Russia Prepares For 2022 Africa Summit As Trade & Investment Increase
Russia, like China, sees the same trade opportunities as AfCFTA makes a difference
Russia is preparing for the second Russia-Africa summit, which is now scheduled for October-November 2022 in Addis Ababa, Ethiopia. A coordination council has been established under the aegis of the Secretariat of the Russia-Africa Partnership Forum (RAPF). The announcement comes just as the eighth Forum on China-Africa Cooperation has just concluded in Senegal.
According to Sergei Lavrov, Russia’s Foreign Minister, “Concrete proposals for consolidating Russian-African cooperation are being worked out by three councils (coordinating, public and scientific ones) reporting to the Partnership Forum Secretariat. They represent ministries, agencies, business and public organizations engaged in the development of relations with the African continent.”
Moscow is poised to build relations of strategic partnership with pan-African organizations and regional integration associations, Lavrov added.
“Two fundamentally pivotal documents were inked at the previous summit, namely the Memorandum of Understanding between the Government of the Russian Federation and the African Union on basic principles of relations and cooperation and the Memorandum of Understanding between the Eurasian Economic Commission and the African Union on economic cooperation. A roadmap of cooperation between Russia and the Southern African Development Community (SADS) is being finalized.” Lavrov said.
Like China, Russian trade and investment has also been increasing in Africa, and like China it has also viewed the African Continental Free Trade Agreement (AfCFTA), which came into effect on January 1st this year, as an opportunity.
AfCFTA has had the effect of reducing to zero 95% of all previous intra-Africa tariffs that were imposed on cross-border trade. Only Eritrea has not yet signed up to the deal. With that previous tariff expense eliminated, sourcing for African products can now take place on a continental basis thus expanding the potential for African supply chain development exponentially.
When that capability is matched to Special Economic Zones (SEZ), it becomes possible to match African sourced components with products imported duty free into SEZ bonded areas, where these can then be worked on to produce hybrid African-Imported final products. These can then either be resold back onto the AfCFTA markets (at which point import duty is liable on the imported components) or reexported to other markets – such as Russia and the Eurasian Economic Union trade bloc. This takes advantage of both lower African sourcing and production costs. Russia has already begun developing such SEZ in Africa, most notably in Egypt’s Port Said but also in Mozambique and Namibia.
Russia-African trade has this year boomed as a result, with this trend likely to continue. The Afreximbank President, Benedict Oramah said just last week in an interview with Tass that trade between African countries and Russia have seen considerable progress. “Just six years ago there were exports of some US$8 billion from Russia and imports to Russia from Africa of US$2 billion or less. Today we have Russian exports to Africa worth US$14 billion a year and imports of African products of about US$5 billion. That means bilateral trade is about US$20 billion”. This represents a doubling in Russian-African trade since 2015, or an average annual growth rate of 15%.
North Africa currently dominates Russian trade, lead by Egypt (US$4.53 billion), Algeria (US$3 billion), Morocco (US$1.2 billion) with South Africa fourth with US$1 billion. However in nearly all African countries, Russian trade and investment is increasing.
Russia is in the process of establishing a US$5 billion ecommerce trade portal with African countries, has been targeting Nigeria as a growth market, and has a naval base at Port Sudan. The Eurasian Economic Union is to sign off an agricultural trade deal with the African Union. Egypt meanwhile is shortly expected to sign off an EAEU Free Trade Agreement. Russia is heavily involved in the African oil and gas industry, but has also been investing in infrastructure, with Russia providing rail equipment to Egypt and developing manufacturing facilities on a continental basis.
Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at email@example.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.