Russian Trade Turnover With African Countries Up 17% To US$20 Billion
Africa has become a recipient of renewed Russian interest in trade and investment, following a similar path to that taken by China. Russian trade with African nations combined reached US$20 billion last year, a rise of 17%. This is expected to continue; Africa has recently agreed the African Continental Free Trade Agreement (AfCFTA) which dispenses with tariffs on 90% on all intra-African products. Only Nigeria remains outside the FTA. This move has significant benefits for Russian businesses trading and manufacturing in Africa as they can now source cross-border throughout much of the continent.
The AfCFTA deal reduces tariffs – to be phased in over a five year period among some members – to zero on about 90% of all intra-African traded goods, thereby essentially demolishing cross-border trade barriers. That, coupled with the still-developing DTA network that Russia has built up in Africa over the past decade is set to provide a huge boost to Africa-Russia trade, with some estimates suggesting it will rise by a further 25% in the next 12 months. That will spur further infrastructure development and increase Russia’s role in Africa exponentially. It will also impact upon South-East Asia – not far away across the Indian Ocean, which washes up against the East African coast, and where Moscow is also making inroads in trade and with several potential Free Trade Agreements between several of the ASEAN nations and the Eurasian Economic Union.
Russia currently has DTA with Algeria, Botswana, Egypt, Mali, Morocco, Namibia and South Africa. The latter is a member of the BRICS grouping along with Russia, China, India and Brazil, and is a 20% shareholder along with Russia of the BRICS New Development Bank.
The trade development in Africa is likely to see additional cooperation between Russian and Chinese businesses on the Continent. This is because the low end manufacturing that China pushed out to South-East Asia is starting to be pushed out again – both due to intensive labor issues and increasing operating costs. The implementation of AfCFTA is expected to see millions of African workers currently engaged in agriculture shift into manufacturing. About 50% of the African workforce is currently engaged in agriculture, yet it only produces a small amount of GDP. Shifting that worker pool into manufacturing has a significant impact on productivity. This is turn will mean that production facilities that were in China ten years ago and are now in South-East Asia will eventually relocate again to Africa, and especially the East and Southern African nations of Kenya, Tanzania, Madagascar, Mozambique and South Africa. Spill-over will occur in Uganda, Zambia and Zimbabwe. Russia has concentrated more on North Africa and has a jointly invested in a Free Trade Zone for Russian manufacturers in Port Said in Egypt. Russian bilateral trade with Egypt has subsequently boomed, and rose 37% in 2018.
Russia additionally has a logistics base in Eritrea, giving it access to the Red Sea. Russian Foreign Minister Sergey Lavrov has also recently visited Angola, Namibia, Mozambique, Ethiopia, and Zimbabwe, signing a raft of agreements for economic zones, mineral exploration and for other co-operations including military supplies and training. The first Russia-Africa Summit is due to be held this coming October in Sochi.
- Russian-Egypt Trade Increases 37 Percent in First Half of 2018
- Russia to Establish Overseas Industrial Investment Zones
Russia Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors in Russia and Russian investors in Asia, and maintains partner offices in Moscow and St,Petersburg, and full professional service offices throughout China, ASEAN and India. Please contact us at email@example.com for assistance or visit our website at www.dezshira.com