Russia’s strategy to enter the African Market

In this interview with Alisa Andreevna Prokhorova, Managing Director for International Activities and Interaction with Business Councils, and Group of companies of the Russian Export Center, not only discusses at length but also offers an in-depth information with statistics about Russia’s trade with Africa. The first Russia–Africa Summit has ultimately set the grounds for raising trade collaboration across various areas and work towards a new dynamism in the existing economic cooperation with African countries.

In an emailed discussion with Kester Kenn Klomegah in May 2021, Prokhorova unreservedly stressed that as the African continent undergoes positive transformation, platforms for dialogue trade between Russia and Africa are profoundly emerging too. She particularly refers to the newly created continental free trade zone in Africa for potential Russian investors and business people, facilitate their quest for interaction with industry organizations and enterprises of the sub-Saharan African countries.

Here are the interview excerpts:

Is the African market promising from an economic point of view? Does Russia play a special role on the African continent?

What is the peculiarity of the African continent? The fact that the demand is very high (a large territory of the continent, 54 countries), but many countries are not creditworthy. All countries of the world, large corporations plan a strategy to enter the market with a deterred effect. So, they invest. For example, China enters many African countries and takes major projects, but implements them at its own expense. Because, at the moment, it’s very difficult to achieve high demand from African population.

Russian companies do not have enough resources to engage in such investment expansion. The market is potentially the largest, Africa – is the continent of the future, but at the moment, the demand is generally limited.

Secondly, the USSR was very active in Africa. It had built and invested a lot, so since those times Russia has a positive image. Besides the past achievements, it is still necessary to build more business partnerships and form an economic strategy for the future.

What is the dynamics of economic relations between Russia and Africa over the past five years? Which changes are being tracked?

Russian exports to African countries over the past decade have generally shown a steady upward trend (adjusted for a number of specific factors). If in 2010 exports was only US$ 5 billion (less than 1.5% of the total), then in 2019 – already US$ 14 billion (3.3%).

Due to the low share of fuel in the supplies, the role of Africa in non-commodity exports is much more significant. Over the past 5 years Russian non-commodity export to Africa has consistently exceeded US$ 10 billion (2018 was a record year, exports amounted to US$ 14.4 billion). 

Speaking about Africa, we need to clearly distinguish the countries of this continent into two groups: the northern and southern parts. Russia traditionally has good economic relations with the countries of North Africa (trade turnover of US$ 11.7 billion in 2019), where there is a dynamic growth of Russian non-resource non-energy exports.

With the south African countries (trade turnover of US$ 5 billion in 2019) the statistics are more inconsistent, where the export of Russian non-commodity goods over the five past years ranges from US$ 1.8 billion in 2015 to US$ 2.2 billion in 2019. In spite of that, 2018 was the most successful year with an export volume of US$ 2.7 billion.

How much does Russia export to African countries on average per year? Which of them have the largest share in the Russian trade balance?

As I have already noted Russia works most actively with the countries of Northern Africa where Egypt stands out. Algeria and Morocco can also be distinguished.

Non-commodity exports 2019 (USD million): Egypt – 5407, Algeria – 2985, Nigeria – 367, Morocco – 332, Sudan – 271, South Africa – 260, Tunisia – 170, Kenya – 156.

Non-commodity exports for 8 months in 2020 (USD million): Egypt – 1624, Algeria – 1148, Nigeria – 279, Sudan – 203, Morocco – 199, South Africa – 155, Kenya – 115, Tunisia – 102.

As for major export contracts, the following can be noted:

The contract for the supply of 1.3 thousand passenger railcars for Egypt, in the amount of about 1 billion euros, was won by Transmashholding in cooperation with its Hungarian partner (the head contractor is the Tver Carriage Building Plant). Deliveries under this contract have already begun and by October, 117 railcars (US$ 59 million) have been shipped. EXIAR and EXIMBANK of Russia also take part as I know.

What is the role of non-commodity exports in trade with African countries? Moreover, are there any major infrastructure projects with the participation of Russia?

Russian Export Center pays a priority attention to the development of the relations with sub-Saharan Africa. The outcome of 2020 the volume of non-commodity export amounted to US$ 432.1 million. There was a support for the supply of Russian products in 34 countries of the region.

The main destinations of Russian non-commodity exports were: Rwanda (165 million), South Africa (32 million), Zambia (27.5 million US dollars), Tanzania (17.8 million US dollars), Ghana (17.1 million US dollars), Kenya (16.6 million US dollars) and Uganda (14.6 million US dollars). The main export industries are agriculture, mechanical engineering, chemical industry, timber industry, and metallurgical industry.

At the moment Russian Export Center takes part in the development of prospects for the participation of Russian companies in a number of infrastructure projects, in particular, for the equipment and construction of hydroelectric power plants in a number of countries in East Africa, the construction of a railway in one of the countries in West Africa.

Today, our portfolio also includes projects for the supply of products from the Russian automobile industry to Ghana, Nigeria and Ethiopia. A project for the supply of agricultural and railway equipment to a number of countries in South Africa is being worked out. In total, the work is carried out on projects in 18 countries of the region.

With the participation of Russian Export Center the implementation of a number of landmark projects of Russian companies in Africa in key industries, whose products are most in demand on the continent, is being discussed. It’s about the mining industry, metallurgy, chemical industry, agricultural products, infrastructure projects.

Special attention is paid to the development of exports of Russian high-tech products, the possibilities of supplying medical equipment, high-tech solutions in the field of hydro and solar energy, communication and security systems are being worked out. It is important to note that most of these projects are long-term, and their full implementation and delivery of results require long-term collaboration with African counterparts.

Economic partners from which African countries are interested in obtaining accreditation? And which of the services are in demand?

We are also stepping up our efforts to expand our foreign network. Since December 2021, Russian Export Center has accredited partners in countries such as the Democratic Republic of the Congo (DRC), Angola, the Republic of the Congo, Ivory Coast, and Rwanda. Partners in countries such as Ethiopia, Kenya, Tanzania, Ghana, and Senegal are in the process of accreditation.

We record an increase in the interest of Russian exporters in obtaining both financial services (lending and insurance) and non-financial services (search for a foreign buyer, top-level search for a partner) in West Africa (Nigeria, Benin, Ghana, Ivory Coast) and a number of East African countries (Tanzania, Kenya, Ethiopia).

We note an increase in the number of requests to find a Russian supplier from sub-Saharan Africa. Companies from such countries as South Africa, Nigeria, Ivory Coast, Ghana, Ethiopia, Tanzania, and Benin are most interested in increasing imports of Russian companies’ products. The most frequently we receive requests to search for suppliers in such industries as: mineral fertilizers, food products and petrochemicals.

Are you planning to establish cooperation with regional organizations and, if so, with which ones?

We plan to expand the channels of interaction with industry organizations and business councils of the sub-Saharan African countries. Special emphasis will be placed on cooperation with regional integration groupings (for example, the Southern African Development Community-SADC, the Economic Community of West African Countries-ECOWAS and the East African Community-EAC)

Besides, several projects can be noted: the activities and plans of the Afrocom at the Russian Chamber of Commerce and Industry (CCI) in the direction of Africa, the Russia-Africa Summit 2022, and the possible opening of a tasting pavilion in one of the African countries.

Why African business is extremely low or completely absent, compared to Asian countries, in the Russian Federation? Under the circumstances, what should be done to improve the current situation, to make a two-way trade?

Development of bilateral relations in the business environment depends on the intergovernmental commissions. These commissions work out the terms of cooperation as well as resolve issues of economic, technical and legal nature. In order to improve the situation in two-way trade between Russia and Africa it is necessary to develop state cooperation.

Moreover, the remoteness and insufficiency of developed transport networks with Africa are also key issues of bilateral cooperation. The elimination of trade barriers and dialogue at the level of intergovernmental commissions will allow countries to improve two-way trade links.

With the adoption of African continental free trade, what is your interpretation of this free trade, and how useful it could be for corporate Russian exporters?

The African free trade zone opens up opportunities for the free movement of services, goods, capital and labor in the region. This reduces costs and facilitates trade between countries, making Africa even more attractive to other states.

Russia supports the concept of the African free trade zone because it is very convenient for exporters who get the necessary certificates and trade permits in one country, and then sell their products to other African states. This free trade area allows producers to reduce the costs and time of transportation of goods. It increases the attractiveness of African market and makes it more significant for Russian exporters. 

Kester Kenn Klomegah
Kester Kenn Klomegah
MD Africa Editor 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.