“Made in Russia”: Securing Russia’s economic interests

Squeezed between the United States and European Union sanctions, Russia has been exploring effective ways to increase exports of its industrial products under the “Made in Russia” programme to traditional markets in Latin America, Asia and Africa.

The primary strategic goal is to secure Russia’s economic interests abroad while at the same time support Russian industries in raising revenue to modernise Soviet-era industries. But increasing exports especially to African markets, Russia has to confront market competition from Western players and Asian countries such as China, India and the Gulf states.

In a recent interview, Peter Fradkov, general director of the Russian Export Centre (REC), has explained that Russia has been making every effort to avoid the “raw-materials” export model and focus on developing export-oriented industries and the launch of the REC was a key step towards the development of a full-fledged national export support system.

The Soviet Union made a significant contribution to the social and economic development of African countries by building large industrial and infrastructure facilities and helping to establish national education and health care systems. However, in the 1990s the Russian-African relations came virtually to a standstill. At present, Russia’s foreign trade turnover with Africa is about US $12 billion, which is a rather modest achievement. Nevertheless, the African continent remains a rather promising market for Russian industrial goods.

Admittedly, the government authorities, and both inter-governmental commissions and the REC, are primarily concerned with removing barriers for Russian exporters and opening up foreign markets for them in Africa. Reinforcement of positions of Russian exporters in Africa requires creation of certain conditions and the key task is penetration into the global market. For this purpose, the REC has launched a programme to promote Russian goods and services under a single country brand “Made in Russia” and in this context, Africa is a very important partner for us, though not an easy one.

He underscored the fact that “Russian manufacturers have a number of specific competitive advantages. Let us take, for example, agricultural machinery. The main advantage of Russian products as compared to the counterparts by major foreign manufacturers is a lower price and almost the same level of capacity, quality and useful life.”

On the other hand, there are some difficulties still inherent in the Russia-African business partnership. According to Fradkov there are still insufficient awareness of the real economic opportunities, market conditions and specific counterparts in African markets by Russian businesses and poor awareness of capabilities of Russian partners for Africans.

“We are often faced with discriminatory barriers, which are there not because we are from Russia, but because we have just not thought about how to remove these barriers. Our primary task is to gradually change the thinking of Russian entrepreneurs, who are often sceptical about entering foreign markets, including Africa. Secondly, we strive to promote the image of Russia as a producer of diverse and high-quality products,” he underlined in the interview.

With new trends and directions in global business, African countries have to look to the Eurasian region as a huge market for exports as well as make efforts to consolidate and strengthen economic cooperation, says Tatiana Cheremnaya, the president of ANO “Centre for Effective Development of Territories” and head of the working group on public-private partnership “Business Union of Eurasia” based in Moscow, Russia.

Cheremnaya discussed here three main points and they are as follows: The problems of effective cooperation between Russia and Africa are political in nature. Thus, the strengthening of Russia’s position leads to the strengthening of its influence in the world, including in Africa and vice versa, sectional policy has significantly reduced Russian exports.

The second problem for the development of Russian-African business is the lack of competitiveness of Russia, which allows working only in the low-budget segment. This is due to structural problems in the Russian economy, the need for modernisation, the bulk of the products produced during the Soviet Union.

The third problem is competition from the United States, China and India as more developed countries with more advanced technological solutions, and from the European countries as the former “patrons” of African countries.

Russian President Vladimir Putin, taking part in a congress during the 11th Russian Business Week organised by the Russian Union of Industrialists and Entrepreneurs early February 2018, discussed how innovative technology is reshaping the global business landscape. He, however, encouraged Russian industrialists and businesses participating in the forum to improve their business approaches in order to have competitive advantages in the global market.

“This is the most important thing. And fundamentally fresh markets for goods and services will become available, and new leaders will appear as well. Naturally, competition will exacerbate. Clearly, in a situation like that, no one will be playing fair with their competitors, including in the global business environment,” Putin said.

Russia has trade centres established in Africa. But these Russian trade centres must necessarily embark on a “Doing Business in Africa” campaign to encourage Russian businesses to take advantage of growing trade and investment opportunities, to promote trade fairs and business-to-business matchmaking in key spheres in Africa.

Maxim Matusevich, an associate professor and director, Russian and East European Studies Programme, at the Seton Hall University, told me in an interview that, “In the past decade there was some revival of economic ties between Africa and Russia – mostly limited to arms trade and oil/gas exploration and extraction. Russia’s presence in Africa and within African markets continues to be marginal and I think that Russia has often failed to capitalise on the historical connection between Moscow and those African elites who had been educated in the Soviet Union.”

“It is possible that the ongoing crisis in the relations between Russia and the West will stimulate Russia’s leadership to look for new markets for new sources of agricultural produce. Many African nations possess abundant natural resources and have little interest in Russia’s gas and oil. As it was during the Soviet times, Russia can only offer few manufactured goods that would successfully compete with Western-made products. African nations will probably continue to acquire Russian-made arms, but otherwise, I see only few prospects for a diversification of cooperation in the near future,” added Maxim Matusevich.

Former Ethiopian ambassador extraordinary and plenipotentiary to the Russian Federation, professor Teketel Forssido has also explained that Russian businessmen think that business can be done from government to government levels (at the state levels) but in many countries business at the state levels has been complimented by private participation. Using government as an umbrella could be alright, but countries such as India, China and others run businesses without government in Africa. The government, of course, has to clear the way for smooth business transactions. “Russians are counting on the authorities to do business, but if they always rely on the state, business can be ineffective. That is why Russians businessmen are slow as we have seen it,” he said.

According to Forssido, Russia has to open its market for Africa and there are various ways to do this. One surest way is to use the existing rules and regulations. The preferential treatments for agricultural products exist but Africans don’t use them. Then, individual countries have to negotiate with the Russian government for their products to enter the market.

Further, the African regional economic blocs can be useful instruments because these blocs are very important and can work with their counterparts to facilitate trade between Africa and Russia. For instance, in the Common Market for Eastern and Southern Africa and Southern African Development Community zones in Africa, goods and services move freely, and now I think these blocs should look into the line of working as regional economic blocs with Russia.

“At the moment, China has done a lot in Africa despite worldwide criticisms. China is not the only player on the continent, but also India, Turkey and other serious players. But, when we talk about Russia, I think it is not comparable. China is largely involved in Africa, practically in all sectors as we can see. We expect that Russia can do more if they want to, looking at their huge potential capability. They still have their own priorities, anyway,” he pointed out assertively.

As already known, Moscow’s long term goals include developing investment cooperation with African countries, widening the presence of Russian companies in the African markets through increased deliveries of industrial and food products, and enhancing Russian participation in driving the economic development of Africa. At the same time, Russia needs to look at simplifying access to its market for African countries.

In one of his speeches posted to the official website, Russian foreign minister Sergei Lavrov noted frankly in remarks, “It is evident that the significant potential of our economic cooperation is far from being exhausted and much remains to be done so that Russian and African partners know more about each other’s capacities and needs. The creation of a mechanism for the provision of public support to business interaction between Russian companies and the African continent is on the agenda.”

*Kester Kenn Klomegah is an independent researcher and a policy consultant on African affairs in the Russian Federation and Eurasian Union.