Posted on March, 24, 2023 at 06:17 am
Burkina Faso, in West Africa, a member of the African Continental Free Trade Area (AfCFTA), has suggested creating a joint bank with Russia to facilitate financial transactions between the two countries and promote trade, according to Ousmane Bougouma, the speaker of the countries Transitional Legislative Assembly stated on Wednesday (March 22).
“I think that when it comes to strengthening cooperation with Russia in key areas of the economy, it is very important that we explore the possibility of creating a joint bank between Russia and Africa with a branch in Burkina Faso,” he said.
The establishment of a joint financial institution will pave the way for broader cooperation between Russia and the West African country, Bougouma said, adding that it would be “useful” for mutual trade and investment.
In January, the prime minister of Burkina Faso, Apollinaire Joachim Kyelem de Tambela, proposed setting up a joint committee to boost trade and economic relations with Moscow. Earlier this week, the first State Duma deputy chairman, Aleksandr Zhukov, said that Africa was “a rapidly developing region with great prospects,” adding that Russia is currently “actively working” to expand cooperation with countries in the continent.
“Our mutual economic interests include investments, cooperation within production chains, cooperation in strategic infrastructure projects, energy, medicine, financial technologies, and that, of course, along with the traditional supply of grain and fertilizers,” he said at the International Parliamentary Conference ‘Russia – Africa in a Multipolar World’.
Russia is “determined to continue building a strategic partnership” with African nations, while multiple Russian state-owned and private companies are already actively investing on the continent.
The proposal is a logical one, and it should be noted that the Burkina Faso proposal is for the creation of a pan-African policy and trade bank, not a bilateral Burkina Faso-Russia bank. Africa is becoming more centralized, with the AfCFTA agreement adding value to investors as it has eliminated intra-African tariffs on goods transit between African nations. With a huge African domestic market, low labour costs and improving infrastructure, there is growing awareness that Africa is developing, albeit in patches, as a manufacturing, export, and domestic market in its own right.
What is missing is a viable pan-African trading bank, what exists have tended to be under-capitalised and subject to local market restrictions. Trade tends to be arranged via regional national banks where the financial regulations in place can make it hard to take money out of the country.
Changes are coming, however. South Africa is a member of the BRICS grouping along with Russia, and bilateral trade has been expanding. It reached US$1.39 billion in 2021, while direct shipping routes recommenced in January 2023 for the first time in 30 years. Overall Russia-Africa trade reached US$17.9 billion in 2022.
Egypt meanwhile has just joined the BRICS New Development Bank as an equity stakeholder, meaning it too is part of the expanded BRICS+ and giving Russia a northern gateway to Africa in addition to its South African market entry point.
The way ahead with the Burkina Faso proposal will probably be up for discussion with China and other related BRICS+, Eurasian and Middle-Eastern partners. India would also be interested in participation in such a project. A pan-African bank, based in Africa (Nairobi would probably be seen as a potential head office location) with a collective African equity membership with additional trade finance provided by China, Russia, the UAE, India, and offshore investment via Mauritius as a tax haven would appear to be a logical development.
Source: Russia Briefing