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Table 1
India’s Trade with Africa. Values in US$ Million:
|
Year |
1997-98 |
2002-03 |
2006-07 |
2010-2011 |
|
India’s total Export to Africa |
1492.03 |
2516.12 |
8407.53 |
16281.17 |
|
India’s total Import to Africa |
2081.77 |
2889.31 |
11362.76 |
26062.02 |
|
Total Trade with Africa |
3573.8 |
5405.43 |
19770.29 |
42343.19 |
Source: www.commerce.nic
Table 1 shows that India-Africa exports have jumped from US$ 1,492.03 millions in 1997-98 to US$ 16,281.17 millions in 2010-2011, while imports have recorded US2018.77 millions to 26,062.02 during the same period. Indeed India’s imports from Africa increased as India’s demand for raw materials and oil increased sharply during this period. India’s imports from African countries are mostly primary goods and oil, along with gold and other minerals. Regarding India’s exports to Africa, chemical and pharmaceutical products, machinery, transport equipment, food and livestock, products etc occupy more prominent positions than manufacturing goods in 2010–2011.
India’s top ten trading partners are South Africa, Nigeria, Angola, Egypt, Ghana, Morocco, Sudan, Tanzania, Tunisia, and Kenya. South Africa is the major export partner followed by Kenya, Nigeria and Egypt. Commodities like gold and silver became very prominent as they accounted for two-fifth of total imports from Africa. It is evident from this that India’s import composition has changed dramatically over the past decade. A growing economy and an increasing gold consuming class of people have dictated this import structure. In fact, South Africa, the largest gold producer, accounted for 68% of India’s total import from Africa in 2004.186
These trade flows are largely driven by economic complementarities between the two regions. This point has been advanced by Broadman in his book Africa’s Silk Trade in relation to Africa’s trade with China and India. He writes, “Although African exports to Asia as a whole do not exhibit a significant pattern of product diversification, inter-sectoral complementarities between Africa and Asia do exist. The rich resource endowment in Africa provides a natural comparative advantage in raw materials and resource-based products. China and India, on the other hand, have a rich stock of skilled labor compared to Africa and thus have a comparative advantage in manufactured products.187
The India-Africa Forum Summit, held in May 2011, gave a new thrust to India’s engagement with Africa, with an increase in existing credit lines to Africa from US$ 2.15 billion to US$ 5.4 billion for 3 years. India has also approved duty-free access to 94% of its total tariff lines as well as preferential duty access to 92.5% of global exports to the least developed countries in Africa.188
Apart from the Government, the private sector has also pitched in to explore the African markets, and now commands a significant presence in Africa. From the mid-1990s, organizations like the Confederation of Indian Industries (CII), the Associated Chambers of Commerce and Industry (ASSOCHAM), the Federation of Indian Chambers of Commerce and Industry (FICCI), and the Federation of Indian Exporters’ Organization (FIEO) identified Africa as a thrust area and launched programmes to promote economic and business cooperation. For example, to enhance trade the Confederation of Indian Industry (CII) regularly held the ‘Made in India Show’ to various African countries. With this show, CII encouraged Indian companies to display their products in textiles, drugs and pharmaceuticals, food processing, machine tools, auto components, construction equipment etc. to the trade and business representatives of countries from Africa. Moreover, FICCI has identified eight countries in Africa as top priority for India’s exports – Nigeria, South Africa, Kenya, Mauritius, Ghana, Tanzania, Algeria and Sudan. They have also listed the top 10 product groups for export to these countries, as a means to achieving higher trade growth. These countries were selected on the basis of their economic growth and improved political and economic stability, vast oil and gas reserves, and the ongoing restructuring of their economies. These initiatives have ensured an expansion of India’s trade with Africa.
India’s Investments in Africa
It goes without saying that trade flows encourage investments. India’s investment in Africa is led by the private sector, with most of the investments in the services and manufacture sectors. However, in recent times, India has diversified its investments significantly in the oil and mining industries of Africa. In East and Southern Africa, the large Indian diaspora, whose members have business ties with India and a good knowledge of Africa has played a significant role in attracting new investments from India to the African continent. This is especially true, given that India is flush with foreign currency reserves, and the government has lifted regulations and controls, to allow firms to go abroad. It has also removed the $100 million cap on foreign investment by Indian firms abroad. Through the period 1995–2004, Africa accounted for 16% of India’s FDI, at $2.6 billion. Indian oil companies in Africa, like ONGC Mittal Energy Ltd., have also pursued acquisition oil and gas assets. This is in the backdrop of Africa’s proven oil reserves of about 16 billion metric tons and gas reserves of about 500 trillion cubic feet189.
Besides, India has made considerable investments in sectors like apparel, retail ventures, fisheries, food processing, commercial real estate and transport construction, tourism, power plants, and telecommunications, as well as finance. Indian conglomerates like the Tatas, the Kirolaskars, pharmaceutical firms like Cipla and automobile companies like Mahindra have all undertaken profitable projects in Africa. The Tata Group has invested about US$ 100 million till 2009, and plans to triple that amount over the next three years. The Group claims to have employed 700 people in Africa and also provided indirect employment opportunities three times that number. According to the Tata Group’s profile, their activities range from infrastructure development, energy and hospitality services to financial, communication and automotive outputs190.
In East Africa, Mauritius is a major Indian FDI destination in Africa, particularly in the financial sector, as well as in the telecommunications and pharmaceuticals sectors accounting for about 70% of total flows into the continent. Routing overseas private Indian investment through Mauritius, directed at other host countries, and even bringing back the investment into the home country is very attractive for Indian companies. This is because they can avail of benefits of low rates of dividend and income tax in Mauritius, and as well benefits from double tax avoidance treaties that other countries have signed with Mauritius. Being an offshore financial centre, Mauritius has also attracted a large number of Indian software companies catering to financial service providers. Kenya and Uganda are the other African countries that have attracted Indian software investments.
In Kenya and Ethiopia, Indian companies are active in a range of sectors including pharmaceuticals, machinery and equipment, chemicals, textiles, paper and paper products, financial services, software, refinery and printing. In Ethiopia, Indian private investment reaches $4.5 billion and is dominated mostly by floriculture and agriculture in 2011191.
In major prospects of coffee production, Tata Coffee entered into an agreement in 2006 with the Ugandan government to set up a 3, 600 metric tones per annum capacity plant in that country, at an investment of Rs. 70 crore in 2005. The Ugandan government at Jinja has allocated Tata Coffee 50 acres, about 60km from Kampala. In Uganda, India is now the third largest source of foreign direct investment, after the UK and Kenya.
The second most attractive region for Indian FDI, North Africa had attracted investment worth over US$550 million by March 2007. Indian enterprises had a total of $750 million invested in 40 projects in Egypt alone in diverse areas like chemicals, petrochemicals, pharmaceuticals, cosmetics, garments etc. In Egypt, the OVL/IPR consortium has invested in excess of US $31 million in oil exploration project. Indian companies are active in chemical ventures in Morocco. In Sudan, ONGC bought a 25% stake in Sudan's Greater Nile oilfield in 2002, even though China National Petroleum Corp. (CNPC) operates in this oilfield in a big way. ONGC has also planned to invest US$750 million for renovation of Sudanese oilfields.192 Sudan offers Indian investors – most of them in the oil and gas sector – attractive incentives and preferential access to Arab countries. Efforts by Sudan to encourage Indian investments in other sectors have drawn investments in automobiles and light engineering goods. In a major breakthrough for the state-run Oil India Limited (OIL) in securing oil and gas assets abroad, the company and its partners have entered into an agreement with National Oil Corporation of Libya for four exploration blocks in that country that are estimated to hold two trillion cubic metres (tcm) of gas reserves.
In West Africa, Nigeria attracts significant Indian investments. Nigeria is the main trading partner of India in Africa with major FDI directed at metals, rubber and plastic products, infrastructure machinery and equipment. Oil companies such as Essar entered Nigeria in 2007, while state-controlled oil firm ONGC has bought concessions for long-term oil and natural gas extractions in Nigeria and Angola. Dabur India announced the commissioning of its new manufacturing facility in Nigeria. The new manufacturing facility has been set up by African Consumer Care, a subsidiary of Dabur International. The plant set up with an investment of around US$ 4 million will manufacture a range of toothpastes for the African markets. The production line at the new facility would be expanded to introduce newer toothpaste variants and manufacture a range of skin care, home care and household disinfectant products193.
Although, traditionally, India’s private sector investments have focused on countries where the Indian population has a significant presence, this approach is rapidly shifting, as they now increasingly seek investments in non-Anglophone Western African countries. For instance, trade deals with Francophone Cote d’Ivoire, are expected to grow to $1 billion by 2011. India’s Oil and Natural Gas Corporation has agreed to buy 30% offshore oil exploration in Ivory Coast. The Government of India has also offered small loan facilities to private sector companies to cover the risk of payment. The impact of this strategy has been remarkably positive in the field of urban transport. In Abidjan, several Indian-made buses ply the roads. Nearly 350 Tata buses are at work in Dakar, Senegal. Tata Motors beat stiff competition from European car makers Renault and Volvo, and went on to win a World Bank-funded contract to build a minibus assembly line in Senegal. The original seed loan was $18 million. Senegal also has substantial Indian investment directed entirely into the chemicals sector. Recently the Liberian parliament ratified a 25-year deal allowing Arcelor Mittal to launch a $1 billion iron ore mining project that will eventually employ 20,000. Indian firms are now setting up cotton mills in Chad, cement plants in the Congo.
Although Southern Africa had attracted a minimal proportion of total Indian direct investment (1.4%) to Africa in comparison to the North, East and West Africa, however, major Indian corporations now have a presence in the region. In South Africa, the Indian conglomerate like Tata Group has 26% participation and Tata Motors is the 6th largest investor company in South Africa. The amount is estimated at nine billion rands ($1 billion). Tata is already in the mining sector in Mozambique and South Africa, but was now looking for more opportunities in coal and iron ore in East and West African regions. With a substantial presence of Tata Consultancy Services in South Africa, the company was looking to expand its Information Technology by venturing to other countries. Furthermore, Tata Steel in a tie-up with South Africa's Sasol Synfuel International is setting up the country's first project to convert coal into liquid at a mammoth investment of Rs 45,000 crore in Orissa194.
In Zambia, Tata is investing in the 120 MW Itezhi-Tezhi hydropower project. This electricity project is being implemented by a joint venture company of Tata Africa Holdings with state-owned Zambia Electricity Supply Corporation. Vedanta Resources, a publicly traded metals conglomerate founded in Mumbai in 1976, has invested more than $750 million in Zambian copper mines195.
Indian pharmaceutical companies have also made significant headway in the African market. They supply low cost generic drugs and provide support to humanitarian programs across the African continent. Ranbaxy, a leading Indian pharmaceutical company, has provided reasonably priced medicines, particularly Antiretroviral (ARV) drugs, to several African countries including Nigeria, Kenya and Zambia. Another pharmaceutical company, Cipla, provides HIV/AIDS drugs to 1 in 3 patients in Africa. India's pharmaceutical company Cipla corporation in conjunction with Quality Chemicals Industries Ltd., a Ugandan pharmaceuticals manufacturer, is planning an $80 million expansion to their current operations in Uganda. This expansion will enhance their capacity to produce generic AIDS and malaria medication. Some pharmaceutical companies, notably Ranbaxy, also have production facilities in Africa196. These pharmaceutical companies are not only adding to their bottom line, they are providing urgently needed healthcare at affordable prices.
Moreover, with India being recognized and accepted as the IT destination by the world, countries like South Africa and Nigeria, which promise to be growing markets for the respective regional organizations like SADC and ECOWAS, offer enormous business opportunity to the Indian IT sector. In fact, Indian IT firms are helping African countries transform business through integrated technology solutions.
The route followed by Indian companies in Africa is largely through acquisitions led by private players, unlike China's policy of direct investments through state-owned entities. In fact, according to Thomson Reuters data, Indian acquisitions were a third of total acquisitions (in terms of value) in Sub-Saharan Africa in 2010, the highest by any country in the region. In the ICT sector, major initiatives in the African countries have been taken by Indian private sectors. The takeover of Zain Telecom's Africa Operations by Indian telecom major Bharti Airtel for US $10.7 billion has ensured its presence in 15 African countries and also made it the 7th largest telecom player in the world.197
Companies such as Bharti Airtel and multinational conglomerate Tata Group, which operate in Nigeria, invest in African markets on their own volition and do not seem to be supported by the Indian Government. These companies wield considerable influence in the Nigerian market, and Nigeria is the third biggest importer of Indian goods and services among African countries.
Through Bharti Airtel, other Indian companies are grabbing a market share not only in Nigeria, but in the wider African market too. For example, in 2010, Godrej acquired the Nigerian personal care product maker Tura for about US$ 33 million, and is planning to acquire 51% stake (which will eventually be 100% in 3 years) for over INR 500 crores in the hair care company, Darling Group Holdings. On the other hand, Tech Mahindra, an information technology outsourcing company now provides customer care services in several African countries. Through partnering with Bharti Airtel, Tech Mahindra has also partnered with MTN and Multilink in Nigeria.198
The future will see an increasing presence of Indian companies in Africa, considering that, to date, the number of Indian companies in the list of Greenfield FDI projects in Africa stood at 48 – the highest. In comparison, China had 32 companies. In the backdrop of the increasing global presence of Indian firms, India is fast emerging as a major participant in the African market. What’s more, with the African Development Bank including India among its 24 non-African members, as well as inviting Indian companies to bid for US$4.6bn – set aside by the Bank for infrastructural development projects199, the presence of Indian in Africa is set to increase even further.
Capacity-building
India has actively pursued capacity-building and a development agenda in Africa since the 1960’s. It was the first Asian country to become a full member of the African Capacity Building Foundation (ACBF) in 2005, and assured US $1 million to the Foundation’s sustainable development and poverty alleviation capacity building initiative.200 In its capacity-building initiatives, Indian Technical and Economic Co-operation (ITEC) is most popular programme in Africa. Under this programme, India has provided more than $ 1 billion worth of technical assistance and training. to African countries. Moreover, India plans to scale up training courses under ITEC programme, for which it has increased training positions by 900, as announced by the Indian Prime Minister during the India-Africa Summit, 2011. Therefore, a total of 2500 training positions under ITEC will be offered to Africans during the next three years, with total scholarships during the same period totaling 22,000 in number.201
Not limited to the economic field, India’s engagement also focuses on political, social, education and cultural fields. Initiatives have been taken to strengthen political cooperation between the Indian and African governments, with India announcing that it would increase support for education and human resource development. At the bilateral level during the India-Africa Summit 2011, it was decided to establish new institutes at the Pan-African level for English language training across various sectors – food, textile, weather forecasting, life and earth sciences, and agriculture and rural development. The Prime Minister of India offered an additional US $700 million to establish new institutions and training programmes, in consultation with the African Union and its institutions.202
The Indian government is also financing an "e-network" project to enhance internet connectivity in Africa, linking 5 regional universities, 5 specialty hospitals, 53 regular hospitals and 53 educational institutions across Africa to Indian universities and hospitals via a satellite and a fiber optic network. For this brainchild of former President of India, A.P.J. Abdul Kalam, India has offered US $100 million. Already 29 African countries have signed up for the project. In fact, the first Centre for Indian Studies (CIS) has start operations in 2007 at the University of Witwatersrand or Wits in Johannesburg.
Indian companies have been operating in the infrastructural sectors in Africa. Taking the lead are India’s state-owned engineering companies like IRCON and RITES (Rail India Technical and Economic Services), both of which play significant roles in constructing road and railways in Africa. RITES has bagged contracts to refurbish and run railways in Mozambique, Sudan and Tanzania.203 Moreover, IRCON has constructed railways in Algeria and is also working in the railway projects in Sudan, Nigeria and Zambia.204 There is also financial support to the tune of US $300 million for the development of a new Ethiopia-Djibouti Railway line.
In addition, India has contributed to UN peacekeeping operations in Africa. According to the Ministry of External Affairs, Government of India, India is the largest contributor of peacekeepers to the continent with 3,500 troops in the DRC while a 1,400 Indian military contingent constitutes the largest contribution to the UN Mission in Ethiopia and Eritrea. Apart from providing peacekeepers, India has also supplied UN peacekeeping missions with helicopters, medical and communication equipment.
In conclusion, India’s approach to improving its relations with Africa is one of the ways by which South-South ties can be strengthened. This includes exploring areas of possible complimentarity in trade, examining viability of joint ventures in selected sectors, and sharing appropriate technology on mutual advantage basis. More importantly, as Indian aid and investments are not tied to any political conditions, it helps the African countries to frame their infrastructural and other developmental programmes on their own terms. The non-interference of the Indian government in the political activities of African countries has been highly appreciated by several African governments, especially Sudan. India’s investments also help African economies to improve the price of their primary commodities and their terms of trade. It also helps African countries to enhance sub-regional economic integration and to maximize the benefits thereof.
4. BRICS: Dynamics, Resilience and the role of China
BRIC, an acronym coined by Goldman Sachs chief economist Jim O'Neill in 2001 to include Brazil, Russia, India and China, the four developing economies and emerging markets, have taken the world’s breath in recent decade in terms of the fast growth and future perspective of its economic entity. Only few year after the publication of the important research report to bring its birth, Jim O’Neill gave a new forecast in 2009 that BRIC would overtake the combined GDP of the G7 nations by 2027, nearly a decade sooner than the conclusion by the previous study. Now the BRICS – Brazil, Russia, India, China, and the group's newest member South Africa – are rather big in terms of population, landmass and economic size. Together, the five countries make up 40 percent of the world's population, 25 percent of the world's landmass, and about 20 percent of global GDP. They already control some 43 percent of global foreign exchange reserves, and their share keeps rising. With South Africa as a new member, the combination becomes more balanced with a representative from African continent, a continent with enormous human resources, natural resources and rich cultural tradition, although the enclosure resulted in some disagreement from the creator of the acronym.
BRICS has now become a phenomenon, a fact and the focus of the world academia, which likes to use it to describe the change of the global economic situation and even a solution for modern world which has sunk into an economic crisis.
Different Names
In international field, people are accustomed to use names or titles to describe countries with similar characteristics at present, regardless of their different histories or cultures. In particular, acronyms have long been favourite of economic experts and policymakers, as a convenient tool for describing the world and the changes taking place. For recent years, besides BRICS, there have appeared several terms or acronyms to describe the countries which have performed satisfactorily in global economy.
VISTA 5
In 2005, Japanese BRIC Institute put forward a new acronym, VISTA, e.g., Vietnam, Indonesia, South Africa, Turkey and Argentine, to indicate emerging countries, which all have the conditions of an emerging market, rich natural resources, increasing young laborers, stable political and economic situation, active attraction of foreign investment and expanding consumers.
Next Eleven N-11
In December 12, 2005 – a new term of Next Eleven was created (besides the BRIC) by Goldman Sachs to describe eleven big developing countries with a large population and fast economic development, e.g, Mexico, Indonesia, South Korea, Turkey, Vietnam, Philippines, Pakistan, Nigeria, Egypt, Iran and Bangladesh. The term was coined to predict the bright future of the eleven countries.205
Group of Five (Outreach Five)
In 2007, Group of Five is another term used by G8 in the so-called “Heiligendamm Process” created by German Prime Minister Angela Merkel to indicate the promising five countries, namely Brazil, China, India, Mexico and South Africa, which the G8 wanted to include in the discussion of the global issues. People also use Outreach Five to describe the same group.
B(R)ICSAM Constellation
Since Russia has entered the G8 Group, it was removed by some from BRICS, thus Group of Five appeared as above-mentioned. However, Centre for International Governance Innovation in Waterloo of Canada insists to include Russia in the Group thus created B(R)ICSAM Constellation, e.g. Brazil, Russia, India, China, South Africa and Mexico.206
Emerging 7 (E7)
In 2009, Emerging Seven was put forward by PricewaterhouseCoopers to include China, India, Brazil, Russia, Indonesia, Mexico and Turkey, and it was predicted that in 2020, the economic aggregate of E7 would reach 70% of the G7, and in 2032, Emerging Seven would surpass the present G7 in all the fields.
CIVETS (CIVITS)
In 2009, another acronym CIVETS was first put forward by The Economist, to include Columbia, Indonesia, Vietnam, Egypt, Turkey and South Africa, for they all possess characteristics of a huge young population and vigorously diversified economy, thus being a best place to attract investment. Later, Columbia was changed to China, and Egypt to India. Since the pronunciation is the same, the term stuck to the market. 207
Emerging 11
On April 9, 2010, Boao Forum for Asia held in Hainan Island in China put forward a new concept, Emerging 11, which includes Argentine, Brazil, China, India, Indonesia, South Korea, Mexico, Russia, Saudi Arabia, South Africa and Turkey. The 11 countries are also members of the G20. It is recognized that the emerging countries should be studied as a totality.
Growing Economies
On February 7, 2011, Jim O’Neill again put forward the idea that the Growing Economies including BRICs and Next 11, e.g. Brazil, Russia, India, China, Mexico, Indonesia, South Korea, Turkey, Vietnam, Philippines, Pakistan, Nigeria, Egypt, Iran and Bangladesh have formed an emerging market of 15 countries and became the new and the biggest driving force in world economy. The BRICs and N-11 created the best hotspot for investment, since they all have a large population, rich natural resources and big group of consumers.
MIST
In 2012, Jim O’Neill created another acronym, which denoted the ideal countries for foreign investment. Out of the N 11, MIST includes four countries, e.g., Mexico, Indonesia, South Korea and Turkey. Together with Bangladesh, Egypt, Nigeria, Pakistan, Philippines, Vietnam and Iran, the original N 11, performed much better than the BRICs. According to the performance of the investment, Goldman Sachs has gained profit of 12% from N 11 countries, yet only 1.5% from BRICs.
There are also other terms to describe the new phenomenon, such as Asian Drivers of the Global Change, Anchor Countries, Emerging Economies, Emerged Markets, Emerging Countries, Emerging Markets Countries, Emerging Market Economies (EMEs),208 etc.
What do all these acronyms, new names and titles indicate? It means an unexpected change has occurred in international arena, be it economy or politics.
Similar Implication
In a book entitled Head to Head: The Coming Economic Battle among Japan, Europe and America published in 1992, the author analyzed the economic powers in the coming century. Lester C. Thurow, a prominent economist in the U.S.A., one of the original founders of the Economic Policy Institute in 1986 and former dean of the MIT Sloan School of Management made in this book some predictions for the 21st century. He was quite confident in his naming of the coming economic powers, Japan, Europe and U.S.A. His argument is that in the 20th century, the rich country club admitted only one country, Japan, into the club, and it is not at all strange if no country would be admitted into the rich country club in the 21st century. Obviously, his prediction was incorrect since none of the BRICS was mentioned in his list and he pointed out that Europe would take the lead in the new century.209