INDIA AND AFRICA- WHAT’S THE DEAL?

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As the economic rise of Brazil, Russia, India and China (BRIC) continue to be charted in the global economy, the relationship between Africa and India is coming under increased scrutiny and sparking focused interest. Pertinent questions include: How did the interaction between Africa and India start? What is the nature of the modern economic dynamic between the two parties and what are the implications of this engagement? What should Africa be worried about and how can we benefit? As the Lion economies begin to roar, they will raise global attention. Of focus in this piece is how the African Lions are interacting with the Asian Elephant called India.

HISTORICAL CONNECTIONS

India has been a long-standing partner to Africa and is in no ways new to the continent. The Indo-Africa economic interaction started through slavery where the European Indian Ocean slave systems drew captive labour from Africa and the Indian sub-continent. This joint history between the two sired familiarities between them. Under colonial rule outfits such as the British East India Company cemented interactions between Africa and India. In East Africa, Indians came in as labourers in the late 1800s to build the Uganda-Kenya railway[1]. Many of these original Indian workers stayed on to work as, ‘artisans, traders, clerks, and, finally, small administrators… Some even became doctors and lawyers.[2] Having established roots in Africa, some Indians became so identified with Africa that they fought alongside Africans for their independence as well in struggles against apartheid.

MODERN ECONOMIC TIES

In terms of modern Indo-African economic dynamics significant in-roads have been made, ‘India’s trade with Africa has doubled in the past four years, from $24.98 billion in 2006–07 to $52.81 billion in 2010–11….Indian investments in Africa totaled 1.52 billion in 2009–10’.[3] In terms of India’s imports with Africa, these grew, ‘from US$ 587.5 million to US$ 18.8 billion between 1990 and 2009, whilst its exports to the continent increased from US$ 436.8 million to US$ 13.2 billion during the same period’. [4] In terms of imports from Africa these are, ‘predominantly crude petroleum, gold, and inorganic chemical products’ reflecting India’s growing energy demands.[5] Exports however are more diverse and, ‘include manufactured goods, machinery, transportation equipment, food, and pharmaceutical products’.[6] Concerning bilateral trade, ‘both the sides have set a target of $70 billion to be achieved by 2015’.[7]

The Indian government is fully aware of the asymmetrical access it has historically had with some Eastern African countries and thus, ‘it remains committed to build and strengthen its commercial and economic ties with other African countries (Southern and Western regions)’.[8]

There are several key initiatives to keep in when discussing the economic ties between the parties:

  • Duty Free Tariff Preference: This provides for unilateral duty free and preferential market access for exports from low income countries including 33 from Africa.[9]
  • Focus: Africa programme: The main objective of this is, ‘to increase the interaction between the two regions by identifying the potential areas of bilateral trade and investment’. The programme is with 24 African countries and is designed to promote Indian exports in textile item, drugs and pharmaceuticals, machinery, transport equipment, and telecom and IT.
  • IBSA initiative: This Tri-lateral Commission is between India, Brazil and South Africa and is designed to foster, ‘cooperation in fields like health, IT, civil aviation and defence’ as well as business exchanges in, ‘infrastructure, technology, sustainable development and energy’.[10]
  • India – Africa Project Partnership Conclaves: This is an agreement between various Indian ministries and banks with the Africa Development Bank to facilitate join projects between the parties.  This year alone, ‘More than 200 projects worth almost $30 billion in sectors like infrastructure, mining, agriculture, telecom and healthcare were discussed at the India-Africa conclave’. [11]
  • TEAM-9 Initiative- Focus on West Africa: As part of its effort to reach out to West Africa, this initiative is between 9 West African countries and India and seeks to share expertise, intellectual and physical resource as well as build economic opportunities.
  • Lines of Credit (LOCs):  LOCs to Africa include, ‘US$ 5 million each to the Eastern and Southern African Trade and Development Bank (PTA Bank), the Industrial Development Bank Ltd, Kenya, and the East African Development Bank (EADB)’.[12] Indeed, ‘by far the largest part of Indian ExIm expenditure is allocated to African countries, receiving 61% of Indian ExIm Bank operational loans in 2009’.[13]

In addition to these are numerous independent deals, too numerous to trace between the two. For example:

India’s Oil and National Gas Corporation (ONGC) acquired shares in oil exploration ventures in Libya and Nigeria, which account for 15 percent of India’s oil imports…It also invested in Sudan’s hydrocarbon sector (US$ 690 million) and in offshore drilling in Côte d’Ivoire (US$ 12.5 million)…Vedanta Resources invested about US$ 750 million in a Zambian copper mine project, while Arcelor Mittal, which is the leading global steel company, launched a US$ 1 billion iron ore mining project in Liberia ’.[14]

Stealth in nature and not as ‘loud’ as China, India is making significant in-roads into the continent. Indeed, ‘India benefits from its invisibility and has so far managed to escape external criticism of its approach’ in Africa.[15]

Overseas Development Assistance (ODA)

Formal development assistance strategies include the following:

  • ODA directly coordinated by MEA. By, ‘2007-2008, Indian development assistance under the MEA’s jurisdiction reached US$420 million’.[16]This aid is primarily deployed through the following:
    • Indian Technical and Economic Cooperation (ITEC) programme: Launched in 1964 as a bilateral programme of assistance of the Government of India, to provide technical support to developing countries.[17]
    • Aid to African countries through SCAAP (Special Commonwealth Assistance for Africa Programme): This programme is targeted to 19 African countries and has six ODA components namely,: civilian and defence training; projects and project related activities; deputation of Indian experts abroad; Study tours; Donation of equipment and  Aid for Disaster Relief.
    • Under IBSA: As part of this relationship, a communal fund was set up to fight, ‘poverty and hunger in the three countries’ with ‘US$1 million annual contribution per country, administered by the UNDP. [18] Development Projects under IBSA include small-scale agricultural management in Guinea Bissau, health care clinics in Cape Verde and HIV/Aids clinics in Burundi.[19]
    • Under Team 9: Under this umbrella, Africa is benefiting from technical skills and technology transfer from India in sectors such as, ‘agriculture, small- scale industries, pharmaceuticals and healthcare , information’ as well as support for infrastructure development. [20], [21]
    • Pan African E-network Project: This is a joint initiative with the African Union fully financed by the government of India and worth US 117 million[22]. The project is focused on creating linkages for tele-education and tele-medicine to make Indian expertise and facilities available to Africa. [23]
    • Cancellation of debt: India cancelled US$24 million worth of debt of the Heavily Indebted Poor Countries (HIPCs) of Ghana, Mozambique, Tanzania, Uganda and Zambia[24]
    • Concessional loans: India borrows, ‘in the international capital markets and then on-lends concessional terms to less credit-worthy countries in Sub-Saharan Africa and elsewhere’. [25] This a form of ODA as India essentially takes on the burden and risk of making access to credit more affordable for Africa.
    • Development focused LOCs and grants: India had  US$2 billion worth of grants and LoCs to African countries by 2010, ‘for projects as varied as IT training centre (Lesotho), rural electrification (Mozambique, Ethiopia), railways (Senegal, Mali),; and cement factory (Congo)’.[26]

This list is by no means comprehensive however it does indicate the increasingly important development partner role India is etching out for itself in Africa.

THE CHINA ISSUE

China and India don’t mix well it seems. Rivalry for Africa’s resources and land is merely a modern expression of an old relationship: ‘South-South cooperation emerged in the 1950s in the context of the common struggle of former colonies to attain independence and greater autonomy…China and India were both at the fore-front of this movement, and since then have been in competition with each other to become the leading representative of Southern states’. [27] More recently however, Indians resent the fact that the, ‘Chinese Communist Party (CCP) has laid claim to Arunachal Pradesh in the Northeast of India, where it maintains a heavy military presence’.[28] This already-existing diplomatic tension between the India and China has spilt over into their going-ons in Africa. India clearly sees China as competitor and is actively amping up its presence partly in response to the behemoth China has become on the continent. One can argue that India has an advantage over China as it is seen as more benign and less domineering than China. Further, India rightly points out that is does not have the Chinese habit of cozying-up with rogue African regimes such as Zimbabwe and Sudan. India has other advantages. Africa and India share an ‘anti-colonial tradition’ and historic linkages to the continent that make India well-placed to eventually have a more significant presence on the continent. However, this familiarly between India and Africa is not always positive. Racial tensions exist between the two parties, even in relations between Africans of Indian heritage and Black Africans. In Kenya one can certainly see the tensions exist because despite decades of living side by side, there is still very little integration between the two communities. This dynamic is not one China has to contend with. China is seen as a ‘fresh’ power with limited socio-historical connections and therefore less baggage weighing down the interaction. Articulating and addressing the complexity in Indo-African racial dynamic in one that the Indian government ought to be aware and seek to influence in a positive direction if it is to, ‘compete with China globally and emerge as a new economic superpower’.[29]

 

RESPONSE TO INDIA’S ENGAGEMENT IN AFRICA

Anti-Africa argument

Energy -hungry

Africa has serious reason to view India’s newfound interest in Africa with profound scepticism. While India is fond of pointing to China’s voracious appetite for African resources, it too has this appetite. Skim through exports of Africa to India and it will soon become clear that mineral fuels dominate the list. Frankly, ‘The numbers behind China and India’s seemingly insatiable thirst for energy are mind-boggling… India consumes 3 million barrels per day, two-thirds of them imported… India will eventually be importing around 7.4 million barrels per day’.[30] Clearly, Africa will be increasingly turned to as a source of that fuel with current trends indicating that India will keep Africa as a mere provider of raw material.

Grabbing land

The ever-sensitive land issue rears its ugly head here. India is, ‘tapping the emerging agricultural opportunities in Africa…to help Indian farmers reap the benefits of the huge potential that lie in Africa’.[31] Basically, India wants to farm on African soil, to feed Indian mouths, even as some African’s starve. In fact, ‘Indian farming companies have bought hundreds of thousands of hectares in Ethiopia, Kenya, Madagascar, Senegal and Mozambique, where they are growing rice, sugar cane, maize and lentils for their own domestic market back in India’.[32] Chaos would emerge if Africans were to see food cultivated on what they perceive to be their land being shipped abroad while they themselves starve. So there is reason for Africans to resist this Indian onslaught as there may very be no dividends for Africans to reap themselves.

Race issues

Already touched upon, some tension does exist in race relations between Indians and black Africans. If left unaddressed some tensions may spill over into open hostility. Bear in mind such spill-overs have previously occurred. In 1972 Uganda’s President Idi Amin, ordered the expulsion of Indians from the country. Frankly, this race issue is the elephant in the room that can be easily glossed over and left to fester. It is in the interest of the Indian government to be aware of this reality and mitigate the potentially negative flavour it could infuse into Indo-African relations.

Pro-Africa argument

Mutual benefits

India’s interaction with Africa is the most mutually beneficial Africa has with any other major power on the continent. The extent to which Indians have embedded themselves in the continent and to a certain extent identified with the continent may make both them and the Indian government better placed to invest thoughtfully on the continent when compared to China for example.

Relevant expertise

India has practical skills that can be easily applied to African needs. Indeed, ‘India’s expertise in agro-processing and small farm mechanization is of relevance to Africa’s farming industry and could help African countries address their food security crisis’.[33]  Further, India has the, ‘ability to supply appropriate technology and at highly competitive cost’.[34] Moreover, ‘India’s strengths in biotechnology, pharmaceuticals, railways and space research are relevant to Africa’.[35]

Sense of responsibility

Perhaps a benefit of the long-standing relationship India has had with Africa, India may to have deeper sense of responsibility over Africa than China or other emerging powers do. This may be reflected in the fact that, ‘Rather than employing Indian workers, and in contrast to Chinese practice, many Indian firms train local staff for particular projects’.[36] India is also interested in Africa being more than merely a provider of natural resources but also a processing and value addition base, ‘ONGC Mittal committed itself to building an oil refinery worth USD 6 billion in exchange for extraction concessions. India has also been using ExIm activity to support the development of power plants in countries where it is extracting natural resources’.[37] It appears as though some Indian investors are committed to seeing Africa benefits.

 

RECOMMENDATIONS

  • Make use of the commodity boom India is playing a role in fuelling: Africa is well placed to use the commodity boom of traditional, especially energy related exports, ‘to invest in basic needs and   infrastructure, and enhance its industrial and technological capacity’.[38]
  • Create new sources of revenue: The nature of  Indian (and Chinese) investment in Africa in new industries and sectors (e.g. agro-industries, SME’s, pharmaceuticals, textiles, IT, banking and retail) offers the chance of accelerating diversification and moving from an agricultural to a more industrial and technology-based economy.[39]
  • Make use of the competition between India and other powers especially China: African governments are well placed to make use of the multi-polar world India and others are creating for them. Africans thus, ‘have to bolster their bargaining strategies…minimize the risks and harness unique medium and long term opportunities’.[40] Africa is well-placed to try and get the best of all the options at its disposal.

[1] Brueggemann ,Rudy (2000), Indians of East Africa, http://www.rudyfoto.com/IndiansofAfrica.html

[2] Brueggemann ,Rudy (2000), Indians of East Africa, http://www.rudyfoto.com/IndiansofAfrica.html

[3] Invest India Initiative (2012) , India-Africa Partnership: Gaining Currency, http://www.indiaafricainvest.in/index.php?option=com_content&view=article&id=297&Itemid=457

[4] African Development Bank (2011), ‘India’s Economic Engagement with Africa’, Africa Economic Brief Volume 2, Issue 6http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/India%27s%20Economic%20Engagement%20with%20Africa.pdf

[5] African Development Bank (2011), ‘India’s Economic Engagement with Africa’, Africa Economic Brief Volume 2, Issue 6http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/India%27s%20Economic%20Engagement%20with%20Africa.pdf

[6] African Development Bank (2011), ‘India’s Economic Engagement with Africa’, Africa Economic Brief Volume 2, Issue 6http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/India%27s%20Economic%20Engagement%20with%20Africa.pdf

[7] Mittal, Sunil Bharti and Maxwell M Mkwezalamba(2012) , ‘India, Africa set trade target of $90 billion by 2015’, The Economic times, http://articles.economictimes.indiatimes.com/2012-03-17/news/31204825_1_sacu-trade-target-india-africa-business-council

[8] African Development Bank (2011), ‘India’s Economic Engagement with Africa’, Africa Economic Brief Volume 2, Issue 6http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/India%27s%20Economic%20Engagement%20with%20Africa.pdf

[9] Invest India Initiative (2012), ‘India’s Trade and Investment Initiatives in Africa’  http://www.indiaafricainvest.in/index.php?option=com_content&view=article&id=276

[10] African Review, India’s Initiatives To Enhance Regional And Bilateral Trade And Investment Relations

http://www.indoafrican.org/Indias%20Iniatied.pdf

[11]Munjal, Sunil Kant and Jonathan Wutawunashe(2012), ‘Projects worth $30 billion discussed at India-Africa conclave’, The Economic Times,http://articles.economictimes.indiatimes.com/2012-03-20/news/31214929_1_african-countries-india-africa-project-partnership-conclave

[12] Africa Business Pages, ‘India – Boosting Trade With Africa’ http://www.africa-business.com/features/india_africa.html

[13]Saidi, Myriam Dahman and Christina Wolf (2011), ‘Recalibrating Development Co-Operation: How Can African Countries Benefit From Emerging Partners?’  OECD Development Centre, http://www.oecd.org/dev/48450803.pdf

[14] African Development Bank (2011), ‘India’s Economic Engagement with Africa’, Africa Economic Brief Volume 2, Issue 6http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/India%27s%20Economic%20Engagement%20with%20Africa.pdf

[16] Bijoy, C. R. (2010) ‘India: Transiting to a Global Donor’, Special Report on South-South Cooperation http://www.realityofaid.org/userfiles/roareports/roareport_3ce2522270.pdf

[17] ITEC, Ministry of External Affairs,  http://itec.mea.gov.in/

[18] African Review, India’s Initiatives To Enhance Regional And Bilateral Trade And Investment Relations

http://www.indoafrican.org/Indias%20Iniatied.pdf

[19] White, Lyal (2010), ‘IBSA: Reflect, Realign & Redefine IBSA’, Redefine IBSA Academic Forum IPC, Brasilia April 2010, http://www.ipc-undp.org/pressroom/files/ipc150.pdf

[20] African Review, India’s Initiatives To Enhance Regional And Bilateral Trade And Investment Relations

http://www.indoafrican.org/Indias%20Iniatied.pdf

[21] Bijoy, C. R. (2010) ‘India: Transiting to a Global Donor’, Special Report on South-South Cooperation http://www.realityofaid.org/userfiles/roareports/roareport_3ce2522270.pdf

[23] Invest India Initiative (2012) , India-Africa Partnership: Gaining Currency, http://www.indiaafricainvest.in/index.php?option=com_content&view=article&id=297&Itemid=457

[24]Bijoy, C. R. (2010) ‘India: Transiting to a Global Donor’, Special Report on South-South Cooperation http://www.realityofaid.org/userfiles/roareports/roareport_3ce2522270.pdf

[25] Bijoy, C. R. (2010) ‘India: Transiting to a Global Donor’, Special Report on South-South Cooperation http://www.realityofaid.org/userfiles/roareports/roareport_3ce2522270.pdf

[26] Bijoy, C. R. (2010) ‘India: Transiting to a Global Donor’, Special Report on South-South Cooperation http://www.realityofaid.org/userfiles/roareports/roareport_3ce2522270.pdf

[27] McCarthy, Tom (2011), ‘Assessing China and India’s New Role in Africa’, http://www.e-ir.info/2011/07/26/assessing-china-and-india%E2%80%99s-new-role-in-africa/

[28] Philipp, Joshua (2011), ‘India-China Rivalry Heads to Africa’ Epoch times,

http://www.theepochtimes.com/n2/world/india-china-rivalry-heads-to-africa-56945.html

[29] Sharma, Spandan (2010), ‘India & Africa: Colonial Cousins, and more…’ http://simcwire.simc.edu/?q=node/3545

[30] Bloomberg BusinessWeek (2011), ‘China and India’s Growing Energy Rivalry’, http://www.businessweek.com/globalbiz/content/dec2010/gb20101215_795065.htm

[31] The Economic Times (2011), ‘African nations offering land for free to Indian farmers’

http://articles.economictimes.indiatimes.com/2010-08-11/news/27580718_1_indian-farmers-sudan-and-ethopia-number-of-indians-farming

[32] Nelson, Dean (2009), ‘India joins ‘neocolonial’ rush for Africa’s land and labour’, The Telegraph,

http://www.telegraph.co.uk/news/worldnews/asia/india/5673437/India-joins-neocolonial-rush-for-Africas-land-and-labour.html

[33] African Development Bank (2011), ‘India’s Economic Engagement with Africa’, Africa Economic Brief Volume 2, Issue 6http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/India%27s%20Economic%20Engagement%20with%20Africa.pdf

[34]African Development Bank (2011), ‘India’s Economic Engagement with Africa’, Africa Economic Brief Volume 2, Issue 6http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/India%27s%20Economic%20Engagement%20with%20Africa.pdf

[36] Price, Gareth (2011) ‘For the Global Good: India’s Developing International Role’, http://www.chathamhouse.org/sites/default/files/public/Research/Asia/r_indiarole0511.pdf

[37] Saidi, Myriam Dahman and Christina Wolf (2011), ‘Recalibrating Development Co-Operation: How Can African Countries Benefit From Emerging Partners?’  OECD Development Centre, http://www.oecd.org/dev/48450803.pdf

[38] Sumit, Roy (2012), ‘China and India, the ‘Emerging Giants,’ and African economic prospects’, http://www.globalpolicyjournal.com/articles/world-economy-trade-and-finance/china-and-india-%E2%80%98emerging-giants%E2%80%99-and-african-economic-pros

[39]Sumit, Roy (2012), ‘China and India, the ‘Emerging Giants,’ and African economic prospects’, http://www.globalpolicyjournal.com/articles/world-economy-trade-and-finance/china-and-india-%E2%80%98emerging-giants%E2%80%99-and-african-economic-pros

[40] Sumit, Roy (2012), ‘China and India, the ‘Emerging Giants,’ and African economic prospects’, http://www.globalpolicyjournal.com/articles/world-economy-trade-and-finance/china-and-india-%E2%80%98emerging-giants%E2%80%99-and-african-economic-pros

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