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India looking to carve out a niche in Africa to counter China’s clout

India looking to carve out a niche in Africa to counter China’s clout
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First Published: Tue, Apr 08 2008. 12 19 AM IST

Updated: Tue, Apr 08 2008. 12 19 AM IST
New Delhi: A fortnight ago, as he was flying back from Luanda to Addis Ababa after a tour of Namibia and Angola, minister of state for commerce and power Jairam Ramesh got talking to the Air Angola pilot. The pilot told him that he had two grown-up daughters called Indira and Shrimati.
“I knew Indira had been named after Indira Gandhi,” Ramesh says, “but when I asked the pilot why he had chosen Shrimati, he asked me, ‘Don’t you know that your former prime minister’s name was Shrimati Indira Gandhi?’”
The anecdote may be humorous, but Ramesh’s visit to Africa was serious business. India is beginning to look at Africa as a trade partner, a source of energy, and a happy hunting ground for its companies that are beginning to look for opportunities outside the country.
This seriousness is evident in the importance being assigned by the country to the first India-Africa Forum summit, a two-day meeting that will start on Tuesday and , including South African President Thabo Mbeki and African Union Commission’s chairman Alfa Oumar Konare. The summit will be inaugurated by Prime Minister Manmohan Singh.
The government has asked all officers of the rank of joint secretary and above, at least in the ministries of commerce and external affairs, to attend the inauguration at the Capital’s Vigyan Bhawan.
India, it is evident, wants to better its economic and diplomatic relations with Africa in a geopolitical game where China is the unnamed opponent.
Discovery of Africa
From medicines to mining, energy to diamonds, and coffee to horticulture, India’s discovery of Africa is on.
In Cote D’Ivoire, Tata Steel Ltd is investing $1.5 billion in an iron ore plant to help source raw material for making steel. In the Arlit region of Niger, a little-known firm from Mumbai called Taurian Resources Pvt. Ltd recently won a contract to mine 3,000 sq. km of the southern Sahara desert for uranium. In Ethiopia, Bangalore-based Karuturi Networks Ltd grows roses for export to the US, among other markets. And nine out of 10 di-amonds sourced from Africa’s mines are sold to India’s vast diamond finishing industry.
India’s presence in Africa dates back to the British Raj, when indentured labour from the country was used to work sugar cane farms in South Africa. Gujarati communities followed to set up shop, mainly in east Africa.
Mahatma Gandhi’s 21-year stint in South Africa, from 1893 to 1914, when he fashioned the non-violent resistance movement called satyagraha, encouraged an independent India to support anti-apartheid groupings such as the African National Congress (ANC) in South Africa and the South-West African People’s Organization (SWAPO) in erstwhile South-West Africa (today’s Namibia).
However, as India embarked on its liberalization programme in the early 1990s, coinciding with the end of white rule in South Africa in 1994, it shifted its focus to the West. And it simply lost interest in Africa. That didn’t just happen in terms of diplomatic relations; it happened even in terms of trade and commerce.
“In its engagement with the world, India Inc. has remained far too enamoured of Europe and the US; they simply don’t understand the potential of the African market,” says Malvinder Mohan Singh, CEO and MD of Ranbaxy Laboratories Ltd, which has the second largest medicine distribution network in Africa after Glaxo SmithKline Plc.
The China angle
The India-Africa summit comes in the wake of similar summits held between Africa and the EU and Japan in recent years. In 2006, when China hosted the China-Africa Cooperation (FOCAC) forum, which was attended by 41 out of 53 African heads of state, India sat up in alarm.
At FOCAC, Chinese President Hu Jintao promised $3 billion in preferential loans to Africa, another $2 billion in export credits and the creation of a $5 billion fund to encourage Chinese investment in Africa. Hu pointed out that trade between China and Africa amounted to $40 billion in 2006—up 40% from the year before—and that China had written off the debt of 31 poor African nations.
Deals worth $2 billion between Chinese and African firms were signed at the summit. In contrast, at the India-Africa business conclave last month in New Delhi, a dialogue focused on business that served as a sort of precursor to the summit that starts on Tuesday, while deals worth $10 billion were discussed, nothing was signed.
All this makes the India-Africa summit significant.
The summit is expected to end with a declaration that stresses the historical bond between India and Africa, and the growing partnership between the two. An action plan on taking the relationship further on several dimensions, including business, is also on the cards. As is an announcement of aid to Africa.
Senior officials from the ministry of external affairs (MEA) say it isn’t as if India hasn’t done anything in Africa. The officials, who did not wish to be named, point out that the country’s trade with Africa has increased from $5 billion in 2002 to $32 billion in 2007. They say India extends $500 million in various lines of credit every year (half of the credit offered by the department of economic affairs worldwide) to Africa. And they add the MEA’s Aid to Africa programme has spent Rs80 crore in the last three years.
Incidentally, a survey by an industry body on Monday said India’s two-way trade with African nations could double to $50 billion by 2012 if the government signs more trade pacts and offers incentives to exporters. The survey of 41 companies, conducted by Federation of Indian Chambers of Commerce and Industry, also said the government should further enhance the credit lines to African countries as this would only lead to higher exports.
Ramesh says India should not even compare itself with China. “There is no race between us; the Chinese have left us far, far, far behind in Africa.” Considering the widespread affection for Mahatma Gandhi, Jawaharlal Nehru, Indira Gandhi and Rajiv Gandhi across Africa, Ramesh adds that he is surprised that the country has been “unable to convert that political goodwill into deep economic partnerships.”
In Congo, according to The Economist magazine, Chinese state-owned firms are building or refurbishing railways, roads and mines at a cost of $12 billion, in exchange for the right to mine copper ore, cobalt and tantalum (used in mobile phones and laptops) of equivalent value.
By 2006, the Chinese had poured in as much as $15 billion in energy-rich Angola and the African country decided it had no need for the International Monetary Fund’s many billions that came with strings attached. China’s readiness to invest in Sudan’s oilfields (the Greater Nile Oil Project has the China National Petroleum Corp., India’s Oil and Natural Gas Corp. Ltd and Malaysia’s Petronas working in tandem) has been a major reason why the Sudanese have rejected Western attempts to mediate in the Darfur conflict.
If India has to make a difference in Africa, Ramesh says, “it can no longer be stuck in the public sector mode of cooperation.” While lines of credit are key in winning contracts in power and the railways (“demonstrated sectors of Indian competence,” says Ramesh), it is imperative that the government and private sector work together to push the “new India that is enjoying such respect globally.”
Private sector’s role
Everywhere he went in Namibia and Angola, Ramesh says, he heard the Africans wax eloquent about Tata Motors Ltd and its cars (both the Nano and the Jaguar), about Mahindra and Mahindra Ltd utility vehicles (on which Angolan fighters used to mount their 155mm mortar guns during the independence struggle) and Reliance Industries Ltd, which is currently seeking oil contracts in Angola.
When economic reforms began in 1991, India’s trade with Africa was a mere $967 million. By 2006-07, Indian imports had touched $11 billion, while exports stood at $8.4 billion. And Indian companies were investing around $15 billion in the continent—in manufacturing, hydroelectric projects, transmission lines, fertilizers and seeds, pharmaceuticals and information technology.
Instead of competing with China’s big bucks, India should “carve out a niche’’ on human skill development and training, science and technology and higher education, Ramesh says. Indian IT education company, NIIT Ltd, which recently celebrated its 10th anniversary in Africa, has trained 150,000 people in 36 centres across the continent.
NIIT president G. Raghavan says when NIIT offered scholarships (ranging from 10-40%) in Lagos, Nigeria, last year, the screenings had to be done in a stadium because 47,000 people turned up. NIIT chairman Rajendra Pawar is part of South African President Thabo Mbeki’s international advisory council, while Raghavan himself serves on the country’s e-skills council.
ONGC Videsh Ltd’s peak investment in Africa reached $2 billion in 2003, says the firm’s managing director R.S. Butola. Nigeria is a major market for Ranbaxy, and in South Africa the firm’s anti-retroviral drug to combat HIV/AIDS has been a resounding success.
“We have been seen as a trusted brand in Africa since the 1970s,” says Ranbaxy’s Singh, “so we began to leverage our research and development to come out with novel formulations geared to combat HIV/AIDS.”
Ranbaxy’s success has meant the price of anti-retrovirals has fallen from $20,000 a year to $80 a year, making it hugely effective in the price-sensitive African market. The firm is now working on a new drug for malaria, which will be ready by 2011, adds Singh.
“Not a China copycat”
Harry Broadman, economic adviser on Africa to the World Bank in Washington and author of Africa’s Silk Road: China and India’s New Economic Frontier, says in an email interview that he does not agree with critics who say India is being a “copycat” of China in Africa.
“India has a longer history of economic relations and deeper ethnic ties with many African countries and this may well give Indian firms certain competitive advantages vis-à-vis Chinese firms… Moreover, most large Indian firms are private and tend to operate according to commercial principles, whereas the typical large Chinese firm operation in Africa is a state-owned enterprise and can tolerate inefficiencies and may well have access to government subsidies,” Broadman says.
However, analysts say the Indian government’s own approach in Africa would indicate that it is spreading itself thin. So, there’s a Rs78 lakh small industry information centre in Tanzania, a $5 million SME project in Zimbabwe, an $80 million hydroelectric power project in Rwanda, an $8 million financial package for the Seychelles, and another $7 million for a railway project in Senegal, among other projects of similar magnitude.
One Indian government official denies the charge. He says some African states are so poor that their capacity to absorb technology is mostly geared towards the small and medium sectors. “Moreover, unlike the Chinese, who are interested in Africa’s natural resources primarily to drive their own economy, Indian projects in Africa are geared to help Africa help itself,” the official adds.
For instance, India is helping build the Pan-African e-network, where all 53 African nations are being connected by a satellite and optic fibre network at an estimated cost of Rs543 crore. Crucially, all heads of state and government in Africa will soon be able to use the network for voice and video conferencing between themselves.
Politics and trade
India will never comment on the current conflict in Kenya, or the fact that in Zimbabwe, India’s old friend Robert Mugabe has finally lost the elections, another government official says.
The official adds that the Indian democratic experience is beginning to make an impact in Africa. The Bureau of Parliamentary Studies and Training is in great demand across Tanzania, Ethiopia and Kenya, and former Lok Sabha secretary-general G.C. Malhotra advises several countries on parliamentary democracy. Tanzania’s Election Commission has requested help from the Election Commission of India.
Such relationships will come in handy as India struggles to find enough energy to fuel the needs of its growing economy. India imports 11% of its oil needs from Nigeria and is currently renewing a push in energy-rich Angola, sub-Saharan Africa’s largest oil producer, where it has lost some ground to the Chinese.
The International Energy Agency predicts that India will overtake Japan, the US and China as the world’s largest net importer of oil by 2025.
For relations between India and Africa to improve, Jairam Ramesh says the two must cut out the third-country middleman. In the diamond market, for instance, India imports $10 billion of roughs every year from Africa (which produces 70% of the world’s diamonds), which it cuts and polishes and exports for $14 billion.
And 85% of Africa’s diamonds are not bought directly by India, but from Antwerp and London.
“Why can’t we establish a direct relationship with Africa?” Ramesh asks. He adds that he had offered to his counterparts in Namibia and Angola the chance to do so.
“India could set up cutting and polishing industries in Africa, right alongside the mines. Instead of selling roughs to the Western world, value-added African diamonds would add much more to the national kitty. In turn, Indian craftsmen can source these gemstones for making jewellery,” he adds.
Broadman says such joint ventures are the future. Indian firms can “help the continent diversify its exports out of natural resources, as well as develop backward and forward linkages to climb the value chain.”
Reuters contributed to this story.
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First Published: Tue, Apr 08 2008. 12 19 AM IST