Connect with us

Economy

Russia targets African markets with its agricultural products

Avatar photo

Published

on

Russian Agriculture Ministry’s Agroexport Federal Center for Development of Agribusiness Exports in close partnership collaboration with Trust Technologies and the business expert community drew up a business plan for the development of exports of principal agricultural products (grain, dairy, butter, meat and confectionery products) to promising markets of African countries.

The goal of the project is to prepare a practice-oriented model for increasing supplies and enhancing the competitiveness of Russian agricultural goods in the African market.

According to the business report, five African countries have been identified and chosen as traget markets for the delivery of the agricultural products. These are Angola, Cameroon, Ethiopia, Ghana, Kenya, Mauritius, Nigeria, Tunisia and South Africa.

These countries account for 40% of the continent’s population and one third of all African imports of agricultural products. According to ITC Trade Map, the total volume of imports of agricultural products in these countries in 2021 amounted to almost $33 billion.

Russian grain is competitive in the markets of target African countries and is already in demand. At the same time, grain crops have a high potential due to the expected increase in their purchases. Due to a growing population and limited opportunities to increase domestic production, grain imports are expected to grow by 8 million tonnes from 2021 to 2030. 

The African countries that are being studied together import more than 1.3 million tonnes of meat products a year. The leaders by volume of imports are South Africa, Ghana and Angola. In Nigeria and Kenya alone, the baking market has grown at an average annual rate of 38% over the past 5 years.

Within the framework of the business concept, another strategic area is deepening of cooperation in trading of oil products, primarily vegetable oils. Since 2016, oil imports in the target countries have grown twice as fast as agricultural imports overall, and by 2025, oil sales to the target countries will grow another 67%.

“Analysts estimate that consumption of meat products is expected to increase in many countries of the African continent. And while poultry meat will account for the bulk of growth as the most affordable and technologically advanced, organic growth will also be seen in all other types of meat,” Konstantin Korneev, executive director of Rincon Management, said and quoted in the report.

According to estimates, the potential supply of meat products from Russia to priority African countries by 2030 could reach 148,000 tonnes. There is also potential for boosting the supply of Russian dairy products. The first dairy product for which stable supplies from Russia have been established was ice cream. However, significant opportunities are opening up for shipments of milk powder, whey, cheese and butter, experts said.

According to forecasts, the milk deficit in Africa in 2025 will increase to 12.9 million tonnes (in milk equivalent) from 8.9 million tonnes in 2019. In 2030, it will reach 17 million tonnes. Africa currently imports $4.8 billion worth of dairy products, with the target countries among the top 20 importers.

As for the supply of finished food products, experts believe that for a long-term presence in Africa, the optimal scenario is to localize production to meet market needs. South Africa, Ghana and Kenya are identified as priority countries for this scenario. The volume of consumption of finished food products in the target countries exceeds $29 billion a year.

“The African continent is an interesting and promising area for the development of Russian food exports. However, when working in this market, it is important to take into account a number of factors: strong differences in the level of welfare of the population, political instability in some countries, state regulation of prices for a number of goods, et cetera,” Agroexport head Dmitry Krasnov was quoted as saying in the statement.

According to Krasnov’s explanation the materials of the concept can help Russian business determine priority countries for organization of supplies and choose the focus range taking into account market peculiarities.

In a related development, Russia’s Industry and Trade Ministry has drafted a list of special economic zones (SEZ) in friendly countries where Russian companies could potentially set up production amid sanctions and sent it to business associations.

The ministry decided to compile the list due to the sanctions imposed by “unfriendly” countries and difficulties with purchases of imported raw materials, components and equipment that are used by Russian manufacturers, the letter said.

“As a result of the Industry and Trade Ministry’s work with Russian trade missions abroad, information has been compiled on special economic zones in friendly countries (95 potential sites). Information about the sites abroad has been conveyed to major Russian industrial companies and business associations,” the ministry said.

“Localization of production in the following areas is being considered: transport engineering, energy equipment, construction materials, chemical products and so on,” the ministry said.

Russia has embarked on “special military operation” aims at “demilitarization and denazification” of Ukraine since February 24, and is currently experiencing a raft of sanctions imposed by the United States and Canada, European Union, Japan, Australia, New Zealand and a host of other countries.

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.

Continue Reading
Comments

Economy

Baltic reality: High inflation and declining of living standards

Published

on

The Baltic States’ economy is in bad condition. The latest estimate from the EU’s statistics body shows that Eurozone inflation is continuing to soar to record highs.

The Baltic countries continue to be the hardest hit. These states in particular are experiencing the highest levels of inflation in the Eurozone. Thus, inflation in Latvia and Lithuania hit 22.4 per cent and 22.5 per cent respectively. Estonia also has seen inflation rise year on year from 6.4 per cent in September 2021 to 24.2 per cent in September 2022. The more so, the Baltic States continue to see soaring energy and food prices which lead to declining standard of living.

The Bank of Lithuania has published its latest economic forecast and revised gross domestic product (GDP) growth projections for 2023 from 3.4% to 0.9%.

Statistics Lithuania also reports that in September 2022, the consumer confidence indicator stood at minus 16 and, compared to August, decreased by 5 percentage points. The decrease in the consumer confidence indicator in September was determined by negative changes in all of its components.

According to SEB bank economist Tadas Povilauskas, the number of poor people in Lithuania will increase. Living standards will be affected by rising food and energy prices. The current price of natural gas is too high and the economy cannot “go” with it. It is evidently that energy prices shocks have far-reaching effects on Lithuanian economy and population.

The main cause of such state of affairs is deteriorated relations with Russia. Russia has lately been the EU’s top supplier of oil, natural gas, and coal, accounting for around a quarter of its energy.

The conflict in Ukraine and political confrontation between Russia and the West has exacerbated the energy crisis by fuelling global worries it may lead to an interruption of oil or natural gas supplies from Russia. Moscow said in September it would not fully resume its gas supplies to Europe until the West lifts its sanctions.

It is obviously that the conflict in Ukraine dramatically worsened the situation on the markets, as Russia and Ukraine account for nearly a third of global wheat and barley, and two-thirds of the world’s exports of sunflower oil used for cooking. Ukraine is also the world’s fourth-biggest exporter of corn.

According to Euronews, the prices of many commodities – crucially including food – strained global supply chains, leaving crops to rot, caused panic in many European countries, including the Baltic States.

High inflation has become the direct consequence of sanctions imposed on Russia. As for the Baltic States, the lack of wisdom to find compromises and blindly following the European Union’s decisions have lead to declining standards of living. The desire to punish such huge state as Russia played a cruel joke on the Baltic States. It will be difficult to explain the population why they should turn down the heating in homes, schools and hospitals over the winter.

Continue Reading

Economy

Policy mistakes could trigger worse recession than 2007 crisis

Avatar photo

Published

on

st

The world is headed towards a global recession and prolonged stagnation unless fiscal and monetary policies holding sway in some advanced economies are quickly changed, according to a new report released on Monday by the UN Conference on Trade and Development (UNCTAD).“There is still time to step back from the edge of recession,” said UNCTAD chief Rebeca Grynspan.

‘Political will’

“This is a matter of policy choices and political will,” she added, noting that the current course of action is hurting the most vulnerable.

UNCTAD is warning that the policy-induced global recession could be worse than the global financial crisis of 2007 to 2009.

Excessive monetary tightening and inadequate financial support could expose developing world economies further to cascading crises, the agency said.

The Development prospects in a fractured world report points out that supply-side shocks, waning consumer and investor confidence, and the war in Ukraine have provoked a global slowdown and triggered inflationary pressures.

And while all regions will be affected, alarm bells are ringing most for developing countries, many of which are edging closer to debt default.

As climate stress intensifies, so do losses and damage inside vulnerable economies that lack the fiscal space to deal with disasters.

Grim outlook

The report projects that world economic growth will slow to 2.5 per cent in 2022 and drop to 2.2 per cent in 2023 – a global slowdown that would leave GDP below its pre-COVID pandemic trend and cost the world more than $17 trillion in lost productivity.

Despite this, leading central banks are sharply raising interest rates, threatening to cut off growth and making life much harder for the heavily indebted.

The global slowdown will further expose developing countries to a cascade of debt, health, and climate crises.

Middle-income countries in Latin America and low-income countries in Africa could suffer some of the sharpest slowdowns this year, according to the report.

Debt crisis

With 60 per cent of low-income countries and 30 per cent of emerging market economies in or near debt distress, UNCTAD warns of a possible global debt crisis.

Countries that were showing signs of debt distress before the pandemic are being hit especially hard by the global slowdown.

And climate shocks are heightening the risk of economic instability in indebted developing countries, seemingly under-appreciated by the G20 major economies and other international financial bodies.

“Developing countries have already spent an estimated $379 billion of reserves to defend their currencies this year,” almost double the amount of the International Monetary Fund’s (IMF) recently allocated Special Drawing Rights to supplement their official reserves. 

The UN body is requesting that international financial institutions urgently provide increased liquidity and extend debt relief for developing countries. It’s calling on the IMF to allow fairer use of Special Drawing Rights; and for countries to prioritize a multilateral legal framework on debt restructuring.

Hiking interest rates

Meanwhile, interest rate hikes in advanced economies are hitting the most vulnerable hardest

Some 90 developing countries have seen their currencies weaken against the dollar this year – over a third of them by more than 10 per cent.

And as the prices of necessities like food and energy have soared in the wake of the Ukraine war, a stronger dollar worsens the situation by raising import prices in developing countries.

Moving forward, UNCTAD is calling for advanced economies to avoid austerity measures and international organizations to reform the multilateral architecture to give developing countries a fairer say.

Calm markets, dampen speculation

For much of the last two years, rising commodity prices – particularly food and energy – have posed significant challenges for households everywhere.

And while upward pressure on fertilizer prices threatens lasting damage to many small farmers around the world, commodity markets have been in a turbulent state for a decade.

Although the UN-brokered Black Sea Grain Initiative has significantly helped to lower global food prices, insufficient attention has been paid to the role of speculators and betting frenzies in futures contracts, commodity swaps and exchange traded funds (ETFs) the report said.

Also, large multinational corporations with considerable market power appear to have taken undue advantage of the current context to boost profits on the backs of some of the world’s poorest.

UNCTAD has asked governments to increase public spending and use price controls on energy, food and other vital areas; investors to channel more money into renewables; and called on the international community to extend more support to the UN-brokered Grain Initiative.

Continue Reading

Economy

‘Sanctions Storm’: Recovery After the Disaster

Avatar photo

Published

on

After the start of the special operation in Ukraine, a “sanctions storm” hit Russia; more sanctions were imposed against Russia in a few months than against Iran in decades. But a catastrophe did not take place, and the stage of stabilization came.

Indeed, almost all the weapons in the sanctions arsenal were used one after another: commodities exchange was suspended in some sectors, export and import controls were put in place, restrictions on air and sea transportation were introduced. The sanctions have spread to the investment and financial sectors, paralyzing many transactions with the West and complicating them with the East. An image impact came from the mass withdrawal of foreign business from the Russian market—not directly caused by the sanctions, but demonstrating “over-compliance,” excessive submission to them.

In the public mind, the destabilizing wave created the impression of the end of the story of the market economy in Russia, an impending catastrophe. But the catastrophe did not happen. The stage of stabilization has come, and it is important to use it correctly.

What to do?

In the near future, the Russian authorities and business will have to solve three groups of interrelated tasks. First, they must provide the domestic market with necessary goods, and restore value chains by the use of alternative partners. Second, they need to establish reliable financial mechanisms for working with these partners. Third, it is necessary to look for new growth points for the future, industries in which dependence on the West was critical. It is important to work out the possibilities: for new partners entering the markets and for attracting investors from friendly countries, as well as trying to integrate into new value chains.

Partners, first of all, include China and India. The southern direction is also not unpromising—to begin with, this includes Iran and Turkey, as well as a search for investors in the Arab world and the development of logistics routes through the Middle East. Nevertheless, in all areas, the key obstacle is the threat of secondary sanctions by the United States and the EU—which means that the second task becomes the main one: building a safe infrastructure for financial cooperation.

China remains Russia’s first trading partner—but despite the strategic partnership on the political level, large Chinese companies and banks that are active in the international market are suspending cooperation with Russia, fearing secondary US sanctions. In these conditions, it is important to work on explaining the nuances of the sanctions policy for Chinese business, creating secure payment channels that do not depend on foreign banks or on the dollar and the euro, and developing profitable package offers. Beijing seeks to use the opportunities opening up in the Russian market to occupy the vacant niches and strengthen the yuan in international payments, which means that its interest in finding a common solution is high.

A similar situation is developing in the Indian market, with the difference that Indian business is more connected than Chinese business with America, and its awareness of doing business in Russia is lower. As a consequence, Indian companies and banks integrated into the global economy will comply even more closely with sanctions restrictions, despite their interest in developing ties with Russia. Accordingly, even more active informational work is needed to establish Russian-Indian business ties, as well as the creation of a secure settlement mechanism. India already has similar experience, from doing business with Iran. In particular, UCOBank was formed to trade with it in rupees. Similar structures can be created in the Russian direction.

If the necessary channels are laid, both China and India can not only replace some Western goods in Russian markets, and ensure purchases from the Russian energy, agricultural, and military-industrial sectors—preserving their prospects for business—but also become zones of qualitative economic growth. Chinese partners can become a support in the development of bilateral cooperation in the fields of electronics and digital technologies (including 5G), and Indian, in pharmacology and high-tech agriculture. It also makes sense for business to look at these countries from the point of view of the development of green technologies in energy and agriculture, and the introduction of ESG practices, since these countries are also interested in this.

From our partner RIAC

Continue Reading

Publications

Latest

Religion48 mins ago

Betting on the wrong horse: The battle to define moderate Islam

Proponents of a moderate Islam that embraces tolerance, diversity, and pluralism may be betting on the wrong horse by supporting...

Defense2 hours ago

Ukraine Joins NATO: Assessing Future Disasters

News related to the Russo-Ukrainian war is still for public consumption and scholar nowdays.  As  chess game, Russia-Ukraine are in...

Europe4 hours ago

European Union Trucks Banned From Entering Russia

In a reciprocal step, an executive order banning European Union haulage trucks crossing borders into Russia’s territory aggravates economic situation...

Economy7 hours ago

Baltic reality: High inflation and declining of living standards

The Baltic States’ economy is in bad condition. The latest estimate from the EU’s statistics body shows that Eurozone inflation...

Europe9 hours ago

For A New Foreign Policy in Italy

The sad and notorious vicissitudes of the non-existence of an Italian foreign policy have hit rock bottom over the last...

Intelligence15 hours ago

Who Masterminded the Suicide Attack on Hazara Students’ Educational Center Kaj in Kabul?

According to explicit intelligence information, last Friday, September 30, 2022, a suicide attack on Hazara students in an educational center...

Green Planet19 hours ago

Grey whale’s disappearance from Atlantic Ocean holds clues to possible return

By  SOFIA STRODT Youri van den Hurk is preparing for a possible big welcome-home event – the return of the grey...

Trending