Russia's efforts to expand business ties with Africa date back nearly a decade. As Africa plans its further modernization, it is opening up to new Russian investment in infrastructure and natural resources.
Russian President Dmitry Medvedev during a welcome ceremony in front of the State House in Namibia's Windhoek in June, 2009. Photo: RIA Novosti
Russia is accelerating its efforts to become a major business partner of Africa, which not only has resources Russia lacks but also massive infrastructure needs and a growing consumer class.
President Vladimir Putin signaled Russia’s intention to expand business ties with the continent a decade ago in 2006, when he became the first Russian leader to visit Sub-Saharan Africa. On the eve of his trip to South Africa, he noted that big Russian companies such as Renova, Norilsk Nickel, Evraz Group, Basic Element, Severstal, Renaissance Capital and Vnesheconombank “are actively entering the South African market” and “are interested in further expanding their presence.”
African business and political leaders are welcoming Russia’s resurgence in the continent after 15 years of limited Russian ties with Africa. Between the collapse of the Soviet Union in 1991 and the mid-2000s Russia spent much of its energy on the sweeping challenge of building a market economy from scratch.
Why African leaders welcome Russia's return to the continent
African leaders who welcome Russia’s return have noted that the continent’s modernization needs are so vast — several trillion dollars — that no one country can supply all of it. When it comes to potential investors, their message is “the more, the merrier.”
African leaders are also happy about Russia’s return because it gives their countries more investment choice. When a handful of nations dominates investment on the continent, countries that need financing are hard-pressed not to accept those investors’ terms. Russia offers another option.
Another reason many African leaders welcome Russia’s decision to expand ties with the continent is shared heritage. The Soviet Union educated 50,000 Africans in its universities from the 1960s to 1991, and gave 200,000 other Africans various kinds of training on the continent.
Russia continues to educate Africans. At the moment more than 8,000 African students are pursuing degrees in the country. Half are on full scholarships.
Many Africans educated in the Soviet Union and Russia have returned home to become political, business and academic leaders. Many have expressed gratitude for the opportunities they received.
Finally — and this is very important — many Africans appreciate the fact that the Soviet Union never tried to colonize the continent. It’s impossible to overemphasize the credibility this has given Russia as a reliable partner.
A dramatic sign of Africans’ eagerness to obtain Russian investment was Ethiopian Prime Minister Meles Zinawai request in 2011 that the two countries hold a conference in Ethiopia’s capital of Addis Ababa to showcase Russian investment opportunities. It attracted 250 government and business leaders from Ethiopia, Zimbabwe, Niger, Mali and Sudan.
A decade of Russian business ties with Africa
Some Western journalists and commentators have contended that Russia began ramping up its business development efforts only in the past year. The reason, they asserted, was that Russia desperately needed to find new markets to make up for those lost due to geopolitical tensions with the West.
That scenario is off the mark, however. Russia actually began reaching out to the continent again a decade ago.
Putin took one of the first steps in 2006 when he visited Morocco and South Africa, one of Russia’s partners in the BRICS alignment that also includes Brazil, India and China.
Another step was Russia’s forgiveness in 2008 of $16 billion in debt that African countries were unable to repay during the Soviet era. Russia followed this up with $20 billion in debt forgiveness in 2012.
In 2009, Dmitri Medvedev, who succeeded Putin as president in 2008, visited the strategically important countries of Egypt, Nigeria, Angola and Namibia.
The visits of two heads of state within three years underscored Russia’s commitment to returning to Africa in a big way to do business, to help the continent modernize and to help improve Africans’ lives.
In addition to government leaders, the Russian business community has reached out to Africa with events such as the Urals-Africa economic forum in 2013 that attracted delegations from 40 African nations to the host city of Yekaterinburg.
Russia's African initiatives in 2014 and beyond
In the first half of 2014, delegations from Algeria, Angola, Egypt, Mauritania, Morocco, Mozambique, Eritrea, Sudan, South Sudan, Uganda and Zimbabwe visited Moscow for business talks.
Russia’s chairmanship of BRICS this year, and its hosting of the organization’s seventh summit, will give it a chance to build additional business ties with Africa.
Russia’s biggest recent investment in Africa is RT Global Resources’ $4 billion agreement in 2013 to build an oil refinery in Uganda.
Uganda needs the refinery to process oil from a major field it discovered near its western border with Congo — a resource that will help it become a regional economic power.
The refinery will have a capacity of 60,000 barrels a day. A 205-kilometer (127-mile) pipeline will deliver its products to a terminal near the capital of Kampala in the country’s southeast.
Another mega-project that Russia is helping develop is Zimbabwe’s biggest platinum mine. The $3 billion deal was signed in September of 2014.
Russia is resource-rich, but Africa has some minerals it could use more of, including bauxite, manganese, cobalt, platinum, chromium, vanadium, uranium and diamonds.
Russia wants its partnership with Africa to extend well beyond minerals, however.
Its oil- and gas-production experience goes back 150 years, so it has the know-how to develop petroleum fields and build refineries, petrochemical complexes and pipelines in Africa. Aware of that, some countries, such as Niger, have actively courted Russian petroleum investment.
Russia also has the skill to build railroads that could help connect Africa by moving people and goods. Russian Railways and African business leaders have discussed building a Trans-Kalahari line connecting mines in Botswana with ports in Namibia.
Another project under discussion is a Central African Railroad connecting Chad, the Central African Republic Niger and Namibia. It, too, would carry raw materials to ports.
Russia is aware that Africa’s middle class has reached 350 million and continues to grow. This means that in addition to looking for opportunities to build infrastructure, it hopes to provide financial and telecommunications services on the continent.
Russia's VEB and VTB banks are already doing business in Africa. And telecommunications firms such as AFK System, Altimo, MegaFon and Sitronics are either there or planning a presence.
The bottom line is that Russian leaders see Africa as a great place to do business and a chance to access a young, dynamic consumer base of unprecedented scale. They are delighted to be making a renewed commitment to the continent. Russia plans to be there for the long haul.
The opinion of the author may not necessarily reflect the position of Russia Direct or its staff.