May 28, 2011

Asia’s Race in Africa: What it holds for India?

Guest Column: By Dr. B.R. .Deepak

As India and China establish themselves as the two poles of world economic growth, they have started to influence the growth patterns in many countries, and the African continent is no exception. Interestingly, there are strong possibilities that Africa will emerge as yet another pole of world economic growth given the size of its huge market and natural resources. This has also lead the Asian giants to scramble for markets in the African continent, billionairefinancier George Soros has even pronounced these countries as "Africa's new colonialists" who he said were "exploiting the world's poorest continent in the same way as its old European masters." This may be an exaggeration, however, the Asian race in Africa is for real, and has been reflected in the so called India-Africa and China-Africa summits. This also demonstrates that India and China would like to forge partnership with Africa and handle this partnership with utmost care owing to latter’s huge economic and political capital. The probability of a successful partnership especially for India appears possible as African countries have many things in common with India. It is here that India can play a vital role in ‘capacity building’ as pronounced by the Indian Prime Minister Manmohan Singh during the second India-Africa Forum Summit on May 24, 2011 in Addis Ababa, the Ethiopian capital. The first Summit was held in April 2008in New Delhi.

In Addis Ababa, the Indian Prime Minister announced that "India will continue to support efforts at infrastructure development, regional integration, capacity building and human resources development in Africa." To this effect India promised 5 billion US dollars for the next three years for Africa’s infrastructure development and 700 million US dollars to establish institutions and training programs. Many experts view these summits as a move to catch up with China’s influence in that region and answering India’s impending quest for energy security. It may be recalled that China initiated similar summits with Africa since 2006 in Beijing; the second China-Africa summit was held in 2009 in the Egyptian resort of Sharm el-Sheikh. During the summit China pledged 10 billion dollars in aid to the African countries and canceled an accumulated 2.8 billion US dollars of debt for 35 African countries. The Chinese investment in Africa is estimated to be around 10 billion US dollars.

India has a historical relationship with Africa, especially during the post-colonial period. The very concept of non-cooperation and civil disobedience by Mahatma Gandhi was experimented in Africa itself during the late 19th century. However, the relationship swung from a period of great emotional and political solidarity in the 1950s and 1960s to selective engagement in the 1970s and 1980s. If we carefully analyze the Delhi Declaration issued at the close of April 2008 Summit, it is clear that India has diversified and fine-tuned its policies in political, security related, economic, science and technology, human resource development, social, cultural and other areas of mutual interest. This is a strategic partnership that would be based on the fundamental principles of equality and mutual respect. This is evident from the establishment of the 3 Africa Divisions since 2003 by the Ministry of External Affairs, India.

As regards Africa’s place in world economy, India firmly believes that like India and China, Africa is yet another "engine of world economic growth". If we talk about Africa’s integration into the global economy, it obviously includes various aspects of the globalization process, such as trade, industrialization, FDI and capital flows. A resource rich Africa is already having 108 billion dollar trade with China and 45 billion dollar with India and over 50 billion with the ASEAN. Both India and China have heavily invested in Africa’s energy resources, infrastructure development, telecommunications and mining.

In 2007, India invested $13.6 billion abroad, of which 2.3 billion has gone into Africa. The trade and investment from two of the world’s fastest growing economies going to Africa could significantly facilitate Africa’s integration into the global economy and must be translated into greater growth in Africa. If we look at the Asia- Africa trade, Africa’s primary commodity exports to Asia account for 86% of its total exports to Asia. Its processed imports, including manufactured products and food products, account for 80% of its total imports from Asia. In other words Africa provides natural comparative advantage on raw materials and resource-based products.

Since the first India-Africa summit in New Delhi in 2008, trade between the two partners has increased substantially. As regards India’s quest for energy security, yes, energy security is an essential and very important component of India-Africa partnership, for the African light crude oil, and gas account for 12% and 8% of the global oil and gas reserves. Presently 30 percent of India‘s energy needs are met by oil, with 70 percent of oil supply being imported. Much of the remaining 70 percent of energy demand is met by domestic coal reserves. If the reports of the International Energy Agency are to be believed, it is estimated that in order to maintain and sustain its current growth trajectory of 8% per annum, India will have to increase its energy consumption by at least by 3.6 percent annually, implying that if India’s energy demand would be doubled by 2025 and it would import 90 percent of its petroleum supply. Seen in this light, the India-Africa energy security becomes an important component of India-Africa relations.

As far as rules of engagements in Africa are concerned India and China have adopted equally divergent strategies. If China has adopted the model of ‘vertical integration’, India had gone for ‘horizontal integration’ with the African economies. It is true that by relying on government backing and economic strength, Chinese companies are often able to outbid competitors for procuring contracts from local governments. However, most of the Indian firms in Africa are either privately owned or under mixed private-public ownership. They are less vertically integrated, and engage in far more sales to private African enterprises.

The Indian government is also actively supporting Indian businesses in Africa through various government institutionssuch as the Export-Import Bank of India, FICCI, CII; it has been providing soft loans, cheap generic drugs and market access to goods from Least Developed African countries into India on nominal tariff rates. The case of Indian pharmaceutical companies doing business in Africa is such an example. Ranbaxy, has provided reasonably priced medicines, particularly Antiretroviral (ARV) drugs, to several African countries including Nigeria, Kenya and Zambia. Cipla another Indian pharmaceutical giant, provides HIV/AIDS drugs to 1 in 3 patients in Africa.

The ‘horizontal integration’ model may not have won many projects for the Indian companies,but has certainly earned enormous goodwill for India in Africa. There are asymmetries in the economic relations between Asia and Africa. For example, though the African export to Asia account for 25% of its global exports, it accounts only 1.6% of its global trade. Secondly, Africa’s FDI in Asia is abysmal; thirdly, African textile and apparel industry is competing with the extremely competitive Chinese and Indian textile industries globally. Therefore, it becomes imperative that the South-South economic relationship address asymmetries. Some of the measures could be reduction in tariffs on Africa’s leading exports; helping Africa in strengthening its basic market institutions, and governance; Sectoral capacity building is vital. For example, Africa’s large imports of diamonds from India could be processed in Africa itself by inviting Indian investment in this sector instead of importing processed diamonds from India. Also, Africa needs to be integrated with the global value-chain.

For example, cotton exports from Africa are increasingly being complemented by intermediate materials, say fabrics supplied by the Asean countries to apparel producers in Africa.Politically too, Africa is equally relevant to India as sub-Saharan Africa holds over 50 seats in the UN Security Council. Both have reiterated that there is need for urgent and comprehensive reform of the United Nations, in particular, the expansion of the UN Security Council, in both permanent and non-permanent categories of membership. India would also like to bolster diplomatic and security presence in Africa. The anti-piracy patrols in the key shipping routes of the Gulf of Aden and the Indian Ocean since 2008 are pointers in this direction. The routine India-Africa summits will definitely make this relationship healthier and stronger, equally important for India is to engage individual African countries at various levels and forge even closer ties with them.

Dr. B R Deepak is professor of Chinese and the Dean of School of Languages, Doon University, Dehradun India, he could be reached at

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