India’s economic growth outpaced its Northern neighbour over the last year, at the same time commodity exports from Africa to China are reportedly falling and suddenly commentators are discussing that the golden age of Sino – African relations could be coming to an end.
India is already the continent’s second biggest trade partner with around US$ 70 billions worth of bilateral trade in 2014, roughly equal with the USA but well behind China. But could India take China’s place as Africa’s economic lodestone? Indian engagement with the continent is developing fast and Prime Minister Modi has taken an a strong interest in wooing African leaders, but what does it all amount to?
Much of the rhetoric sounds familiar, India promises to be an equal trade partner and paints itself as anti-colonial and promotes “South – South” cooperation. But Indian imports from Africa are primarily in the extractive sector; diamonds, gems and oil feature prominently. Unfortunately this will do little to displace the notion that Africa is a raw materials exporter and India is no different to other outside powers.
India’s exports to Africa are primarily consumer goods such as pharmaceuticals, cars and phones, all value added products which will do much to enhance the Make in India initiative. This pattern of trade is partly reflected in the picture of Indian FDI going into Africa, firms like telecoms giant Bharti Airtel have made an impression in Africa (but are now losing money and have not gained the subscribers they forecast). There are Indian firms involved in manufacturing, agribusiness and oil and gas plus many other sectors. Indian investment has been primarily focused in countries across East and Southern Africa like Kenya with large disapora populations and where English is widely spoken, there much scope for moving into French and Lusophone Africa.
Official figures show Indian investment into Mauritius as being very high (US$ 9 billion in 2015), but most of this is just parking money to hide it from the tax authorities, rather than “real” investment. These figures also artificially boost the overall Indian investment in Africa figures and provide another reason why FDI stats should be taken with a pinch of salt.
Private businesses led the Indian charge into Africa, now the government is playing catch up and providing trade finance support, credit lines and more diplomatic backing to commercial activities (there was a major India – Africa jamboree in New Delhi last October). This is an interesting reversal of the Chinese experience in Africa which was very much government directed from the start and remains dominated by state owned enterprises, although private firms are now catching up.
India have some advantages over China in that they are seen in a more favourable light by many on the continent thanks to longer standing cultural ties, the beacon that is Indian democracy and the fact their business practices are more likely to benefit locals than the Chinese firms. However China remains ahead simply because it’s economy is so much larger than Indias which creates greater demand for African exports, plus the government and Chinese firms have far more financial firepower for investment into the continent.
India may not overtake China as Africa’s major trade partner or investment partner, but it will undoubtedly step up its engagement with the continent as its economy booms and it will lead the other rising powers such as Malaysia, Vietnam and Brazil which have been quietly emulating the Chinese in expanding trade and investment ties across Africa.