AFROCOM Chairman Igor Morozov: "Africa is the last relatively free market for Russia to export domestic goods"
Article by Igor Morozov, Chairman of AFROCOM, Senator of the Russian Federation, for the magazine Regions of Russia
In recent decades, Africa has become the main continent for which the Euro-Atlantic region and Greater Eurasia are engaged in an active struggle. It is therefore not surprising that the EU is increasing its trade with African countries, which now stands at more than $300 billion a year. The US, through its Prosper Africa programme, continues its offensive with US investment and high-tech products in priority African markets. Powerful competition to the West on all azimuths is the Middle Kingdom. China, which is the leader in financing infrastructure projects, has made huge investments in seaports, transport arteries, hydroelectric power and promising deposits of rare-earth metals. According to the Agency for International Development and Cooperation, China has built more than 6,000 km of railways, 6,000 km of roads, almost 20 ports and has invested in 25, more than 80 major energy facilities, more than 130 medical facilities, 45 sports facilities and more than 170 schools in Africa. Japan and Korea are moving ahead vigorously. India, Turkey, Saudi Arabia and the UAE are trying to keep up the Asian pace.
In such difficult circumstances, the "Return to Africa" slogan, which sounded at the Sochi Summit as a planetary slogan for Russia, was received with great enthusiasm by our business community and the ruling elite. Indeed, given the harsh sanctions imposed by the West and the crisis caused by the pandemic and the decline in global trade, it is impossible to grow the national economy without mastering new markets, let alone reaching the targets of increasing non-resource non-energy exports to USD 250 billion (the parameters of the national project "International Cooperation in the Field of Energy"). (parameters of the national project "International Cooperation and Export").
What does Russia have in Africa today? Just over 20 companies are working on raw material projects in different parts of the continent, and the country traditionally exports grain, fertilizers and petroleum products with a total turnover of 17 billion U.S. dollars (2020). (2020 г.)! This situation suggests only one thing - there is a need for a large-scale involvement of small and medium-sized businesses from Russian regions in the African direction. The entire export potential of the regional economy must be rethought: the transport sector, agricultural machinery and equipment, mechanical engineering and navigation equipment, mining, water purification and information technology.
And most importantly, what can Russia offer our African partners today in the high-tech sector? In 30 years, Russia has become a completely different country and today we understand that information technology, pharmaceutical technology, space - these are all things in which Russia has entered the global paradigm and is now one of the most competitive players.
Russia leads the way in the prevalence of fintech services. The country is number one in the use of contactless payments. The penetration rate of fintech services in Russia is 82%. It is higher only in India and China. According to Skolkovo, the volume of venture capital investment in Russia in the first half of 2021 was $1 billion, fintech investment was $78 million in eight deals. The global volume of venture capital investment in the first half of 2021 was $291 billion. Russian financial institutions are now most interested in the development of payment services, financial marketplaces and wallets, embedded finance, as well as personal finance management, loyalty programme solutions, secure personal data processing, cybersecurity, automation of banking processes and cloud technologies.
It is known that hi-tech medical centres have been established in the regions over the last 5-7 years and telemedicine techniques are being developed. The foundations have been laid for disaster medicine units capable of responding to civilisation challenges anywhere in the world. After the Sputnik V vaccine broke into the world leaders of the pharmaceutical market, it became clear to everyone: Russia has something to offer to its African partners.
However, it should be understood that Africa is rapidly changing, and the rules of working there are also changing. "Agenda 2063, adopted by the African Union as a programme for the continent's development, requires localisation of foreign manufacturers, creation of jobs and investment in infrastructure projects with a social agenda. And yet, despite its current and potential problems, the African continent is gradually becoming a global project for the West and Eurasia, and the competition for it is just beginning.
In this context, it is necessary to create conditions that are competitive for our exporters in order to promote Russian goods. It is clear that the Russian Export Centre has no direct investment fund in its system of financing African projects. Successful practice in Africa clearly demonstrates the wide use of such funds by China, India and France. We need to create new mechanisms to account for concessions on natural resources in investment projects and foreign trade transactions, compensatory (counter) trade, and mutual settlements in national currencies. We are seeing Chinese partners roll out the electronic yuan to pay for their foreign contracts, primarily African contracts. Other countries are not lagging behind China either. The Central Bank of Russia, while developing the concept of e-roun, should already at the first stage take into account the Chinese experience in order to try out such innovative solutions in the African direction. This will require a change in current legislation, and most importantly, a change in the mindset that Africa is Russia's last relatively free market for exporting domestic goods. In another decade or two, it will become a highly developed industrial space with no room for laggards. This is why we must be bolder in taking bolder political and economic decisions, creating free trade zones and a system of investment promotion and protection agreements, removing administrative and trade barriers and exploiting the competitive advantages we inherited from the USSR.
A Russian industrial zone in Egypt should be launched in the near future; this will help our exporters to quickly localise their production.
When considering tactics for promoting goods and services, attention should be paid to the practice of the Coordination Committee for Economic Cooperation with African Countries under the Chamber of Commerce and Industry of the Russian Federation. AFROCOM
was established as a coordinating structure of the Russian Chamber of Commerce and Industry to bring together all regional businesses in Russia, as well as to do everything possible to transfer new knowledge about what Africa is like today and what it is of interest to Russian business. By setting up trade houses and Russian business support centres in key African countries, AFROCOM
arranges business missions from Russian regions to these countries, as well as conferences and round-table discussions (in Russia and Africa, in person and via videoconferencing), which enable Russian entrepreneurs to learn about market conditions, partners and better understand the atmosphere of the investment climate in the country. In turn, mobile exhibitions and exhibitions of export production acquaint our African partners with competitive products currently offered by our regions.
is a bridge between Russian business and African countries, a platform for restoring active economic cooperation with our African partners. AFROCOM
has already done a lot to create a working infrastructure for Russian regional business. Based on the new model of the Russian School abroad, which has been elaborated by Rossotrudnichestvo, AFROCOM
intends to actively assist in promoting it throughout Africa. The school is the Russian language, it is knowledge of Russian literature and Russian history. The school is the future students of Russian universities, the future elite of Africa. And Africa expects this from Russia...