Russian Business in Africa: Missed Opportunities and Prospects

Africa is gaining greater importance in the foreign policy of developed nations, who are competing for influence on the continent. The United States, the United Kingdom, France, China, and India all seek to expand political and economic ties with African nations. Their main interest in Africa lies in their growing need for its vast resources. Moreover, Africa remains an enormous and largely undeveloped market for technology and consumer goods. 

Russian companies are also pursuing their interests in Africa. Rusal, LUKoil, Gazprom, Renova, Norilsk Nickel, Alrosa, Rosatom, Rosoboronexport, and sundry telecom and financial corporations – these are only some of Russian companies that have set up operations in Africa. Until recently, they mostly invested in the mining industry, but economic cooperation is expanding. However, Africa still accounts for just 1.5% of Russia’s foreign investment – a drop in the ocean. It must be admitted that Russia’s economic policy in Africa lacks dynamism. African countries have been waiting for us for too long, we lost our positions in post-apartheid Africa and have largely missed new opportunities. Currently, Russia lags behind leading nations in most economic parameters in this region.

At the same time, Russia is taking action to restore the influence it once had in Africa and to find new investment opportunities. The situation became a bit clearer following Vladimir Putin’s visit to South Africa and Morocco in September 2006 and Dmitry Medvedev’s African trip in June 2009, during which he visited Egypt, Nigeria, Namibia and Angola. President Medvedev’s visit marked Russia’s interest in reviving relations with African countries and in key areas of economic relations. The visit of South African President Jacob Zuma to Moscow in 2010 confirmed that African countries, too, were interested in reviving relations. During the talks, President Zuma invited his Russian counterpart to visit South Africa in 2012.

Following talks with the South African president in Moscow, Dmitry Medvedev pointed out that the heads of the two countries needed to meet more frequently. “We agreed to boost our bilateral contacts…Working meetings between presidents are vital,” Medvedev said. He emphasized that the two countries’ “approaches to tackling today's complex global challenges are close and sometimes fully coincide.” He added: “Both Russia and South Africa are strong advocates of establishing a new international order based on equitable distribution of opportunities, the use of all international development institutions that exist today, the formation of modern global security architecture based on the rule of international law, values and interests of all parties and, of course, respect for sovereignty.”

President Zuma’s visit to Moscow helped set new targets for the countries’ trade and economic relations. The meeting with President Dmitry Medvedev and Prime Minister Vladimir Putin confirmed that Russia and South Africa shared a common approach to these issues, Zuma said.

The South African president said his visit to Russia was “extremely successful”, adding, “We view Russia as a strategic partner that will help us find new ways to boost our economic development…Russia, too, could find opportunities to diversify its foreign trade activity.”

Cooperation programs are being devised in mining, the energy sector and the use of natural resources. Russia and South Africa are cooperating productively in space technology. A project to establish a remote global sensing system kicked off in 2008.

Russian banks and investment companies are stepping up their activity in the region. VTB bank has set up affiliates in Angola and Namibia. Renaissance Capital has opened an affiliate in Nigeria. The Renaissance Africa Fund has become operational. Metropol bank has attempted to start operating in the Democratic Republic of Congo. Vnesheconombank Chairman Vladimir Dmitriyev heads the Coordinating Committee for Economic Cooperation with Sub-Saharan African Countries.

Telecom companies are also interested in the continent. Africa is seen as a promising market by telecom companies Altimo and Megafon and the Sistema Financial Corporation, including the Sitronics high tech company. So, the major Russian companies – serious strategic players – are coming in the African market.

Russian businesses working in the region receive support from the Russian government, while the Institute for African Studies of the Russian Academy of Sciences provides them with information support. To that end, an expert council has been set up in the coordinating committee to provide information and analysis for Russian companies, which often turn to the Institute for African Studies for help and consultation on African countries. Research and special expeditions help Russian business understand Africa’s cultural nuances as well as potential risks and opportunities. Research also allows for a comprehensive assessment of what the African business community and governments expect from foreign partners.

The work of the Coordinating Committee for Economic Cooperation with Sub-Saharan African Countries is a testament to Russia’s business activity in the region. The committee brings together the Russian government and private organizations to coordinate their work in Africa. As of July 2011, the committee included over 120 organizations and companies. The committee also has two bilateral business councils, the Russian-South African and Russian-Nigerian Business Councils. The Russian Chamber of Commerce of Industry plays a crucial role in advancing Russian-African business relations. The chamber organizes and hosts regular meetings of Russian and African businesses. One of the most recent events was the meeting between Russian entrepreneurs and the minister of industry of the Democratic Republic of Congo and his deputies, held this summer.

In conclusion, for all the difficulties and the sometimes frustratingly slow pace of development, business relations between Russia and Africa are gaining momentum and forming a niche in Russia’s economy.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.