, for example.

And several of the African leaders appealed to President Vladimir Putin for more direct Russian help in fighting those enemies. Chad’s President Idriss Deby, for example, complained that the countries of the Sahel, which are engaged in an almost existential struggle with the jihadists, are spending between 18% and 32% of their national budgets on security.

Putin was surprised by this high figure, noting that Russia spends only 5% of its budget on defence and was working to decrease that figure.

In another sense, the summit and economic forum did continue the struggle against the old colonial powers, but this time it was an economic and political struggle and against, what was in effect, being viewed as neo-colonialism.

This summit represented Russia’s attempt to catch up with the West, China, India and other powers in forging a strategic relationship with the whole of Africa.

And one of Putin’s main selling points, compared to the West, is that Russia does not impose political or even economic conditions on its support to Africa. Russia does not meddle in Africa’s affairs. It respects Africa’s sovereignty.

At least, that’s the pitch. This year, Russia even established the International Agency for Sovereign Development (IASD) to push that line. Its mandate is to help developing countries, especially African nations, undertake economic reforms and raise funds on international capital markets.

The IASD was prominent at the Sochi summit, mostly making the argument that international financial institutions such as the World Bank and IMF are imposing a Western agenda on the countries they lend money to.

“The IMF and World Bank are the instruments of America’s global financial dominance,” said Konstantin Malofeev, IASD’s chairperson.

“The agreements signed between these institutes and African countries allegedly lend money under 2-3%, however, they include about 27 essential clauses that set requirements to African governments, which is direct interference in politics and sovereignty of African countries,” he added.

He claimed “Africa is a net lender for international financial institutions and not the other way round” because of transfer pricing by multinational corporations and other ruses to avoid paying taxes in Africa by legally domiciling themselves in offshore tax havens.

Without transfer pricing, Africa’s GDP would be between $3-trillion and $4.7-trillion, compared to the actual $2.3-trillion, he claimed. After extracting money from Africa in this way, these Western corporations “craftily bring it back as financial aid for poor countries,” Malofeev added.

He said global banks prohibit the investing of private customers’ money in African countries. Yet African countries needed to tap those private capital markets – where investors were ready to invest in Africa – to achieve sovereign independence from the IMF and World Bank.

He proposed instead that African governments should create sovereign funds to ensure that the dividends or rents from their natural resources stayed inside the country.

Moscow expressed similar sentiments:

“Russia takes a strong and consistent stand on the need for changing the global financial architecture, ie a further increase in the role and influence of new global centres of economic growth and redistribution of financial resources in their favour with an emphasis on African states,” said Oleg Ozerov, deputy director of the Africa Department in Russia’s Ministry of Foreign Affairs.

Another institution prominent at the summit, the Eurasian Economic Union,(EAEU) comprising Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan, echoed these criticisms about the supposed dominance of international economic institutions by Western governments.

“Many states believe that the existing economic system and international division of labour are not fair,” said Tigran Sargsyan, chairman of the board of the Eurasian Economic Commission, the EAEU’s secretariat.

The EAEU is widely seen as Putin’s retort to the European Union and mirrors many of its institutions.

There were discussions at the summit about a closer collaboration between the EAEU and the African Union.

Visitors examine Kalashnikov weapons during the Russia-Africa Economic Forum Exhibition on the sidelines of the Russia-Africa Summit and Economic Forum in the Black sea resort of Sochi, Russia, 24 October 2019. The Russia-Africa Summit and Economic Forum take place on 23-24 October 2019. EPA-EFE/SERGEI CHIRIKOV / POOL

Somewhat ironically, after all the criticism of the Bretton Woods institutions, Igor Morozov, deputy chair of the Russian Federation Council’s committee on science, education, and culture said Russia already provides about $1-billion a year in aid for sustainable development and humanitarian help, much of that to Africa. But since this goes through the World Bank and the UN, it is not visible to Africa as Russian aid. However, he seemed to be proposing that Russia change this to direct aid from Russia to Africa countries to make its assistance to Africa more apparent.

Farit Mukhametshin, deputy chair of the Russian Federation Council’s Committee on International Affairs, reflected the sense that this was a catch-up summit for Russia when he said a lot of work still needed to be done to restore Russia-Africa relations to the level of their rich past (in the Soviet era).

“The discussion at the forum showed that African countries and Russia do not know each other well enough today. This needs to be fixed. We need to provide awareness about our affairs, our education, new technologies, the security sector, and the experience of the state guaranteeing investment projects.”

For economic cooperation to really take off, Russia and Africa would have to go beyond huge projects to business between small and medium-sized enterprises and between cities and individuals, he said.

He also said Russia needed to expand the number of specialists from African countries studying in Russia and give them the right to work at Russian enterprises. And Moscow should also intensify work with African graduates who had studied in Russia during both the Soviet and Russian periods, as they already understood Russians better and could help find common ground.

From the other side, the Southern African Development Community (SADC )executive secretary, Stergomena Lawrence Tax, agreed with him, at least to the extent of confirming that Russia is generally ignorant about Africa. She said there weren’t many examples of successful collaboration in the private sector, largely due to lack of information.

“Last year I was at the Moscow Chamber of Commerce and Industry, and it was very clear that the Chamber of Commerce doesn’t know much about Africa,” she said.

Andrey Kemarsky, director of the Africa Department of the Russian Foreign Ministry, said economic relations between Russia and Africa did not match their good political relations.

“African markets are extremely important for the Russian economy. We can expand the joint use of natural resources, introduce our high technologies, and develop tourism.”

He said training African specialists would strengthen bilateral relations and public relations:

“We are working in a rather fierce competition. We must remain calm about this. We have the opportunity to overcome negative factors. And public relations will play a very important role on this path,” Kemarsky said.

On the PRO score, Mikhail Bogdanov, Russia’s deputy minister of foreign affairs and special presidential representative for the Middle East and Africa, complained that articles from Russian new media were often not published in Africa and elsewhere. This vacuum got filled with “one-sided information from other players in the media market. This information can be biased, or outright hostile towards Russia and residents of other countries.”

“Africa is largely unaware of Russia, since African media mainly consumes Western sources and then replicates them. And all the fake news, the Russophobia and anti-Russian propaganda, spread by the Western media, are repeated in the African media,” echoed Alexey Vasiliev, honorary president, Institute for African Studies of the Russian Academy of Sciences and chief editor of the Asia and Africa Today journal.

In response to this situation, the Russian state media announced at the summit that they would be stepping up their efforts to cover Africa better, by expanding their networks of correspondents on the continent or by increasing their training of African journalists.

Sergey Mikhaylov, general director of the Russian news agency TASS, for example, said his organisation would provide Africans with an interpretation of global and African events different from that of most Western media, including by expanding the number of its offices on the continent.

So, once one had cleared away this sort of ideological flak in relations between Russia and Africa, what was left? What, substantially, does Russia offer Africa? And vice versa?

The summit declaration identified the priority areas of economic cooperation as energy, including renewable energy; infrastructure development, especially the construction of railways and housing; modern and hi-tech mining and processing of minerals; agriculture, digital technology, exploration, medicine, science and education.

Prominent among those priorities which Russia pitched to Africa at the summit was its nuclear expertise. Perhaps the most visible Russian company at the summit was the state atomic energy corporation, Rosatom, which had a very popular stand at the economic forum and signed nuclear cooperation agreements with Ethiopia and Rwanda.

Rosatom CEO Alexey Likhachev said his company now had nuclear agreements with 18 African states:

“We believe that demand for nuclear technologies is most acute on the African continent in particular.

“The challenges that we usually work with and respond to are the most acute in African countries and require immediate solutions. The continent, which is among the richest in terms of mineral reserves, has an energy shortage today, and in some countries this deficit is catastrophic,” Likhachev said.

The corporation’s first deputy director Kirill Komarov, director of its development and international business unit, said Rosatom was paying special attention to Africa “which is undoubtedly an area of growth”.

Another skill which Russia offered Africa was in digital engineering. Putin boasted at the summit that Moscow was the most digitalised city in the world.

“Russia is the world’s only market where local online services win over their American rivals in an open and fair competition,” said Mushegh Sahakyan, director for the international development of Yandex Taxi – the Russian version of Uber.

South Africa’s largest investor in Russia, the media company Naspers, shares this assessment of the country’s digital sophistication, which it has turned to considerable profit.

“Russia has a high level of digitalisation, talented engineers, that is why we plan to invest more in Russia in the future,” Naspers CEO Phuti Mahanyele-Dabengwa told the economic forum.

Naspers Group CEO Bob van Dijk added that Russia was one of the company’s top three markets in global business, working in the consumer segment of the internet, that was worth about $110-billion.

Alexey Overchuk, a deputy commissioner of Russia’s Federal Tax Service, described how the service was using digital technologies to improve tax collection, including by linking shop payment tills directly to the service so that VAT was deducted automatically. This was helping to cut the national budget without increasing spending. Increasing tax collection is a vital need for African countries, especially in the light of the tax ruses multinationals increasingly resort to.

Overchuk offered Russia’s expertise to help the Africans get one step ahead of the new digital economy challenges such as more sophisticated value chains, the growing role of intangible assets, new virtual trans-border goods and services, as well as cryptocurrencies.

Mining is another area of Russian skill which it offered Africa at the summit.

State-owned Rosgeologia, the largest geological exploration company in Russia, has acquired its expertise in discovering much of the country’s own mineral and energy resources, including its vast gas reserves. Its general director, Sergey Gorkov, said:

“We possess colossal information on African countries’ geology. No other country in the world has this information. We boast 40 years of experience in 26 African countries...”

He said the company understood how to tackle complicated geology and was able to bring new technologies to create new jobs and infrastructure. This enabled Rosgeologia “to be the cornerstone for the economy of whole regions and countries, which, apart from other things, plays a major role in export and impacts social stability”.

State-owned Russian Railways, the third-largest in the world by network length, was also prominent at the summit, marketing its service to African countries.

“The existing competencies of Russian Railways will be demanded in Africa,” said the company’s CEO, Oleg Belozerov. African countries would only be able to maintain the necessary economic pace by developing railways. This had been proven across the world, he said.

Much has been written about Russia’s large arms sales to Africa, and its arms companies are not letting up, as their substantial presence at the Sochi economic forum made clear. Putin, no doubt conscious of possible negative connotations, claimed that Russia’s food exports to Africa last year exceeded arms exports by a large margin of some $25-billion to $15-billion.

Dmitry Mazepin, chairman of Uralchem, a large Russian fertiliser company, said because vast territories of Russia were risky for agriculture, Russian companies had over the decades accumulated unique agricultural competencies.

And so they were becoming primary commercial partners to African countries, in the export of both agricultural produce and technology. The key objective was to lift the quality of life in Africa to the standard of developed countries. In this, providing food security for all was critical.

“It is a strategic goal, and we are able and willing to help our African partners with it,” he said. At the summit, Uralchem signed an agreement with the Angolan company Grupo Opaia SA to jointly establish a fertiliser factory in Angola.

“Africa is a large consumer of agricultural produce. Last year, the volume of our exports exceeded $4.6-billion,” said Sergey Yushin, head of the executive committee, National Meat Association.

But he added for food exports to really take off would require African countries to lower non-tariff barriers. Russian food exporters were counting on importing countries to set well-balanced phytosanitary rules as well as “clear, precise and transparent business rules”. Phytosanitary rules are the measures countries put in place to avoid importing animal and plant diseases.

Yushin said Russian policy was to deliver organic, environment-friendly and safe produce.

But the question of financing Russia’s proposed increased commerce also vexed the summit.

“A promising area of cooperation involves attracting big Russian investors in industries strategic for many African countries, such as agriculture, mining or processing raw material,” Andrey Kostin, president and chairman of the management board, VTB Bank.

But others pointed out that attracting investment and financing was a major challenge.

“A great hindrance for our business in African countries is the fact that there are no settlements in our national currency, no correspondent accounts in roubles, which results in the poor presence of Russian banks in African countries,” said Nataliya Zaiser, chair of the board, Africa Business Initiative Union.

To some extent, the Russian government is addressing this problem; Russian Minister of Industry and Trade Denis Manturov said systematic support from the state was one of the key conditions for the success of any business projects abroad.

“And, in this regard, we have developed a whole complex of measures. We have set the goal of identifying promising niches and areas of cooperation and assisting companies in establishing business ties with trade missions of the Russian Federation.

“There are four of them on the African continent: in Algeria, Egypt, Morocco, and South Africa. Our trade missions around the world work in close cooperation with the Russian Export Center, which administers non-financial and financial mechanisms to support the export of our products.

“They could significantly reduce the cost of Russian machinery and equipment. In addition, Roseximbank and EXIAR, a member of the REC Group, provide businesses with access to borrowed financial resources on favourable terms,” Manturov said.

Uralchem’s Mazepin cautioned:

“You can only enter the African continent in principle with infrastructure and state support. Because the African continent, of course, is very attractive for investment. We all understand how many people live there, what potential there is, and what the potential for growth is, but there are huge financial, logistical, political, and other risks there, and it’s a rather risky task to go alone against the tide and take these risks upon ourselves.”

Andrey Slepnev, director-general of Russian Export Center, said the centre included the Russian Agency for Export Credit and Investment Insurance and Eximbank of Russia. And so it already had all products related to financing Russian companies’ projects abroad. Significant budget funds were being allocated for projects abroad.

He added that the Russian Export Center, Russia’s state development corporation VEB.RF, the Russian bank Sberbank and Gemcorp Capital LLP had signed “an extremely important agreement” on the sidelines of the economic forum to finance Russian exports to Africa. About 10 countries were already involved but more would be added. The facility would help to realise Putin’s vow at the summit to double trade with Africa over the next few years.

Karima Nigmatulina, general director of Vi Holding, said that company, plus the Cairo-based Afreximbank, the state-owned Giprotsvetmet company, and Russian Export Center, were developing a new, large-scale interstate platform to fund mining projects in African countries by Russian specialised geological organisations and companies – with the help of guarantees from African governments. Afreximbank – which is already well-known for lending money to risky debtors like Zimbabwe – seems to be up for the game of financing African business ventures.

“We clearly understand the risks related to doing business in Africa,” said Kanayo Awani, managing director of the bank’s Intra-African Trade Initiative.

“We totally support Russian investors and the idea of the Suez Canal special economic zone,” he said, referring to a big Russian-Egyptian project which featured prominently at the summit.

“Floating capital, project financing, investment insurance, guarantees are the instruments that make you feel safe. We have plenty of guarantee products,” he added.

“Moreover, we guarantee governmental support in case of difficult situations.”

Apart from commerce, Russia also offers humanitarian assistance to Africa, including in health. Putin boasted at the summit about Russia’s expertise in epidemiological surveillance and infectious disease prevention and said the vaccine against Ebola it had offered African countries during the major outbreak of the fatal disease in West Africa in 2014-2015 and more recently in DRC was the best in the world.

“Russian Federation has a well-established and fully functioning system of infectious disease surveillance and prevention,” said Anna Popova, the head of the Federal Service for Surveillance on Consumer Rights Protection and Human Well-being.

She added that Russia had evolved this system in dealing with the high number of natural disasters, changes and emergencies in Russia over the last years.

Abdoulaye Yéro Baldé, Guinea’s minister of higher education and Scientific research, said when Ebola hit his country in 2014-2015, “Russia assisted us a lot, because it helped us fight against the disease… processing samples, for instance.

“It helped us take the right measures on our level and create hi-tech laboratories.”

Diana Atwine, permanent secretary, Ministry of Health of the Republic of Uganda, said Russia, “has an incredible experience in this area and has done colossal research. You have so many types of vaccines, and we know we can achieve a lot through cooperation.” She added that she was happy Uganda had signed a cooperation agreement with Russia.

Likewise, Eteni Longondo, health minister of DRC, which is still experiencing an Ebola outbreak, said DRC had signed a biosecurity contract with Russia that would start with two mobile laboratories and vaccinations. Russia would also train local medical professions to fight not only Ebola but other epidemics.

Egypt is clearly the Africa country which has the strongest economic ties with Russia and it was probably no coincidence that Egyptian President Abdel Fattah el-Sisi co-chaired the Sochi summit with Putin – even though El-Sisi is also the current chairperson of the African Union.

Egypt is so far the only African country to have contracted with Rosatom to build a nuclear power plant and is also implementing the Suez economic zone, which could become a prototype for other African countries.

South Africa’s economic ties, by contrast, are not very strong. Last year total trade between it and Russia was just over $1-billion, with SA exports totalling about $783-million and its imports about $285-billion.

Putin said at his meeting with President Cyril Ramaphosa that that figure should be increased significantly and Russia has prioritised SA among the African countries for increased commercial relations. Ramaphosa seemed enthusiastic about his meeting, praising Russia for adopting a mature, business-oriented approach to relations with Africa and not trying to take advantage of its support for African liberation struggles to gain leverage in its contemporary relations.

But it is not quite clear yet where or how that increased commerce will occur. Certainly, no big nuclear power plant contract for Rosatom seems in prospect – though Putin asked Ramaphosa about it again at their meeting in Sochi.

Some South African officials at the summit muttered that Russia was still not seeing the full value of SA and suggested that South Africa saw itself more as a competitor than partner with Russia in the rest of the continent. DM

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