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August 22, 2012

Africa's other big BRIC – India

August 22, 2012
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Some nice analysis of India’s African footprint in a new paper by Sumit Roy (right) in LSE’s Global Policy journal (ungated – props to them).Dr Sumit  Roy Picture

India’s exchange with Africa is rooted in the precolonial period with subsequent developments in the colonial and the post-colonial era. In the 18th century the territories were tied through migration and commerce. Indian links with business contacts in East Africa were utilised by traders through imports, exports and shipping.  India’s later ideological support unfolded through its challenge to racism. This is exemplified by Gandhi’s ‘Satyagraha’ movement in South Africa (1906-14) to fight for the rights of Indians. However, only the future will tell if Gandhi’s vision of the relationship will prevail and if “the commerce between India and Africa will be of ideas and services, not of manufactured goods against raw materials after the fashion of western exploiters.”

The basis of Africa policy by India, after its independence (1947), was laid down by the Prime Minister, Jawaharlal Nehru. This occurred on two fronts: first, the struggle against colonisation and racial discrimination in South Africa; second, to supporting People of Indian Origin (PIO) to confront similar problems. Over the last four decades, India has given more than US $2 billion in technical assistance to countries in the South, with the bulk going to Africa.  In the last decade a number of initiatives have also promoted trade with the African private sector. This coexisted with the public sector. Most of the imports consisted of agricultural products, minerals such as copper, and oil, while exports comprised textiles, pharmaceuticals and engineering products.

India-Africa links climaxed in the India-Africa Delhi Summit held in April 2008 with the participation of 14 African countries. The aim was to reinforce firm partnerships in the core areas of trade, energy and cooperation and on global issues such as the UN reforms, terrorism and climate change.  However, India’s own interests were made explicit by its Petroleum Minister, Murli Deora, who declared “Africa is pivotal to our energy security and we have decided to have a sustained engagement with them.”

The rhetoric within the Delhi Declaration and the Framework for Cooperation, both of which emerged from the summit, set out to enhance mutual development. Firstly, they included a political document covering bilateral, regional and international issues of shared interest (exemplified by UN reforms, climatic change, WTO and international  terrorism); secondly, they centred on cooperation in major areas to stimulate development (education, science and technology, agricultural productivity, food security, industrial growth, africa_india-foruminfrastructure health). India’s pledges were reiterated at the second India-Africa Summit in Addis Ababa, Ethiopia in May 2011 with goals of boosting trade from $45 billion in 2011 to $70 billion by 2015, providing an additional $500 million of aid to the $5.4 billion already promised, and building capacity. Despite these promised engagements India still lags behind China, whose trade with Africa is over $130 billion.

In terms of FDI, India, with strong historical ties with Eastern and Southern Africa, and a sizable diaspora, has exerted leverage by attracting new investment to Africa. This has been supported by its access to foreign reserves and its decision to lift regulations and controls on firms operating abroad. It has also been investing in new sectors including financial, food processing and light manufacturing. This has coexisted with the aggressive use of state-owned development banks to invest heavily in key sectors in countries like Nigeria and Sudan; a policy that India hopes will secure its strategic economic interests centred on Africa’s oil, gas and other natural resource-based industries.

Overall, Indian companies have been making major investments in copper mining, as in Zambia, and iron ore and steel refining, as in Liberia and Nigeria. Investment by Indian companies also extends to infrastructure. To illustrate, state-owned infrastructure and engineering companies RITES and IRCON have supported Africa’s rail and road development and its engineering companies. Furthermore, the recent investment pattern in Africa indicates future possibilities in industries, chemicals and pharmaceutical production, iron and steel mining, textiles, transport, banking and the retail sector. This has been led by major private (eg. the Tata Group and Mittal Steel) and public (e.g. RITES and IRCON) companies. Moreover, the Indian state has supported the public companies through credit (e.g. Exim). The hope of building critical human capital (health and education) has also been aroused by the creation of an Indian pan African e-network to link 53 African countries to Indian universities and hospitals.

2 comments

  1. A very useful historical trade perspective of the relationship between the continents and India. One way of measuring the success is to look at the quantity of the whole deal.That can help in understanding the dynamics and the need. However it is important to measure the qualitative impact of India`s investment in Africa- how and to what extent does the investment from India impact Human development in Africa.It will also be useful to make some comparison with China given much misgivings about the role of China and its investments in Africa.
    Is India qualitative different because it is perusing a more enlightened economic agenda than China.? I will need far more than the above report to be convinced.
    Is Mr Sumit ready for the challenge?

  2. Thanks, Pushpanth,for your appreciation and thought provoking ideas.Actually, the Oxfam blog extracted aspects of my paper on China,India and Africa. The full paper is available in ‘Global Policy’ which one can get by clicking the link on the top of the article. It covers some of the points you raised. Basically, both China and India are pursuing their own strategic goals and it is really up to the African nations and their people to respond to the challenges which stem from the relationship.

    Sumit Roy

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