Russia-Africa partnership: Who wins, what?
The Russia-Africa summit which was held from 27-28 July, in Moscow, presented an opportunity for participants to evaluate their association and reset it for a desired mutual outcome. The tepid investment, trade, technology and cultural exchanges between the two, points to a conspicuous chasm that long needed to be filled. Russia-Africa trade, for instance, was an uninspiring $18 billion, in 2022. Though the figure has been increasing through the years, it is a stark difference from Africa’s interaction with the West, which is much larger. Africa has so far, not managed to leverage on its mutual trust and historical bonds with the Eurasian giant. On the other hand, sceptics have conveyed their concerns that Russia is a suspicious partner, incapable of bringing value to the continent, on account of its lack of financial capital, association with mercenary armies and the geopolitical risks arising from interacting with it, over the West. Nevertheless, if African nations use discretion, sovereignty and strategic ability, there might be some rewards to be reaped, mutually. Below, are a number of areas, outlining the potential which this partnership holds for all members.
Agriculture
Russia is an agricultural giant. It is the largest exporter of wheat on global markets, with an impressive 20% share. Several other grains and agricultural commodities such as corn, sunflower oil and barley originate from their region, and are a vital part of global supplies. Apart from food, the nation is a crucial source of fertilizer, worldwide, being an eminent supplier of ammonia, urea, MOP (muriate of potash), MAP (monoammonium phosphate) and DAP (di-ammonium phosphate) fertilizers. This conveys the need for establishing efficient trade mechanisms for food and fertilizers, for the continent’s food security. Without such, the risk of food inflation and unavailability remains urgent. The geopolitical tensions with NATO, point to a more food insecure world. Resolving risks in this area, is imperative.
International Relations
Africa needs a strong and economically prosperous Russia, for its own security and sovereignty. A multipolar world ensures that there are no exclusive political blocs, which determine international laws, political climate, or the economic fate of smaller, weaker, or poorer nations, without bringing their challenges into consideration. The oversized voting rights of Western nations at the IMF, World Bank, and various UN forums, for instance, need to be guided by an acknowledgement of smaller nations, without which, the latter would be imperilled. Unfortunately, the case has largely been that, developing nations, including those on the African continent, have not been taken into account when policies, and protocols are developed by several multilateral organisations. By all means, Africa needs Moscow and Beijing’s support, if the reformation of these organizations is going to be achieved.
Extractive sector
Russia is the world’s third-largest, gold producer, oil producer, and coal exporter. African nations with a desire to raise the prices of their commodities (gold, oil, coal) on international markets, can work with Russia towards influencing the pertinent market dynamics. Cooperation in determining the supply of gold, oil and coal, amongst others, can be a robust move towards addressing the budgetary support needs of countries on the continent. This is what OPEC does, as oil producing nations leverage their resources for maximum benefit and improved citizen welfare. Multilateral meetings are held regularly by OPEC, in order to curb and manage oil supply on international markets, with the outcome of prices which are sustainable for oil industries in the oil exporting countries. The same structures can be set for natural resources, which both Russia and Africa have in common.
Finance and trade
When the U.S. dollar rises, emerging and developing economies suffer the most. According to the IMF, a 10% appreciation of the U.S. dollar, decreases the GDP of emerging market economies by a troubling 1.9%. The consequences are felt more acutely by developing economies. At the same time, the role of the dollar in international trade needs to be re-evaluated. Since the currency is not backed by assets, there is no need for it to be used in over 80% of international trade transactions and almost 60% of nations’ foreign exchange reserves, as is the current situation. Several experts are of the conviction that the dollar is overvalued and developing nations should not continue subjecting themselves to international trade and stocking reserves using the currency. Although it uses Rubles, Russia also has a dollar problem. The removal of Russian banks from the dollar dominated SWIFT platform, means that Russian businesses cannot directly get revenue or make payments in dollars, for international trade. Therefore, since this is a shared existential challenge, both African nations and Moscow should begin deliberations on how to replace the dollar. Trade between Africa and Russia has been subdued, although increasing through the years. Only $18 billion was realized in 2022. Regardless of the lower trade volumes, the thrust towards an alternative currency needs to be put in motion, as it serves mutual interests. The overflowing natural resources in both territories, provides an opportunity for the creation of an asset-backed digital currency. The alternative money, may be backed by gold, oil, coal, lithium, silver or other commodities. A consideration of the key resources available in prominent African economies will prove useful in this regard. As for Russia, any commercial commodity will suffice, as the nation is endowed with plentiful commodities. The technological advancement and integrity of Russia, imply that, it is judicious to give them the responsibility to manage the ledger or digital administration of the currency. If crafted perfectly, the new currency can be a good competitor to the dollar, whose role in global financial architecture has left a huge opportunity, owing to fundamental problems associated with it.
Transport & Logistics
Railway is the future. Climate change and depleting world oil resources, suggest that alternatives to road freight and passenger transport need to be put in place. Russia, having the third-largest railway network (85 500km), globally, has skills and competences required in assisting African nations deepen their investments in rail, or manage the transition to the alternative mode of transportation. Forming joint ventures and investing on key lines of the network in Africa, on a corridor (one at a time) basis, can address the issue of limited financial capital.
Conclusion
It is therefore imperative for African nations to be clear on their goals and follow through with implementing agreements made with Russia, as the opportunities that exist can yield bountiful rewards, for all.
By: Kevin Tutani
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