After the second Russia-Africa summit held in St. Petersburg from July 27-28, media reports indicated South Africa continues play Russian roulette with its economy. Several reports underlined the historical fact that Russia had contributed tremendously during its political struggle to attain independence, but also highlighted Russia’s extremely low level of economic engagement and investment in the southern African nation.
Research establishes the fact that Russia accounts for a paltry 0.2% of South Africa’s global export trade, while the United States, United Kingdom and the European Union account for a combined 35% – with China around 9%. Energy deficit has crippled industrial operations and supplies for domestic use have largely been reduced. Social discontent, as a result of the crisis, has engulfed every corner of South Africa.
Russia and South Africa have had good bilateral relations and both are members of BRICS (Brazil, Russia, India, China and South Africa), but the current level of economic cooperation could be described as unjustifiable and unacceptable in these relationships. South Africa, widely considered as an economic power in Africa, is currently experiencing the worst economic crisis of its history.
Mark-Anthony Johnson notes in his opinion article of early August that the country risks becoming bankrupt for its relationship with Russia, which adds virtually nothing to the economy, state revenues, economic growth, job creation, socioeconomic stability and investor sentiment.
South Africa has been hit with problems ranging from energy deficits, collapsing industrial production and rising tensions among the large labour force. For instance, in early August, South African business leaders told President Cyril Ramaphosa that the jobless rate could rise to 38.1% by 2030 without urgent action to solve the country’s energy, logistics and crime crises. Unemployment in South Africa is already among the highest of more than 80 nations tracked by Bloomberg.
South Africa’s Investec Chief, Annabel Bishop, has also given some detailed appraisals and analysed critical setbacks in the current Russia-South African bilateral cooperation. Annabel Bishop explained the dire consequences of entertaining relations with Russia – a country that has continued to push war with Ukraine. Russia began the war on February 24, 2022 – and it has shattered the global economic system. The Russia-Ukraine conflict has adversely impacted Africa.
Concerns arose when the United States formally indicated that South Africa was in danger of being ousted from the African Growth and Opportunity Act (AGOA), losing its trade benefits due to its love of Russia. Since its inception more than two decades ago, the African Growth and Opportunity Act (AGOA) has offered Africans the opportunity to engage and establish business networks from Africa to the United States and vice versa. It offers conditions as a “stepping-stone to address regional and global challenges”, especially with Africa’s young and entrepreneurial population.
In a letter to Secretary of State Antony Blinken at the beginning of June, US legislators said that there are “serious concerns with current plans to host this year’s AGOA Forum in South Africa”, and that “actions by South Africa call into question its eligibility for trade benefits under AGOA”.
This development came as United States Intelligence suggested that South Africa’s government has deepened its military relationship with Russia over the past year, as accusations suggested a Russian cargo vessel subject to US sanctions docked in South Africa where the government covertly supplied Russia with arms and ammunition that could be used for its illegal war in Ukraine.
On top of this, South Africa held joint military exercises with Russia and China, authorised a Russian military cargo plane (also subject to United States sanctions) to land at a South African air force base, and continues the push to host the BRICS Summit – where government aims to strengthen its ties with China and Russia.
With an estimated population of 58 million, South Africa is the southernmost country in Africa. Perhaps this South African love for Russia might be justifiable if there were massive economic upsides to strengthening ties with the Russian Federation. However, it’s the exact opposite.
President Vladimir Putin however used the opportunity during bilateral discussions with South African President Cyril Ramaphosa at the second Russia-Africa summit to re-emphasise that Russia-South Africa relations are based on the principles of strategic partnership, with interactions becoming more diverse and varied.
“We have established a multi-level political dialogue, and our trade and economic ties and cooperation are making progress. In 2022 mutual trade posted growth of 16.4 percent, which is a solid indicator. I think absolute figures could also be higher, but US$1.3billion is actually a good figure,” Putin said.
In his response, Ramaphosa explained that: “What’s particularly pleasing is that Russia conducts its relationship with Africa at a strategic level, and it conducts it with a great deal of respect and recognition for the sovereignty of African states. Russia has continued to be supportive of Africa as it did in the past, even during the Soviet Union days”.
But specifically relating to Russia’s relationship with South Africa, Ramaphosa noted that: “At the investment level, there are quite a number of Russian companies that have invested in the South African market – as there are companies from South Africa which are also investing in the Russian market”.
Ramaphosa expressed wariness over low economic engagement. South Africa has to experience more growth in exchanges of trade. Cooperation should now be much broader in the energy sector. Currently, South Africa is going through an energy crisis and could learn a lot and do a lot together with Russia on the energy side.
Quite recently, Peter Fabricius – a Consultant at the Pretoria-based Institute for Security Studies (ISS) – argued that African leaders have not been negotiating for their long-term development needs and/or for trade incentives, but only comfortably showing implicit support for Russia.
“It is full of statements implicitly harnessing Africa in support of Moscow’s posture against Western sanctions imposed on it for invading Ukraine,” he wrote in his analytical article titled ‘From Russia, With Little To Show’, published by ISS Today in early August.
According to his analysis, South African President Cyril Ramaphosa – perhaps unexpectedly, given his government’s reputation for Russophilia – spoke for these when he told Putin that Africans hadn’t come for ‘donations’ but wanted him to reinstate the Black Sea Grain Initiative (BSGI). Putin’s withdrawal from the BSGI led to hiked food prices and food insecurity in Africa. And Ramaphosa said Africa wanted negotiations to end the war in Ukraine.
Several African leaders at the summit said they wanted Russia to help them overcome Africa’s prevailing trade relationship with the developed world, which involves exporting mostly raw materials and importing mainly manufactured, value-added goods.
Putin insisted that Russia had never thought of Africa as a place to buy raw materials, and had built many enterprises and power and steel plants. But in reality, foreign direct investment in Africa is negligible, and trade is heavily imbalanced in Russia’s favour.
About 70% of Russia’s African trade is concentrated in four countries – Egypt, Algeria, Morocco and South Africa. At the Sochi summit, Putin promised to double trade in five years; but it has in fact declined. The St Petersburg summit was mostly of value to Putin and those African leaders dependent on Russian military muscle, or empathetic to Moscow because of Soviet-era support and a shared sense of victimhood over Western sanctions.
These statistics partly reflect the absence in Russia of anything like America’s African Growth and Opportunity Act duty-free import scheme, or the EU’s agreements to incentivise their imports of value-added African products. Russia’s investments in Africa represent about 1% of total inward foreign direct investment.
South Africa and Russia have lately drawn criticism. South Africa has been in the media news-stream. So, let’s hope that Moscow will be able to fully utilise a more economically useful leverage. Nevertheless, the question arises – what, in fact, can Africa offer Russia? Doing business there is still very risky. Therefore, making investments in disadvantaged countries – the impact on which is very limited – is a dubious prospect, argues Viktor Birykov in his Russian article published in Military Review.
With the global complexities and contradictions, smart African nations prefer Russia play a role by investing in Africa; but this does not mean other external partners won’t capitalise on the competitive environment to come into Africa. In profitable terms, Africa should have many partners, especially with the creation of a single free trade area on the continent. The generally accepted fact is that Africa’s burgeoning population of 1.4 billion presents multifaceted economic opportunities.
Despite unprecedented pressure from the West, the summit was held. Now Africa is looking forward to having a unique economic engagement, not hyperbolic rhetoric on neo-colonialism. It was very noticeable throughout the summit that Russia aspires to build a truly strategic and resonating diverse partnership with Africa. Understandably, Russia seems to have offered economic initiatives to its African friends and colleagues, but the simple question remains – to what extent can these ambitious economic initiatives be effectively and practically realised in South Africa and across Africa?
