Investment in SMEs Hold Key to Africa’s Growth

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This article first appeared in my weekly column with the Business Daily on August 19, 2018

I am often asked this question, ‘What will it take for Africa to develop?’ And my answer is simple: Invest in Micro, Small and Medium Enterprise (MSMEs) whether formal or informal. Unknown to many, they account for an increasing share of growth in GDP and jobs. Yet the typical response is, ‘Oh but they’re so high risk, we can’t possibly invest in that segment.’ And this is the issue. MSMEs are the most marginalised in terms of access to funds and technical support, across the continent. Then everyone sits around wondering why economic growth in Africa doesn’t translate to equitable growth.

A trader arranges her products for sale on Customs Road in Mombasa last April.


In the past year or so in Kenya, we’ve seen private sector being squeezed out of credit by government. The interest rate cap created impossible risk margins and actually inverted monetary policy. Normally, a reduction in interest rates should expand credit provision, yet in the context of an interest rate cap, this logic fails. Lower interest rates lower the risk ceiling of credit provision and actually contracts liquidity. And reverse is true too. So where are we? We’re in a situation where monetary policy does not follow traditional logic streams, and as a result, has led to the Kenyan government to push private sector out of credit streams due to the interest rate cap and their own aggressive and substitutive appetite for credit.

So the question becomes: Given these extenuating circumstances, how can we revive credit to the private sector? There are two answers to that question. The first is incentives. Government has to create an incentives structure that extends credit to MSMEs despite the interest rate cap. The cap has led to a notable decline in credit provision to private sector. To stem this trend government has to create unique packages that allow private sector to access credit in the context of personalised assessment. The biggest problem with risk assessment at the moment is that it’s often done by junior officers with limited experience and who face hard and unforgivable targets. This has to change. Credit assessment should be done by the more experienced individuals who can understand the nuances of running an MSME. We need a holistic upgrade in assessing risk that leads to intelligent incentives provision. Because, if MSMEs are not financed, the economy is not financed. Government and financiers must create an incentives structures that drives funds to the MSMEs who create employment and fuel the economy.

Image result for sme kenya


The second answer is development expenditure by government. First, government MUST prioritise development over recurrent expenditure. And that’s not enough, government should create structures that enable indigenous and domicile private sector to absorb the bulk of development spending. A failure to do so will translate to Kenyan taxpayers paying for services and goods that benefit outsiders. Let government ensure that the bulk of development spending goes to indigenous companies, particularly MSMEs. Only then will Kenyans feel the POWER of government spending. And in doing so, government will force MSMEs to improve their performance and develop the capacity to meet high level targets.

In short without MSMEs accessing credit and being the target of government development spending, not much will change. There must be a fortitude of spirit and determination of mind that builds the domestic private sector.

 Anzetse Were is a development economist;



The economic cost of marginalisation

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This article first appeared in my weekly column with the Business Daily on January 29, 2017

Over the past week I have been travelling around the country and have visited what can only be described as grossly neglected areas of the country. The difference between the state of infrastructure, water and sanitation systems, schools and even internet access in areas which have enjoyed government and private sector investment, and those which have not, is truly stark. And although devolution has brought some attention to counties and communities locked in neglect, a pattern of leaving ‘those areas’ to the NGO world and food relief organisations still lingers. This chronic marginalisation is costing the country millions.

Firstly, the lack of investment in human capital mainly in the form of education, healthcare as well as physical and food security has implications on productivity. In failing to ensure that every Kenyan is well fed and has access to basic healthcare and schooling, the country has written off millions of Kenyans, their ingenuity, their potential and their ability to develop the country. Individuals who are sick, poorly educated and malnourished are far less productive than those who are healthy, well-educated and food secure. The neglect has meant that employment-creating businesses were not opened, important innovations not discovered and ingenuity not tapped into, all of which could have had a positive impact on the country’s economic development.

Image result for human capital


Secondly, there is a notable lack of support to businesses in vast swathes of the country. In those areas, businesses often fail to become successful due to external factors, not due to a lack of intelligence, determination or business acumen. Many good business ideas die due the lack of transport infrastructure and electricity rather than because the business idea was a poor one. If Kenyans marvel at how Thika Highway unlocked entrepreneurship along that road alone, imagine what a truly robust transport network could deliver. Business in many parts of the country do not take off due to external factors and as a result entire regions of the country fail grow and contribute to the GDP and wealth of the nation.

Finally, even if small pockets of private sector activity thrive in neglected areas, they probably function at subpar levels, unable to expand and grow optimally. Not only do they have to live with the reality of poor transport and energy networks, finding skilled labour for business operations is close to impossible due to low levels of education and a high disease burden. And if individuals manage to earn an education in such areas, they often leave the region as soon as feasibly possible. As a result, businesses in such regions operate below potential leading to subpar contributions to the economy.

Image result for poverty kenya


However, as with all clouds, there is a silver lining. There is a grit, resolve and spirit of determination in areas that have been forgotten. While some have resigned to their lot, others have a tenacious spirit determined to succeed. But what is clear is that there is a need for creative investment strategies to develop remote regions executed through blended financing and alliances of public, private and civil society actors. It is clear that just one type of financing or support is inadequate. There is a need for professionals and business people to step out of their bubbles and leverage their combined financial and skills assets towards shared interests. Without the pooling of resources and talent, the potential of millions of Kenyans will continue to go waste and fail to build the personal and communal wealth the country so desperately needs.

Anzetse Were is a development economist;


What is really going on with the Kenyan Economy? TV Interviews

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On November 13, 2016 I spoke on a panel on KTN on the disparity between Kenya’s GDP growth statistics and the lived economic reality of Kenyans.

On November 9, 2016 I was part of a two person panel on K24 discussing the state of the Kenyan economy.

What Trump means for Africa

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This article first appeared in my weekly column with the Business Daily on November 13, 2016

The United States shocked the world (and themselves) by electing Donald Trump as the next President of the country. While the USA tries to unpack what this means for them as a country, Africa should ask similar questions as well. Trump barely mentioned the continent during his campaigning and the little that was said was disparaging. For example he tweeted ‘Every penny of the USD 7 billion going to Africa as per Obama will be stolen – corruption is rampant!’. Clearly he seems to have a pessimistic view of the continent, so what would a Trump Presidency mean for Africa?


The first is insularity. The USA is number one for Trump and his focus will be targeted on his own country and fixing domestic problems. There may be a contraction of the presence of the USA as an aggressive global player in the current international order. For example, Trump stated that North Korea should be China’s problem to solve, not USA’s. And Trump has openly rejected the notion that the USA should be the world’s policeman. What this means for Africa is that we can expect the USA to be far less involved in African affairs than Obama has been.

For example, analysts make the point that the Obama administration has overseen an expansion of American military might in Africa. An investigation found that the United States maintains at least 60 bases or military outposts throughout Africa. Will Trump find it necessary to maintain such a heavy and expensive military presence on the continent? I would anticipate continued presence in areas in Africa that are hotspots of Islamist terrorism such as Al-Shabaab in Somalia and Kenya given how important defeating such entities such as ISIS are to him. However, there may very well be a reconfiguration and roll back of military on the continent in other areas so that the money can be channelled elsewhere. Thus on one hand Trump may support extreme militarized responses to potential terror threats in pockets of Africa, but a withdrawal in less tense areas.

Secondly, Trump seems to be of the view that Africa is corrupt and that money that currently goes to Africa would be better spent on the USA’s own pressing needs. Perhaps Africa should expect reductions in funding to entities such as USAID and even the removal of programmes such as President’s Emergency Plan For AIDS Relief (PEPFAR) may be on the table. Further, given Trump’s position on climate change, the USD 34 million programme Obama announced to help developing countries strengthen their climate resilience may be scrapped.

Image result for africa


Finally, one of the points Trump has made clear is his intention to renegotiate trade agreements for the benefit of the USA. He is of the view that current trade regimes are costing the USA jobs and income. Although his statement have been mainly targeted at countries such as China, Africa should not assume the continent will not be affected. As Quartz Africa points out, the African Growth and Opportunity Act (AGOA) which gives African exports to the US preferential treatment, expires in 2025. Trump’s administration will need to begin negotiating its renewal soon after he takes office. I think Africa should prepare itself for, at a minimum, much harder negotiations with the Trump administration than was the case under Obama.

In short, Africa should be aware of the fact that Africa has been not a priority for Trump thus far, and although his administration will have to address the continent, the generosity Africa benefited from under Obama will likely end under Trump. Further, Trump’s election as President has deeply divided the USA and he will need to expend effort addressing this divide, leaving him far less time to think about Africa.

Anzetse Were is a development economist;

The State of Enterprise in Kenya

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This article first appeared in my weekly column with the Business Daily on October 30, 2016

Last week the Kenya National Bureau of Statistics (KNBS) released the National Micro, Small and Medium Establishment (MSME) Survey. KNBS defines micro-enterprises and having less than 10 employees; small enterprises having 10 to 49 employees and medium sized enterprises as having 50 and 99 employees. In terms of licensed versus unlicensed business, the survey found that there are 1.56 million licensed MSMEs and 5.85 million unlicensed businesses. With regards to employment, number of persons employed by MSMEs is approximately 14.9 million with the unlicensed enterprises contributing 57.8 per cent. Overall, micro sized enterprises accounted for 81.1 per cent of employment reported in the MSMEs. The value of the MSME’s output is estimated at KES 3,371.7 billion against a national output of KES 9,971.4 representing a contribution of 33.8 per cent in 2015. In terms of distribution of MSMEs by sex of business owners, the survey found out that 47.9 per cent of the licensed establishments were owned by males and 31.4 per cent were owned by females. Further, 60.7 per cent of unlicensed establishments were solely owned by females. In terms of type of activity, repair of motor vehicles and motor cycles accounted for more than half of the total persons working in MSMEs.

Unsurprisingly 80.6 per cent of establishments reported family/own funds as the main source of start-up capital while 4.2 per cent of business owners got loans from family and/or friends to start their business. What was interesting however is how income generated was used. Micro establishments reported spending 44.4 percent of income on household and family needs. Medium and small establishments spent significantly high part of their net income on investment at 63.4 and 69.5, per cent, respectively. 93.8 percent of the unlicensed businesses reported a monthly turnover of less than KES 50,000 and none had a turnover above KES 1,000,000. Licensed establishment with a monthly turnover between KES 50,000 to KES 200,000 constituted 31.3 per cent. More than half of the licensed medium establishments recorded a turnover of more than KES 1,000,000.

Image result for business Kenya


While useful there are several gaps in the survey. The first and most obvious is a failure of analysis with a focus on the informal sector. The survey used the terms licensed versus unlicensed, with no clear focus on whether the unlicensed segment is considered informal. All the survey has in terms of registration data is that 78.9 per cent of the businesses were not in the registers maintained by the counties. However, the KNBS also makes the point that a county license (also referred to Single Business Permit) is a requisite for all enterprises. Licensing is not a sufficient indicator form informality, as there may be licensed enterprises that still operate informally with regards to tax compliance, adherence to minimum wage, and submission of statutory payments.

However, what was useful in terms of extrapolating informality, is that the survey noted that all unlicensed businesses in the MSME sector are micro- establishments. It would not be a stretch to assume that unlicensed businesses are informal, but as mentioned, licensed business can also operate informally. The important point here perhaps is that informal firms tend to be micro in size.

Image result for business Kenya


The second concern with the survey is the paltry data on tax compliance. The survey makes the point that licensed MSMEs pay a monthly average of KES 33.8 billion in taxes compared to KES 294.0 million paid by unlicensed businesses. Again other features of formality are not clearly delineated thus one can only extrapolate that a significant portion of income earned by unlicensed establishments is not taxed.

Finally, the issue of productivity was not addressed in the survey. There is no indication as to whether licensed enterprises are more productive than unlicensed ones, or which of the micro, small or medium enterprises are the most productive.

In short this MSME survey is a step in the right direction however it is a shame that KNBS did not use this opportunity to truly delineate between formal and informal economic activity. This can be seen in the fact that the Economic Survey released by KNBS this year indicated 82 percent of employed Kenyans are engaged in the informal sector. Yet in this survey unlicensed enterprises account for only 57.8 percent of those employed. In the future, it would be useful for KNBS to focus on formality versus informality more so than licensed versus unlicensed.

Anzetse Were is a development economist;




What to expect in Kenya’s economy in 2016

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This article first appeared in my weekly column with the Business Daily on January 10, 2016

The year 2015 was instructive for the Kenyan economy and government. So what is in store for the economy in 2016? There are key factors that will bolster economic growth as well as factors that may threaten growth.


Inflation started inching upward last year and reached 8 percent in December 2015, above the 7.5 percent limit preferred by the Central Bank of Kenya (CBK). The bulk of this inflation has been import inflation associated with the KES weakening against the USD pushing up import bills. This spillover effect may continue to drive the cost of imports upward fuelling more rises in inflation. Therefore, the CBK should continue to keep an eye on inflation and take action to pull inflation below the 7.5 percent limit when needed.


Interest Rates

Part of the conversation that dominated conversation about the economy at the end of last year was rising interest rates. A combination of factors such as rate hikes to control KES depreciation, aggressive borrowing from government in domestic markets and high T-bill rates contributed to some banks signaling intent to raise rates. Sadly the news does not get better this year; as mentioned, inflation is at 8 percent and as this is above the preferred CBK limit, it is possible that the CBK will raise interest rates to try and manage upward pressure on inflation. Further, as the US economy continues to recover, it may lead to a further strengthening of the dollar against the KES. Thus again, as we saw last year, CBK may raise interest rates to manage KES depreciation against the dollar. In terms of any foreign borrowing in which government would want to engage this year, IMF’s Lagarde makes the point that the increase of interest rates in the USA has already contributed to higher financing costs for some borrowers, including those in emerging and developing markets. Therefore, government should be ready to borrow on more expensive terms in international markets this year. Also bear in mind that government’s management of the Eurobond has negatively impacted investor confidence in government fiscal management; this is likely to translate into more expensive borrowing terms as well.

Intensification of Political Activity

It is almost certain that electioneering will start this year with politicians beginning to build momentum for elections next year. Sadly in Kenya, intensification of political activity tends to be correlated with lower growth. Luckily this is a threat that can be managed if politicians on all sides of the political divide are responsible in comments made and avoid negative political sensationlisation of issues in their bid to garner votes.


The good news for the economy is that key infrastructure projects are progressing well. In terms of transport infrastructure, the construction of the standard gauge railway in Kenya is ahead of schedule. Further there are updates and expansions in the country’s airports and ports and the tarmacking 10,000 kilometres of new road is ongoing. Secondly, important strides are being made in energy infrastructure; solar power projects will add 1 gigawatt of power to the grid, there is a 310-megawatt wind farm in Lake Turkana as well as the drilling of 20 new geothermal wells. The implications of how such investment, some of which complete this year, could fuel economic growth is apparent.


Ease of doing business

Kenya climbed up 21 places on the World Bank’s Ease of Doing Business Index to stand at 108 in 2016. This is a positive sign to investors both local and abroad in terms of Kenya’s attractiveness as a business and investment destination. It is important that stakeholders keep the positive momentum going in order to bolster Kenya being perceived as san attractive country in which to invest.

Anzetse Were is a development economist;


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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.


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.


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.


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]



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.



  • 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,

[2] Brueggemann ,Rudy (2000), Indians of East Africa,

[3] Invest India Initiative (2012) , India-Africa Partnership: Gaining Currency,

[4] African Development Bank (2011), ‘India’s Economic Engagement with Africa’, Africa Economic Brief Volume 2, Issue 6

[5] African Development Bank (2011), ‘India’s Economic Engagement with Africa’, Africa Economic Brief Volume 2, Issue 6

[6] African Development Bank (2011), ‘India’s Economic Engagement with Africa’, Africa Economic Brief Volume 2, Issue 6

[7] Mittal, Sunil Bharti and Maxwell M Mkwezalamba(2012) , ‘India, Africa set trade target of $90 billion by 2015’, The Economic times,

[8] African Development Bank (2011), ‘India’s Economic Engagement with Africa’, Africa Economic Brief Volume 2, Issue 6

[9] Invest India Initiative (2012), ‘India’s Trade and Investment Initiatives in Africa’

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

[11]Munjal, Sunil Kant and Jonathan Wutawunashe(2012), ‘Projects worth $30 billion discussed at India-Africa conclave’, The Economic Times,

[12] Africa Business Pages, ‘India – Boosting Trade With Africa’

[13]Saidi, Myriam Dahman and Christina Wolf (2011), ‘Recalibrating Development Co-Operation: How Can African Countries Benefit From Emerging Partners?’  OECD Development Centre,

[14] African Development Bank (2011), ‘India’s Economic Engagement with Africa’, Africa Economic Brief Volume 2, Issue 6

[16] Bijoy, C. R. (2010) ‘India: Transiting to a Global Donor’, Special Report on South-South Cooperation

[17] ITEC, Ministry of External Affairs,

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

[19] White, Lyal (2010), ‘IBSA: Reflect, Realign & Redefine IBSA’, Redefine IBSA Academic Forum IPC, Brasilia April 2010,

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

[21] Bijoy, C. R. (2010) ‘India: Transiting to a Global Donor’, Special Report on South-South Cooperation

[23] Invest India Initiative (2012) , India-Africa Partnership: Gaining Currency,

[24]Bijoy, C. R. (2010) ‘India: Transiting to a Global Donor’, Special Report on South-South Cooperation

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