New Delhi/Addis Ababa: Bereft of China’s riches, India is banking on diplomacy, development and its entrepreneurial private sector to woo African nations to open markets and natural resources to Asia’s third-largest economy.
New Delhi has promised billions of dollars in development support, financing for infrastructure projects and the building of educational and training institutes as it positions itself as the alternative to Beijing.
India enjoys historical ties with some African countries, but became a mere observer when China came calling for resources and energy, with financial riches New Delhi could not match.
China boasts foreign exchange reserves of more than $3 trillion, 10 times India’s $307 billion, and has aggressively used state-owned development banks to invest heavily in oil, gas and other resources across the continent.
But after being caught cold by China, and losing a series of bids for oil rights and infrastructure projects to its Asian rival, India is banking on a new approach to Africa that blends trade and investment with development economics.
“India’s approach is reciprocal, expecting access to resources in exchange for developing technology and training Africa’s human resources. That’s how India is different to other foreign powers,” said Suresh Kumar, head of the Department of African Studies, University of Delhi.
“In providing education, technology, development and security, India is a complete partner.”
Like China, India has posted high economic growth rates since 1990 and the economy in a country of 1.2 billion people is now expanding at more than 8% a year. Resources from Africa are seen as crucial to help sustain growth.
Total trade between India and African countries stood at $46 billion last year, still less than half of China’s $108 billion in 2008, but a huge increase on $3 billion in 2000-01. India says it will reach $70 billion by 2015.
Beijing also leads the way in diplomatic terms, with 42 embassies across sub-Saharan Africa, double India’s diplomatic presence of only 21 embassies, a report from the London-based Chatham House think-tank said.
Making up for lost time
Indian is keen to trumpet its cultural links with African countries, citing a shared history of imperialism and trade routes established hundreds of years ago.
The Indian diaspora in Africa tops 2 million people, but it is mainly concentrated in South Africa, the Indian Ocean and some countries along the Eastern seaboard such as Kenya.
“The private sector is pushing the Indian government to engage on Africa more consistently and to expand its network,” said Alex Vines, head of Chatham House’s Africa Programme.
Prime Minister Manmohan Singh, on a six-day trip to Ethiopia and Tanzania this week, pledged $5 billion over three years in development support, $700 million for new institutions and training programmes and $300 million for an Ethiopia-Djibouti railway line.
“India can be blamed for waking up late to the African opportunity, but can make up for lost time by projecting itself as a more humane investor than its northern neighbour,” wrote Hindustan Times in an editorial.
While India, and other emerging economies, see Africa as an important supplier and customer to drive growth, it is a sign of New Delhi’s growing global economic and political clout, that it is seeking to play a leading role in Africa’s development.
“Africa is determined to partner in India’s economic resurgence as India is committed to be a close partner in Africa’s renaissance,” said the declaration after the second Africa-India summit in Ethiopia this week.
India’s state-run oil firms are beginning to invest in countries including Nigeria and Kenya, coal and diamond firms have invested across the continent, and new embassies in Niger and Malawi have been opened to assist firms with securing uranium for India’s fast-growing nuclear power industry.
Private sector push
India is also keen to leverage its global expertise in the information technology, agriculture and human resource sectors in helping African countries, many of which face similar developmental hurdles that India itself is grappling with.
While China has snapped up resources through governmental agreements, India’s government wants the private sector to spearhead the push to secure investments across the continent.
“India’s engagement with Africa is completely different with that of China. With China its state-to-state, even if the investors are private companies,” said Zemedeneh Negatu, Ernst & Young’s managing partner for Ethiopia.
Indian telecoms firm Bharti Airtel spent $9 billion acquiring Zain’s African assets last year, with a view to implementing strategies in Africa that were developed in the world’s fastest-growing mobile market.
Largely thanks to the Bharti deal, India was the most acquisitive nation in Africa in 2010.
With African consumer spending set to nearly double to $1.4 trillion by 2020, according to McKinsey and Co., Indian consumer goods makers are also pushing hard across the continent.
Godrej Consumer has bought personal care products makers in Nigeria and South Africa, while Dabur India, Marico and Emami have also bought assets.
“India’s engagement with Africa in the economic sense will be driven by the private sector,” said H.H. Viswanathan of the New Delhi-based Observer Research Foundation.
“The majority of the top 10 Indian companies in Africa are private firms, not state-run like the Chinese firms.”
Development assistance aside, as the Indian private sector expands in Africa, the continent is also destined to benefit from job creation as companies seek lower production costs.
“Labour costs have become more and more expensive in China and India. Chinese and Indian companies are starting look at destinations where they can do their things cost-competitively,” said Ernst & Young’s Zemedeneh.
“That’s where Africa benefits.”