Why upcoming visit to Africa by Iran President Raeis matters
Iranian President Ebrahim Raeisi will begin a three-nation visit to Africa on Tuesday for the first trip in 11 years by an Iranian president to the continent, aimed at increasing Iran's footprints in a region with a GDP of about $3.1 trillion.
Heading a delegation, the Iranian president will travel to Kenya, Zimbabwe and Uganda at the official invitation of his counterparts in those countries.
Trade between Iran and Africa increased between 2005 and 2006, but it began to decline from 2007 due to the Global Financial Crisis and cruel sanctions imposed on the Islamic Republic under a UN Security Council resolution.
Surveys show Iran’s trade with Africa has remained subdued at about $1.2 billion over the past few years, during which no significant step was taken to restore economic relations.
That is going to change, according to the director general of the Africa Office of Iran Trade Development Organization, who expects Iran’s trade with Africa to reach $10 billion in the next three years.
Africa is home to 18% of the world's population with an increasing population growth and some 30 percent of the world's mineral reserves. It is a vital region with some of the fastest growing economies in the world, where countries are now more stable and predictable places to live, work and build businesses.
Africa is rich in natural resources ranging from arable land, water, oil, natural gas, minerals, forests and wildlife. The continent holds a huge proportion of the world’s natural resources, both renewables and non-renewables.
It is home to some 30 percent of the world’s mineral reserves. The continent has 40 percent of the world’s gold and up to 90 percent of its chromium and platinum. The largest reserves of cobalt, diamonds, platinum and uranium in the world are in Africa. It holds 65 percent of the world’s arable land and ten percent of the planet’s internal renewable fresh water source.
According to Mehrad Emad, a member of the Tehran Chamber of Commerce, Africa's foreign trade has grown significantly in the last twenty years, but Iran has not yet been able to use this capacity.
“That said, the African market still remains virgin territory and Iran can stake out a share of this market,” he told Mizan news agency.
In Emad’s words, the lack of proper introduction of the African market to Iranian businessmen and economic entrepreneurs is one of the reasons why Iran has been lagging behind other countries in the continent.
Another reason is the cruel sanctions. For exports to Africa, Iranian traders have to send their goods through neighboring countries such as the UAE, Oman and Turkey, which entails in re-exports and higher exports costs.
Emad says to increase trade and relationship with African countries, Iran should activate joint chambers of commerce to introduce target markets and existing risks, because Iranian exporters have little interest in the continent due to lack of knowledge.
Africa, he says, is a safe and low-risk destination for Iranian traders, with a market for minerals, oil and gas, nano and food products such as pistachio and saffron, polymers, petrochemicals and technical engineering services.
Meanwhile, there is ample capacity in Iran for shipment of goods to African countries by sea, which is the most affordable way to move products all around the world and suited to many business types.
One of the remarkable features of Iran in trade with African countries is the issue of distance. The distance between Iran and Africa is much lower than the distance between, let’s say, China and Africa. This is a significant advantage which Iran can use to increase the level of trade with the African continent.
President Raeisi's visit to Africa will enhance Iran’s economic and political relations and pave the way for development of economic cooperation between the two sides. This will certainly benefit the private sector most.
Exporters and owners of private businesses have tagged along with President Raeisi’s delegations in his recent foreign visits.
According to Emad, one of the solutions to increase relations between the private sector and other countries, and the accompaniment private enterprises in the president’s foreign visits will ultimately benefit Iran's economy.
African markets are diverse, and buying power is growing among consumers across the continent. Iranian economists say the country can carve out a niche with proper planning, emphasizing the role of the private sector and developing joint chambers of commerce.
“The volume of Iran's trade with different African countries has been different. In other words, Iran has had good economic success with the eastern countries of the continent, such as Kenya and Tanzania, but it has less used the capacity of other countries,” Hamid-Reza Salehi, another member of Tehran Chamber of Commerce, says.
By increasing exports, providing technical and engineering services and investing in some projects, new revenues can be obtained for the country, he said.