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Russia’s Business Dreams, What’s The Reality

Kester Kenn Klomegah



Recognizing the widening gap and huge untapped potential in their economic cooperation, Russia and Africa are gearing up efforts in raising the level of trade and business, Lyubov Demidova, Deputy Chairperson of the Regional Chamber of Commerce and Industry at Moscow Region, explained in an interview with me, while emphasizing unreservedly the importance of increasing business and economic cooperation with the African countries.

She says that Russians are constantly interested in partnering with large and medium scale businesses in the African market as well as in the continuing interest of Africans to further cooperate with Russia, and further pointed out that a significant impetus to the Russian-African business cooperation was given by the visit of the then Russian leader Dmitry Medvedev to a number of African countries in June 2009.

Since then, many Russian delegations have visited the continent, the highest ranking delegation headed by Foreign Minister Sergei Lavrov to a few African countries, notably Zimbabwe where he launched the $3 billion project and in Addis Ababa, Ethiopia where he held discussion with Africa Union Commission Chairperson, Nkosazana Dlamini-Zuma, about Russia’s readiness to infrastructural development.

In 2014, Russia started a new $3 billion platinum mine about 50 km north-west of Harare, the Zimbabwean capital. The Russian project, where production is projected to peak at 800 000 ounces year, involves a consortium consisting of the Rostekhnologii State Corporation, Vneshekonombank, as well as investment and industrial group, Vi Holding, in a joint venture with some private Zimbabwe investors as well as the Zimbabwean government.

Brigadier General Mike Nicholas Sango, Zimbabwe’s Ambassador to the Russian Federation, wrote recently that Russia’s biggest economic commitment to Zimbabwe to date was its agreement in September 2014 to invest $3 billion in what is Zimbabwe’s largest platinum mine.

“What will set this investment apart from those that have been in Zimbabwe for decades is that the project will see the installation of a refinery to add value, thereby creating more employment and secondary industries,” Brigadier General Sango explained to the local media.

“We are confident that this is just the start of a Russian-Zimbabwe economic partnership that will blossom in coming years. Our two countries are discussing other mining deals in addition to energy, agriculture, manufacturing and industrial projects. Russia also continues to assist Zimbabwe in training young Zimbabweans in special-skills areas such as medicine, general engineering, agricultural engineering and many other disciplines,” Ambassador Sango added. Groundwork was laid for expanding trade and investment when Zimbabwean President Robert Mugabe met President Vladimir Putin in Moscow in May 2015.

Undoubtedly, Russia has been implementing a number of other large-scale projects with participation of Russian capital in Africa. Among them are the development of the world’s largest bauxite deposit in Guinea and an aluminium plant in Nigeria as well as oil and gas in Uganda.

Of particular importance is also the creation a Russian industrial zone in Egypt. It is expected that products of Russian companies will localize their production and will be in demand not only in the local market, but also in all regions of North and East Africa, the Middle East and Eastern Europe.

Besides projects, trade is also important. Speaking at a symposium organized by the Embassy of the Republic of Ghana as part of the Independence Day (March 6) celebration in Moscow and which was attended by the eminent group of diplomats, industry leaders, prominent international traders and analysts, Dr. Leonid Fituni, Deputy Director of the Institute for African Studies under the Russian Academy of Sciences, called on Russian authorities to take significant practical steps to provide African countries with broad preferences in trade.

He pointed out that “Russia attaches special significance to deepening trade and investment cooperation with African States, including the involvement of Russian economic operators in the implementation of infrastructure projects. It is encouraging that more Russian companies being aware of the prospects that are opening in the large market of the continent work actively in such fields as nuclear energy, hydrocarbon and metallurgy industries.”

On their part to engage Russian investors, Africans have seized efforts and shown activeness in business events (conferences, forums, seminars and exhibitions) in many cities, the latest in St. Petersburg and Yekaterinburg, in the Russian Federation. Official government representatives and private individuals from about fifteen African countries attended the IV Russian-African Forum (RAF) held on 11-14 July as part of the INNOPROM-2016 international industrial trade fair in Yekaterinburg (Urals).

According to the organizing committee, this year the African delegates represented different countries included Burkina Faso, Zimbabwe, Burundi, South Africa, Namibia, Rwanda, Senegal, Cameroon, Mozambique, Chad, Kenya, Ghana, Nigeria, Algeria and Egypt.

The “Russian – African Forum” has become an integral part of the program of the exhibition and it is no coincidence, that the African vector every year becomes more and more significant in the foreign policy of Russia, – said Russian Minister of Industry and Trade, Denis Manturov while addressing the gathering.

He expressed assertively Russia’s readiness to expand its activities in projects of nuclear energy and, oil and gas industry. “We hope that the authorities of the countries of the African continent will contribute their part in creating most favorable conditions for the development of all joint projects that we have been discussing and also here at INNOPROM,” said Denis Manturov.

As already well-known, Russian companies are interested in projects focusing on mineral extraction, the energy sector, construction of large manufacturing facilities, human resources training, healthcare development, agriculture and food security, cooperation in digital technology and communications.

The general or popular sentiments at the 2016 Russian-African forum was that Russia and Africa need a more efficient system of exchanging vital information and effective efforts have to target, first and foremost, the search for new partnerships, new ways directed at boosting the economic cooperation and at implementing the biggest and most promising projects.

Unbelievably for over two decades, Russian officials in their speeches have repeated the same identified pitfalls, speed bumps or setbacks in the bilateral relations between Russia and Africa. The Foreign Ministry published the text of Deputy Foreign Minister Mikhail Bogdanov’s speech at its official website in July 2013 which he highlighted the same decade-old problems at a session of the Urals-Africa economic forum in Yekaterinburg.

“One must admit that the practical span of Russian companies’ business operations in Africa falls far below our export capabilities, on the one hand, and the huge natural resources of the huge continent, on the other,” Bogdanov said.

“Poor knowledge of the African markets’ structure and the characteristics of African customers by the Russian business community remains an undeniable fact,” he said. “The Africans in their turn are insufficiently informed on the capabilities of potential Russian partners,” Bogdanov said.

Experts have also been looking at ways to improve trade relations and economic cooperation. For instance, Andrey Efimenko, an Expert at the Russian Chamber of Commerce and Trade said in an exclusive interview with me that CCI of Russia closely monitored the activities of Russian companies in Africa, as a number of companies – members of Chamber are implementing major investment projects in this region of the world, in particular, Renova group, Gazprombank, LUKOIL, Rosneft, etc.

“Unfortunately,” Efimenko regrettably pointed out, “some large Russian companies operating on the African market, has managed to establish itself negatively in a number of countries. This is primarily due to ignorance of cultural peculiarities of the region, the lack of social responsibility, failure to completely fulfill contractual obligations. These cases damage the image of Russia and Russian companies with further entering the African market.”

The Russian Chamber of Commerce conducted a survey of Russian companies regarding the work on the African markets has shown that in conditions of sanctions have hampered their access to financial and credit resources that could be directed to participate in the implementation of infrastructure projects, the purchase of foodstuffs and agricultural raw materials.

Certain deterrent factor is the cost of logistics from Africa to Russia and/or vice versa and weak solvency of local companies, interested in obtaining Russian products on preferential terms. Another constraint to the development of business cooperation with certain countries in the region (Guinea, Nigeria, Sierra Leone) is currently an epidemic of the Ebola virus, as well as the lack of political stability in several African countries (Chad, Nigeria, Liberia, etc), the Expert explained.

In conditions of high competition on the African markets from China, European Union and the United States believe that public-private partnership with the coordinating and steering role of the state is at this stage the key to success and the best form of development of cooperation of Russia with African countries.

An important factor in the expansion of Russian-African relations – the establishment of development institutions such as the Russian export center and Roseximbank. CCI of Russia is making serious efforts to unite the business community of the country for development of interaction with African countries.

On the initiative of the Chamber and with the support of Russian state, public and private organizations in 2009, established a Coordinating Committee on Economic Cooperation with Africa (south of Sahara) popularly referred to as AfroCom. Today, it unites more than 120 Russian organizations and companies interested in developing relations with Africa.

With the participation of the Committee are regularly conducted business activities, which are important both for the deepening of bilateral relations with individual countries, and to strengthen Russia-African relations in general. The Committee pays special attention to information work. The site completely devoted to the economy of the African continent and the development of Russian-African economic relations.

As a further step, the Africa Business Initiative (ABI) in partnership with the Institute for African Studies of the Russian Academy of Sciences, with the support of the Ministry of Foreign Affairs of the Russian Federation, are also attempting to bring together key representatives from large Russian companies, government and the academic community as a working group to focus on helping Russian companies to enter and work in Africa.

There is still high optimism. “Russia has a large scientific and technical potential, and the Moscow regions also are historically developed as industrial and scientific centers and have good opportunities to develop their export potential to Africa. I would not want to associate the current crisis in the West and in Europe with the development of relations between Russia and African States,” Lyubov Demidova wrote me in an emailed interview.

She further informed that the new regional committee will include representatives of Russian organizations and companies, from government, public and business organizations in Russia, major Russian companies which already occupied a niche in Africa, and those who plan to transact business in Africa.

The main directions of its work are to inform members of the committee, to explore the possibilities of establishing a mechanism of financial support for Russian entrepreneurs, the organization of various business activities, including conferences, seminars, business meetings to establish contacts with potential partners.

One of the most important directions in the committee’s work is working on the information back-up of the image. It consists of several components: forming a positive image of Russia and its business community, the provision of necessary business information about Africa, including the dissemination of information on tenders declared in Africa, analysis of the peculiarities of economic and socio-cultural development in Africa, reference materials about Russia and about the potential of Russian-African cooperation.

In order to bolster trade and raise economic cooperation, another new Regional Council for the Development of Economic Relations with African countries (RCDRA) was created early this February which will serve as a good mechanism for the development of fruitful cooperation in various fields.

For its part, the newly created Council will make every effort to establish large-scale, long-term and mutually beneficial cooperation and hopefully will meet the some positive results on the part of African States.

The main obstacle is insufficient knowledge of the economic potential, on the part of Russian entrepreneurs, needs and opportunities of the African region. For this, the Council hopes to help members of the business community of all African countries to address systematically issues of effective cooperation.

“The main task is to shift to a more comprehensive approach, using the extensive territorial network of the Russian Chamber of Commerce. Russia’s business should be provided with full information on economic development in African countries and their needs in order to establish an ongoing Russia-African mutually beneficial business dialogue,”she suggested.

The most promising option for solving the problem of intensification of bilateral contacts is the practical work to establish links between individual companies and business associations from both sides, which will gradually accumulate positive experience of working together, to understand the capabilities and needs of each other leading to the development of the economy with Russian and with the African side, Demidova concluded.

Currently, the turnover of trade between Russia and Africa is estimated at $2.5 billion, while imports of non-primary goods to the African continent already aggregate to $430 billion and are growing at 10-15 % a year. Nearly, in all economic sectors in African countries, Russia’s major competitors are from foreign countries especially Asia, western Europe and European Union.

Kester Kenn Klomegah is an independent researcher and writer on African affairs in the EurAsian region and former Soviet republics. He wrote previously for African Press Agency, African Executive and Inter Press Service. Earlier, he had worked for The Moscow Times, a reputable English newspaper. Klomegah taught part-time at the Moscow Institute of Modern Journalism. He studied international journalism and mass communication, and later spent a year at the Moscow State Institute of International Relations. He co-authored a book “AIDS/HIV and Men: Taking Risk or Taking Responsibility” published by the London-based Panos Institute. In 2004 and again in 2009, he won the Golden Word Prize for a series of analytical articles on Russia's economic cooperation with African countries.


231,000 New Jobs Added in Western Balkans amid Ongoing Economic Challenges, Emigration

MD Staff



A 3.9 percent increase in employment over the last year has led to the creation of 231,000 new jobs throughout the six countries of the Western Balkans, according to the “Western Balkans Labor Market Trends 2018” report, launched today by the World Bank and the Vienna Institute for International Economic Studies (wiiw). Unemployment also fell from 18.6 percent to 16.2 percent, reaching historic lows in some countries.

Leading the way for employment in the region was Kosovo, which saw an increase of 9.2 percent, followed by Serbia (4.3 percent), Montenegro (3.5 percent), Albania (3.4 percent), FYR Macedonia (2.7 percent), and Bosnia and Herzegovina (1.9 percent). Despite this progress, however, low activity rates – particularly among women and young people – along with high rates of long-term unemployment and a prevalence of informal work, continue to pose challenges for sustained economic growth in the region.

“The region has made great strides in improving labor market outcomes over the last year – meaning more people are finding jobs,” says Linda Van Gelder, World Bank Country Director for the Western Balkans. “However, we continue to see high rates of people who are not in employment, education or in training programs and we need to find ways to link them to future opportunities.”

Youth unemployment of 37.6 percent is a key challenge for the region. However, this rate is down from last year and nearly every country in the region is experiencing the lowest levels of youth unemployment since 2010. Country rates range from 29 percent in Montenegro and Serbia, to more than 50 percent in Kosovo. According to the report, it may be difficult for young people who become detached from jobs or education for long periods to reintegrate into the labor market. They also face a wage gap, earning up to 20 percent less than those who find employment sooner.

The report also notes that female employment rates are on the rise but they still remain low by European standards. The employment rate for women across the region stands at 43.2 percent, varying from a low of 13.1 percent in Kosovo to a high of 52.3 percent in Serbia. The gender gap in employment has also narrowed since 2010, ranging from 28.9 percentage points in Kosovo to 9.8 percentage points in Montenegro.

“Economic trends in the region look to be headed in the right direction,” says Robert Stehrer, Scientific Director of the Vienna Institute for International Economic Studies. “Getting more people, particularly young and women into employment remains one of the key challenges in the region to sustain economic and social convergence.”

A number of obstacles to employment need to be addressed to reduce ongoing emigration from the region, especially common among young, educated people. In order to address this, further knowledge is needed. Countries in the region should synchronize their data on emigration and improve the registration and publication of migration statistics. By utilizing high-quality data that is in-line with international standards on workforce composition – both domestically and internationally – will produce accurate analysis of labor market dynamics in the region and allow for the design of policies that can simultaneously address the challenges of emigration and reap the benefits of migration.

Better linkages between secondary graduates and the labor market, as well as earlier interventions to retain students, can improve opportunities for employment. Policies, such as child care, care facilities for the elderly, flexible work arrangements and more part-time jobs would also promote labor market integration among women.

The report was produced with financial support from the Austrian Ministry of Finance.

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Economic Growth in Gulf Region Set to Improve following a Weak Performance in 2017

MD Staff



The Gulf Cooperation Council (GCC) region witnessed another year of disappointing economic performance in 2017 but growth should improve in 2018 and 2019, according to the World Bank’s biannual Gulf Economic Monitor released today in Kuwait.

The region eked out growth of just 0.5% in 2017 – the weakest since 2009 and down from 2.5% the previous year. The GCC region’s economies experienced flat or declining growth as lower oil production and tighter fiscal policy took a toll on activity in the non-oil sector. External debt issuance continued to rise to help finance large fiscal deficits.

Economic growth is expected to strengthen gradually, helped by the recent partial recovery in energy prices, the expiration of oil production cuts after 2018, and an easing of fiscal austerity. The World Bank expects growth to firm to 2.1% in 2018 and rise further to 2.7% in 2019. Growth in Saudi Arabia is expected to rebound close to 2% in 2018-19 and to strengthen similarly elsewhere in the region.

“Policy attention is shifting towards deeper structural reforms needed to sever the region’s longer-term fortunes from those of the energy sector,” said Nadir Mohammed, World Bank Country Director for the GCC. “While the recent increase in oil prices provides some breathing space, policy makers should guard against complacency and instead double down on reforms needed to breathe new life into sluggish domestic economies, to create jobs for young people and to diversify the economic base. Any slippage could negatively impact the credibility of the policy framework and dampen investor sentiment.

Looking forward, there are several downside risks that may weigh on activity. Lower than expected oil prices could exert pressure on the OPEC producers to extend or deepen their production reduction agreement and dampen medium-term growth in the GCC countries.

Although fiscal and current account balances are improving, the region continues to face large financing needs and remains vulnerable to shifts in global risk sentiment and the cost of funding. Geopolitical developments and relations within the region could slow growth prospects. Slippage in the implementation of country reform plans arising from weak institutional capacity will rob the GCC of the benefits of fiscal adjustment and of deeper structural reforms that aim to diversify their economies.

Over the longer term, the enduring dominance of the hydrocarbon sector in the GCC economies argues for the vigorous implementation of structural reforms.  The terms of trade shocks in 2008-09 and in 2014-16 barely dented the dominance of the hydrocarbon sector in the GCC, with the bulk of the adjustment so far driven by spending cuts rather than the emergence of other traded sectors.

Structural reforms should focus on economic diversification, private sector development, and labor market and fiscal reforms. The GCC states’ long-term ambitions are articulated in various country vision statements and investment plans, and aspire to build competitive economies that utilize the talents of their people.

Implementing these structural transformation programs requires continuing political commitment from the GCC governments.

Saudi Arabia has shown considerable leadership in this regard: the 12 “vision realization plans” associated with its Vision 2030 aspirations aim to significantly transform the economy over the next 15 years by lifting the private sector share of the economy from 40 to 65% and the small and medium enterprise contribution to GDP from 20 to 35%.

Transforming from an oil-dependent economy to a self-propelled, human capital-oriented one requires some fundamental changes in the mindset; some also call this a new social contract,” said Kevin Carey, Practice Manager at the World Bank.  “GCC countries do not need to discard their existing social contracts but rather to upgrade them to reflect new realities of low for long oil prices, increasing global competition and the long-term threats from technological and climate change.”

As with other Arab countries, the GCC states also face sustainability, equity and welfare challenges related to their pension systems. These issues need to be addressed urgently to prevent any negative impact on economic growth, fiscal sustainability, and labor market stability.

Among the potential solutions that could help improve pension outcomes, the Gulf Economic Monitor underscores the importance of improving efficiency by reducing the prevailing fragmentation in many of the GCC pension systems; making access and contributions as simple and systematic as possible through the strengthening of ID and IT systems and the capabilities of pension administration bodies; and strengthening the governance of pension institutions. If GCC countries wish to attract global talent, they will also need to consider potential solutions for expatriates that help to meet their long-term pension and financial security needs.

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Poland: Build on current economic strength to innovate and invest in skills and infrastructure

MD Staff



Poland’s economic growth remains strong. Rising family benefits and a booming jobs market are lifting household income while poverty rates and inequality are falling, says a new OECD report.

In its latest Economic Survey of Poland, the OECD encourages policy-makers to build on the country’s current economic strength and social progress in order to tackle major remaining challenges. To sustain rising living standards Poland has to develop its capacity to innovate and invest in skills and infrastructure, as is acknowledged in the government’s Strategy for Responsible Development. The report says that the level of expenditure on research and development, despite recent welcome rises and tax incentives, remains weak. Vocational training suffers from limited business engagement which is hindering many of the country’s plentiful small enterprises from modernising and improving productivity.

Poland is also ageing rapidly. The working age population is projected to decline markedly over the coming decades. The lowering of the retirement age risks increasing poverty among the elderly, particularly women, says the OECD. Women often have patchy career paths and their retirement age is now set to remain unusually low. Workers should be made aware of the benefits of working longer for their future pension income, the report says.

Despite efforts to improve childcare, it remains insufficient and expensive, especially in rural areas. More investment in childcare is required as part of a range of measures to help combine work and family life and strengthen the number of women in employment.

Presenting the Survey in Warsaw, OECD Deputy Secretary-General Mari Kiviniemi said, “Poland is in a strong position. A dynamic job market together with the Family 500 + programme has helped make economic development more inclusive. Many people now benefit from new opportunities and rising incomes.”

“The time is ripe to ensure that living standards continue to rise. Strengthening innovation, improving infrastructure and investing in skills will be crucial. With rising labour and skills shortages, many employers now realise how important it is to invest in training. The government must seize this opportunity to engage with them.”

Measures to improve tax compliance have succeeded in shrinking the public deficit despite higher spending on social benefits. But more resources – or shift in how they are used – will be needed to raise  spending in priority areas such as public infrastructure, healthcare and higher education and research.

Limiting reduced VAT rates, increasing environmental taxes and giving a stronger role to the progressive personal income tax would raise additional revenue while contributing to more equity and a greener environment.

Plans to reform higher education and improve research excellence and industry-science co-operation are welcome, the report says. The general health status of Poles and access to healthcare are very unequal, while environmental quality is below the average of OECD countries. Tax rates on air and water pollution and on CO2 emissions are low and many environmentally harmful fuel uses are exempt from taxation. Raising environmental taxes would provide stronger incentives to replace ageing coal-intensive equipment with greener alternatives.

A clear immigration policy strategy is also needed to better monitor integration of foreigners in line with labour market needs, the protection of their rights and their access to education and training.

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