Africa, Asia-Pacific, Development & Aid, Economy & Trade, Energy, Environment, Financial Crisis, Food and Agriculture, Global Governance, Headlines, Trade & Investment, Trade and poverty: Facts beyond theory

TRADE: Crisis Pushing Emerging Markets to Move Beyond the Dollar

Kester Kenn Klomegah interviews VIKTOR POLIKARPOV of the Russia-South Africa Business Council

MOSCOW, Jul 7 2009 (IPS) - The global economic crisis is pushing countries in regions with emerging markets, such as Russia and South Africa, to together move beyond the dollar-based economic model. Given their politico-economic similarities, these two countries should build on opportunities to share expertise and technology.

These are the views of Victor Polikarpov, executive secretary of the Russia-South Africa Business Council. The council was created in 2006 during the first official visit of former Russian president Vladimir Putin to southern Africa to deepen and expand commercial and economic relations between Russia and South Africa.

Polikarpov tells IPS correspondent, Kester Kenn Klomegah, about how both Russia and South Africa’s dependency on natural resources is no way to develop; about the problem of "crooks" wanting to make a fast buck from Russia’s oil industry; and how Russia could benefit from South Africa’s agro-processing and mining expertise.

IPS: What are some of the significant achievements of the business council so far? Victor Polikarpov (VP): I'm pleased to say that the trade turnover between our countries has doubled over the past year and makes up half a billion dollars now. This is not much yet but these are very positive dynamics, for sure.

The greater part of the turnover growth was secured by South African agricultural and food exports to Russia. South Africa has been successfully exploiting the niche it discovered in the huge import-oriented food and agricultural market of our country.

Russian business has also displayed a lot of interest in the South African market and tabled a number of cutting-edge technological projects in traditional and renewable energy, construction, medicine, pure water supply, mining, forestry and other spheres.

IPS: Russia and South Africa, both economic giants in key emerging markets, are struggling to overcome the global economic crisis. What else do they have in common? VP: Despite the distance between our countries, Russia and South Africa possess a great deal in common. About the same period of time ago we transited politically from highly centralised and non-democratic regimes to free societies. Both countries are leaders in their respective regions, geopolitically.

Both countries are heavily dependent on extraction and beneficiation of mineral resources.

The world economic downturn is objectively pushing these economies closer together to form a new model of economic development less dependent on the dollar. The crisis makes us strategise about our economic relations differently.

The period of "extra money" coming from exports of mineral resources is over — both for Russia and South Africa — until there is another economic boom. A high level of reliance on natural resources only is not the way of modern development.

Cutting-edge technological advancement today can secure real economic progress and solutions of outstanding social problems. This is understood in the majority of African countries.

In spite of the crisis, Africa is to grow at a pace of three to four percent of gross domestic product (GDP) while the (opposite is happening in the) rest of the world. Africa is a huge world market today and is more and more orienting itself towards technological imports, rather that importing commodities.

IPS: Is Russia interested in exporting its technology to South Africa? VP: High-tech cooperation with a view of joint technological expansion to Africa is the biggest strategic business opportunity for Russian and South African business today.

Russia is not really an investment nation. With the exception of a few big asset management companies, such as Renova, few can boast of big investment projects in Africa. The crisis today also slows down the yield of such investments.

The unique selling point of Russia is technology. Our engineering and science have always been internationally recognized and are still very strong in Russia in spite of setbacks during the years of transformation.

Russia strongly views South Africa as a key strategic partner and a gateway to the markets of Africa. South Africa could be potentially a great manufacturing base for our engineering products.

South Africa is also very strong technologically. By putting efforts together, we could get unique market niches in many industries. Technological cooperation will secure close long-term business interaction between our companies.

Only by working hand-in-hand with companies which have presence all over the continent can we succeed in exploiting the opportunities. High-tech cooperation will boost the quality and quantity of jobs in our countries and secure structural changes in our economies.

My emphasis on high-tech cooperation does not preclude our cooperating in traditional sectors such as in the exporting of South African wines, fruit, spices, herbal teas, beef, ostrich meat, cosmetics and so on. We are happy to see them growing.

IPS: Apart from technology and exploitation of mineral resources, is the council encouraging companies to diversify into other lucrative areas? VP: Certainly we should encourage diversification. It is time South Africa brings to Russia the agro-processing technologies, equipment and skills that we are lacking so much here.

I hope one of our business forums will be dedicated to agricultural transportation, storage, processing and packing. I know some companies have already established business relations on this.

We invite South African business to take a closer look at the opportunities in developing world-class luxury spa resorts, hotels and golf fields. If South African businesspeople want to invest, there is a great opportunity now in the Krasnodar region in the southern part of Russia.

As is already well known, the government is offering lots of investment projects for the winter Olympics 2014 around Sochi.

It might be a good opportunity for South Africa to export footwear and children's clothes. There are good chances for promoting South African mining equipment and mining security solutions. We could expand cooperation in automobile and coal industry.

There is a fantastic niche in the sphere of forestry. I have some concrete proposals coming from the Russian companies in terms of setting up joint timber processing with further joint sales of ready-made products.

Nanotechnology, space, microbiology, machine building, research and development in lots of sectors of industry, telecommunications and information technology – these are immediate sectors where we are ready to cooperate.

I would also like to alert South African companies to sourcing oil products from Russia. We are all for this business, however, there seems to be a lot of misunderstanding. There have been numerous applications coming to me from South African companies asking to find some good partners.

As you know, oil products are of a strategic nature. Their exports are controlled by the state per the export quotas and permits issued to manufacturers and traders. Potential partners are normally scrutinised for background and availability of cash.

So far we've met with some crook-like guys whose companies have either been blacklisted or they have nothing to do with the oil business and are looking for quick money as intermediaries. We need reputable South African companies to deal with.

IPS: Many people have complained about information flow. To what extent is this affecting business between Russia and South Africa? VP: Our local company directors and potential businesspeople are not well informed about South African business in Russia and I think it is very important to tune our business efforts toward providing vital business information.

South Africa is a great country with fantastic potential and opportunities. However, the problem is that it is not so much promoted in Russia.

There might be still a bogey of "communism" or cold Russian winters that prevent South African businesspeople from coming to our international exhibitions and trade shows. They could gain a lot. We need to change perceptions.