Indian Inroads Into Africa
By Vinny Davis*
With
the Euro zone, U.S, and China undergoing a phase of relative slowdown, economic
forecasts have placed Africa in an enviable position- as a new and emerging
market. This explains why a rejuvenated India was upbeat to seal its position
in the Rising Africa. The third Indo-African summit captured attention, being
the highest African participation in the recent times.
The
African continent is rightly getting subsumed into Alex De Waal’s term of
‘political marketplace’. Economic
diplomacy will be the tool to woo major trans-national engagements with Africa.
The substantial presence of Indian business activities in the region will
become the new level playing field to mobilize a revamped foreign policy
concern. Though the capacity constraints of India pose a stumbling block
towards the fuller realization of this goal, any key development is pitted to
have a larger resonance in re-affirming the Indo-African ties. India would be
embarking on a position of engagement with mutual benefits, than getting
carried away in the empty rhetoric of South-South cause.
Shared
historical experiences of colonization and geographical proximity can be the
catalysts for Indian inroads into the African continent. According to a recent
study by the IMF (2014), Africa’s share of the global working age population is
estimated to increase from 12.6 percent in 2010 to over 41 percent by
2100. This means that the continent will
have a share of 3.2 billion in the projected 4 billion population increase by
2100. Notwithstanding, Africa is touted to reap from its abundant reserves. The
2 billion years old Bushveld Complex (South Africa) is a veritable storehouse
of strategic metals (platinum, chromium, and vanadium) that are major
pre-requisites in high tech industrial processes. A substantial share of the world’s
chromium and cobalt reserves and a quarter of aluminum ore is in Africa,
besides the reserves of precious gems. If Southern Africa is rich in coal, West
and North Africa is replete with petroleum reserves and iron ore reserves. East
Africa has recently catapulted itself to importance for international oil
companies with its fresh hydrocarbon reserves. It is estimated that over 120 bn
barrels of oil reserves are in Africa, making it the second largest exporter of
oil in the world. The joint study by KPMG and CII (2015) noted that, with
Africa accounting for only 4% of global oil consumption, the export potential
is huge. The luxury market in the region is also expected to touch $405 million
by 2019, and its luxury market is touted to grow at 5.6% per year. Consequently,
harnessing this demographic dividend together with the rich mineral and
hydrocarbon reserves can aptly satiate the investors and businesses serving
mutual benefit.
Indian foothold in the region has a real time influence
since the days of colonization and liberation wars. The support by countries like Egypt and Ghana
for the Non-Aligned Movement spearheaded by India reinforced this relation during
the times of Cold war. Over the previous decades, there have been many ups and
downs in the Indo-African relations. The support by the continent to Japan in
the United Nations Security Council Non-Permanent Seat in 1996 would have
prompted the Indian government to pay more emphasis on Africa in its foreign
policy hierarchy. Needless to say, the Indo-African Summit of 2008, was a
breakthrough in leveraging the benefits of South-South cooperation. Post 2008
Summit, India pledged $7.4 billion to the African countries of which more than
$3 billion has been disbursed.
The list of Indian business interests in Africa is
jaw-dropping, with both the public and private sector attempting to cash in
maximum benefits. ONGC Videsh Ltd, BHEL, TCIL, Bharti Airtel, Tata Africa
Holdings, Tata Chemicals, Mahindra & Mahindra, Reliance Industries, Bajaj
Motors, Ranbaxy, Dabur India, Ashok Leyland, Essar Energy, Larsen & Toubro,
Birla Group, Jindal Steel & Power Limited, Wipro, Punj Llyod, TVS, Bank of
Baroda, State Bank of India, to name a few who have already established their
presence in the continent. Sudan, Egypt, Ghana, Nigeria, Morocco, South Sudan,
South Africa, Tanzania, Botswana and Mauritius are the major stakeholders in this
regard.
The Modi government has been steadily bringing to the fore,
the need for economic diplomacy to steer foreign relations. Indo-Africa trade
touched $70 billion in 2014-15, alongside the Indian investments in Africa in
the past decade soaring to $30-$35 billion. Though this may seem minuscule in comparison
to Chinese trade that has exponentially increased to over $200 billion, India
is seeking to boost its economic diplomacy with Africa. India will require more
teeth to its bilateral trade with the region, for the joint vision of 2014
World Economic Forum to fructify. Realization of $500 billion in trade between
India and Africa by 2020 will necessitate easing tariff and non-tariff
barriers, import control duties besides being a key stakeholder in African
desire to have a Free Trade Zone by 2017. The Continental Free Trade Area will
expand the economic market for the region, with equal emphasis on trade in
goods and services. Indian encouragement to develop a conducive environment for
economic development with mutual benefits will be embraced. The African
uneasiness with Chinese presence is slowly revealing its face in the form of
skirmishes between the locals and Chinese companies over its hard labour
practices. Chinese Foreign Direct Investment (FDI) in the African continent is
over $3 billion. It is harder yet to predict if the slowing Chinese economy
would prompt its leaders to concentrate less on Africa. Private sector participation was minimalist in
the recently concluded Indo-African Summit.
Conversely, it was the other way round in the 2013 Japan-Africa summit.
As the 5th largest investor in the region, Information Communication
Technology and Hydrocarbon businesses are pitted to flourish in the decades to
come. Engagement with the Diasporas will be imperative, as over 13% of global
Indian Diaspora are in Africa.
Bloody conflicts, piracy, corruption, ethnic divides, spurt
in the terror outfits (Boko Haram, Al-Shabab, & Al Qaeda), and the recent failures
of state-building exercises can pose as major irritants. The Indian democratic
charisma can be deployed to deepen its engagements with benefits for the
African counterparts as well. Indian contribution towards the peacekeeping
operations in Africa is always lauded, with the recent being its painstaking
efforts in South Sudan. Through its participation in such multi-lateral
mechanisms, India is vying for reforms in the UNSC to advance the need for
inclusivity in international institutions of governance. A revamped Blue Water
Navy is also in the pipeline for allaying the concerns of maritime security and
for the protection of Sea Lanes of Communication. This will undoubtedly require
a strong East African support.
The African leaders might have attempted to use the summit
as a platform to adhere to the goals of the Africa Development Charter 2063, which
envisages the region to be an influential global player in the future. Though a
bumpy ride awaits them, the erstwhile “Dark
Continent” has resurfaced becoming the fastest growing continent in last
decade, with the economy projected to expand to $ 2.6 trillion by 2020. It is
unlikely to predict which African country will join the race for G-4 (a group
seeking permanent UNSC membership), alongside India, Japan, and Brazil as the
recent progress by African countries like Nigeria, Ethiopia or other
Sub-Saharan African nations are commendable.
The summit identified the need for a joint monitoring
mechanism with the African Union to oversee the follow-up of the concessional
credit of $10 billion (for 5 years), and a grant assistance of $600 million
pledged by India. The Indo-African Development Fund ($ 100 million) and
Indo-African Health Fund ($ 10 million) are also part of the grant assistance
to the region. With representatives from over 54 African nations, the Summit
could provide the groundwork to augment collective efforts to boost trade and
investment, technological assistance, anti- piracy & counter-terrorism,
UNSC reforms, and capacity building initiatives (human resources development,
skill up gradation).
On expected lines, India will be seeking to project an image
of a responsible power striving to strengthen peace and development in Africa
with its enhanced soft power linkages. It will not be easy for India to step up
its ante, as the major power scramble for resources from Africa continues. The
dexterity of the African Union will be tested, as international trade and
development should not end up compromising economic and political control of
the region.
* The Author is Managing Associate at CPPR - Centre for Strategic Studies. Views are personal and does not present that of CPPR.
*This article is published in collaboration with the IMANI Centre for Policy and Education, Ghana. It forms part of a series of papers to be produced by Centre for Public Policy Research and IMANI as part of the 2015 India Africa Summit.
* The Author is Managing Associate at CPPR - Centre for Strategic Studies. Views are personal and does not present that of CPPR.
*This article is published in collaboration with the IMANI Centre for Policy and Education, Ghana. It forms part of a series of papers to be produced by Centre for Public Policy Research and IMANI as part of the 2015 India Africa Summit.
References
http://www.bloomberg.com/professional/blog/africa-luxury-goods-market-full-of-untapped-promise/?bbgsum=DG-WS-CORE-SL-LI
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