In October 2015, New Delhi hosted the India-Africa Forum Summit, which for the first time brought together all 54 African countries. At the summit, Indian President Narendra Modi showed India’s interest in strengthening relations with African countries, discussing economic as well as political and diplomatic ties. India wants to join the UN Security Council and is counting on the African delegates’ votes to achieve that. But India is also interested in spurring its economic development, by investing abroad, accessing overseas markets, and securing energy resources, and it very much has its eye on Africa.
Compared to other major world economies, India is an emerging economy, but it is making inroads into Africa. Indian investment flow in Africa is significant, at $50 billion in 2014, although the vast majority of that goes to the tax haven Mauritius. Still, Indian companies are active in a number of sectors in African economies, among them automobiles, services (mainly telecommunications and finance), pharmaceuticals, construction and resources.
Historically, India had an early presence in East Africa (particularly in Kenya, Tanzania and Uganda) and Southern Africa (South Africa, Mauritius, Madagascar and Seychelles); hence, there is an important African population of Indian descent in these countries. While Indian investments are mostly concentrated in these countries due to the early historical ties and significant populations of Indian origin, more and more Indian companies are investing in West and North Africa.
Africans of Indian descent help foster Africa-India economic and cultural relations. Many are involved in private entrepreneurship and set up businesses between Africa and India in various economic sectors. They facilitate access to African markets for Indian companies.
India-China Rivalry in Africa?
Africa’s partners, and particularly its traditional partners, often view emerging economies’ engagement with Africa is a threat and a cause for rivalry and competition, even though Europe and the United States, as Africa’s traditional partners, are still the top foreign investors in Africa and its largest trading partners. The growing investment and trade relations between emerging economies and African countries do contribute to declining trade and investment between Africa and its traditional partners, a situation fuelled by the financial crisis in Europe and the United States as well as growing interest in South-South trade and investment between African countries and emerging economies in the global South.
African countries are keen to diversify their partnerships, to reap the advantages these new interactions could offer. While the European Union and the United States, for instance, enjoy robust economic relations with China, they worry when African countries seek the same. In a globalizing world, African countries, like any other, are free to choose their partners. While many in Europe and the United States see China’s engagement in Africa as competition, each of Africa’s partners (traditional as well as emerging) pursue their own political, diplomatic and economic interests, and so do African countries.
As for India and China in Africa, in terms of investment and trade statistics, there is little competition. In 2014, China’s trade with Africa was at $200 billion, while trade between India and Africa was at $70 billion. As for investment, leaving aside the Mauritius tax haven, Chinese investment in Africa outweighs India’s. However, India-Africa relations are growing and the October summit has signaled India’s long-term engagement with the continent. At any rate, rivalries can be overstated. Business is increasingly multinational, and companies tend to collaborate and partner in the same business sectors.
Any rivalries aside, Africa is now very much a part of international relations, economic cooperation, and international trade. Shifts in partnerships, fuelled by new global dynamics, are helping to redefine and shape Africa’s position vis-à-vis its traditional as well as emerging partners. These relations, if well managed, could contribute to Africa’s development, attracting more investment, creating jobs, transferring skills and technology, and diversifying African economies. While Africa’s partners are mainly driven by the need to secure resources and access markets for their industries, African countries should aim at maximizing the advantages they reap from these diverse partnerships and interests. Governments should make sure that the investments boost growth and change economic structures, and that the revenues generated are reinvested in their countries and citizens. They must also ensure that areas where investments are made do not suffer environmental damage, that people’s livelihoods are not affected, and that African labor laws and workers’ rights are respected.
While foreign investments contribute to development, endogenous policies and strategies for development based on strong institutions and the implementation and monitoring of these policies and strategies remain crucial from a long-term sustainable development perspective.
Dr. Daouda Cissé is a Research Fellow at the China Institute, University of Alberta, Edmonton, Canada.