Page 24 - MiNDSPACE Issue 2 2022 - Old Mutual Corporate

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counterparts through the global financial system. However, the overall impact of international sanctions on Africa’s external trade prospects will be constrained by the relatively minor role that Russia plays as a trading partner with the continent.
particularly for countries that buy arms from Russia; restrictions on trade with Russia and Ukraine, both imports and exports; commodity price rises, especially for oil and gas, metals
and food staples; a squeeze on foreign direct investment
Russia has expanded its influence in Africa over the past decade, and the war in Ukraine – which is part of an increasingly tense stand-off with the West – is likely to accelerate its use of unconventional tactics as it pursues its strategic objectives on the continent. The focus will be to build political, economic and security relationships in countries with weak and unstable governments, concentrated political elites, rich natural resources and geostrategic importance.
(FDI) from Russia, largely in mining and energy infrastructure development; and reduced inbound tourism from Russia.
Russia accounts for a small proportion of the FDI channelled to the continent, but some specific projects will come under financial stress because of sanctions on Russia, whether this comes through barriers to international payments, reduced availability of project finance or increased risk aversion among host countries and investment partners. According to fDi Intelligence, Russia provided less than 1% of Africa’s total FDI in 2019, and most Russian investment was focused on natural resource ventures, particularly hydrocarbons projects and the mining of industrial and precious metals, rare earth elements and diamonds.
SHIFTS IN RUSSIA’S POLITICAL AND SECURITY FOCUS
Russia will step up its one-on-one engagement with the leaders of the region’s autocratic and semi-authoritarian regimes. Already, it has helped to protect ruling or emerging governing elites (and critical infrastructure) in countries such as the Central African Republic (CAR), Libya, Madagascar, Mali, Mozambique and Sudan. Russia has developed strong ties with the semi-authoritarian regime in Algeria and the autocratic regime in Egypt.
African countries that have Russian participation in hydrocarbons projects include Cameroon, Congo-Brazzaville, Ghana, Mozambique and Nigeria; Russian mining interests are found in Angola (diamonds), Guinea (aluminium and bauxite), Nigeria (aluminium), Sudan (gold) and Zimbabwe (platinum). Russian projects in these countries face a much more uncertain future, although Russia will be loath to relinquish its rights
to strategic assets in Africa and could increasingly resort to unconventional methods to secure its investments. Equally, the door may open for other non-Russian commercial interests to expand their foothold in Africa.
Unconventional outreach strategies – private mercenary groups, disinformation campaigns, election-meddling schemes and arms-for-resources deals – will remain key aspects of Russia’s approach to Africa. Military hardware has largely been sold to Algeria and Egypt, but deals have also been struck in recent years with Angola, Burkina Faso, Cameroon, Equatorial Guinea, Ethiopia, Libya, Mali, Mozambique, Nigeria and Sudan. According to the SIPRI Arms Transfers Database, Africa was the second-largest market for accumulated Russian arms
sales between 2011 and 2020 and this position does not look like it will change any time soon. Russia is a disruptive actor in Africa and this role could escalate as tensions with the West and the war in Ukraine continue, placing regional security and cooperation at risk in Africa’s conflict hotspots.
IMPACT ON RUSSIAN TRADE AND INVESTMENT IN AFRICA
The widening net of international sanctions imposed on Russia by the US, EU, UK and other aligned states will complicate African trade and investment deals involving Russian entities. This stems from international pressure to abide by the sanctions, the lingering threat of penalties for failing to comply and greater difficulty in effecting transactions with Russian
kraine-related risks are already having an impact on major global economies, and will spill over into emerging markets that face rising global commodity prices and growing inflation.
According to the UN Conference on Trade and Development, Russia accounted for just 2% to 3% of Africa’s international goods trade with the world from 2016 through to 2020. Africa exported $1.4 billion of goods to Russia in 2020, which represented 0.4% of the continent’s total export trade. African imports from Russia were worth $8.5 billion in 2020 and accounted for 1.7% of the continent’s total import trade.
For Africa, the main risks to consider include: security –
Egypt, Nigeria, Morocco and South Africa stand to lose most from increased barriers to trade with Russia, but the amounts at risk are dwarfed by trade with other parts of the world. Just over half of all African exports to Russia are fruit and vegetables and almost all are shipped from Egypt, South Africa and Morocco. Imports from Russia are mostly food staples (predominantly wheat) and to a much lesser extent petrol, iron and steel, fertilisers and coal. Egypt, Morocco, Nigeria and to a much lesser extent Tunisia and Senegal account for more than half of Africa’s total imports from Russia.
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