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Monday, July 15, 2024
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Russia-Africa summit: Leveraging on mutual trust and historical connections for a vigorous future

Article by Kevin Tutani

The Russia-Africa summit which kicks off in Moscow, from 27-28 July, provides a much-needed opportunity for participants to evaluate their association and reset it for an overall positive outcome. Opportunities abound, with rewards to be reaped, as long as clarity and resoluteness in fulfilling commitments are available.

Historically, several African nations owe their independence to Russia’s unwavering assistance, in their fight against imperialism. The USSR, which was a multinational conglomerate of socialist states, under the administrative capital of Moscow, provided funding, arms and moral support to more than a handful of countries on the continent, whose independence may have not been realized without the assistance.

Notable states such as Ethiopia, Zimbabwe, South Africa, DRC, Morocco, Algeria and Angola, were beneficiaries of Moscow’s generosity and reticence against Western imperialism. In just a few decades after the independence of African states, Western nations are back to their default, fascist configuration, this time, making Russia their target.

The war in Ukraine which has its roots in NATO’s intention to geographically envelop Russia, and subdue it, would have been avoided had the West remained true to their utterances that they were not going to continue expanding eastward, toward the Eurasian giant. It is indeed during such a pivotal time in history, that Russia’s unflinching loyalty towards Africa needs to be rewarded, handsomely. Therefore, an outlay of the areas which can serve mutual benefit for the two, is provided below.

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.

The successes that the country has realized in agriculture, lay out a clear need for establishing efficient trade channels 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. Rewards to be gained indicate reduced public spending and circumvention of famine. When food prices rally and elude the financial means of citizens, governments are obliged to attend to welfare issues through subsidies and other pertinent mechanisms. Signing MOUs in the food and fertilizer trade, with Russia, will assist in averting that, with just the stroke of a biro.

Lingering in the same field of agriculture, meaningful knowledge exchanges and agribusiness opportunities can be targeted for utilization, during the summit. In a time when food prices are elevated, Africa needs to open up to Russian agricultural firms, so that they participate in farming, which involves the leading cash crops and export earners on the continent.

For instance, Zimbabwe may encourage prominent Russian firms to produce part of their global maize, barley, and wheat output in the country. This is obviously a low-hanging fruit, as demand exists and prices are firm. Streamlining such commitments and providing formal assurances, will improve the nation’s productivity and GDP.

The issue of employment is inevitably addressed by this as well. The expertise which Russia has in specialized farming techniques, and international marketing and logistics of agricultural commodities, is an opportunity for generating sustainable wealth for the partners at the summit.

Energy

Oil is an indispensable resource in the 21st century. The oil market in 2022, is estimated to be in the region of $2.2 trillion, with an average consumption of 80.75 million barrels per day.

Zimbabwe consumed 1.8 billion litres of fuel, last year, according to the Ministry of Energy and Power Development. This can equate to a value of between 5%-7% of the country’s GDP. Most African countries, including Zimbabwe, depend on imports for oil and petroleum products. An increase in oil prices naturally ignites impertinent inflationary pressures, which are difficult to resolve.

On the other hand, Russia has been reported to have been selling discounted oil to India, North African nations, China and some countries in the Far East. If Zimbabwe purchases oil products from Russia, at a 20% discount, for instance, this may imply savings of around $200 million or more, each year. The bargains are much greater for sophisticated economies such as South Africa.

Understanding that Russian coal was selling for as much as, 60% discounts, on international prices, in 2022, according to official communication, advises that a 20% discount on oil, is not wishful thinking. In this regard, oil-importing countries on the continent, should grasp this opportunity and ensure that petroleum resources are channelled exclusively from Russia.

They can even go to the extent of legislating for that through enacting applicable laws. The value will then be reaped as taxes on fuel are expanded, thereby growing government revenue. This is a win-win situation, where the trader enjoys discounts, the government earns more taxes, citizens pay less for fuel at the pump and Russia evades the inhibitions of Western sanctions. There is clearly a healthy margin which can be exploited for the benefit of many interests.

International Relations
Africa needs a strong and economically prosperous Russia, for its 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.

It is important for countries on the continent to support Russia at international multilateral forums and vote alongside them. Powerful Western nations have oversized voting rights at the IMF, World Bank, and various UN forums. Due to the war in Ukraine, it is expected for such groupings to work towards weakening Russia, through passing conventions and regulations which isolate and disempower it. It is in such situations that African nations should speak for Russia at such forums so that they remain relevant and justice is not forsaken.

In the same manner, Africa needs Moscow’s support, if it aims to achieve the reformation of the IMF and World Bank, organizations which are configured to drive poor nations into deeper crises, on the pretext of their infamous Structural Adjustment Programs.

A look at green energy transition frameworks, also shows that Africa’s financial means and its position as the least polluter, are not considered by architects of international programs and regulations. In just a few years, it may become difficult for African countries to use their coal resources and fossil fuels, without escaping punitive measures such as moratoriums on exports, etc.

Without borrowing the voice of a stronger Beijing and Moscow, it will be almost insurmountable for the continent to broker just and relevant terms for its nations, at international fora. If Russia is weakened, Africa’s voice and standing will sink into the abyss.

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 provide 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.

Additionally, joining BRICS should be high on the agenda of alienated African countries. Russia is an integral member of the conglomerate and can facilitate easier access to the group. The bloc has its own multilateral bank (NDB), prominent emerging economies and the potential to house more than half of the world’s population.

Aligning with such a useful union as an alternative to the current, unjust multilateral systems, will bring key advantages. Firstly, budgetary support will be issued without strings attached, for the countries in need of credit. Secondly, there is less room for manipulation of the sovereignty of a member or its political systems.

Thirdly, the massive population of current member states provides markets for exports. Additionally, the shared perspective in international relations, with current participants, infers that negotiations at other international platforms will be streamlined.

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 towards influencing market dynamics for increased prices, forex earnings and revenue.

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.

Partnerships in coal extraction are another important area for cooperation. Zimbabwe, currently mines around 2 million tonnes of coal, annually. However, the reserves of over 2 billion tonnes, reported by the government, indicate that current production is a long way from optimal capacity. It is possible to achieve 5 to 7 million tonnes per year, depending on investments and cooperation created in the sector. At record prices of around $200 per tonne in 2022, the nation missed out on the windfalls, as less than 200 000 tonnes were exported.

An additional 3 million tonnes in production, would have earned approximately $600 million, with roughly $450 million of that being super profits (, exceeding, standard earnings). Cooperation with Moscow in coal mining is advisable, as Russia is a top exporter of the commodity, worldwide.

Transport & Logistics
The 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 the skills, and competencies in assisting African nations deepen their investments in rail or manage the transition to an 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. In the case of Zimbabwe, a 70-30, Russian-Zimbabwean joint venture, can be established for revitalizing crucial freight railway lines such as the Maputo, Beira, Durban or DRC corridors.

The National Railways of Zimbabwe has massive business to handle, particularly from the domestic mining sector, which can provide assured recuperation of any investments assigned to railway. New opportunities such as lithium and the potential of the coal sector, show that if the NRZ has enough capacity, it can surpass its past glory of moving 18 million tonnes per annum, in the late 1990s. Reviving the railway operator also implies forex earnings, employment and higher GDP.

It is therefore imperative for African nations to be clear on their goals at this summit and follow through with implementing agreements reached, as the opportunities that exist for cooperation with Russia, can yield plentiful rewards.

Kevin Tutani is an entrepreneur and political economy analyst. He can be reached at tutanikevin@gmail.com


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