Last month I visited the 13th Africa Forum in Cape Town, organized by Troika Dialog’s strategic partner Standard Bank. Talking with delegates, I was struck once again by the sheer scale of opportunity that exists in Africa for Russian business, just as Russia becomes an increasingly attractive market for African products.
A complex continent of 53 countries and more than 2,000 languages with historical connections to Europe, Asia and the Americas, Africa’s economy has continued to grow through the financial crisis, albeit at a slower rate than before. Despite the decline of conventional capital flows, innovative solutions such as microfinance, private equity and venture capital have maintained the powerful pace of progress.
To be sure, there is still a lot of work that needs to be done. Outside investors need to match domestic political commitment to build required infrastructure. Health and water provision remain crucial to Africa’s cities, where almost half the continent’s population will live by 2015. And investors still seek reassurance about the relatively strong regulatory environment in most African countries.
President Dmitry Medvedev’s visit to Africa in June was an important step to shift Russian perceptions of the continent. But it was not just a diplomatic mission. Medvedev was accompanied by 300 businesspeople, inspired to talk to African counterparts about how they can share expertise and resources.
Russia still lags behind its BRIC partners in terms of bilateral trade with Africa, but its trade with Africa is the fastest growing — at 15 percent annually since 1992. Although most other trade partners look to Africa mainly as a source of raw materials, Russia, which is rich in raw materials, can expand its trade relationship to a higher level.
This story is no longer about lackluster investment as a vehicle to plunder Africa of resources. Africa is an enormous potential marketplace for Russian goods and services. It has a population of almost 1 billion people, recognized early by telecoms companies that provided the continent with mobile phone service.
But cooperation is a two-way street. Russia has the high technology to upgrade the African resources industry and the expertise that comes from a century of developing its own natural resources. Africa is already a major exporter of food and iron ore to Russia, with volumes set to soar in coming years.
The lion’s share of Russian investment into the emerging markets has been focused on the Commonwealth of Independent States, but investment in Africa, in particular, is growing fast. This investment is an important factor to develop the continent’s infrastructure, services sector and financial markets.
Education is also critical. An increasing number of African university students are studying in Russia, and leading business schools like the Skolkovo School of Management are preparing future business leaders to work with Africa and other emerging markets.
It’s no longer necessary for trade and investment flows between two emerging markets to take a circuitous route via London or New York. Relationships are direct, and the benefits are felt directly by both parties. I would like to see Russia more connected to the world, and Africa is an excellent place to expand Russia’s role as a leading economic power.
Ruben Vardanian is chairman of the board of directors and CEO of Troika Dialog Group and president of the Skolkovo School of Management.