The “I” Factor

By Asoka Ranaweera

The writer is the founder and CEO of a company that advises investors on structuring investments and developing projects in West, East and Central Africa

Just recently Manmohan Singh India’s Prime Minister visited Addis Ababa accompanied by senior ministers and a who’s who of India’s most venerable businessmen. His mission was to meet his African counterparts who had come together for the 2nd Africa India Forum Summit.

This was the PM’s third visit in eight years to Africa and Mr. Singh had presided over the first ever summit in April, 2008. At the first pow wow India offered Africa amongst other things a large credit facility worth $5.4 billion over five years. Three years on India’s offering got bigger and arguably better.

This time India offered Africa a $5 billion credit facility spread over 3 years, 22,000 university scholarships, $700 million for institutional building, $300 million for an Ethiopian-Djiboutian railway, India Africa food processing and textile clusters and the list goes on and on.

In 2000 India Africa trade and investment was worth around $3 billion, eleven years on and it’s close to $47 billion, a phenomenal increase by any measure. In the last decade India has grown by an average of 9% per annum whilst Africa has grown at around 5%. Clearly, something significant is going on between them.

And here is perhaps part of that answer, in 2010 Indian imports from Africa totaled $20 billion and exports were worth $10 billion. Clearly, Africa has a lot of things that India needs to fuel its growing economy and commodities such as oil, gas, copper, and iron ore are just some of the basic elements that any large economy needs if it is to grow at a brisk pace.

Before people get too upset and talk about neocolonialism let just say that Africa and India buy and sell from each other based on comparative advantage. And that the evolution of south-south cooperation between Africa and India and indeed all south-south countries is a relatively good thing above all for Africans.

Part of the reason of course is that competition for Africa’s resources, which is helping grow economies the world over should lead to better terms and conditions for African commodities and hence its peoples. That’s what in theory should happen.

The effect of global demand for Africa’s commodities is contributing to an unprecedented boom on the continent. After all let us not forget that 7 of the 20 fastest growing economies in the world are in Africa today.

Speaking of competition India vehemently denies that the recently concluded summit has anything to do with China, whose presence in Africa has surely altered the dynamics of continents development. In 2010 Africa China trade was worth approximately $116 billion in 2000 it was just $10 billion.

Instead India says that its engagement is different from China’s for one thing India is after all the world’s largest democracy. India says it can offer Africans the sum of its development experience which it says is more democratic and less authoritarian than China’s.

Also, India likes to point out that to date it is mostly Chinese state owned companies that are engaged in Africa whilst private investments from China are far and few between. And it is precisely this entrepreneurial spirit from India it is argued can help spur competition and innovation in local African markets, contributing to human and technical capacity building amongst a host of other direct and ancillary benefits.

In fact some Indian companies are already home grown names in several African countries including Mittal Steel, Tata, Reliance Industries, Airtel and Essar. Perhaps there is something to be found in India’s counter points to China? Maybe the behemoth of the sub-continent can serve as an alterative model through, which African countries could at least in part base their development on? Of course much of this remains to be seen.

Importantly, India also has a significant Diaspora of African Indian’s living throughout the continent but concentrated in large numbers in the east and south. In countries like Kenya, Uganda, Tanzania and South Africa, African Indian communities have played pivotal and invaluable roles in the national development of economies for several generations.

Often they have taken the lead and risk in investing money, time and resources to develop a variety of businesses large and small. Perhaps here too India can distinguish itself not just from China but from other countries in Africa too?

However India justifies its current interest, ultimately it is important for Africans to reap the benefits of India’s new found fondness for Africa. And the time to do it is now whilst India devotes more of its diplomatic and economic clout in support of its African interests.

To begin with, many more African countries need to secure better terms for their natural resources and they are perfectly positioned to test India’s claims to be a ‘different’ actor on the continent. They should ask India for fairer terms and also for the development of infrastructure not necessarily related to natural resource extraction. After all when the minerals are gone something has to be left behind? Perhaps India could set an example in this regard?

Africans should ask for and continue to lobby India to support its trade and investment policies at international meetings and of course in the World Trade Organization. In particular African countries should ask for more robust support for their positions within the United Nations organizations. In recent times India has claimed to support the position of many African countries at WTO meetings when in fact it has clearly done the opposite.

Finally, Africans might want to try and emulate India’s success in growing its information communications technology industries by asking for more technical and financial assistance to spur the growth of the industries of today and tomorrow as opposed to concentrating purely on natural resource extraction.

In this way Africans can build an enduring and sustained legacy of India’s increasing involvement on the continent and perhaps one day we might recall that in fact it was the “I” factor that made something of a difference on the continent?