India: An ideal partner for Africa?

‘If the going gets tough the tough gets going.’ (A Ugandan delegate at the 5th CII-Exim Bank Conclave on India Africa Project Partnership, 22-24 March 2009, New Delhi).

INTRODUCTION

The current economic recession has impacted the developed and the developing countries and has had a devastating effect on the African continent. With the economic downturn the developing countries are being ‘hit by two transmission levels- trade and finance’. There is a steep decline in the demand, prices and export earnings of commodity prices and that has adversely affected several commodity dependent African countries. Second, in this phase of a global credit crunch, there has there been a decline in credit lines/loans to domestic banks and that in turn has resulted in the sharp decline in foreign direct investments in developing countries such as Africa, ‘because of difficulty in access to credit and economic contractions’. As per the Institute of International Finance the ‘net capital flows to emerging markets fell from US$929 billion in 2007 to US$466 billion in 2008 and US$165 billion in 2009.[1]

In the wake of the falling commodity prices and in the phase of economic recession, Chinese companies that seemed to offer African countries an economic alternative to the Western investments, with their ‘no strings attached’ approach are now backing out from the ‘ New Scramble for Africa’ that they had so aggressively entered into. For example, in the mineral rich country of Guinea, the Chinese have backed out from the US$1 billion hydroelectric plan development scheme and several other high risk investments plans across the African continent.[2] However this does not imply that India or any other country will make high risk investments that yield no returns. All this is meant to convey is that Africa should not be swept off its feet with China’s ‘no strings attached ‘ investment strategy and know that China will invest only when it serves their political, economic or strategic purpose. Moreover, in the context of the global resource crunch, Africa needs to diversify its sources of trade and investments. It is in this context that the three day Conclave that took place in March 2009 aimed at ‘creating synergies between Indian competence and the requirements of Africa’, assumes significance.[3]

The Conclave aimed at outlining a road map on which India and Africa can go together. The African delegates beckoned Indian investors as there is a realisation that in these difficult times of economic slump, when the ‘big boys’ have taken away the money there is an even greater need for alternative sources for funding that India can offer.[4] Like every other country India too has been affected adversely by the recession, but still it is in a position to invest in Africa as the Indian domestic development has not been dependant on exports. Besides, India is a particularly suitable partner for new models of African development given its advantages and experiences in genuinely ‘Triple A technologies’, namely appropriate, adaptable and affordable (technology that is not the reinvented bullock cart but genuinely state of the art). Africa on the other hand has all that it is required to build the continent. The need of the hour is to harness the resources on the African continent; both physical and human. The Indian investments can certainly make a significant contribution in the years of economic downturn. ‘In the face of the current global financial crisis our destinies and future are closely intertwined.’[5]

India’s trade with Africa rose from US$967 million in 1991 to US$35 billion in 2008 and the country expects to triple trade with Africa over the next five years and reach the US$100 billion mark India. She plans to double the lines of credit to US$5.4 billion over the next five years. The Indian government has also provided US$500 millions for project from ‘Aid to Africa’ budget. India also plans to invest in sectors such as agriculture, mining, information and communication technology (ICT), oil pipelines, chemicals, power generation and transmission, infrastructure.[6]

THE CONCLAVE

The three day meet[7] was a landmark event and connected 483 African delegates with 318 Indian counterparts to take stock of the progress made and address their future needs, forge deeper ties and make it more sustainable. The need to augment government efforts with private initiatives and forge strong private public partnerships and joint venture investment plans between the two sides was expressed by several delegates. The meeting was extremely well attended by Indian representatives from the banking sector, government and private enterprises that include: EXIM Bank, CII, Ministry of External Affairs, academia, and captains of business houses such as inter-alia, Angelique International, Tata Group, Kirloskar Brothers Limited (KBL), Fortis Escorts Hospitals, Mohan Energy Co-operation Pvt. Limited, RITES, Overseas Infrastructure Alliance (OIA), Mahindra and Mahindra Limited, Larsen and Toubro Limited, Shapoorji Pallonji and Company Limited, Mohan Exports and others.

The target sector where India and Africa have mutual business interest were identified as: Agriculture, agro-processing, construction, railway infrastructure and rolling stock, consultancy, minerals, transport infrastructure such as roads, waterways, ports and airports, power and non- conventional energy resources, healthcare, pharmaceuticals, institutional capacity building, information and communications (ICT), iron and steel, education, water and sanitation, low cost housing and community building, oil and gas, turnkey manufacturing projects, tourism, small and medium enterprises (SMEs), biotechnology and consumer goods. The other areas with a potential for cooperation were: Energy conservation at homes and offices through green homes/residential and office complexes and transfer technology through the generation of renewable energy.

The 2009 Conclave was a logical step forward to strengthen ties of mutual co-operation and reciprocity between India and Africa that were established over the past four India-Africa Conclaves. It was based on an ‘atmosphere of trust, leading to an exchange of information and views to strengthen structures to propagate and build long term sustainable economic relations between companies from India and Africa’. The Conclave reinforced the institutional ties forged at the India-Africa Forum Summit of April 2008 and promoted partnerships at the government-to-government level and at an institutional and industry level. It aimed to build capacity – mainly human resources – and explore the possibility of Indian investments in long gestation projects such as infrastructure that Africa so desperately needs.[8]

It is in the context of finance for investments that EXIM Bank of India have furthered the development agenda in Africa through the Lines of Credit (LOC) that are loans extended at concessional rates to support export of projects, goods and services from India with a provision for deferred payments. The bank has signed over 13 LOCs worth over US$4 billion that have facilitated access to affordable industrial machinery for production, technology transfer and improved value addition for primary products and helped create employment. For the EXIM Bank, Africa has always been a focus area and in the coming years Indian can be a key source of finance especially in the infrastructure sector.[9]

However, the African delegates expressed concerns about the inflexibility of the LOC that lead to difficulty in terms of procurement and the rates of interest that were not ‘viable’. Therefore there was an urgent need to simplify the terms and procedures for access to the LOC and come to an understanding on more flexible rates of interest given the fluctuations in the global market that are in a state of recession. A shift from ‘project financing’ and towards ‘programme financing’ and the use of money for direct budget support for investments in development sectors such as infrastructure, health, education, capacity development, business climate and poverty alleviation would prove to be beneficial for Africa.[10]

India is considered an ideal partner for the African continent for several other reasons. First, the two share similar history of colonialism and exploitation. Second, they have similar development problems; of poverty, unemployment, lack of adequate financial resources amongst others. Third, India is a potential investor and an excellent market with good institutions, a vibrant private sector and offers a huge market as the second most populous country in the world. Fourth, she has the financial capacity to engage in trade, investments and transfer of technology to Africa.[11]

Transfer of technology and skills is a potential area of partnership between Africa and India especially in the sector of small and medium enterprises (SMEs). Thus the core agenda for the Indian investors would be to build capacity or people and make them employable and thus alleviate poverty on the African continent. This is of essence in order to increase the purchasing power of a continent with over 965 million people.[12]

Organisations like the CII and the companies associated with them could help in harnessing human resources through transfer of technology, skills and micro- finance at the grassroots level to help alleviate poverty on the ongoing model of ‘Build India-Build People’ that is being implemented by in India.[13]

India offers a range of low cost products and services. The consumer with a limited budget is seen as a market for products and services that are tailored to his budget, as in the case of healthcare services through the intentionally accredited, high quality and relatively low costing medical services that India now offers, thus sharing the disease burden of Africa. In addition India also offers the healing touch through the consultation services that are being offered to African patients through the recently launched Pan- African E- network project by the government of India on 26 February 2009 as a part of its ‘Aid to Africa’ Programme.[14] In addition to the medical segment, the India- Africa engagement has grown in various other sectors as well.

INDIA’S ECONOMIC ENGAGEMENT IN AFRICA: SUCCESS STORIES

In the war-ravaged country of Southern Sudan, the presence of Indian companies such Angelique International, Water and Power Consultancy Services (WAPCOS) and Spice Telecom and their role in the economic reconstruction of the country has been significant and much appreciated by the local Sudanese people. At the Conclave, the delegates from the country invited India to invest in infrastructure and build highways, a network of roads to develop tourism and to access and market their agricultural produce such as gum, sugarcane, fruit tress, lemon, and pineapple. ‘We are not going back to war and we need Indian investors to channelise our revenues from oil to agriculture and develop tourism along the river Nile’.[15]

Companies like Kirloskar Brother Limited (KBL), the Tata group, Mahindra and Mahindra and several others have a vast and long presence on the African continent. The African delegates expressed that TATA vehicles, Mahindra tractors or the Kirloskar water pumps used for irrigating farmlands, were brands that were recognised all over Africa for the ‘value for money that they offered’.[16] The presence of a large Indian diaspora on the African continent has also been an important factor in leveraging Indian brands.

India and Africa, both predominantly agrarian economies, are considered ideal partners for each other. India has been successful in building an impressive food security system for itself. ‘There was a time when India was dependent on aid and imports and the country did not produce enough to feed its own people. But we knew that no country could produce enough to feed India and therefore we had to strive towards achieving self-sufficiency in the agricultural sector. Today we are self sufficient because of the green revolution and improved technology and India can share its experience with Africa. The agriculture sector in Africa has the potential to give more to farmers through value addition such as agro food processing. Food security is linked to health security and therefore is of immense significance.’[17]

Some of the Indian business houses engaged in the agricultural sector in Africa- the Kirloskars in Senegal, Angelique International in Mali and Sudan have supplied customised agricultural equipment such as small tractors and drilling equipment that are appropriate and affordable for small holdings. The Kirloskar water pumps and related irrigation equipments have reduced the dependence of the African farmer on rain fed agriculture and thus contributed to increased food productivity and security.[18] This is a critical and noteworthy contribution to countries of Africa which have been net food importers. For example Senegal in the year 2005 imported food worth US$700 million! Further, in countries like Democratic Republic of Congo, Central African Republic and Uganda less that 0.1 per cent of the arable land is irrigated while on an average only 4.7 per cent of the land is irrigated in Africa![19] Therefore the agricultural sector in Africa could benefit immensely from the Indian engagement in agriculture and related activities and likewise India too could learn from and share the good practices and success stories from the African agricultural sector.

It was evident that the Africans were eager to engage with Indian firms, learn from India’s experience and replicate the success that India has had, inter-alia, in agriculture and in with small and medium enterprises (SMEs), sectors that are labour intensive and could generate employment and alleviate poverty.

CELEBRATING PARTNERSHIPS

‘India and Africa are not strangers… and Indian engagement with Africa is distinct. The ongoing Indian Technical and Economic Cooperation (ITEC) programme and Indian Council for Social Science Research (ICSSR) scholarships for African citizens, new LOC of over 5 billion are indicators of increased India- Africa engagement. Leaps in telemedicine, tele-education, pan African E-Network programmes are shining example of South-South cooperation and India’s resolve to assist bridge the digital divide.’[20] Over the three-day conclave, several delegates stated that partnership with India was like ‘home coming’ as many of them were either educated in India or had been taught by Indian teachers in their own countries in Africa.

African leaders also urged India to open up its markets to accelerate a balanced two-way trade between the two partners, which is a fair demand and of essence if the partnership between the two is to be sustained. The partnership between India and Africa is of mutual benefit and interest to the two associates. ‘The African drum and the Indian sitar could create beautiful music’.[21]

The concluding note of the Conclave was of optimism-‘together we can make a difference’.

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* The author was a delegate at the 5th CII-EXIM Bank Conclave on India-Africa Project Partnership, 22-24 March, 2009, New Delhi. The views expressed in the article are personal and based on her interaction with the several African delegates and participation in the sessions at the Conclave.
* Renu Modi is director of the Centre for African Studies at the University of Mumbai.
* Please send comments to [email protected] or comment online at Pambazuka News.

NOTES

[1] Martin Khor, As Chinese Investments in Africa Drops, Hope Sinks, The New York Times, 26 March 2009 accessed 9 April 2009.
[3] Concept note, 5th CII-EXIM Bank Conclave on India- Africa Project Partnership, 22-24 March, 2009.
[4] Member CII International Council and staff Kirloskar Brothers Limited (KBL), the Conclave, 23 March 2009.
[5] Pranab Mukherjee, minister of external affairs, government of India, keynote address, the Conclave, 23 March, 2009.
[6] Indo- Africa Business, 8 November- January 2009,p5, New Media Communications Pvt. Ltd and EXIM Bank.
[7] 5th Confederation of Indian Industry (CII)- Export Import (EXIM) Bank Conclave on India-Africa Project Partnership, 22-24 March, 2009, New Delhi, hereinafter the Conclave.

The organising group, the CII is a non- profit and non-government association that was established over a century ago and works closely with the government on policies that impact business and trade. It comprises of India’s foremost business associations with membership of over 7,500 business related organisations in the private and public sector. The CII provides the much-needed interface between the international business community and the Indian industry.

The EXIM Bank is a government owned financial institution that was established in 1982 with the specific objective of ‘financing, facilitating and promoting Indian foreign trade and thus globalizing Indian businesses’. (EXIM Bank booklet, October 2008)
[8] Concept note, the Conclave, 22-24 March 2009.
[9] Officer EXIM Bank, India, the Conclave 23 March 2009.
[10] Representative, ministry of finance and economic empowerment, government of Mauritius, the Conclave 23 March 2009.
[11] Delegate, CII, the Conclave, 23 March 2009.
[12] Population division of the department of economic and social affairs of the United Nations Secretariat (2007) [pdf].
[13] Delegate CII, the Conclave, 24 March 2009.
[14] Delegate and representative of the medical tourism sector, the Conclave, 23 March 2009.
[15] Delegate and representative ministry of finance and economic planning, Southern Sudan, the Conclave, 24 March 2009.
[16] Personal communication with delegates at the Conclave, 24 March 2009.
[17] Anand Sharma, minister of state for external affairs, and minister for information and groadcasting, government of India, the Conclave, 25 March 2009.
[18] Delegate, Angelique International and Representative from KBL Ltd., the Conclave, 23 March 2009.
[19] Fifty Things you did not know about Africa, World Bank.
[20] Anand Sharma, minister of state for external affairs and minister for information and broadcasting, government of India, the Conclave, 25 March 2009.
[21]Ambassador of Zimbabwe to India and dean of African group of heads of mission, the Conclave, 25 March 2009.