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Moscow – Johannesburg

2009



Grasimcuk, I.Rtink Russian Invstmnt in Sutrn Africa.

WWF’s Trad and Invstmnt Prgramm rprt.

Ivtta Grasimcuk wit cntributins frm Alistair Scrn and Pt du Ply.

– Mscw / Jannsburg; WWF, 2009.

Russia’s dirct invstmnt f abut USD 3 billn in Sutrn Africa vr t

past dcad as placd bfr t cuntry’s gvrnmnt and crprat sctr

tw cics in t acclrating rac amng frign invstrs int Africa. T

rst choice is to follow the established path of direct investment from developed

cnmis tat as, in t wrds f a famus African ladr Waltr Rdny,

‘undrdvlpd Africa’ and invlvd a srius ngativ nvirnmntal impact.T scnd cic is n tat crrspnds wit t frmr Svit Unin’s plicy

f mutually advantagus cpratin wit Africa. In t currnt cntxt, tis

will prv pssibl nly trug jint cpratin t aciv nvirnmntal

sustainability and economic diversication requiring long-term planning and

innvatin.

T purps f tis intrdisciplinary mpirical rsarc papr is t invstigat

t currnt and futur stat f nvirnmntal practics in jint vnturs btwn

Russia and Sutrn Africa as cmpard wit tr pattrns f cpratin

amng mrging markt cnmis.

Acadmic ditr:

V.G.Subin – Dputy Dirctr f t Institut fr African Studis f t Russian

Acadmy f Scincs.

Rviwrs:

V.N.Sitv – Dan f t Scl fr Intrnatinal Businss and Businss

Administratin f t Mscw Stat Institut fr Intrnatinal Rlatins f t

Frign Affairs Ministry f Russia;

K. Gttscalk – Snir Lcturr f t Plitical Scinc

Dpartmnt, Univrsity f t Wstrn Cap.

All rigts rsrvd by WWF.

Tis rprt is distributd fr f carg.



3 ReThINK RUSSIAN INVeSTMeNT IN SoUTheRN AFRICA

CONTENTS

EXECUTIVE SUMMARY 9

INTRODUCTION 13

CHAPTER 1.INVESTMENT NEEDS OF SOUTHERN AFRICA 15

1.1. Sustainability Challenges in SADC Countries 171.2. Profile of South Africa 201.3. Profile of Other SADC Countries 26

CHAPTER 2.RUSSIA’S RETURN TO SOUTHERN AFRICA 29

2.1. The Southern African Dimension of Russia’sPolicy 30

2.2. Russian Business’ Interests in Southern Africa 32

CHAPTER 3.RE-THINKING RUSSIA’S INVESTMENT IN SADC 39

3.1. Russia’s Strategic Interest in Southern AfricanNatural Resources 42

3.2. Russia’s Strategy to Act as a Global Guarantorof Energy Security 42

3.3. Russia’s Efforts to Develop an AssistanceProgramme 45

CONCLUSION 47

REFERENCES 49




Tis rprt is part f a sris f studis by WWF’s Trad and Invstmnt

Prgramm, wic aims at idntifying and cprating wit actrs in t ky

mrging cnmis (Brazil, Russia, India, Cina, Sut Africa and trs)

in rdr t prmt sustainabl trad and invstmnt intrnatinally. T

Prgramm xamins t scp wic xists fr ts cuntris t bcm lading

xprtrs f, and invstrs in, sustainabl gds and srvics, wilst mrging

as ky actrs in prmting a practiv intrnatinal sustainabl dvlpmntagnda.

Fr lp in cllcting matrials fr tis rsarc, t autr wuld lik t tankG. Scprs (SASoL), Y.Skubk, G.Subin and A.Pritvrv (Institut fr

African Studis f t Russian Acadmy f Scincs). T autr als xtnds

r artflt tanks t t hinric Böll Fundatin and t Russian embassy

in Prtria as wll as, prsnally, Russia’s Ambassadr in Sut Africa V.Lukv,

K.Rethmann (Rethmann AG & Co), F. Schwalba-Hoth (European Parliament),

and K. Tüsing (Grman Dvlpmnt Srvic/DeD) w immnsly assistd

in rganisatin f r rsarc trip t Sut Africa, Btswana, Lst and

Namibia in 2000 – 2001.

Tis rsarc papr was cmpltd during t autr’s rsidncis at Ns Artist

Rsidncy in Skagaströnd, Icland and t Pars Trust, Nicsia, Cyprus.




ABBREVIATIONS ASGI-SA Accelerated and Shared Growth Initiative for

Sut AfricaBee Black ecnmic empwrmnt

BRICS Brazil, Russia, India, Cina, Sut Africa

CDM Clan Dvlpmnt Mcanism

CIS Cmmnwalt f Indpndnt Stats

Co2 Carbn Dixid

CSR Crprat Scial Rspnsibility

eMes emrging Markt ecnmis

DRC Dmcratic Rpublic f Cng

FDI Frign Dirct Invstmnt

FAo Fd and Agricultur organisatin (Unitd Natins)

FSC Frst Stwardsip Cuncil

GDP Grss Dmstic Prduct

GhG Grnus GashSe halt, Safty and envirnmnt

IDZ Industrial Dvlpmnt Zn

IMF Intrnatinal Mntary Fund

IPo Initial Public offring

ISo Intrnatinal Standartisatin organisatin

ITEC South-Africa Russia Inter-Governmental Commission

fr Trad and ecnmic Cpratin

NePAD Nw Partnrsip fr Africa’s Dvlpmnt

NGO Non-Governmental Organisation

ODA Ofcial Development Assistance

oeCD organisatin fr ecnmic Cpratin and

DvlpmntPBMR Pebble-Bed Modular (nuclear) Reactor

PPP Purcasing Pwr Parity

RSA Rpublic f Sut Africa

SADC Sutrn African Dvlpmnt Cmmunity

SDI Spatial Dvlpmnt Initiativ

TNCs Trans-National Corporations

UN Unitd Natins

UNCTAD Unitd Natins Cnfrnc n Trad and Dvlpmnt

UNeP Unitd Natins envirnmnt Prgramm

UNDP Unitd Natins Dvlpmnt Prgramm

WeF Wrld ecnmic Frum

WRI Wrld Rsurcs Institut

WTo Wrld Trad organisatin

WWF Wrldwid Fund fr Natur




FIGURES

Figure 1 Southern African Development Community 16Figure 2 Energy Intensity of BRIC + RSA Economies as

compared with World Average, 2004 22Figure 3 Fuel Wood In The Power Mix of Selected Southern

African Countries, 2005 28Figure 4 Oil Production Cost In Russia And Angola, USD per

Barrel, 2006 34Figure 5 Solar Radiation in Southern African Countries,

Kilowatts* hrs / m2day 44

TABLES

Table 1 Sadc At A Glance: Socio-Economic Data 18Table 2 SADC at a Glance: Environmental Data 19Table 3 Brazil, Russia, India, China and South Africa at a Glance 25

Table 4 Russia’s Natural Resource Base Complementarities withSouthern Africa 31Table 5 Major Existing and Planned Investments of Russian

Companies in Southern Africa 37, 38



EXECUTIVE

SUMMARY




This study has found no evidence suggesting that the environmental prole of

Russian invstmnt prjcts in Sutrn Africa is any ‘dirtir’ tan tat f prjcts

implmntd by Wstrn r African invstrs. At t sam tim, tr currntly

xist n xampls f lapfrgging dvlpmnt prjcts prmtd by Russian

invstrs in Sutrn Africa; in tr wrds prjcts prmting tcnlgical

r institutinal braktrugs tat wuld assist Sutrn African cuntris in

bypassing t nvirnmntally damaging and unsustainabl stags f industrialgrwt tat av marrd t past f t majrity f mdrn dvlpd cnmis.

hwvr tr d xist intrsting pprtunitis fr bilatral cpratin

in the eld of environmental sustainability, including amongst others joint

projects in underground coal gasication, gas-to-liquid technologies, small-scale

hydroelectricity, and energy-saving solutions.

A ‘grnr’ apprac twards cpratin wit Sutrn Africa ds nt

necessarily imply or require a divergence by the Russian government from the

high-level choices it has already made in terms of its interest in Southern African

natural rsurcs, its stratgy t act as a glbal guarantr f nrgy scurity, and

its efforts to develop an international assistance programme. What need to be re-

xamind in t sustainability cntxt, wvr, ar t instrumnts by wicthese high-level goals might be achieved.

A numbr f practical intrvntins xist by mans f wic Russian cmpanis can

nanc t nvirnmntal sustainability f tir businsss, bt dmstically

and in Sutrn Africa.

Ts includ:

(i) vluntary standards – t intrductin f and cmplianc wit

more stringent international quality standards and HSE (health,

safety and environment) certications, environmental information

disclsur, pn ‘grn’ dialgu wit lcal cmmunitis and NGos;

(ii) efciency measures – broader application of existing energy-, water-, and

tr rsurcs saving slutins;(iii) crprat scial invstmnt – gratr attntin t lcal scial and ducatinal

issus, wit t aim f training mplys and imprving tir living

standards, as well as enabling local communities to nd alternative income

surcs nc rsurcs dpsits ar xaustd;

(iv) analysis – t intgratin f nvirnmntal and scial prfrmanc indicatrs

int ‘du dilignc’ and invstmnt apprval prcdurs tat wuld prvnt

‘surprises’ and nancial losses (as was the case in the purchase and sale of

t Sut African Vancm vanadium plant by evraz);

(v) responsible ‘green eld’ investment – construction of new power generation

facilitis basd n rnwabl rsurcs suc as wind and slar radiatin,

wit minimal nvirnmntal ftprint, particularly wit rgard t Co2

missins;(vi) rsarc and dvlpmnt – aimd at sustainabl tcnlgy slutins,

including ftprint mitigatin, us f rnwabl nrgy surcs, sustainabl

transprtatin, wast rcycling, and nrgy, watr and tr rsurc

savings.

Despite the current focus of Russian policy- and business decision-makers on

uranium mining and nuclar nrgy prjcts in Sut Africa and Namibia,

there exists considerable doubt regarding the long-term nancial viability and

nvirnmntal sustainability and xpdinc f suc prjcts, particularly in

viw f Sutrn Africa’s abundant rnwabl nrgy




In viw f t incrasing participatin by Russian banks in prjcts basd n

natural resource exploitation in Africa, it is essential that Russian nancial

institutins bgin applying intrnatinal sustainability critria in valuating

ts prjcts, fr xampl t UN Principls fr Rspnsibl Invstmnt and

Equator Principles.

The measures identied in this report form the basis for hedging the commoditiesrvnus fr t futur, by invsting tm in sustainabl businss slutins.

Rtinking Russia’s invstmnt in Sutrn Africa migt invlv additinal csts

in the short term, both in nancial and administrative terms, but this expenditure

suld b viwd as capital invstmnt, ratr tan csts. Furtrmr, t

rturns n tis invstmnt, in t frm f incrasd nvirnmntal sustainability

and natinal and crprat cmptitivnss, ar crtain t b far in xcss f t

initial xpnditur fr bt Russia and Sutrn Africa, and in fact fr t wrld

as a wl.



INTRODUCTION




Tr xists a pltra f visins rgarding t structur and cmpsitin f t

world economy in the mid- to long-term future, but one idea seems to be shared by all

frcastrs: namly tat mrging markt cnmis (eMes) will b a majr frc.

The ground-breaking report Dreaming with BRICs: The Path to 20501 prdictd

tat f t currnt lading industrial cnmis, nly t USA and Japan migt

b amng t wrld’s six largst cnmis (by GDPs calculatd basd n txcang rat) in 2050, wit t rmaining fur bing Brazil, Russia, India,

and China (so-called BRIC economies). Furthermore, larger shares of the world

cnmy may b takn by tr ky eMes, including, but nt limitd t Sut

Africa, Mxic, t Unitd Arab emirats, Turky, Indnsia and Malaysia.

One question that remains unanswered in the ongoing debate on the future

f eMes2, is w t mak tir transfrmatin int cnmic avywigts

nvirnmntally sustainabl.

Accrding t t latst Living Plant Rprt3, nvirnmntal ftprint alrady

xcds natinal bicapacity in many mrging cnmic pwruss, mst

ntably Cina, India, Mxic, and Sut Africa. By cntrast, Brazil and Russiaar t tw lading clgical crditrs amng eMes, sinc tir bicapacity

currntly xcds tir clgical ftprint. Glbally, wvr, ttal nvirnmntal

ftprint vrst t eart’s bicapacity by apprximatly 30% in 2005. Tis

reinforces the need for EMEs to embrace so-called leapfrogging technologies to

bypass the environmentally unsustainable, resource-intensive stages of industrial

grwt tat caractrisd t cnmic prgrss f tday’s dvlpd cuntris4.

Prcisly wat ts lapfrgging dvlpmnt pattrns migt ntail, and

w ty suld b ncuragd, is a mattr f intns dbat acrss t

developmental, economic, scientic and social spheres5. Wat is clar, wvr,

is tat alng wit attmpting t dsign suc braktrug slutins fr

eMes in varius intrnatinal fra, including t Wrld Trad organisatin,

Unitd Natins envirnmnt Prgramm, Glbal envirnmnt Facilityand others, it is equally vital to identify and promote best environmental

practics and ‘grn’ prduct cains riginating witin and btwn eMes.

An xampl f suc ‘dram dals’ migt b Cins cmpanis manufacturing

solar cells from poly-silicon supplied by Russia, in order to sell these products

at an affrdabl pric int Middl eastrn r African, markts, prvidd

f curs tat all participants in tis prductin cain ar making us f

t mst nvirnmntally sustainabl tcnlgis and prducts availabl.

T purps f tis intrdisciplinary mpirical rsarc papr is t invstigat

t currnt and futur stat f nvirnmntal practics in jint vnturs btwn

Russia and Southern Africa as compared with emerging patterns of South-South

cpratin. Sutrn Africa as vr t past svral yars bcm n f tsignicant recipients of Russian outward investment, particularly in the natural

resources sector. Using a case-study approach to assess the environmental

prole of existing and proposed bilateral projects, this report seeks to explain

wy and w it is ncssary t ‘Rtink Russian Invstmnt in Sutrn Africa’.

1 Wilsn, D., and Purustaman, R., 2003. Draming wit BRICs: t Pat t 2050, Glbal

ecnmics papr N. 99, Gldman Sacs.

2 Wintrs, A. and Yusuf, S. (eds.), 2007 Dancing wit Giants: Cina, India, and t Glbal ecnmy.

Wrld Bank and t Institut f Plicy Studis, Wasingtn, D.C.; Aykut, D. and Gldstin, A., 2006.

Developing Country Multinationals: South-South Investment Comes of Age. OECD Development

Cntr wrking papr N. 257, Paris.

3 WWF, 2008. Living Planet Report 2008. WWF-International, Gland.

4 vn Wizsackr, e., Lvins A., and Lvins, L., 1997. Factr Fur: Dubling Walt, halving

Resource Use - A Report to the Club of Rome. Earthscan, London.

5Prkins, R., 2003. envirnmntal Lapfrgging in Dvlping Cuntris: a Critical Assssmnt and

Reconstruction // Natural Resources Forum, Volume 27, No. 3, pp. 177-188.



CHAPTER 1.

INVESTMENTNEEDS

OF SOUTHERNAFRICA




Sutrn Africa’s vast natural rsrvs and sustaind cnmic grwt

rats (Tabls 1 and 2 blw) mak t rgin an incrasingly attractiv

invstmnt targt, nt nly fr ‘traditinal’ stakldrs suc as t USA

and eU, but als fr ky mrging markt cnmis (eMes). Dpnding

upn t avnus int wic ts invstmnts ar cannlld, ty

could either result in the destruction of the unique environmental riches

f Sutrn Africa, r cntribut maningfully t tir prsrvatin.

The fteen countries which make up the Southern African region differ

fundamntally in trms f tir lvls f cnmic dvlpmnt, invstmnt

climats and rgulatry nvirnmnts, as wll as in many tr variabls6.

Fr t purpss f tis study, wvr, it is xpdint t cnsidr tm as a

whole, for a number of reasons. In the rst instance, the development needs of

all ts natins, including t scial, nvirnmntal and tr sustainability

callngs, ar rlativly similar, a fact wic cntributd dirctly t t

stablismnt f t Sutrn African Dvlpmnt Cmmunity (SADC) in

1980. Scndly, t divrs and fragil csystms f t SADC cuntris ar fr

the most part cross-border in nature. Thirdly, many investment projects in the

rgins, spcially in t ara f natural rsurcs, als xtnd acrss natinalborders. And nally, but not least importantly, Russia’s recent investment

activitis av nt bn limitd t Sut Africa, but av includd Angla,

Btswana and Namibia wit ptntial fr xpansin t tr SADC cuntris.

Figure 1. Southern AFricAn Development community.

6 The fteen countries of Southern Africa, united by the Southern African Development Community

(SADC), includ: Angla, Btswana, Dmcratic Rpublic f Cng (DRC), Lst, Madagascar,

Malawi, Mauritius, Mozambique, Namibia, Seychelles, Republic of South Africa (RSA), Swaziland,

Tanzania, Zambia and Zimbabw. T trms ‘Sutrn Africa’ and ‘SADC’ ar usd as synnyms in

tis rprt.

South AfricA

LeSotho

SwAziLAnd

BotSwAnA

nAmiBiA

AngoLA zAmBiA

democrAticrepuBLic of

congo

tAnzAniA

mAdAgAScAr

mAuritiuS

zimBABwemozAmBique

mALAwi

SeycheLLeS




It is cmmn knwldg tat Sutrn Africa is facd wit sm f largst

development challenges in the world, making the region one of the most difcult in

wic t succssfully implmnt t UN Millnnium Dvlpmnt Gals. Ts

callngs includ pvrty, nging famin, t sprad f hIV/AIDS and tr

disass, and a lack f basic infrastructur and srvics suc as ducatin and

alt car. In additin, many cuntris in t rgin xibit svr srtags

in t supply f using, saf watr and lctricity (Tabl 1). In a numbr f countries, these development challenges are exacerbated by military conicts,

plitical instability and t xistnc f undmcratic rgims. Scial and incm

inequalities persist, resulting in high illiteracy and crime rates. Environmental

callngs includ t dgradatin f arabl land, watr srtags and drugts,

pr practics in trms f utilisatin f natural rsurcs us, t ngativ

impact f climat cang, trats t bidivrsity and many mr (Tabl 2).

Africa’s principal stratgy t addrss ts callngs is t Nw Partnrsip fr

Africa’s Development (NEPAD), a development framework initiated by ve heads

f stat (ts f Algria, egypt, Nigria, Sngal and Sut Africa) and adptd

by t African Unin in 2001. In many snss, NePAD prvids a cmmn

platfrm fr ngtiatin by African stats wit t G8, oeCD and ky eMes n

issus f plitical rlatins, scurity, cnmic grwt and uman dvlpmnt.

It is bynd disput, bt intrnally and xtrnally, tat sustaind cnmic

grwt is an ssntial lmnt fr rslving t majrity f t dvlpmnt

callngs in Sutrn Africa. Suc cnmic grwt will translat int

mplymnt cratin, assist in t radicatin f pvrty, and als assist in

scuring a surplus in t currnt accunt n t balanc f paymnts f ts

cuntris, in rdr t fr tm frm an nging cycl f indbtdnss. At prsnt,

ten out of the fteen SADC economies, including South Africa, export less than

they import , resulting in a balance of trade decit and a lack of available capital

for nancing development projects. Such capital can therefore be acquired

only through international public loans or ofcial development assistance.

Invstmnt in prductiv capacity is ssntial fr stimulating cnmicgrwt, and sinc t majrity f t Sutrn African cnmis lack

the capacity to generate sufcient funds from domestic sources, foreign

dirct invstmnt (FDI) is ftn rgardd as t nly altrnativ ptin fr

scuring suc capital. Fr tis rasn, t UN Millnnium Dclaratin calls

fr gratr lvls f FDI int Africa. Unfrtunatly, wvr, t rgin’s

colonial past, as well as its post-colonial experience of FDI that has been

primarily resource-seeking, with very low levels of prot for local economies,

have served to provoke scepticism regarding the benets of FDI to Africa8.

It is als widly rcgnisd tat dirct invstmnt is prfrabl t prtfli

invstmnt, du t its mr prmannt natur, and tat frign invstmnt

in joint ventures and ‘greeneld’ developments is preferable to acquisitions.

Whereas portfolio investments and acquisitions are on the whole more commonin Africa tan dirct invstmnt in nw prjcts, ts frms f invstmnt ar

als mr dpndnt upn t vlatility f wrld cmmdity prics and tr

risks. T lvls f suc invstmnt ftn tapr ff witin a rlativly srt tim

span, without creating workplaces, beneting local communities or pursuing the

nvirnmntal and tr stratgic intrsts f t African natins9. By cntrast,

joint ventures with local partners and ‘greeneld’ developments testify to a more

long-lasting commitment by foreign investors to the host economies, as they

crat nw mplymnt pprtunitis and bradn t tax bas. Furtrmr,

intrnatinal cmpanis wit stratgic intrsts ftn intrduc imprvd

crprat scial rspnsibility practics and mr stringnt alt, safty and

environment (HSE) standards than are required by legislation of host nations.

1.1.SUSTAINABILITY

CHALLENGESIN SADC

COUNTRIES

7 Wrld Bank, 2007. Wrld Dvlpmnt Rprt 2008. Wrld Bank, Wasingtn, D.C., pp. 342 – 344.

8 Rodney, W., 1983, How Europe Underdeveloped Africa. Bogle-L’Ouverture Publications, London andTanzanian Publishing House, Dar-Es-Salaam; Moran, T., Graham, E. and Blomstrom, M. (Eds.) 2005.Ds Frign Dirct Invstmnt Prmt Dvlpmnt? Ptrsn Institut fr Intrnatinal ecnmics,Wasingn D.C., pp. 337 – 366.

9 Mkandawir, T., 2005. Maladjustd African ecnmis and Glbalisatin // Africa Dvlpmnt,N. 30, 1 – 2, p.6.




t A b l e 2 . S A D c A

t A g l A n c e : e n v i r o n m e n t A l D A t A

i d a ( D a a S )

l a d

L a n d a r e a , t h o u s a n d h a ( W R I 2 0 0 5 , p p . 2 1 7 )

1 2 4 6 7 0

5 6 6 7 3

2 2 6 7 0 5

3 0 3 5

5 8 1 5 4

9 4 0 8

2 0 3

7 8 4 0 9 8

2 3 2 9

4 5

1 2 1 4 4 7

1 7 2 0

8 8 3 5 9

7 4 3 3 9

3 8 6 8 5

9 6 4 1 8 1

P r o t e c t e d a r e a s , % o f t o t a l l a n d a r e

a , 2 0 0 4 ( W R I

2 0 0 5 , . 2 1 3 )

4 . 2

1 8 . 1

5 . 1

0 . 2

2 . 4

8 . 9

–

4 . 2

3 . 9

–

5 . 3

–

1 4 . 6

8 . 4

7 . 9

–

b o d v e s y

N u m b e r o f

m a m m a l s p e c i e s

( w r i 2 0 0 5 , . 2 1 3 )

K , 2 0 0 4

2 9 6

1 6 9

4 3 0

5 9

1 6 5

2 0 7

–

2 2 8

1 9 2

–

3 2 0

–

3 7 5

2 5 5

2 2 2

–

t a , 2 0 0 3

1 1

6

2 9

3

4 9

7

–

1 2

1 0

–

2 9

–

3 4

1 1

8

–

N u m b e r o f b i r d s

s p e c i e s

( w r i 2 0 0 5 ,

. 2 1 3 )

K , 2 0 0 4

9 3 0

5 7 0

1 1 4 8

3 1 1

2 6 2

6 5 8

–

6 8 5

6 1 9

–

8 2 9

–

1 0 5 6

7 7 0

6 6 1

–

t a , 2 0 0 3

2 0

9

3 0

7

3 4

1 3

–

2 3

1 8

–

3 6

–

3 7

1 2

1 0

–

N u m b e r o f p l a n t s

s p e c i e s

( w r i 2 0 0 5 ,

. 2 1 3 )

K , 2 0 0 4

5 1 8 5

2 1 5 1

1 1 0 0 7

1 5 9 1

9 5 0 5

3 7 6 5

–

5 6 9 2

3 1 7 4

–

2 3 4 2 0

–

1 0 0 0 8

4

7 4 7

4 4 4 0

–

t a , 2 0 0 3

2 6

0

6 5

1

2 7 6

1 4

–

4 6

2 4

–

7 5

–

2 3 9

8

1 7

–

W a

I n t e r n a l r e n e w a b l e w a t e r r e s o u r c e s , k m 3

( e x c l . t r a n s - b o u n d a r y o w s ) ( W R I 2 0 0 5 , p . 2 0 9 )

1 8 4

3

9 0 0

5

3 3 7

1 6

–

9 9

6

–

4 5

–

8 2

8 0

1 4

–

W a t e r w i t h d r a w a l s , % o f i n t e r n a l r e n e w a b l e

w a t e r r e s o u r c e s , 2 0 0 0 ( W R I 2 0 0 5 , p . 2 0 9 )

< 1 %

5 %

< 1 %

1 %

4 %

6 %

–

< 1 %

4 %

–

3 4 %

–

2 %

2 %

1 9 %

–

F w d a

S h a r e o f b i o m a s s a n d w a s t e i n t h e t o t a

l p r i m a r y

e n e r g y s u p p l y , 2 0 0 5 ( U N D P 2 0 0 7 , p p . 3 0

2 – 3 0 9 )

6 4 %

2 4 %

9 3 %

-

-

-

-

9 6 %

1 4 %

-

1 1 %

-

9 2 %

7 9 %

6 2 %

–

E x t e n t o f f o r e s t , t h o u s a n d h a , 2 0 0 5

( f A o 2 0 0 6 b , . 1 9 6 - 1 9 7 )

5 9 1 0 4

1 1 9 4 3

1 3 3 6 1 0

8

1 2 8 3 8

3 4 0 2

3 7

1 9 6 9 2

7 6 6 1

4 0

9 2 0 3

5 4 1

3 5 2 5 7

4 2 4 5 2

1 7 5 4 0

3 5 3 3 2 8

A n n u a l c h a n g e r a t e o f f o r e s t e x t e n t , % ,

2 0 0 0 - 0 5 ( f A o 2 0 0 6 b , . 1 9 6 - 1 9 7 )

– 0 . 2 %

– 1 . 0 %

– 0 . 2 %

+ 2 . 7 %

– 0 . 3 %

– 0 . 9 %

– 0 . 5 %

– 0 . 3 %

–

0 . 9 %

0

0

+ 0 . 9 %

– 1 . 1 %

– 1 . 0 %

– 1 . 7 %

–

T o t a l r e m o v a l s o f w o o d , t h o u s a n d m

3

( f A o 2 0 0 6 b , . 2 8 0 )

5 1 9 6

8 8 1

8 2 9 9 4

2 4 5 5

7 0 3 1

6 2 7 2

1 4

2 2 0 2 9

-

1 3

1 7 7 4 1

1 0 2 4

2 8 0 3 3

9

8 5 1

1 1 5 6 6

> 1 9 5 1 0 0

D o m e s t i c f u e l w o o d c o n s u m p t i o n a s p

e r c e n t a g e

o f t o t a l r e m o v a l s o f w o o d , 2 0 0 5 ( F A O 2 0 0 6 b , p . 2 8 0 )

7 5 %

8 5 %

9 5 %

1 0 0 %

9 1 %

9 0 %

4 3 %

9 2 %

-

2 3 %

1 %

6 3 %

9 0 %

8 9 %

9 0 %

a x .

8 4 %

e a

a

E n v i r o n m e n t a l P e r f o r m a n c e I n d e x 1

- 1 0 0 ,

1 0 0 = b e s t p e r f o r m a n c e , 2 0 0 8

( Y a l e C e n t e r f o r E n v i r o n - l L a w 2 0 0 8 )

3 9 . 5

6 8 . 7

4 7 . 3

–

5 4 . 6

5 9 . 9

7 8 . 1

5 3 .

7 0 . 6

–

6 9 . 0

6 1 . 3

6 3 . 9

5 5 . 1

6 9 . 3

–

E c o s y s t e m V i t a l i t y I n d e x , 2 0 0 8 ( Y a l e C e

n t e r

f o r E n v i r o n - l L a w 2 0 0 8 )

8 . 9

6 8 . 6

1 2 . 6

5 3 . 1

3 7 . 6

3 4 . 0

9 7 . 7

2 5 . 5

6 0 . 9

–

8 1 . 8

6 1 . 1

5 2 . 2

3 0 . 8

6 7 . 8

–

e v a l h a l i x , 2 0 0 8

( Y a l e C e n t e r f o r E n v i r o n - l L a w 2 0 0 8 )

7 0 . 1

6 8 . 7

8 2 . 0

–

7 1 . 6

8 5 . 8

5 8 . 5

8 2 . 4

8 0 . 4

–

5 6 . 2

6 1 . 6

7 5 . 6

7 9 . 4

7 0 . 8

–

B i o c a p a c i t y , g l o b a l h a p e r p e r s o n , 2 0 0 5

( w w f 2 0 0 8 , . 3 4 – 3 7 )

3 . 2

8 . 5

4 . 2

1 . 1

3 . 7

0 . 5

0 . 7

3 . 4

9 . 0

–

2 . 2

1 . 7

1 . 2

2 . 9

0 . 7

–

f o o t p r i n t , G l o b a l h a p e r p e r s o n , 2 0 0 5

( w w f 2 0 0 8 , p p . 3 4 – 3 7 )

0 . 9

3 . 6

0 . 6

1 . 8

1 . 1

0 . 5

2 . 3

0 . 9

3 . 7

–

2 . 1

0 . 7

1 . 1

0 . 8

1 . 1

–

B i o c a p a c i t y D e c i t / R e s e r v e , g l o b a

l

h a p e r p e r s o n , 2 0 0 5 ( W W F 2 0 0 8 , p p

. 3 4 – 3 7 )

+ 2 . 3

+ 4 . 9

+ 3 . 6

- 0 . 7

+ 2 . 6

0 . 0

– 1 . 6

+ 2 . 5

+ 5 . 3

–

+ 0 . 1

+ 1 . 0

+ 0 . 1

+ 2 . 1

– 0 . 4

–

A g o a

b o s w a a

D r c

l e s o o

m a d a g a s a

m a a w

m a u u s

m o z a q u e

n a a

S e y e e s

S o u A f a

S w a z a d

t a z a a

Z a a

Z a w e

S A D c t o a




Bt Russia and Sut Africa ccupy prminnt psitins amngst eMes as wll

as n t glbal stag, wit ac xibiting particular strngts. Russia, unlik

Sut Africa, is bt a mmbr f t G8 and a prmannt mmbr f t UN

Scurity Cuncil, wil its cnmy is tr tims largr tan tat f Sut Africa

by PPP. Manwil Sut Africa is, unlik Russia, a WTo mmbr and njys a

bttr rputatin fr intrnatinal cmptitivnss. Fr instanc, in t Wrld

ecnmic Frum’s Glbal Cmptitivnss Rprt fr 2008/200910 rprt, Sut Africa ranks 45t in t Glbal Cmptitivnss Indx, wras Russia ccupis

51st plac amngst t 134 cnmis participating in t survy (Tabl 3).

Although natural resource-based industries play a signicant role in both

cnmis, and tir ndwmnts f ts rsurcs mak tm imprtant

raw matrials supplirs t t wrld markt, Russia and Sut Africa cmpt

dirctly nly in a limitd numbr f intrnatinal trad sgmnts, suc as

diamnds. In many tr supply sctrs, t rsurc bass f t tw cuntris

ar cmplmntary (Tabl 4).

T many cmmn faturs sard by Russia and Sut Africa can act as

signicant drivers for cooperation. Economically, both countries place a highdgr f mpasis n maintaining tir cnmic grwt and raising living

standard fr tir ppulatins, pssibly wit a viw t bcming mmbrs f t

organisatin fr ecnmic Cpratin and Dvlpmnt (oeCD). In particular,

in accrdanc wit t Dclaratin f Ladrs Mting f Majr ecnmis n

enrgy Scurity and Climat Cang, rlasd in July 2008 fllwing t G8

mting in hkkaid, Japan, bt gvrnmnts ar activly sking ways t

diversify the sources of their countries’ economic growth and to reduce energy-

and rsurc intnsity, in rdr t rmain glbally cmptitiv. Institutinally,

bt cuntris av xprincd fairly rcnt plitical transitins frm igly

centralised, non-democratic regimes to less-regulated and functionally democratic

scitis. Gplitically, t tw natins ar ladrs f tir rspctiv rgins

– post-Soviet Eurasia comprised of the Commonwealth of Independent States

(CIS), and Sutrn Africa in t cntxt f SADC.

Ts faturs mak Russia and Sut Africa, as wll as many tr eMes,

stratgic rl playrs in t prcss f sifting t wrld’s cnmic grwt

onto a more sustainable path. As both producers and consumers of an ever-

increasing amount of resource-intensive products, the two emerging leaders can

either encourage or discourage environmentally benecial trade and investment

policies within the areas of their respective international inuence.

Invstmnt Priritis

Similarly t tir Russian cuntrparts, Sut Africa’s plitical ladrs viw

cnmic grwt as t mst ffctiv slutin t t cuntry’s dvlpmntcallngs. As a rsult, in 2006 t gvrnmnt launcd t Acclratd and

Shared Growth Initiative for South Africa (AGSI-SA) with the goal of halving

pvrty and unmplymnt in t cuntry by 2014. In rdr t aciv tis

targt, t Sut African gvrnmnt ncurags invstmnt, and in particular

FDI, int:

• Labour-intensive economic activities such as business process outsourcing,

turism and infrastructur dvlpmnt, spurrd by t slctin f Sut

Africa to host the FIFA World Cup in 2010 – the rst international event of

tis scal in Africa (at prsnt, infrastructur upgrad prjcts ar undrway

in thirteen venues across the country). Labour-intensive projects in these

and tr aras ar intndd t assist in mplymnt grwt and imprvingt skills bas f t wrkfrc as wll as incras labur prductivity;

1.2. PROFILEOF SOUTH

AFRICA

10 WeF 2008. Glbal Cmptitivnss Rprt 2008/2009. WeF, Davs, p. 10;

ttp://www.wfrum.rg/dcumnts/GCR0809/indx.tml




• Black Economic Empowerment (BEE) projects, aimed at channelling

economic growth to the benet of the previously disadvantaged segments

f t Sut African ppulatin11. In trms f FDI, including Russian

invstmnt int Sut Africa, tis plicy implis tat prfrnc is givn

t jint vnturs wit Bee grups ratr tan prjcts fully wnd by

frignrs. In tis rspct, Sut Africa’s apprac is similar t t Russian

gvrnmnt’s plicy f ncuraging FDI trug jint vntur wit lcalpartnrs;

• ‘Greeneld’ projects which generate new employment opportunities and tax

rvnus. In tis rgard, pririty is givn t nw prjcts dvlpd wit t

cuntry’s Spatial Dvlpmnt Initiativs (SDIs)12and Industrial Dvlpmnt

Zns (IDZs)13, wic ar lmnts f an cnmic dvlpmnt plicy aimd

at lvlling trritrial disparitis in walt distributin tat wr cratd

undr t apartid rgim. Ts SDIs and IDZs tak t frm f spcial

economic zones, beneting from public investment in infrastructure and in

crtain cass a rlaxd rgulatry rgim, wic ar aimd at prmting

FDI in key export-oriented industries through geographical advantages

and transportation linkages. Certain SDIs are cross-border in nature, forinstanc t Maput Dvlpmnt Crridr btwn Sut Africa and

Mozambique, which also benets Swaziland, Zimbabwe and Botswana, and

the Lubombo Initiative between South Africa, Mozambique and Swaziland.

A numbr f tr SDIs and IDZs ar in varius stags f dvlpmnt and

implmntatin acrss t rgin;

• Since early 2008, preference has been given to projects that do not rely heavily

n t xisting lctricity gnratin capacity in Sut Africa, in tr

words either those that are not electricity-intensive or those that provide for

the construction of their own energy-generation facilities. At present, South

Africa faces a serious energy crisis, resulting from the high energy-intensity

f its cnmy, wic is twic t wrld’s avrag (Figur 2), as wll as frm

under-investment in additional energy generation capacity over the pastsvral yars. In January 2008 t natinal lctricity supply mnply,

eskm, impsd rstrictins in nrgy supply n 138 industrial cnsumrs

and proposed to shelve new electricity-intensive projects, including those of

foreign investors, until at least 2013. This represents a signicant reversal

in plicy – bfr t crisis, Sut Africa’s cap lctricity was activly

marketed internationally as a benet for energy-intensive investment and

larg cnsumrs wr givn discuntd tariffs14.

In 2007, Sut Africa’s gvrnmnt rlasd t Natinal Industrial Plicy

Framework, aimed at enacting some of the provisions of ASGI-SA. One of the

deliverables contained in this document is the identication of those sectors

with highest potential for diversication of the South African economy. Theseinclude natural-resource based sectors; medium technology sectors (including

downstream mineral beneciation); advanced manufacturing sectors; labour

intnsiv sctrs; and tradabl srvics sctrs15.

11 DTI, 2003. A Strategy for Broad-Based Black Economic Empowerment.

Dpartmnt f Trad and Industry f t RSA.

12 existing SDIs includ: Maput Dvlpmnt Crridr, Lubmb SDI, Ricards Bay SDI, including

t Durban and Pitrmaritzburg nds, Wild Cast SDI, Fis Rivr SDI; Wst Cast Invstmnt

Initiative, Platinum SDI, Phalaborwa SDI, and Coast-2-Coast Corridor.

13 existing IDZs includ: Kmptn Park in Gautng, Cga and east Lndn in eastrn Cap,Saldana in Wstrn Cap and Ricard’s Bay in Kwazulu Natal.

14 Businss Rprt, 17 January 2008, ttp://www.busrp.c.za/indx.pp?fSctinId=552&f

ArticlId=4209364 ; Rsafrksprtiza Nwswir, 26 January 2008, ttp://rax.rg/indx.

pp?prductID=733

15 DTI, 2007. Natinal Industrial Plicy Framwrk. Dpartmnt f Trad and Industry

f t RSA, pp. 33 – 38.




In the sphere of anti-monopoly regulation, South Africa’s focus has been

primarily n t unbundling f larg, ftn illgical crpratins cratd undr

t apartid rgim16. In all tr rspcts, cmptitin rgulatin in Sut

Africa is similar t tat f markt cnmis. Manwil, in an incrasingly

glbalisd businss nvirnmnt, Russia’s invstmnts in Sut Africa may als

face anti-monopoly regulations, both within Russia and in the host and other

economies. For instance, the Evraz Group is Russian-owned, but is registered inLuxembourg. As a result, its acquisition of a majority holding in South Africa’s

higvld Stl and Vanadium Crpratin Ltd was subjct t claranc nt

nly by Sut Africa’s cmptitin autritis, but als by ts f t eU. T

latter duly imposed a requirement on Evraz to sell part of Highveld’s vanadium

assts17.

Figure 2. energy intenSity oF bric + rSA economieS AS compAreD With WorlDAverAge, 2004

16 hs, K., 2000. Frign Dirct Invstmnt in Sut Africa (1994 –99) – Cnfrnting

Glbalisatin. Dvlpmnt Sutrn Africa. Vl. 17, N.3. Lndn. P. 90.

17 All Africa, 23 April 2008, ttp://allafrica.cm/stris/200804230072.tml

18 oeCD, July 2008. ecnmic Assssmnt f Sut Africa. organisatin f ecnmic Cpratin

and Dvlpmnt. Plicy Brif. Paris, p. 4.

Source: calculated based on 1) World Bank 2005, pp. 296 - 297; 2) BP 2007, p. 40; 3) UNDP

2007, p. 69.

There appears to be increasing criticism of ASGI-SA by liberal institutions. Inparticular, t oeCD as criticisd t Sut African gvrnmnt’s industrial

policy interventions as being contrary to the requirement to enhance the

lvl f cmptitin in t cnmy18. In spit f tis criticism, wvr, it

is likly tat t currnt “mildly” intrvntinist plicy will cntinu aftr

t cuntry’s parliamntary and prsidntial lctins scduld fr May

2009.Wit rspct t FDI, tis apprac lds t ptntial fr gratr

cooperation between the state-owned enterprises of South Africa and

ts f tr eMes, mst ntably frm Cina, India, and pssibly Russia.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

kg

Brazil

CO2 emissions per GDO,

kg per USD (exchange rate)

Primary Energy Consumption per GDP,

kg of oil equivalent per USD (exchange rate)

Russia India China WorldSouthAfrica




envirnmntal Rgulatins

In 1996, South Africa became one of the rst countries in the world to include the

rigt t sustainabl dvlpmnt in its Cnstitutin (Sctin 24). Furtrmr,

in 1998 t Natinal envirnmntal Managmnt Act was prmulgatd,

ntrncing t ‘pllutr pays’ and tr nvirnmntal principls in t spr

f businss pratins. otr pics f nvirnmntal lgislatin includ t

envirnmntal Cnsrvatin Act (1989), Cnsrvatin f Agricultural Rsurcs

Act (1993), Maritim Zns Act (1994), Marin Living Rsurcs Act (1998),

Natinal Watr Act (1998), Minral and Ptrlum Rsurcs Dvlpmnt Act

(2002), Air Quality Act (2004), Nuclar enrgy Act (1999) and Natinal Nuclar

Rgulatr Act (1999). In additin, t natinal Dpartmnt f envirnmntal

Affairs and Turism as dvlpd a Natinal Framwrk n Sustainabl

Dvlpmnt, wic is yt t b signd int law. Sut Africa’s nvirnmntal

law nfrcmnt agncis includ a spcializd nvirnmntal plic frc r

envirnmntal Managmnt Inspctrs, ppularly knwn as t ‘Grn Scrpins’.

Lik Russia, Sut Africa is a party t a numbr f intrnatinal nvirnmntal law

cnvntins, including t Kyt Prtcl n climat cang. Undr t Prtcl,

Sut Africa is classd as a dvlping cuntry and trfr as n intrnatinallgal bligatins t rduc its grnus gas (GhG) missins. Sut Africa’s

gvrnmnt as wvr laid dwn t rgulatry framwrk nabling Clan

Dvlpmnt Mcanism (CDM) prjcts in accrdanc wit t Prtcl. In

additin, t natinal Cabint, as wll as t ruling party, av during 2008 publicly

endorsed the ndings of the national Long-Term Mitigation Scenarios (LTMS)

cnsultativ prcss, wic dvlpd a st f scnaris and plicy rcmmndatins

for shifting the national economy onto a low-carbon development pathway.




Sut Africa’s Invstmnt in RussiaIn rdr t gain accss t intrnatinal tcnlgy pls and nw markts, Sut

African cmpanis av csn a numbr f utward FDI dstinatins, including

Russia. hwvr t xprincs f Sut African businsss in Russia av at

tims bn cntrvrsial; wras Sut African invstrs av acivd sm

succsss in t Russian cnsumr gds and srvics sctr (fr xampl Sut

African Breweries and Naspers), the implementation of large-scale projects bySut Africa’s crprat ladrs as in a numbr f instancs bn bstructd by

buraucratic intrfrnc, a lack f transparncy and rgulatry unprdictability.

Fr xampl, Sun Intrnatinal’s plan t cnstruct an ntrtainmnt cntr

utsid Mscw valud at USD 2 billin as bn suspndd du t a cang

in Russia’s gambling lgislatin. D Brs, an intrnatinal diamnd mnply

with South African roots, has been involved in a decade-long dispute with the

Russian ptrlum cmpany LUKoIL vr t rigts t t Grib diamnd pip in

t Arkanglsk rgin19.

South Africa’s foremost investor in Russia is the Anglo-American Corporation

(altug t cmpany’s primary stck xcang listing is in Lndn). Trug

its subsidiary Mondi Business Paper, Anglo-American invested over USD 320million between 1997 and 2003 in the acquisition of a paper mill near Syktyvkar

in t Kmi rpublic. T cmpany as als launcd a eur 525 millin

prgramm t upgrad t mill by 2010, wit a viw t incrasing prductin

capacity and dcrasing t nvirnmntal ftprint and ngativ alt

impacts assciatd wit t facility. In particular, t mill will b cnvrtd

to utilise an environmentally-friendlier technology of elemental chlorine-free

blacing. Mr tan alf f Mndi’s lgging aras in Russia (vr 1 millin

hectares) have been certied in accordance with the Forest Stewardship Council’s

(FSC) vluntary intrnatinal standards f nvirnmntal cmplianc20.

In the mining sector, Anglo-American has an alliance with Severstal, one of

Russia’s largst stlmakrs, t xplr dpsits f nickl, cppr and zinc in

Russia. Angl Platinum, in partnrsip wit tr invstrs, is invlvd inxplratin prjcts in t Kla Pninsula and Cntral Urals.

19 Minwb, 16 April 2008, ttp://www.minwb.cm/minwb/viw/minwb/n/

pag37?id=51181&sn=Dtail

20 Mndi Grup, 2007. Mndi Grup Sustainability Rprt 2007. Mndi Grup, p. 28.




evn if Sut Africa is xcludd frm t analysis, t rmaining SADC cuntris

constitute one of the most diverse regions in Sub-Saharan Africa, both in terms

f tir cnmic prfrmanc and tir vrall lvl f dvlpmnt (Tabl 1).

Angla and t DRC pssss t largst GDPs in trms f currnt xcang rat

and PPP valus rspctivly, but t valus fr bt cnmis ar far smallr

tan tat f Sut Africa. In fact, t GDPs f mst SADC stats ar far smallrthan the turnovers of the trans-national corporations (TNCs) that are investing

in the region. At the same time, however, ofcial statistics fail to take into account

t larg infrmal sctrs f ac cnmy, a cmmn fatur f t ntir SADC

rgin. Amngst tr industris, tis infrmal sctr invlvs illgal mining

and il tft, as wll as a larg infrmal rtail sctr.

By any measures, Angola is the region’s fastest-growing economy, and one of the

fastest-growing in the world, albeit from an extremely low base. Angola’s year-

on-year GDP growth increased from 16.9 percent in 2006 to an estimated 24.3

percent in 2007, with contributions by both oil and non-oil sectors21.

Wit t xcptin f Zimbabw, all Sutrn African cnmis av njydrbust grwt rats sinc 2000, albit again frm a lw bas. on f t

principal drivrs f t incras in Sutrn Africa’s grss rginal prduct

was t xpansin f t natural rsurc xtractin sctr, cupld wit rising

cmmdity prics.

hwvr, t SADC rgin as als managd t divrsify its surcs f cnmic

growth through signicant growth in the tourism industry. The demand for travel

and turism in t SADC rgin mr tan dubld frm USD 12.7 billin in

1990 t USD 28.9 billin in 2006, rsulting in undrds f tusands f nw jbs.

During tat prid, t avrag annual grwt rat f t turism industry in

Sutrn Africa is stimatd at 10 prcnt, wic surpasss tat f t minral

xtractin sctr23. This development is an important one, as it testies to the

growing proceeds to be derived from the conservation of the unique naturalrsurcs f Sutrn Africa.

Wras cuntris suc as Btswana and Namibia ar cnsidrd t pssss

rlativly transparnt gvrnmntal institutins, in Angla, t DRC and

Zimbabw, crruptin prsnts a srius callng24. Givn t istris f ts

countries, it terms of liberation struggles and post-colonial civil conicts, as well

as the subsequent challenges of disarmament of various factions, there exist

srius cncrns tat walt gnratd frm minral rsurc xtractin can b

used to support corrupt regimes and fund armed conicts25. T mst bvius

currnt xampl f suc a scnari is Zimbabw, wr crruptin and t

lack f transitin t dmcratic gvrnmnt as rsultd in sustaind cnmic

deterioration, with the national economy shrinking by 6 percent in 2007. Ofcialination in Zimbabwe set a world record in June 2008 of 11.27 million percent

year-on-year26. T nging plitical turmil, brugt abut by t rfusal f t

ruling party t accpt dfat in t natinal lctin ld in Marc 2008, as

mad t cuntry an picntr fr rginal dstabilisatin and illgal migratin,

primarily t Sut Africa.

1.3. PROFILEOF OTHER

SADCCOUNTRIES

21 Sut African Rsrv Bank, 2008. Financial Stability Rviw. Sut African Rsrv Bank,

Prtria, p. 14.

22 Wrld Bank, 2007. Wrld Dvlpmnt Rprt 2008. Wrld Bank, Wasingtn, D.C.,

pp. 340 – 341, 344.

23 Sut African Rsrv Bank, 2008, p. 14.

24 Transparncy Intrnatinal, 2003. Glbal Crruptin Rprt 2003. Transparncy Intrnatinal,

Brlin, pp. 248 – 260.

25 McMillan, J., 2005. “T Main Institutin in t Cuntry Is Crruptin”: Crating Transparncy

in Angla. Cntr n Dmcracy, Dvlpmnt, and t Rul f Law, Stanfrd Institut n

Intrnatinal Studis. Wrking papr N. 36.

26 Rutrs, 19 August 2008, ttp://www.rutrs.cm/articl/marktsNws/idUSLJ35337020080819




0

20 %

40 %

60 %

80 %

100 %

Angola

Share of biomass and waste in total primary energy supply

Fuelwood consumption as percentage of total removals of wood

Botswana DRC Mozam-

bique

Zambia ZimbabweTan-

zania

South

Africa

Percentage of population without access to electricity

Figure 3. Fuel WooD in the poWer mix oF SelecteD Southern AFricAncountrieS, 2005

Source: calculatd basd n 1) UNDP 2007, pp. 302 – 309; 2) FAo 2006b, p. 280;

3) UNDP 2007, pp. 302 – 305.

envirnmntal Rgulatins

T afrmntind sustainability callngs and nsuing invstmnt priritis

ar wll undrstd by t SADC cuntris, but dnr funding and xtrnal

expertise is often required in order to assist in developing and implementingappropriate legislation. As a result, environmental and investment-related

lgislatin in Sutrn Africa is unvnly distributd, altug it wuld appar

to be high quality in certain countries, particularly Botswana, Mozambique,

Tanzania and Namibia. T prblm, wvr, lis nt in t dvlpmnt f

lgislatin, but ratr in t limitd abilitis f Sutrn African gvrnmnts t

nfrc tis lgislatin and implmnt crrspnding stratgis, particularly in

t ligt f a lack f rsurcs and crruptin.

In a numbr f instancs, du t bttr nfrcmnt practics, intrnatinal

rgulatins applicabl t public and privat invstmnt prjcts in t rgin

have proven more efcient than national requirements. This is particularly

t cas in t xcutin f Wrld Bank prjcts and cmplianc wit UN and

WTo agrmnts signd by SADC cuntris. In additin, suc intrnatinal

cmplianc includs vluntary cmmitmnts by cmpanis prating in Africa

undr, amngst trs, t UN Glbal Cmpact, Glbal Rprting Initiativ and

the ‘Equator Principles’ for access to project nance.




During t 1960s, 70s and 80s, t frmr Svit Unin prvidd cnsidrabl

assistanc t indpndnc mvmnts in many African cuntris, nt last t

t bannd African Natinal Cngrss and its allis in tir armd struggl

against t apartid rgim in Sut Africa. Tis cntributin, cupld wit

t fact tat many African ladrs prsnally rcivd ducatin and supprt

from the USSR, created a generally positive, anti-colonialist image of Russia in

t rgin. hwvr, tis favurabl rputatin as bn smwat taintd byt incnsistncy f Russia’s plicy twards Africa fllwing t cllaps f t

Svit Unin.

At prsnt, Russia is in t prcss f partially rstring t psitin it prviusly

ccupid in Sutrn Africa. Nvrtlss, tr rmains a divid btwn t

Russian political leadership’s newly-revived long-term strategic interest in

Sutrn Africa, and Russian businss invlvmnt in t rgin, wic is ftn

driven by short-term priorities. At the same time, however, signs do exist that

tis divid can b bridgd.

Over the past several years, Sub-Saharan Africa has received increasing attention

frm Russia’s plitical ladrsip. Tis study as singld ut tr ky factrsxplaining tis pnmnn:

• Russia’s strategic interest in gaining access to Southern African natural

resources. According to ofcial governmental forecasts, within the next

dcad, Russia’s cnmically viabl rsrvs f zinc, mangans, crmits,

diamnds, uranium, gld, cppr, nickl, platinum mtals and il will

be depleted (Table 4). Although Russia possesses signicant untapped

resource deposits, these are often difcult to access and costly to develop.

Fr tis rasn, and givn t vlatility f wrld cmmdity prics, it is in

t cnmic intrsts f Russia t gain accss t surcs f supply f suc

stratgic minrals in rgins wr csts ar lwr, in particular in Sutrn

Africa. Tis stratgic intrst f Russia’s is rinfrcd by t incrasing

cmptitin fr African natural rsurcs, nt nly frm ‘traditinal’stakldrs suc and t USA and eU, but als frm ky eMes, spcially

Cina.

• Russia’s strategy to act as a global guarantor of energy security, as was

utlind, fr instanc, during t G8 Summit in Saint Ptrsburg in 2006.

In tis cntxt, Africa is rgardd as bt a ric rsurc bas, spcially fr

uranium, and a market for Russian energy-related value-added products,

including nuclar ractrs32.

• Russia’s efforts to develop an international development assistance

prgramm cmparabl wit ts f tr G8 pwrs and mmbrs f t

oeCD, in wic Russia is als sking mmbrsip. Russia is rprsntdn t G8/oeCD Africa Partnrsip Frum and in 2007, Russian Prsidnt

Vladimir Putin apprvd t Cncpt f Participatin in Intrnatinal

Dvlpmnt Assistanc f t Russian Fdratin. Accrding t t

Cncpt, Russia’s oDA activitis will priritis ‘prjcts and prgramms

invlving t us f gds and srvics riginating in Russia’33.

2.1. THE

SOUTHERNAFRICANDIMENSION

OF RUSSIA’SPOLICYA

32 Geopolitics, 22 March 2007, http://www.geopolitics.ru/news/afr-004.htm

33 Cncpt f Russia’s Participatin in Intrnatinal Dvlpmnt Assistanc, 2007. Apprvd by t

Prsidnt f t Russian Fdratin n 14 Jun 2007, p. 12.




Source: 1) Long-Term State Programme of the Research of Subsoils and Reproduction of the

Minral and Raw Matrials Bas (2005 – 2010 and trug 2020) f t Russian

Fdratin, pp. 27 – 29; 2) SADC 1997; 3) US Glgical Survy 2007.

tAble 4. ruSSiA’S nAturAl reSource bASe complementAritieS With Southern AFricA

ma

ya w rssa w dd SADc s a ssssss f a( aaa d)

SADcsa wd’s ass f a

ad

ssa ss

lad 2007 B 2025 Namibia, South Africa, Zambia –

maas s 2008 B 2025 DRC, South Africa 83 %

Z 2011 B 2025 drc, nAmiBiA, zAmBiA –

c s 2013 B 2025Madagascar, South Africa,

zbab93 %

Dads 2013 B 2025Angola, Botswana, DRC, Lesotho,

Namibia, South Africa, Tanzania> 50 %

Qaz 2013 2013 Madagascar, Mozambique –

t 2015 B 2025DRC, Namibia, South Africa,

Tanzania, Zimbabwe –

ua 2015 B 2025Angola, DRC, Namibia, South Africa,

zaba12 %

gd 2015 B 2025Angola, DRC, Namibia, South Africa,

Tanzania, Zambia, Zimbabwe53 %

o 2015 B 2025 Ala, drc –

c 2016 B 2025Angola, Botswana, DRC, Namibia,South Africa, Zambia, Zimbabwe

8 %

nk 2016 B 2025Botswana, South Africa, Tanzania,

zbab10 %

ts 2016 B 2025 naba –

pa- as 2018 B 2025 South Africa, Zimbabwe 88 %

ga 2018 B 2025 Madagascar, Mozambique –

ca B 2025 B 2025Botswana, DRC, Madagascar, SouthAfrica, Swaziland, Tanzania, Zambia,

zbab

12 %

psa B 2025 B 2025 Angola, South Africa, Tanzania 10 %

pas B 2025 B 2025 Botswana –

ba B 2025 Beyond 2025 Angola, Madagascar –

i s B 2025 B 2025Angola, Botswana, South Africa,

Tanzania, Zimbabwe5 %

naa as B 2025 B 2025Angola, DRC, Mozambique, South

Africa, Tanzania–

vaad B 2025 B 2025 South Africa –

Fsa B 2025 B 2025 Ala –

Sa B 2025 B 2025Botswana, Madagascar, Namibia,

South Africa–




Tis study stimats Russia’s dirct invstmnt stck in Sutrn Africa at

USD 3 billin as f Jun 2008, basd upn t aggrgatin f publicly rprtd

values of Russian acquisitions in the region (see Table 5 for details). This puts

Russia’s FDI in Sutrn Africa at apprximatly 14 prcnt f t ttal valu

of Russia’s outward direct investment stock, which was ofcially worth USD 21

billin at t nd f Jun 200834. The estimate includes assessments of large-

scale Russian investments in the region that ofcial statistics might have failedt tak int accunt, bcaus transactins ar ftn ffctd via tird cuntris.

In particular, Russia’s largest acquisition in Southern Africa to date resulted

from Norilsk Nickel’s takeover of LionOre, a Canada-based company with key

prating assts in Sut Africa, Btswana and Australia. A furtr xampl is

the acquisition of South Africa’s Highveld Steel and Vanadium Corporation by

evraz, a Russian capital grup rgistrd in Luxmburd.

T bulk f Russian invstmnt int Sutrn Africa ccurrd during 2006 and

2007. Basd n publicly availabl surcs, including crprat prss rlass

and mdia rprts, tis rprt als stimats t aggrgatd valu f Russian

companies’ outstanding proposals for medium-term investment in SADC

cuntris at up t USD 5 billin, altug it is unlikly tat all ts prpsalswill be implemented, particularly in view of the nancial crisis which struck

wrld markts during t scnd alf f 2008.

It wuld appar tat tw cnsidratins ar t driving frcs bind Russian

businss xpansin in Sutrn Africa:

• Depletion of the resource base in Russia (Table 4). This driver is a particularly

xplicit n, fr xampl in t cas f ALRoSA, a Russian diamnd

mnply wnd by t fdral gvrnmnt and t rginal gvrnmnt

f Yakutia. African diamnd rsrvs ar gnrally mr asily accssibl

tan t rmaining undrgrund diamnd dpsits in Yakutia, and as a

rsult, accrding t t cmpany’s Prsidnt Srgy Vybrnv, ALRoSA

‘suld us vry canc t incras its rsurc bas in Africa’35.

• Interest in acquisition of undervalued assets that can help to boost the

companies’ share price. World prices for non-ferrous metals such as nickel,

mangans, platinum grup mtals, gld, crmits, vanadium, and trs

ar igly vlatil. As a rul, during prids f ig prics, t incrasd

revenues earned by industry leaders enable them to undertake large-scale

mergers and acquisitions. By contrast, during periods of falling prices, the

assts prducing ts stratgic mtals ar ftn dispsd f. In accrdanc

with this logic, signicant acquisition activities were undertaken by

Russian mtal and mining cmpanis btwn 2006 and 2008, basd n

high prices for both steel and non-ferrous metals. This acquisition drive

bgan dmstically and xpandd t eurp, Nrt Amrica, Australasiaand Africa. Against tis backgrund, it is prbabl tat sm f t xisting

Russian invstrs in Sutrn Africa may witdraw in t srt t mdium

trm. Suc a witdrawal tk plac in 2006, wn t privatly wnd

Russian company Norilsk Nickel, protably resold its holding in South

Africa’s Goldelds Corporation.

T intractin f ts tw factrs as rsultd in diffring plicis n t

part f Russian businsss prating in Sutrn Africa. on n and, rsurc

depletion holds a signicant strategic impact on Russian business development

and necessitates long-term planning.

2.2. RUSSIANBUSINESS’

INTERESTSIN SOUTHERN

AFRICA

34 Rsstat, 15 August 2008. on Frign Invstmnt in Russia in t First half f 2008 / Об

иностранных инвестициях в I полугодии 2008 г. Russian Federal Service of State Statistics,

Mscw.

35 ALRoSA, 2008. Spc f ALRoSA Prsidnt Srgy Vybrnv at t Cmpany’s Managmnt’s

Mting in Mirny n 29 Marc 2008. ALRoSA, Mirny, p. 1.




It wuld appar, wvr, tat ggrapic xpansin is nt t nly ptin in tis

regard. Whereas Western resource-based multinationals such as Shell, Alcan, Rio

Tint, and trs av bn xpanding tir pratins wrldwid, ty av als

invstd xtnsivly in tcnlgy t imprv minral rsurcs rcvry rats

and av as a rsult imprvd t viability f marginal rsrv dpsits36. Suc

diversication of companies’ reserves ‘portfolio’ might go some way to explaining

the fact that while Russian-based ALROSA is developing diamond mines in Angla, Sut Africa’s D Brs is invstigating diamnd mining prjcts in t

nrt f Russia37.

On the other hand, the cost of resource development and eld operations in Southern

Africa is often much lower than in Russia, resulting in higher prot margins for

prating cmpanis, spcially during prids f ig intrnatinal cmmdity

prics (fr il xtractin statistics s Figur 4). Tis is f particular imprtanc

t Russian cmpanis tat ar invlvd in a prcss f prprty rdistributin,

mergers and acquisitions. Their owners have generally paid little attention to long-

trm cnsidratins, and av in fact in sm instancs bn guidd primarily by

an interest in the acquisition of undervalued assets with a view to re-sale in the

srt t mdium trm

38

. In many cases, this has resulted in limited ‘greeneld’invstmnt, bt in Russia and abrad. As was argud lswr39, t lack f suc

stratgic intrst als lads t limitd invstmnt in nw nvirnmntally frindly

technologies, the acquisition of which, as a rule, provides a return on investment in

t lng run ratr tan t srt r mdium trm.

As a rsult, t sustainability rcrd f Russian cmpanis in Sutrn Africa as

bn mixd. Fr xampl, Nrilsk Nickl’s invstmnts in nickl mining cmpanis

in Southern Africa have generally been regarded as benecial both by the companies

and t lcal cmmunitis. T Nkmati prjct in Sut Africa is a 50/50 jint

vntur, in wic Nrilsk Nickl’s lcal partnr is t Bee cmpany African

Rainbw Minrals. Tis arrangmnt nsurs tat t jint vntur cmplis

wit t Sut African gvrnmnt’s priritis in trms f imprving t cnmic

status f prviusly disadvantagd sctins f t ppulatin. Furtrmr, NrilskNickel reported its plans to commit USD 830 million to investment in ‘greeneld’

dvlpmnts and t mdrnisatin f its facilitis in Sut Africa and Btswana

by 201040, though in the new circumstances of the nancial crisis in early 2009 the

cmpany annuncd its plans t scal dwn its vrsas invstmnt prgramm

rst in Australia and then in Botswana and South Africa41. Finally, t cmpany

is in t prcss f intrducing an nvirnmntally frindly tcnlgy, knwn as

Activx, int its pratins in t rgin42.

36 Smart Money, Moscow, № 9 (99), 17 March 2008, http://www.smoney.ru/article.

stml?2008/03/17/5151

37Minwb, 16 April 2008, ttp://www.minwb.cm/minwb/viw/minwb/n/


38 Kim, A. / Ким, А., 2005. Russians on the Global Sale / Русские на мировой распродаже. Finans,

№ 15, 18 – 24 April 2005, http://www.nansmag.ru/15293

39 Gerasimchuk, I./ Герасимчук, И., 2007. Environmental Practice of Transnational Corporations /

Экологическая практика транснациональных корпораций. WWF Russia, Moscow, pp. 66 – 68.40 Minwb, 26 Sptmbr 2007, ttp://www.minwb.nt/minwb/viw/minwb/n/


41 RIA Nvsti, 17 January 2009; ttp://www.rian.ru/cnmy/20090117/159469833.tml

42 Sunday Standard, 20 May 2007, ttp://www.sundaystandard.inf/nws/nws_itm.

pp?GrupID=1&NwsID=1499




0

2

4

6

8

10

12

14

16

18

Russia, existingoperating fields

Field development cost

Operating cost

Angola Russia,new fields

Figure 4. oil proDuction coSt in ruSSiA AnD AngolA, uSD per bArrel, 2006

Source: Cambridge Energy Research Associates as provided in Smart Money, Moscow, № 9

(99), 17 Marc 2008, ttp://www.smny.ru/articl.stml?2008/03/17/5151.

Another privately-held Russian metals company, Evraz, has accorded less

consideration to the environmental aspects of its Southern African acquisition

activities. In 2006, driven by an interest in acquiring a larger share of the global

vanadium market, Evraz acquired the Highveld Steel and Vanadium Corporation

Ltd in Sut Africa fr USD 678 millin43. The assets acquired by Evraz weregnrally caractrisd by pr nvirnmntal prfrmanc. In octbr 2007,

an inspctin by t ‘Grn Scrpins’ n higvld Stl’s Vancm vanadium

plant xpsd a numbr f transgrssins f nvirnmntal lgislatin, including

t cntaminatin f grundwatr, a criminal ffnc in trms f t Watr Act44.

Ts transgrssins undubtdly cntributd t t situatin in wic evraz

was unabl t rcup its invstmnt, wn it was frcd by eurpan cmptitin

autritis t divst itslf f sm f higvld’s assts45. Accrding t mdia

rprts46, evraz is as a rsult currntly rviwing higvld’s capital xpnditur

strategy, in order to place more emphasis on investments in environment- and

safety-related equipment, systems and services.

The environmental aspects of ‘greeneld’ investment projects proposed by Russiancmpanis als mrit sm attntin. Ts prpsals includ t dvlpmnt

of manganese and uranium elds, as well as construction of a manganese smelter

in South Africa by Renova, the development of uranium elds by a consortium

f Russian cmpanis in Namibia, t cnstructin f an aluminium smltr by

RUSAL and a frtilisr plant by Azt in Sut Africa, a numbr f small minral

prspcting prjcts by Sintz in Angla and Namibia, and il prspcting and

dvlpmnt by ALRoSA, Gazprm and LUKoIL in Angla.

43 Smart Mny, 9 octbr 2006, ttp://www.smny.ru/articl.stml?2006/10/09/1476

44 Businss Day, 5 octbr 2007; ttp://www.businssday.c.za/articls/articl.

aspx?ID=BD4A579828

45 Businss Rprt, 24 April 2007, ttp://www.busrp.c.za/indx.pp?fSctinId=553&fArticlId=4

370487

46 enginring Nws, 17 August 2007, ttp://www.nginringnws.c.za/articl.pp?a_id=114089




There exists no evidence to suggest that these ‘greeneld’ developments by Russian

cmpanis ar any lss nvirnmntally rspnsibl tan prjcts undrtakn

by Wstrn r African cmpanis in t sam industris. hwvr, t cmmn

fatur uniting all ts prjcts prpsd by Russian invstrs is tir ig

nrgy intnsity. Russian invstrs ar naturally awar f t currnt lctricity

crisis in Sut Africa, and av xprssd a radinss t assist in incrasing

local electricity supply capacity. ALROSA has already completed the rst phasef cnstructin f t Cicapa ydrlctric statin in Angla, t supprt its cr

diamnd mining businss, and is currntly in t prcss f implmnting t

scnd pas f tis prjct. RUSAL is cnsidring t cnstructin f a captiv

pwr statin fr its prpsd aluminum smltr. At t sam tim, wvr, t

majr pririty in trms f nrgy cpratin wit Sutrn Africa as up t nw

bn t prmtin f Russian nuclar nrgy slutins.

At prsnt, Sut Africa is t nly African cuntry prating a nuclar pwr

plant, namly Kbrg (cntaining tw ractrs) nar Cap Twn. Russia is

currently supplying Koeberg with enriched uranium derived from diluted ex-

military stckpils47. Sut Africa’s natinal lctricity mnply, eskm,

recently announced plans to invite foreign companies to build six large-scalenuclar ractrs by 2025 at a cst f apprximatly USD 90 billin. In additin,

Sut Africa as fr t past svral yars bn attmpting t dvlp its wn

design for small-output Pebble-Bed Modular Reactors (PBMR) for both domestic

us and xprt48.

These developments, as well as the availability of large-scale uranium deposits

in Sut Africa and Namibia, av prvkd incrasd intrst n t part f t

Russian government and Russia’s state-owned nuclear corporation Rosatom in

nuclar cpratin wit ts tw cuntris. Rsatm is currntly prmting a

similar bilateral cooperation pattern with a number of uranium-rich countries,

in rdr t min uranium abrad, nric it in Russia in t Angarsk facility, and

cnstruct nuclar pwr plants in ts cuntris t utilis t nuclar ful frm

Russia49.

In viw f a srtag f prating capital and lcal xprtis in Sut Africa and

Namibia, Rsatm as bn attmpting t partnr wit tr Russian invstrs

t start uranium xplratin and prductin activitis in Sut Africa and

Namibia. During 2006 and 2007, Rosatom agreed that privately-owned Renova

wuld act in tis capacity, but in 2008 Rnva startd scaling dwn its Sutrn

African uranium plans50.

Russia’s ffrts t gain cntracts t prvid nuclar pwr plants cnstructin

srvics in SADC cuntris av tus far brn vry littl fruit. Accrding t

mdia rprts, in arly 2008, Sut Africa’s gvrnmnt xcludd Rsatm frm

the shortlist of possible participants for a tender to construct the rst of the sixplanned large-scale nuclear reactors, instead giving preference to French and

Amrican cmpanis51. In Namibia, t Russian gvrnmnt and Rsatm av

been promoting a proposal for a small oating nuclear power plant52. on f t

pssibl uss fr tis plant is sa watr dsalinatin. hwvr t prspcts fr

tis prjct ar als unclar.

47 Rsatm, 25 Nvmbr 2004, ttp://www.minatm.ru/Nws/Main/viw?id=9213&idCannl=71

48 T Tims, 14 January 2008, ttp://www.ttims.c.za/Nws/Articl.aspx?id=680981

49 Plit.Ru, 6 Fbruary 2008, ttp://www.plit.ru/nws/2008/02/06/simnv.tml

50 Rsafrksprtiza Nwswir, 2 April 2008, ttp://rax.rg/indx.pp?prductID=789

51 Minwb, 18 Marc 2008, ttp://www.minwb.cm/minwb/viw/minwb/n/

pag38?id=49574&sn=dtail

52 Kornysheva. A./ Корнышева, А., 2007. Sun, Air and Ore / Солнце, воздух и руда // Kommersant-

Dengi. № 14 (620), 16 April 2007, http://www.kommersant.ru/doc.aspx?DocsID=759014




Cnsidratin f t afrmntind cass prvids scp fr t fllwing

cnclusins:

• Russian businesses that are active in Southern Africa have in general

pursud invstmnt prjcts nly in t industris in wic ty av bn

operating in Russia, namely ferrous and non-ferrous metals, diamonds,

ptrlum and uranium. All ts prjcts ar nrgy intnsiv and pssssa cnsidrabl nvirnmntal ftprint.

• There is no evidence suggesting that the environmental prole of Russian

invstmnt prjcts in Sutrn Africa is any ‘dirtir’ tan tat f prjcts

undrtakn by Wstrn r African invstrs in t sam industris.

• At the same time, there exist no examples of leapfrogging development

prjcts prmtd by Russian invstrs in Sutrn Africa; in tr wrds,

braktrug prjcts tat wuld nabl Sutrn African cuntris

t bypass t nvirnmntally damaging and unsustainabl stags f

industrial grwt tat av marrd t past f t majrity f dvlpd

cuntris.

Ts trnds ar nt particularly surprising, sinc ty wuld appar t mirrr

xisting businss practics witin Russia53. Russia’s own economy is energy- and

resource-intensive, and until this situation changes, it will be premature to expect

Russian invstrs prmt lapfrgging dvlpmnt pattrns abrad. At t

sam tim, wvr, givn t cnsidrabl nvirnmntal ftprint f t prjcts

bing undrtakn by Russian cmpanis in Sutrn Africa, any stps twards

imprving tir nvirnmntal practics ar crtain t rduc t sustainability

risks attacd t ts prjcts.

53 Pussnkva N. and Slntsva e., 2007. Russian Cmpanis in t 21st Cntury – Twards

Competitive Corporate Citizenship. WWF-Russia, Moscow.



CHAPTER 3.

RE-THINKINGRUSSIA’S

INVESTMENTIN SADC




Post-Soviet Russia is the latecomer amongst large-scale investors into African

natural rsurcs, aving bn prcdd by bt ‘traditinal’ stakldrs

suc as t USA and eU, and by tr BRICS cuntris, particularly Cina54.

hwvr, tis is a rac tat as cntinud vr many dcads and rsultd in a

grat dal f scpticism abut FDI in Africa.

Whereas countries such as Norway, Canada and Australia have gained signicantupstream and downstream spillover benets from inward FDI in extractive

industries, in other resource-rich countries, especially in Africa, such FDI has

generally beneted local economies and societies to a very limited extent55. Tis

implis tat, as sn as frign invstrs dplt dpsits f natural rsurcs

f African natins, ty as a rul abandn ts st cuntris, and lav tm

wit svrly dgradd nvirnmnts and virtually n prating mcanisms f

cnmic grwt.

In this regard, the obvious question to be answered is whether the emerging

South-South56 cooperation will differ substantially from the historic North-South

relationship. EMEs have naturally not engaged in colonisation-type activities in

the past, but this fact is not sufcient to ensure that their investments providetangible benets to African economies. In particular, China’s expansion in Africa

as alrady givn a ris t a tndncy fr sclars and jurnalists, primarily in

dvlpd cuntris, but t sm xtnt als in Africa, t vic tir cncrns

regarding a potential form of ‘neo-colonialism’ being introduced by Beijing57.

In t cas f Russia, t pssibility xists t cannl its invstmnt int Africa

into more sustainable avenues. Russia, itself a resource-rich nation and an

ecological creditor, faces an urgent requirement to diversify the sources of its

cnmic grwt, just as is t cas wit t majrity f African cuntris.

T avy rlianc by t Russian and Sutrn African cnmis n t

extraction of non-renewable resources is of course not sustainable in the long

trm. Ts rsurcs will by tir vry natur b dpltd at sm pint, vnif the most efcient technologies are applied, while the growing urgency to

address the issue of climate change is certain to signicantly decrease the size

of world markets for fossil-fuel resources. At the same time, volatile rises in

wrld cmmdity prics mak a numbr f prviusly uncmptitiv rnwabl

and resource-efcient solutions increasingly viable. As a result of these factors,

t wrld’s dvlpmnt pat is sur t mv nt a mr sustainabl fting in

the medium to long term, potentially leaving resource-based economies such as

ts f Russia and Sutrn Africa utsid t nw mainstram. In t wrds f

Sik Amd Zaki Yamani, Saudi Arabia’s il ministr in 1970s, "t Stn Ag

didn’t nd fr lack f stn, and t il ag will nd lng bfr t wrld runs ut

f il”58; t sam lds tru fr many f t wrld’s tr minral rsurcs.

54 Commerce and Industry Chamber of the Russian Federation / ТПП РФ, 28 February 2006.

Russia and Africa in the Short- and Mid-term. / Россия и Африка в кратко- и среднесрочной

перспективе. Moscow.

55 Mran, T., Graam, e. and Blmstrm, M. (eds.) 2005. Ds Frign Dirct Invstmnt Prmt

Dvlpmnt? Ptrsn Institut fr Intrnatinal ecnmics, Wasingn D.C

56 Tug Russia is ggrapically in t Nrt, pliticians and sclars smtims includ it intt ntin f ‘Sut’ du t tr cmmn dvlpmnt faturs (Aykut and Gldstin 2006).

57 Krngay, F., 2008. Africa’s Stratgic Diplmatic engagmnt wit Cina // Nw Impulss frm

t Sut. Cina’s engagmnt f Africa. Cntr fr Cins Studis, Univrsity f Stllnbs,

Sut Africa.

58 T Nw Yrk Tims, 25 August 2005, ttp://www.nytims.cm/2005/08/21/magazin/21oIL.

tml?pagwantd=all




ovr t past tw dcads, t intgratin f nvirnmntal cnsidratins int

business decision-making has become a signicant factor in the international

cmptitivnss f bt natins and crpratins59. Improved efciency in the use

of energy and other resources holds the potential for signicant savings by the

privat sctr. Suc ‘grning’ als assists bt stats and cmpanis t prvnt

environmental degradation, and consequent expenditures on rehabilitation

activitis, as wll as t avid t rputatinal risks assciatd wit sucnvirnmntal damag. envirnmntal ftprint is incrasingly takn int

cnsidratin in invstmnt and insuranc dcisins rgarding virtually all typs

f prjcts. Tis prcss as matrially cntributd t tcnlgical prgrss and

t dvlpmnt f nw nvirnmntal practics and lapfrgging tcnlgis,

which provide signicant competitive advantages to businesses and nations.

At t sam tim, wvr, it wuld b prmatur t xpct Russian invstrs in

Sutrn Africa t pursu bttr sustainability and crprat scial rspnsibly

practics in Africa tan ty d in Russia. In many cass, t primary fcus f

Russian businesses is the maximisation of prots for their owners in the short term,

ftn wit a viw t a futur sal. Nvrtlss, it wuld b unfair t apprtin

blame for this short-sightedness exclusively to the Russian private sector, sinceit rmains t cas tat in bt Russia and Sutrn Africa, t invstmnt

climates continues to be somewhat unpredictable, with signicant uncertainty

rgarding pssibl cangs in taxatin rgims and varius rgulatry practics.

Given this scenario, it would appear that an increased focus on long-term planning

and sustainability issus n t part f Russian cmpanis migt b prmptd by

an imprvmnt in t transparncy and prdictability f t dmstic businss

nvirnmnt by t gvrnmnts f bt Russia and Sutrn Africa.

Amng tr factrs, t intrductin f mr stringnt nvirnmntal rgulatins

in Russia will srv t prpar Russian businss fr cmptitin in intrnatinal

markts, including ts in Sutrn Africa. In tis rgard, a psitiv, albit

smwat dlayd, masur is t Russian Prsidntial dcr f 4 Jun 2008,

on Masurs t mak t Russian ecnmy Mr enrgy and envirnmntEfcient.

A ‘grnr’ apprac twards cpratin wit Sutrn Africa ds nt

necessarily imply or require a divergence by the Russian government from the

high-level choices it has already made in terms of its interest in Southern African

natural rsurcs, its stratgy t act as a glbal guarantr f nrgy scurity, and

its efforts to develop an international assistance programme. What need to be re-

xamind in t sustainability cntxt, wvr, ar t instrumnts by wic

these high-level goals might be achieved.

59 Prtr, M, van dr Lind, C., 1995. Grn and Cmptitiv: ending t Stalmat. harvard

Business Review. № 73, September-October, pp. 120-155; Esty, D., Porter, M., 2001. Ranking

Natinal envirnmntal Rgulatin and Prfrmanc: A Lading Indicatr f Futur

Competitiveness? The Global Competitiveness Report 2001-2002. N.-Y., p. 78.




Practical masurs wic can b implmntd by Russian cmpanis, in rdr t

nanc t sustainability f tir businsss bt dmstically and in Sutrn

African, includ t fllwing:

• Voluntary standards – the introduction of and compliance with more

stringent international quality standards and HSE (health, safety and

environment) certications, environmental information disclosure, open‘grn’ dialgu wit lcal cmmunitis and NGos

• Corporate social investment – greater attention to local social and

ducatinal issus, wit t aim f training mplys and imprving tir

living standards, as well as enabling local communities to nd alternative

incm surcs nc rsurcs dpsits ar xaustd

• Analysis – the integration of environmental and social performance indicators

int ‘du dilignc’ and invstmnt apprval prcdurs tat wuld prvnt

‘surprises’ and nancial losses (as was the case in the purchase and sale of

t Vancm vanadium plant by evraz)

• Research and development – aimed at sustainable technology solutions,

including ftprint mitigatins, us f rnwabl nrgy surcs, sustainabl

transprtatin, wast rcycling and nrgy, watr and tr rsurcs

savings

As mntind, Nrilsk Nickl’s applicatin f ‘Activx’ tcnlgy at its Sutrn

African mins can srv as an xampl f psitiv actins in tis ara (vn

tug tis tcnlgy was initially dvlpd in Australia).

Russia’s fcus n nrgy cpratin wit Sutrn Africa can assist in rslving

n f t mst prssing dvlpmnt issus in t rgin, namly accss t

nrgy. In tis rgard, ptntial xists fr t fllwing cntributins by Russiancmpanis:

• Efciency measures – broader application of existing energy-, water-, and

tr rsurcs saving slutins

• Investment – construction of new power generation facilities based on

rnwabl rsurcs suc as wind and slar radiatin, wit minimal

nvirnmntal ftprint, particularly wit rgard t Co2 missins

• Research and development – particularly in terms of leapfrogging

tcnlgis, bt in t spr f nrgy savings and t us f rnwabl

nrgy surcs

In tis rgard, tw intrsting xampls xist f cpratin btwn Russia and

South Africa. The rst concerns the cooperation between South Africa’s state-

owned electrical utility, Eskom, and the Russian scientic community in the eld

of underground coal gasication technology. This technology allows the energy

content of coal to be extracted without mining, instead providing liquid petroleum

gas as an input fr lctricity gnratin. Tis mtd f nrgy xtractin can

produce signicant conversion efciency improvements over conventional coal-

red electricity generation60. At prsnt, wvr, t majrity f t intrst,

and ptntial invstmnt, in tis tcnlgy is frm eskm, ratr tan frm

Russian cmpanis.

3.1. RUSSIA’SSTRATEGIC

INTEREST INSOUTHERN

AFRICANNATURAL

RESOURCES

3.2. RUSSIA’SSTRATEGY

TO ACT ASA GLOBAL

GUARANTOROF ENERGYSECURITY

60 Rutrs, 23 April 2008, ttp://factiva.cm




T scnd xampl f cpratin btwn Russia and Sut Africa cncrns t

‘gas-to-liquid’ technology owned by South Africa’s PetroSA and SASOL, which has

reportedly attracted the attention of Russia’s two state-owned petroleum majors,

Gazprom and Rosneft. This solution holds the potential to signicantly reduce

gas aring in Russia. According to the Russian Ministry of Natural Resources,

Rsnft plans t build a GTL plant at its Sakalin facility, wit supprt frm

PtrSA and SASoL61.

Despite the current focus by Russian policy and business decision-makers on

uranium mining and nuclar nrgy prjcts in Sut Africa and Namibia,

there exists considerable doubt regarding the long-term nancial viability

and nvirnmntal sustainability f suc prjcts. Frm an nvirnmntal

prspctiv, wil an incras in t cntributin f nuclar nrgy t lctricity

gnratin capacity can assist in t rductin f Co2 missins in t srt

trm, in t lngr trm, nuclar capacity crats srius callngs suc as

spnt ful and nuclar wast dispsal, as wll as incrasd risks in trms f t

unsanctind us f nricd uranium. In cnmic trms, altug nuclar

nrgy dirctly incrass t glbal availability f lctricity, it is similar t fssil

fuels in the sense that it continues to rely on a nite resource. Furthermore,t xprinc f antr African cuntry, Nigr, sws littl vidnc f any

psitiv impact f a larg uranium xtractin industry n lcal dvlpmnt.

Nuclear power generation requires considerable economies of scale and should

idally b distributd trug a natinal r rginal grid, and is trfr far

mr suitd t industrial lctricity supply tan t mting t nrgy nds f

avrag Africans living utsid aras f grid cvrag62.

Sutrn Africa psssss abundant rnwabl nrgy rsrvs; slar radiatin

lvls in Sut Africa and Namibia ar amngst t igst in t wrld (Figur

5), and both countries contain signicant areas of semi-desert, unsuitable for

agricultur, wic can b utilisd fr slar nrgy accumulatin facilitis. In t

DRC, cnstructin f wat is scduld t b t wrld’s largst ydrlctric

scm, is currntly undrway n t Cng rivr’s Inga Falls. onc cmpltd,tis facility will av an lctricity gnratin capacity f 40 GW63 . Intrstingly,

this project does not involve the construction of large-scale dams and water

rsrvirs, and as a rsult, its ptntial nvirnmntal ftprint is limitd.

Altug n Russian cmpanis ar participating in t Inga Falls prjct,

ALRoSA as alrady invstd in t cnstructin f smallr ydrpwr statins

in Angla, and antr Russian cmpany, Tknprmxprt, as actd as a

cntractr t a numbr f African ydrlctricity prjcts, trby accumulating

considerable experience in the eld.

Sut Africa psssss t wrld largst rsrvs f palladium, a platinum grup

metal used as a catalyst in hydrogen-powered engines - a solution for hybrid motor

vicls tat is rciving incrasd attntin in dvlpd cuntris, particularlyin Japan and t USA.

While renewable energy sources, particularly hydro-power, are capable of

feeding into national grids, one of their most tangible benets is that they

are also particularly suitable for small-scale applications, and can therefore

b wnd and pratd by t cmmunitis tat ty supply, ratr tan by

gvrnmnts r crpratins lcatd many mils away, r in sm cass vn n a

different continent. In this context, bio-energy and in particular solar energy are

increasingly viewed as a vital component of SADC’s rural (off-grid) electrication

prgramms, wic av in many instancs bn slwd by t ig csts f grid

xtnsin srvics.

61 RBC Daily, 19 Marc 2007, ttp://www.rbcdaily.ru/2007/03/19/tk/268514

62 Du Plooy, P., 2008. Re-Think Investment in (South) Africa. WWF South Africa, Johannesburg, pp.

36, 47 – 48.

63 BBC, 21 April 2008, ttp://nws.bbc.c.uk/2/i/businss/7358542.stm




Figure 5. SolAr rADiAtion in Southern AFricAn countrieS,KiloWAttS*hrS/m2/DAy

In additin t plans fr nw nrgy gnratin capacity, t ptntial xists frRussia and Sut Africa t cprat in t implmntatin f prjcts aimd

at increased efciency in the use of already available energy resources and the

rductin f tir Co2 missins. Undr t Kyt Prtcl, Jint Implmntatin

projects in Russia and CDM projects in Southern Africa offer signicant

opportunities to increase energy efciency in a commercially benecial manner.

Although neither Russia or the Southern African countries are required to reduce

tir GhG missins during t Kyt Prtcl’s implmntatin prid, nding

in 2012, a nw ngtiatd intrnatinal agrmnt tat rplacs t Prtcl

may impose such requirements. Under such circumstances, it is obvious that

the energy-intensive facilities owned by Russian investors in Southern Africa, in

particular non-ferrous metal smelters, will need to substantially improve their

energy efciency standards. In this regard the Russian company Factor Ltd. hasalready begun working with South Africa’s Eskom on energy-saving projects.

Source: Cuamba B, 2008. Sustainabl enrgy Patways fr t SADC Rgin. Prsntatin

at the DFID-DSA policy forum International Development in the Face of Climate Change:

Bynd Mainstraming?, Grnwic, 2 Jun 2008.

South AfricALeSotho

SwAziLAnd

BotSwAnA

nAmiBiA

legenD:SolAr rADiAtion in

KiloWAttS-hrS/m2/DAy

>6.5

6.0 - 6.5

5.5 - 6.0

5.0 - 5.5

4.5 - 5.04.0 - 4.53.5 - 4.0

zAmBiA

tAnzAniA

mAdAgAScAr

zimBABwe

mozAmBique

mALAwi

democrAticrepuBLic of

congo

AngoLA

SeycheLLeS




Trug varius multilatral (including t G8), as wll as unilatral initiativs,

post-Soviet Russia has to date written off USD 16 billion of African debt64. In 2006

and 2007, Russia annually cntributd vr USD 100 millin t varius multilatral

oDA initiativs65. Ts funds wr fr t mst part cannld trug xisting

intrnatinal oDA bdis, suc as varius UN funds and rganisatins. Ts aid

activitis ar plannd t cntinu, in lin wit t Cncpt f Russia’s Participatin

in Intrnatinal Dvlpmnt Assistanc (2007). In t mdium trm, Russia islikly t crat its wn Frign Aid Agncy, and als bcm a mmbr f t African

Dvlpmnt Bank, wit t lattr stp intndd t prmt t participatin by

Russian cmpanis in African tndrs. Ts masurs will als sk t bradn

Russia’s invlvmnt in Africa’s dvlpmnt plicis.

At the same time, Russia’s nancial institutions are increasing their operations

in Africa, fr xampl trug t prvisin f lans t industrial prjcts in

which Russian companies are participating, nancial consultancy services and

the organisation of IPOs for African companies. The nancial institutions most

heavily involved in these activities are the newly-established Russian Development

Bank (reformed Vnesheconombank), the state-owned VTB bank, and Renaissance

Capital (RenCap), a privately-owned Russian investment house

66

.

Givn t cnsidrabl nvirnmntal ftprint f t majrity f prjcts

nanced by Russian banks in Africa, it is essential that Russian nancial

institutins, including tir subsidiaris in Africa, bgin t apply intrnatinal

environmental standards in the evaluation of project nance opportunities.

Suc standards includ vluntary bncmarks fr managing nvirnmntal and

social issues, such as the Equator Principles, which have been adopted by more

than 50 nancial institutions worldwide, with these institutions accounting for

approximately 70 – 80 percent of the global project nance market. Unfortunately,

however, in contrast to nancial institutions in many EMEs, no Russian bank

as t dat accptd suc vluntary bligatins. In Sut Africa, Ndbank, wic

as ntrd int a partnrsip agrmnt wit Vnscnmbank, and Standard

Bank, which in early 2009 announced its acquisition of a stake in Russia’s TroikaDialog Bank, are parties to the Equator Principles.

The measures identied in this report form the basis for hedging commodities revenues

fr t futur, by invsting tm in sustainabl businss slutins. Rtinking

Russia’s invstmnt in Sutrn Africa migt invlv additinal csts in t srt

term, both in nancial and administrative terms, but this expenditure should be

viwd as capital invstmnt ratr tan csts. Furtrmr, t rturns n tis

invstmnt, in t frm f incrasd nvirnmntal sustainability and natinal and

crprat cmptitivnss, ar crtain t b far in xcss f t initial xpnditur fr

bt Russia and Sutrn Africa, and in fact fr t wrld as a wl.

3.3. RUSSIA’SEFFORTS TODEVELOP ANASSISTANCEPROGRAMME

64 All Africa, 4 April 2008, ttp://allafrica.cm/stris/200804040246.tml

65 Nw Africa, 29 May 2007, ttp://nwafrica.ru/annss/070604/ru_af1.tm

66 VTB, 2 Sptmbr 2007, ttp://www.vtb.ru/rus/wb.tml?s1=1052&s2=13407&s3=1&l=1; Businss

Rprt, 31 May 2008, ttp://www.busrp.c.za/indx.pp?fSctinId=570&fArticlId=3858930



CONCLUSION




In 2008/9, the nancial crisis, which has been followed in most countries by real

sctr rcssin and dclins in cmmdity prics, as prvidd strng incntivs

fr drastic rviws f cnmic stratgis by all cuntris, including Russia and

t Sutrn African natins. As a rsult, sm f t sustainability imprvmnt

masurs rcmmndd by nvirnmntalists av bn drivn by a ttally

diffrnt imprativ; namly a lack f availability f funds fr invstmnt,

lading in turn t dcisins t dlay invstmnt in, r vn t disinvstmntfrom, capital-, resource- and energy-intensive projects.

In Sut Africa, t natinal lctricity supplir, eskm, annuncd its dcisin

t pstpn t cnstructin and cmmissining f t cuntry’s scnd nuclar

pwr plant by tw yars, citing cst as a majr rasn67. In Russia, majr utward

invstrs av startd scaling dwn tir vrsas invstmnt prgramms,

most of which are related to the acquisition and development of assets in the

cmmdity sctr. Fr xampl, Nrilsk Nickl, Russia’s largst invstr in

Sutrn Africa, annuncd disinvstmnt plans fr its nickl prductin and

prcssing pratins in Btswana and Sut Africa68.

As argud in a rcnt rprt by Dutsc Bank, ntitld ecnmic Stimulus: TCas fr ‘Grn’ Infrastructur, enrgy Scurity and ‘Grn’ Jbs, n pssibl

way ut f t currnt cnmic mltdwn tat invlvs cnsidrabl mplymnt

cuts in conventional industries, may lie in investment into so-called ‘green’

sectors of the economy, since these are generally more diversied, sustainable

and labour-intensive than sectors seen as traditional drivers of economic growth.

Fr xampl, t Cntr fr Amrican Prgrss (CAP) calculatd tat invstmnt

of USD 100 billion in clean energy and efciency would result in 2 million new

jbs, wras an invstmnt in cnvntinal frms f nrgy wuld crat nly

apprximatly 540,000 jbs69. Tis cnclusin culd b similarly applid in Africa,

wr sustainability and unmplymnt prblms, aggravatd by t currnt

markt turbulnc, ar far mr acut tan in t dvlpd wrld.

In spit f its vry tangibl and widsprad ngativ impact n t glbal cnmy,the current economic crisis provides a signicant incentive for making economic

dvlpmnt cics mr nvirnmntally sustainabl, trby limiting

the possibility for further turmoil in the nancial and real sectors of a world

cnmy tat migt trwis cntinu t b basd almst xclusivly n t

xplitatin f natural rsurcs. T fall f cmmdity prics maks t cas fr

economic diversication stronger both in Russia and in the nations of Southern

Africa. Furthermore, while in the period 2009–11, the realisation of large-scale

invstmnt prjcts by Russian cmpanis in Sutrn Africa is unlikly, givn

t capital cnstraints ty fac, tis prid may vry wll prvid t bst

pprtunitis fr cpratin btwn Russian and Sutrn African cmpanis

in areas such as leapfrogging technologies, energy- and resource-savings and

rnwabl nrgy dvlpmnt.

67 Rutrs, 12 January 2009; ttp://af.rutrs.cm/articl/invstingNws/idAFJoe50B0hR20090112

68 RIA Nvsti, 17 January 2009; ttp://www.rian.ru/cnmy/20090117/159469833.tml

69 ecnmic Stimulus: T Cas fr ‘Grn’ Infrastructur, enrgy Scurity and ‘Grn’ Jbs.

Dutsc Bank, Nvmbr 2008, p. 4; ttp://www.dbadvisrs.cm/dam/stat/glbalRsarc/1113_

GrnecnmicStimulus.pdf



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RBC Daily, 19 Marc 2007; ttp://www.rbcdaily.ru/2007/03/19/tk/268514


Rutrs, 19 August 2008; ttp://www.rutrs.cm/articl/marktsNws/

idUSLJ35337020080819 (accssd n 20 August 2008)Rutrs, 23 April 2008; ttp://factiva.cm (accssd n 29 July 2008)

Rutrs, 12 January 2009; ttp://af.rutrs.cm/articl/invstingNws/

idAFJoe50B0hR20090112 (accssd n 1 Fbruary 2009)

RIA Nvsti, 5 octbr 2007; ttp://factiva.cm (accssd n 29 July 2008)

RIA Nvsti, 7 Jun 2007; ttp://rian.ru/wrld/wrld_cmmunity/

20070607/66849815.tml (accssd n 9 August 2008)

RIA Nvsti, 17 January 2009; ttp://www.rian.ru/

cnmy/20090117/159469833.tml (accssd n 1 Fbruary 2009)

Rsafrksprtiza Nwswir, 2 April 2008; ttp://rax.rg/indx.

pp?prductID=789 (accssd n 20 August 2008)

Rsafrksprtiza Nwswir, 26 January 2008; ttp://rax.rg/indx.


Rsafrksprtiza Nwswir, 16 Marc 2008; ttp://www.rax.rg/indx.


Rsafrksprtiza Nwswir, 18 August 2007; ttp://rax.rg/indx.


Rsafrksprtiza Nwswir, 15 Marc 2008; ttp://www.rax.rg/indx.


Rsafrksprtiza Nwswrir, 28 Marc 2007; ttp://www.rax.rg/indx.


Rsatm, 25 Nvmbr 2004; ttp://www.minatm.ru/Nws/Main/viw?id=9213&idCannl=71 (accssd n 20 August 2008)

Smart Mny, 9 octbr 2006; ttp://www.smny.ru/articl.

stml?2006/10/09/1476 (accssd n 20 August 2008)

Smart Money, Moscow, № 9 (99), 17 March 2008; ttp://www.smny.ru/articl.

stml?2008/03/17/5151 (accssd 20 August 2008).

Sunday Standard, 20 May 2007; ttp://www.sundaystandard.inf/nws/nws_

itm.pp?GrupID=1&NwsID=1499 (accssd n 20 August 2008)

T Nw Yrk Tims, 25 August 2005. ttp://www.nytims.cm/2005/08/21/

magazin/21oIL.tml?pagwantd=all (accssd n 12 August 2008)

T Tims, 14 January 2008; ttp://www.ttims.c.za/Nws/Articl.

aspx?id=680981 (accssd n 20 August 2008)

Vdmsti, 19 Marc 2007; ttp://factiva.cm (accssd n 29 July 2008)

Viwswir, 11 April 2008; ttp://www.viwswir.cm/articl1373656522.

tml?pubtypId=930000293&txt= (accssd n 20 August 2008)

Vrmya Nvsti, 6 Marc 2006; ttp://www.vrmya.ru/2006/38/13/146809.

tml (accssd n 20 August 2008)

VTB, 2 Sptmbr 2007; ttp://www.vtb.ru/rus/wb.tml?

s1=1052&s2=13407&s3=1&l=1 (accssd n 20 August 2008)

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