The Association for Economic Cooperation with African States (AECAS), established under the aegis of the Secretariat of the Russia-Africa Partnership Forum (RAPF), held a special meeting of the working group on project financing with the participation of major Russian companies. and banks.
The key topic was to find an effective system of project finance and to design ways to support investment in Africa. The lack of systematic state support and the quiet interest of Russian financial institutions, among other factors, have been identified as part of Russia’s weak economic presence in Africa.
Financing projects in Africa is one of the important keys and, at the same time, the most difficult issue for large Russian companies trying to expand in Africa, and the financial instruments at their disposal are insufficient, according to Anna Belyaeva, Executive Director of the Association for Economic Cooperation with African States.
“We explicitly understand that current funding mechanisms are not enough. We analyzed the experience of European and Western colleagues from developed countries, our direct competitors in Africa: all of them already have mechanisms and funds focused on Africa, ”she said.
In order to increase post-Soviet economic influence, the Russians strove to identify a structured funding mechanism for mega infrastructure projects and in areas such as nuclear power and energy, exploration natural resources and to dramatically increase trade with Africa.
For example, the United States, members of the European Union, Asian countries such as China, India and Japan, have provided funds to support companies ready to carry out projects in various sectors in the African countries. Some have publicly committed funds, including concessional loans, for Africa.
At the latest Ministerial Conference of the Forum on China-Africa Cooperation (FOCAC), Chinese President Xi Jinping said, “China will expand its investment and financing cooperation to support sustainable development in Africa. China has extended a $ 60 billion line of credit to African countries to help them develop infrastructure, agriculture, manufacturing, and small and medium enterprises.
He fully understands Africa’s needs and its desire to open the door to cooperation in the field of scientific and technological innovation on an encouraging basis. The method of financing the construction of infrastructure is relatively simple. Typically, governments obtain preferential loans from the Export-Import Bank of China or the Development Bank of China, with the hiring of Chinese construction contractors.
The Chinese banking system enables major Chinese state-owned enterprises to operate efficiently in Africa, the majority of which are active in infrastructure and construction in Africa. China has always been committed to achieving win-win cooperation and joint development with Africa. Russia could consider the Chinese model of financing various infrastructure and construction projects in Africa.
Official proposals for all kinds of trade and investment support have been in the spotlight over the years. In May 2014, Russian Foreign Minister Sergei Lavrov wrote in one of his articles published on the ministry’s website: “We attach particular importance to deepening our trade and investment cooperation with states. Africans. Russia will offer African countries extensive trade preferences. “
Lavrov wrote: “At the same time, it is evident that the important potential of our economic cooperation is far from being exhausted and that much remains to be done for the Russian and African partners to better understand each other’s capacities and needs. . The creation of a mechanism for the provision of public support for business interaction between Russian companies and the African continent is highly on the agenda.
After the first Russia-Africa summit in the Black Sea city, Russia Sochi in October 2019, Russia and Africa decided to move from mere intentions to concrete actions to bring current bilateral trade and investment to new heights. significantly higher in the years to come.
“There is a lot of interesting and demanding work ahead, and perhaps we should pay attention to the experience of China, which provides its companies with state guarantees and subsidies, thus ensuring the capacity of companies to work in a systematic and long-term manner, ”said Foreign Minister Lavrov.
According to Lavrov, the Russian Foreign Ministry would continue to provide comprehensive support to initiatives aimed at strengthening relations between Russia and Africa. “Our African friends have called for closer interaction with Russia and would welcome our companies to their markets. But a lot depends on the reciprocity of Russian companies and their willingness to show initiative and ingenuity, as well as to offer quality goods and services ”, he underlined.
Senator Igor Morozov, member of the Economic Policy Committee of the Federation Council and chairman of the Coordination Committee on Economic Cooperation with Africa, noted during one of the meetings that under conditions of pressure from sanctions, it is it became necessary to find new markets, new partners and allies for Russia. “This predetermines Russia’s return to Africa, makes this direction a high priority both in terms of geopolitical influence, as well as in the sphere of trade and economic context.”
“It is important for us to expand and improve competitive government support instruments for businesses. It is evident that in the thirty years that Russia left Africa, a number of countries like China, India, the United States and the European Union have significantly increased their investment opportunities in the region, ”said Morozov.
With a growing revival of interest in Africa, the Russians are feverishly seeking to establish effective entry routes into the vast continent. As a result, Senator Igor Morozov unreservedly suggested creating a new structure within the Russian Export Center – an investment fund, further explaining that “such a fund could assess and accumulate concessions as a tangible asset. for the Russian raw materials and innovation sector ”.
Its coordination committee is responsible for adopting a more pragmatic approach to business, deepening and expanding economic collaborations, and establishing direct and beneficial contacts between entrepreneurs and companies from Russia and African countries.
The Coordination Committee for Economic Cooperation with African States was established in 2009 on the initiative of the Chamber of Commerce and Industry of the Russian Federation and the Vnesheconombank with the support of the Council of the Federation and the State Duma of the Federal Assembly of the Russian Federation. It received support from the Ministry of Foreign Affairs, the Ministry of Economy and Trade, the Ministry of Natural Resources, as well as the Ministry of Higher Education and Science.
The President of the Russian Chamber of Chambers and Industry, Sergei Katyrin, added his voice for the establishment of a financial mechanism, declaring that “the main task now is to accelerate the economic return of Russia on the African continent, from which we practically left in the 90s and now it is very difficult to increase our economic presence there in Africa.
According to Katyrin, Russia’s economic presence in Africa today is significantly lower compared to the positions of the main Western countries and BRICS partners. “It’s time to overcome this yawning gap. Today we are facing a difficult task to ensure the activities of Russian entrepreneurship on the African continent under the new conditions, taking into account all the consequences of the coronavirus pandemic. “
Katyrin, moreover, said “we need a state financial mechanism to support the work of Russian companies in Africa, otherwise it will be very difficult to break the fierce competition from Western companies with such support. We need to focus on the areas where we can certainly count on success. “
According to the UNCTAD World Investment Report 2020, the top five investors on the African continent are the European Union (Netherlands, France, Germany, United Kingdom), the United States and China. There are also the Gulf States, the United Arab Emirates and Turkey which constantly play an active role in various spheres of the African continent.
Concretely, the introduction of the African Continental Free Trade Area (AfCFTA) gives an additional signal to foreign actors to take advantage of this new opportunity in Africa. It aims to create a continental market for goods and services, with the free movement of businessmen and investments in Africa. As announced, the AfCFTA has much more to offer besides creating a single market of 1.3 billion people.
Despite the setbacks of those years, the Russians are still full of optimism. Having said that, Russia has its own approach to Africa. It does not put pressure on any foreign country or have to compete with them, because it has its own pace for working with Africa.
Equally optimistic about the emerging challenges and opportunities in Africa, Russia must show financial commitment and deliver on its commitments, especially now that the joint declaration adopted at the historic first summit held in October 2019 finally paves the way for a new dynamism and provides impetus to raise the existing relations between Russia and Africa to a qualitative level.