For more than two decades, Russia has been struggling to establish some economic influence, but such efforts have hit stumbling blocks which policy experts and Russian authorities themselves have attributed to inadequate knowledge of investment and economic possibilities in Africa.
Quite recently, Keir Giles, Associate Fellow (on the Russia and Eurasia Program) at Chatham House in London, wrote in an emailed interview “surely lack of knowledge about investment opportunities is one factor holding back economic engagement, but it is certainly not the only one. The problem remains that there are whole sectors of the economy where Russia is simply irrelevant – to take the most obvious example, consumer goods – and so their engagement will always be dwarfed by China.”
“The only exceptions are the traditional strengths of Russia (and the Soviet Union before it) – infrastructure, raw materials and energy. In effect, the lack of engagement is partly a consequence of the failure to develop and diversify since the end of the Soviet Union that is a fundamental challenge to the Russian economy,” he further explained.
Giles recounted the history that “economic collapse at the end of the Soviet Union affected Moscow’s engagement with Africa along with other regions. While Russia was finding its new place in the world, diplomatic representations abroad were cut back harshly and resources focused on those countries seen as essential.”
As a result, Russian expertise and engagement with Africa entered a hiatus, at exactly the same time China started rapidly to increase investment and presence. Moscow’s recent efforts seek to redress this and catch up – in parallel with, for example, Russia’s return to Latin America – both to find and exploit commercial opportunities, and to foster support from third nations in Russia’s ever more intensive confrontation with the United States and Europe.
“The most conspicuous aspect of Russia’s involvement in Africa is its absence,” says John Endres, Chief Executive Officer of Good Governance Africa from South Africa, adding that “whereas the Soviet Union was quite extensively engaged in Africa, Russia has almost entirely abandoned the field to other foreign players during the past two decades.”
Interestingly, Russia has more than 40 full-fledged diplomatic representations and fixed special trade missions to facilitate trade and investment in a number of African countries, and yet economic engagement has faced difficulties down the years.
The Foreign Ministry published the text of Deputy Foreign Minister Mikhail Bogdanov’s speech on official website where he highlighted the same old problems facing the development of Russia-African ties at a session on 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 one hand, and the huge natural resources of the continent, on the other,” Bogdanov said assertively.
Of course, one of the obstacles has been insufficient knowledge of the economic potential, on the part of Russian entrepreneurs, needs and opportunities of the African region. “Poor knowledge of the African markets’ structure and the characteristics of African customers by the Russian business community remains an undeniable fact. The Africans in their turn are insufficiently informed on the capabilities of potential Russian partners,” Bogdanov stressed in his speech without suggesting any possible solutions.
Re-echoing Deputy Minister Bogdanov, Professor Irina Abramova, the Director of the Institute for African Studies under the Russian Academy of Sciences, has explained the situation thus: “as before, we cannot deny the insufficient knowledge of the Russian business structures specificity of Africa, its requirements, and other parameters. On the other hand, Africans are poorly informed about the possibilities of Russian partnership.”
Similarly, Lyubov Demidova, Deputy Chairperson from the Russian Chamber of Commerce and Industry (Moscow region), wrote in an emailed response to a media interview that “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, she 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 business and economic development in African countries and their needs in order to establish an ongoing Russian-African mutually beneficial business dialogue,” she suggested.
For the past years, only a few of those Russian efforts at reviving economic cooperation have been made public. Media has not been on the priority side of Russian diplomacy. Efforts by a few African countries to obtain media representation have been stifled in the bud. The worse is that African NGOs on culture have not been encouraged to operate in the Russian Federation.
“Russian media write very little about Africa, what is going on there, what are the social and political dynamics in different parts of the continent. Media and NGOs should make big efforts to increase the level of mutual knowledge, which can stimulate interest for each other and lead to increased economic interaction as well,” said Fyodor Lukyanov, Editor-in-Chief of the Journal Russia in Global Affairs. Lukyanov is also the Chairman of the State Council on Foreign and Defense Policy.
“To a certain extent,” Lukyanov said, “the intensification of non-political contacts may contribute to 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 the post-Soviet era.”
For the dearth of vital economic information, Russian Foreign Ministry, Department of Press and Information, could grant media accreditation to, at least, a few African journalists to work in Russia. That could help bridge the business information gap. Most often, African political leaders and corporate business directors have to depend on western media reports about developments in Russia, according to many policy experts.
Dr. O. Igho Natufe, PhD (McGill), a Research Professor at the Center for Studies of Russian-African Relations and Foreign Policy of African Countries, whose book “Russian Foreign Policy in Search of Lost Influence” published recently, explained that in order to improve the overall relationship, Russia has to review its policy strategies and one surest way is to employ or make use of “Soft Power” in dealing with Africa.
Russian authorities have to acknowledge that media has a huge role to play, thus frequent exchange of visits by Russian and African journalists as well as regular publication of economic and business reports could help create public business awareness and further raise to an appreciable level the relationship between the two countries.
Olga Kulkova, Research Fellow at the Center for Studies of Russian-African Relations, Institute for African Studies in Moscow, also noted in her opinion article that “in the global struggle for Africa, Russia is sadly far from outpacing its competitors. In terms of stringency of strategic outlook and activeness, the country is seriously lagging behind China, US, EU, India, Brazil.”
Kulkova suggested that “Africa needs broader coverage in Russian media. Leading Russian media agencies should release more topical news items and quality analytical articles about the continent, on-the-spot TV reports in order to adequately collaborate with African partners and attract Russian business to Africa. More quality information about modern Russia be broadcast in African states. Indisputably, it would take a lot of money and efforts, but the result will pay off.”
Russia has to take into account if it wants to improve the chances for success in Africa. All the leading foreign countries have been doing that quite efficiently for a long time, Kulkova noted. For example, at the Forum on China-Africa Cooperation (FOCAC), both China and Africa have fixed a “China-Africa Press Exchange Center” in China to encourage exchanges and visits between Chinese and African media, and China already supports frequent exchange of correspondents from media organizations of the two sides. Most probably, Russian authorities, both in the Kremlin and in the Foreign Ministry, have to learn from some of China’s policy directions with Africa.
In addition, trade experts have also been looking at ways to improve trade relations and economic cooperation with Africa. For instance, Andrey Efimenko, an Expert at the Russian Chamber of Commerce and Industry, told me that CCI of Russia has closely monitored the activities of Russian companies in Africa.
“Unfortunately,” Efimenko regrettably pointed out, “some large Russian companies operating on the African market have managed to establish themselves 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 fulfill contractual obligations. These cases damage the image of Russia and Russian companies with further entering the African market.”
Tellingly, some Russian researchers have their own explanations too. “Until recently, Africa was poorly represented in macro-economic forecasting and research, especially in terms of Russian-African relations,” wrote Professors Aleksei Vasiliev and Evgeny Korendyasov both from the Russian Academy of Sciences, Institute of African Studies. Professor Vasiliev, a former Special Presidential Envoy to African countries and Korendyasov, a former Russian Ambassador to the Republic of Mali and Burkina Faso.
They both authored an article published (available on Vaidal Discussion Club website) stating that Russia has officially declared promoting relations with Africa a priority goal. Assurances made by Russian officials in their statements that Africa is “in the mainstream of Russia’s foreign policy” have not been substantiated by systematic practical activities, and the development of relations between Russia and Africa has so far nothing to boast about.” (See also: Russia in Global Affairs website).
Without doubts, Russia’s major lines of African partnership in the long-term perspectives include developing investment cooperation, widening Russian companies’ presence in the African markets through increased deliveries of industrial and food products, and enhancing Russia’s participation in driving the economic development of Africa. On the other hand, access to Russian market for African countries has to be simplified. Official statistics on Russia’s trade and investment in Africa are still hard to find.
The Bust: WeWork’s diminishing stature of the perfect “start-up”
Until recently, the globally acclaimed startup, WeWork was transforming the future of office spaces and staff hiring processes. Truly, it was transformational in the sense that the startup was providing a vital service point to many multinationals around the world. However, Mark Dixon, the cofounder of IWG, another workspace solutions company, was not getting the trick. Here was IWG, a decently profitable startup with consistent annual growth, still unable to compete with the superstar of the industry. Soon after SoftBank poured cash into the company, WeWork was valued for more than $40 bn. Then, it was making headlines for overwhelm; now, WeWork is in a state of awe. As market reports suggest, WeWork even lacks the cash to fire its existing employees.
As Adam Neumann, the chastened cofounder of the dwindling company once proclaimed, co-working was the future and that employees would prove to become more productive and efficient. In his own words, different cultures and organizational goals would inspire the entire floor. Much as the concept is about renting an office space, Mr. Neumann deliberately did not elaborate on the nuisances of dealing with office neighbors, as seen from a tenant’s perspective. The idea would have charmed many organizations; it was a great opportunity to redeem operating costs or dealing with unwarranted office culture problems. Or, as many renting executives thought, WeWork would define the ground rules, aptly in accordance with global standards. For many, it was also an experiment for the future. Also, nobody could take away the fact of losing varied insights from “not” participating in what at first seemed like a once in a time revolution.
SoftBank, a Japanese conglomerate investing fund is writing the most important plot in the story. Strangely, both the rise and fall of WeWork has been catalyzed by SoftBank. However, the fact that WeWork was blessed by an investing fund is not strange, or surprising. Amongst sovereign funders, there is competition to stay one foot ahead of another. The Europeans have long stressed on how very few startups from their region go onto becoming a global giant. SoftBank’s associations elsewhere is a testimony to its deliberate strategy of staying ahead in the future. Notwithstanding the fact that the Japanese investors would have loved the idea of co-working space more than others. In early 2017, WeWork’s market value, shot over $40 bn, even though the company was registering profits below what Mr. Dixon’s firm were accounting to. There was a strange gossip in the market around why other investors were not jumping to what the SoftBank deemed as highly profitable. For many like Mr. Dixon and other investors, answers were soon to be found. If it could only be timely, Japanese angels would have anticipated why Mr. Neumann would sell his rights of the name, “We” in WeWork. It was a five million dollar (plus) exit for the charismatic man, whose venture was taken over by those who thought of multiplying their fortunes. SoftBank will be sorry for its decision to trust the hierarchy in Mr. Neumann’s leadership. Nevertheless, post takeover, Mr. Dixon will not be contemplating any further on why it has decided to appoint two CEO’s. Nor will there be any sort of contemplation on why the new appointees have secured their severance package before paying out dues.
As it stands, IWG is not doing a bad business in comparison to WeWork’s downfall. The American start-up was destined for success from its early years. Co-working will still be a grand idea in our times but filthy abundance in a short period of time has brought a winning project to a standstill. There will be other co-working competitors for IWG, but it will learn from the mistakes of a competitor who was bigger than the entire industry. If anything, Mr. Dixon will be smelling opportunities ahead.
Alibaba on Platform Economy
Alibaba on national mobilization of
entrepreneurialism on platform economy: today, Alibaba sold $38 Billion within 24
hours: Around the world, currently, there are 100 nations with less than $38
Billion dollars in annual GDP. Imagine if this single company performed at the
same rate for next 365 days, it would equal to annual GDP of Japan, Germany,
India, France, UK and Canada all combined. Bravo Alibaba, well done, the world in shock
is now fondling in own toolboxes.
Are Nations Awake: Are there enough reasons to explore how national mobilization of entrepreneurialism on platform economies and how it will uplift local grassroots prosperity? Are there enough trade-groups, Chambers of Commerce, Trade Associations with enough skills to play in these AI centric digitally advanced and globally friendly market-places? Outside a miniscule number most seriously out-dated trade-groups are in rapid transformation so they too would become shiny butterflies for the new global-age.
Old days of old ways are now new days of
Salvaging of exportability lost during last decade: Nation by nation, the grassroots medium-size economy was basically, ignored, abandoned and rejected, killing exportable goods and services. So long the trade groups around the 200 nations stuck in their old fashioned comfort zones spanning a century, outside handful organizations most nations are in deep trouble. Observe how nations with riots have the most disorganized, disconnected trade-groups, not due the lack of funding but due to lack of poor leadership with little or no global age skills.
Uplifting working-citizenry after a lost
decade on skills: So long the national leadership assumes that MBA degrees are
the saviors of their next economy and so long the corporations feels comfortable
that all their management is being well trained on YouTube, no additional proof
of this fallacy is necessary other than decimated economies and chaos on the
Understanding The Third Economy: During the first economy; rules of engagement and rules of balancing the books were established, the second economy; where fancy jargon was invented to cook the books to balance with political agenda and now the upcoming third economy where real numbers will balance the real books with real columns all managed by artificial intelligence and block-chain delivering honest picture instantly to all and all the times.
Alibaba proves the direct benefits of a Third Economy; such prosperity can only assured by respecting the balancing of pennies and cents with mobilizing millions of abandoned small and medium enterprises and using free technologies as starting base. Such deployments are only possible when leadership is skillfully equipped to understand global-age and able to serve the special transformation demands, by firing the first person for incompetence for saying they have no new funding to change and firing the next person for disorganization for saying they are too busy and have no time to change.
Public sector around the world had almost all
these resources available to deploy since last decade. Nation by nation, outside
the top business sectors rest of the small medium enterprise players
systematically abandoned and crushed were replaced by too big to fail nonsensical
hype. Now national races in the age of digital platform economy will demand
clarification on their internal conflicts of “digital-divide and mental-divide” and explain dysfunctional imbalanced spending on trade expansion
without “national mobilization of entrepreneurialism” …it is also a fact that
majority nations need massive in-depth-training at all top leadership levels to
understand the new language of the new days.
It’s time to choose; either build world-class export promotion agencies, vertical trade groups to foster trade by global-age showcasing on platform economies and bring home some grassroots prosperity or allow restless citizenry and rise of populism. It time to balance, that where public sectors mostly all over the world failed on such progressive affairs, technology has now blossomed as salvage operation with dramatic tools and deployment options. Is your national leadership ready now? Not to sidetrack, this is not an exclusive IT issues; this is global age expansion and entrepreneurial mobilization issues. Deeper studies and debates are essential.
The world is changing fast is no longer just a cliché, now growing into a warning
National Transformation: Futurism of ‘creating local grassroots economy’ demands two distinct national mobilizations. Firstly, creating skilled citizenry capable to swing with global-age demands and secondly, creating massive digitization of midsize economy to enable global-speed-performance to match trading with 100-200 nations. Mostly not new funding dependent but execution starved. Nations with such mastery will thrive and lead; generational transformation at magical speed with full deployments of platform economy is a prerequisite. Sounds rocket science, it is, but very doable and easy.
Rules of National Mobilization of Entrepreneurialism: To deploy such blueprints, launch a nationwide business-uplifting lifelong learning agenda for the entire export promotion bodies, Chambers, trade associations and also the entire small-medium-exporters base. Review this process meticulously every 100 days. Under right situation, the export promotion of the nation can easily quadruple within a year. It is necessary to keep asking what is blocking this and who is stopping this?
How do you mobilize public and private sector leadership after a lost decade on global-age expansion? With some 100 elections in 2019 alone and million promises on podiums the realities are hidden in creating real grassroots prosperity, now pending Presidential Elections of 2020 USA the mother of all elections will provide massive debates amongst calls of Impeachments, while December 12th Election of UK amongst calls of Brexit and European Union with loud and restless citizenry, a new world is unfolding. The public is informed, and slowly realizing what’s working and what’s not… deep silence at the public sector is not good, a growing sign of lack of skills. Urgent debates needed as 2020 starts with some dramatic shifts of markets, ideas and visions. We are now in the age of national mobilization of entrepreneurialism and platform economies.
China’s Descending Rise
China is in a sustained economic slowdown. This is causing malignant unease among the political and economic leadership of the communist party in Beijing that governs China. Investing in China will be different, because:
“The country’s first sustained economic slowdown in a generation. China’s economic conditions have steadily worsened since the 2008 financial crisis. The country’s growth rate has fallen by half and is likely to plunge further in the years ahead, as debt, foreign protectionism, resource depletion, and rapid aging take their toll.”
Chinese social structures are under duress over their aging society. Formerly in the 1990s-early 2000s: “China had the greatest demographic dividend in history, with eight working-age adults for every citizen aged 65 or older.”
Once societies age, marital numbers decrease, and overall productivity plunges. China’s explosion of older citizens versus working-age will bring unique circumstances for global consumers. Factual evidence of slower productivity is evident throughout China, and will have to be considered for any financial or economic decision for decades ahead. The Chinese economic miracle bursting is largely due to aging demographics.
No one in western or eastern economic analysis circles or think tanks realistically saw this coming former President’s Deng Xiaoping opening of China. This was termed, “Socialism with Chinese characteristics (and/or) ‘socialist market economy,’” still ongoing. This slowdown will have deep ramifications for the global investment community, liberal order in place for over seventy-five years, and Chinese financial wealth that now spans the globe.
When countries age, and use reproductive rights to control populations, they become more assertive abroad, and repressive to its citizenry; this describes China’s social, political and economic philosophies that govern over a billion people. Since its one-child policy was enacted, Chinese economic productivity will plummet, “because it will lose 200 million workers and young consumers and gain 300 million seniors in the course of three decades.”
Suppressive economies have difficulty innovating, producing enough goods domestically, and integrating into world economic mechanisms that intends to distribute wealth globally. But this isn’t the first time these warnings have been made publicly.
Former Premier, Wen Jiabao gave a prescient declaration in March 2007 during the long march of economic progress when Mr. Jiabao had misgivings about China’s growth model by stating, “(Chinese growth had become) ‘unsteady, unbalanced, uncoordinated and unsustainable.” Recent numbers indicated China’s official GDP “has dropped from 15 percent to six percent – the slowest rate in 30 years.”
Expansionary Chinese growth hasn’t experience this level of downturn since the end of the Mao into post-Mao era. What this does for the Belt and Road Initiative that is paving the way for investments into Central Asia up to the Arctic Circle is uncertain? Deep investment difficulties could witness China stopping the flow of billions of infrastructure projects into countries and continents such as Africa desperate for growth.
Public figures from the Chinese government generally have the economy growing at six percent, but many analysts and economists peg the number(s) at “roughly half the official figure.” China’s GDP has consisted of bad debt that typical financial institutions and western governments will transfer from the state to public sector and ultimately costs passed onto consumers. For China’s wealth to increase when so much domestic wealth is spent on infrastructure projects to increase GDP these official numbers need context.
China has bridges, and cities full of empty office and apartment buildings, unused malls, and idle airports that do not increase economic productivity, and if that isn’t the case then infrastructure increasing economic measurements will decrease. Unproductive growth factors officially known are: “20 percent of homes are vacant, and ‘excess capacity’ in major industries tops 30 percent.” According to official Chinese estimates the government misallocated $6 trillion on “ineffective investment between 2009-14.” Debt now exceeds 300 percent of GDP.
What’s discovered is the amount of China’s GDP growth “has resulted from government’s pumping capital into the economy.” Private investments have trouble overtaking government stimulus spending, and Foreign Affairs ascertains “China’s economy may not be growing at all.”
Chinese economic growth – post-Mao – saw the country’s self-sufficiency in agriculture, energy, and water almost complete by the mid-2000s. Through economic malfeasance, population control, and resource decimation, “water has become scarce, and the country is importing more food and energy than any other nation.” Environmental degradation is destroying the basic necessities for every day survival.
This is where the world community and financial resources of east and west can meet needs, and grow interconnected, global economies. Energy is one of the biggest areas that China will engulf global energy supplies
The U.S. Energy Information Administration believes China will continue being the largest natural gas user in non-OECD Asia, and by 2050:
“Expects that China will consumer nearly three times as much natural gas as it did in 2018. China’s projected increase in natural gas consumption is greater than the combined growth of natural gas consumption in all other non-OECD Asian countries.”
Opportunities for liquid natural gas (LNG) facilities to be built globally, and in China to spur domestic and international economic activity are unlimited. As China goes, so goes Asia, and the world is now in the “Asian Century.” Investors, geopolitical strategists, and anyone concerned with global security should never believe it is wise to let China continue to falter economically and societally. Setting up investment mechanisms and diplomatic vehicles that benefit China, and the world community is a prudent choice.
When military choices defeat sound fiscal and monetary polices, the past 150 years have brought “nearly a dozen great powers experienced rapid economic growth followed by long slowdowns.” Normal, civilized behavior was pushed aside. What’s needed for Chinese economic growth is the free flow of information, managed wealth, consumer goods, and research/innovation.
Decades ahead, and current economic realities point to China being a great power that is under pressure, but still needs capital. A weak, unsecure China who isn’t satisfied with its place in the Asian hemisphere or global economic system isn’t good for continued prosperity. It would be smarter to engage and invest within China in the areas of energy, water, agriculture, and electricity where opportunities still abound.
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