Is India enhancing its relationship with Africa?
The author, Richard Li, is a Singapore-based partner with Steel Advisory Partners, a management consulting firm that serves clients across industries. This article was produced for the NTU-SBF Centre for African Studies, a trilateral platform for government, business and academia to promote knowledge and expertise on Africa, established by Nanyang Technological University and the Singapore Business Federation.
India shares a very long history with Africa through trade and its large diaspora throughout the continent. During the British colonial times, the Father of India, Mahatma Gandhi, spent 21 years of his life in South Africa as a lawyer and a civil rights activist. His time in South Africa shaped his political views that lead to his fight against the British rule in India. His satyagraha movement, non-violent resistance and civil disobedience against the British, eventually lead to the independence of India in 1947.
It was under the former Indian prime minister, Manmohan Singh, that the first India-Africa Forum Summit (IAFS) was organised in 2008. The current prime minister, Narendra Modi, wants to have a bigger focus on Africa. In addition, at the beginning of October 2017, for his first overseas visit, President Ram Nath Kovind went to Djibouti and Ethiopia. Like the African continent, the Indian economy has since the 2000s been growing at a very fast rate. With many similarities and differences, that can be leveraged to boost and complement their respective economies, the ties between Africa and India can be further reinforced to benefit each other.
India and the Indian diaspora in Africa
According to the Indian Ministry of External Affairs, in 2016, its global diaspora consisted of 30.8 million non-resident Indians (NRIs) and persons of Indian origin (PIOs). In Africa, there are about 2.8 million people forming the Indian diaspora throughout the continent. The three-biggest Indian communities are in South Africa, Mauritius and Kenya, representing more than 90% of the whole Indian diaspora in Africa.
Most of the Indian diaspora are therefore in southern and eastern Africa. Many have migrated to Africa and settled down over many generations. Some have even made their fortune in Africa. Among the richest Africans, some are of Indian origin. For instance, Kenyan-based Bidco Africa is a major consumer product conglomerate with operations in many African countries; it was founded by Kenyan-born Bhimji Depar Shah. Another Kenyan conglomerate, the Sameer Group, is controlled by Kenyan-born Naushad Merali. As for Ugandan-born Sudhir Ruparelia, he controls the Ugandan conglomerate, the Ruparelia Group.
While the Indian diaspora still maintains links with India, they are also constantly remembered in India with the Pravasi Bharatiya Divas (Non-Resident Indian Day), that is celebrated on every January 9th. This day also serves to remember Mahatma Gandhi’s return to India from South Africa in 1915. India maintains strong links with its diaspora by providing the NRIs and PIOs with the Overseas Citizenship of India (OCI). In his recent visit to Addis Ababa, Ethiopia, President Ram Nath Kovind reminded the local Indian community of the OCI programme that can enable them to be better connected with India. As the engagement between Africa and India increases, the Indian diaspora will indeed be the catalyst to further enhance and expand India-Africa relations.
Synergy between India and Africa
From 2006 till 2016, India’s annual trade with Africa has averaged at about 8.4% of its global trade, a relatively high amount compared to the other big Asian economies. India has steadily increased its trade with Africa, reaching a peak of US$73.4bn in 2014, according to data from the International Trade Centre. Due to the steep decline in commodity prices, the India-Africa trade has declined significantly by about 35% to $47.8bn from 2014 till 2016.
However, Africa as a whole has always enjoyed a positive trade balance from its trade with India. Africa’s trade balance with India has been a positive $4.1bn in 2016 and at its highest, it was $16.4bn in 2011. From 2006 till 2016, the African continent has in fact accumulated a net positive $99.1bn trade balance with India. In 2016, the top-five African trade partners of India were Nigeria, South Africa, Egypt, Tanzania and Kenya.
Africa mainly exports commodities to India. A very important commodity is oil and some of the major oil producers exporting to India are Nigeria, Angola and Equatorial Guinea. Copper from Zambia is also one of the major export items. Precious metals, like platinum and gold from South Africa, and precious stones, like diamonds from Botswana, are also exported to India.
As for India, some of its major exports to Africa are pharmaceutical products, automotive vehicles and parts, as well as machinery. These items represent nearly a third of all the Indian exports. Moreover, India exports refined petroleum products to African countries. While the India-Africa trade declined due to the commodity prices, with its high growth rate, India will need massive amounts of natural resources from Africa to keep on fuelling its future growth. Coupled with a slight price recovery of commodities recently, the India-Africa trade will go up again.
Top Indian companies in Africa
Many of the top-100 Indian companies are tapping into the opportunities in the African continent. In the oil and gas sector, several of the biggest Indian companies are exploring Africa to secure the energy needs of India. Some of them are Indian Oil, Bharat Petroleum, Hindustan Petroleum and Oil & Natural Gas Corporation (ONGC). They are all exploring Africa, as well as investing massively in both upstream and downstream projects.
In the mining sector, Vedanta is in Liberia, Namibia, South Africa and Zambia. It is mining copper, iron ore and zinc. As for Jindal Steel & Power, it is in seven countries, mainly in the Eastern and Southern African regions. It is not only in the coal mining sector, but it is also involved in various power generation projects from coal.
For the construction of his $14bn oil refinery in Nigeria, Aliko Dangote tapped into the expertise of the Indian engineering company, Engineers India Ltd, that has extensive experience in building oil refineries. Having the world’s largest oil refinery, India is also the place where Aliko Dangote is sending hundreds of Nigerians to be trained so that they can manage the Nigerian oil refinery. Another big engineering firm, Larsen & Toubro, is exploring opportunities by providing its expertise in infrastructure building. It has recently been selected to build the light rail system in Mauritius.
Indian companies are also involved in many other industries that are not related to natural resources. In 2010, Bharti Airtel acquired the African mobile operations of Zain for nearly $9bn and is now present in 17 African countries with 78 million subscribers. Moreover, many of the biggest banks, like the State Bank of India, ICICI Bank and Bank of Baroda, are also present in Africa. Furthermore, in the automotive sector, companies like Ashok Leyland, Eicher Motors and Tata Motors are aiming to capture a bigger market share in Africa.
Even in the more advanced information technology sector, many of the global Indian technology companies like Infosys, HCL Technologies and Wipro are working with multinational and African companies. They are helping these companies in their digital transformation journey, as well as optimising their operational costs with business process outsourcing. Most of them have chosen South Africa as their main base, but some have expanded their operations throughout Africa. Tata Consultancy Services is in five Africa countries, while Tech Mahindra is present in 12 countries.
Enhancing India Africa relations
In 2008, to better structure and formalise the India-Africa relations, the first IAFS was organised. Addis Ababa, Ethiopia, was the venue for the second IAFS in 2011. And for the 2015 IAFS, the Indian prime minister, Narendra Modi, welcomed 41 African leaders and their delegations in New Delhi. It was also during that event that Prime Minister Modi announced a $10bn soft financing assistance to support African development.
African leaders are also regularly welcomed in India. At the beginning of this year, at the invitation of Prime Minister Modi, the Kenyan and Rwandan Presidents, Uhuru Kenyatta and Paul Kagame, were on visit in India. Moreover, given that India is a member of the African Development Bank (AfDB), the 52nd annual meeting of the AfDB was held in Gandhinagar, Gujarat, in May 2017. Besides the AfDB President Akinwumi Adesina, other African leaders like Senegalese president, Macky Sall, and others attended and met up with Prime Minister Modi. During that meeting, India also announced its vision for the Asia-Africa Growth Corridor, that will potentially bring about great benefits to Africa.
Despite the recent drop in commodity prices, India-Africa trade has grown by a significant 115% from 2006 till 2016. Moreover, there are more and more Indian companies venturing far into the African continent to support the growth of African companies, as well as tap into attractive opportunities. As a result, the India-Africa relations will keep on growing.
For Africa, African leaders and all Africans must emulate Mahatma Gandhi’s saying, “You must be the change you wish to see in the world”, so that they can continue striving hard to be the change that will create a better future for Africa and the world.
Richard Li is a Singapore-based Partner with Steel Advisory Partners, a management consulting firm that serves clients across industries. Having spent his working career in strategy consulting, he worked with various global clients and covers themes such as Corporate Strategy, Transformation, Digital Innovation and Risk Management. He can be contacted via the Steel Advisory Partners site. This article was specifically written for the NTU-SBF Centre for African Studies.