With the Euro zone, U.S, and China undergoing a phase of relative slowdown, economic forecasts have placed Africa in an enviable position- as a new and emerging market. This explains why a rejuvenated India was upbeat to seal its position in the Rising Africa. Vinny Davis, Managing Associate of Centre for Strategic Studies (India) writes how economic diplomacy will be key to Indian engagement with Africa.
By Vinny Davis | CPPR & IMANI | Issues 00136
The third Indo-African summit captured attention, being the highest African participation in the recent times.
The African continent is rightly getting subsumed into Alex De Waal’s term of ‘political marketplace’. Economic diplomacy will be the tool to woo major trans-national engagements with Africa. The substantial presence of Indian business activities in the region will become the new level playing field to mobilize a revamped foreign policy concern. Though the capacity constraints of India pose a stumbling block towards the fuller realization of this goal, any key development is pitted to have a larger resonance in re-affirming the Indo-African ties. India would be embarking on a position of engagement with mutual benefits, than getting carried away in the empty rhetoric of South-South cause.
Shared historical experiences of colonization and geographical proximity can be the catalysts for Indian inroads into the African continent. According to a recent study by the IMF (2014), Africa’s share of the global working age population is estimated to increase from 12.6 percent in 2010 to over 41 percent by 2100. This means that the continent will have a share of 3.2 billion in the projected 4 billion population increase by 2100. Notwithstanding, Africa is touted to reap from its abundant reserves. The 2 billion years old Bushveld Complex (South Africa) is a veritable storehouse of strategic metals (platinum, chromium, and vanadium) that are major pre-requisites in high tech industrial processes. A substantial share of the world’s chromium and cobalt reserves and a quarter of aluminum ore is in Africa, besides the reserves of precious gems. If Southern Africa is rich in coal, West and North Africa is replete with petroleum reserves and iron ore reserves. East Africa has recently catapulted itself to importance for international oil companies with its fresh hydrocarbon reserves. It is estimated that over 120 bn barrels of oil reserves are in Africa, making it the second largest exporter of oil in the world. The joint study by KPMG and CII (2015) noted that, with Africa accounting for only 4% of global oil consumption, the export potential is huge. The luxury market in the region is also expected to touch $405 million by 2019, and its luxury market is touted to grow at 5.6% per year. Consequently, harnessing this demographic dividend together with the rich mineral and hydrocarbon reserves can aptly satiate the investors and businesses serving mutual benefit.
Indian foothold in the region has a real time influence since the days of colonization and liberation wars. The support by countries like Egypt and Ghana for the Non-Aligned Movement spearheaded by India reinforced this relation during the times of Cold war. Over the previous decades, there have been many ups and downs in the Indo-African relations. The support by the continent to Japan in the United Nations Security Council Non-Permanent Seat in 1996 would have prompted the Indian government to pay more emphasis on Africa in its foreign policy hierarchy. Needless to say, the Indo-African Summit of 2008, was a breakthrough in leveraging the benefits of South-South cooperation. Post 2008 Summit, India pledged $7.4 billion to the African countries of which more than $3 billion has been disbursed.
The list of Indian business interests in Africa is jaw-dropping, with both the public and private sector attempting to cash in maximum benefits. ONGC Videsh Ltd, BHEL, TCIL, Bharti Airtel, Tata Africa Holdings, Tata Chemicals, Mahindra & Mahindra, Reliance Industries, Bajaj Motors, Ranbaxy, Dabur India, Ashok Leyland, Essar Energy, Larsen & Toubro, Birla Group, Jindal Steel & Power Limited, Wipro, Punj Llyod, TVS, Bank of Baroda, State Bank of India, to name a few who have already established their presence in the continent. Sudan, Egypt, Ghana, Nigeria, Morocco, South Sudan, South Africa, Tanzania, Botswana and Mauritius are the major stakeholders in this regard.
The Modi government has been steadily bringing to the fore, the need for economic diplomacy to steer foreign relations. Indo-Africa trade touched $70 billion in 2014-15, alongside the Indian investments in Africa in the past decade soaring to $30-$35 billion. Though this may seem minuscule in comparison to Chinese trade that has exponentially increased to over $200 billion, India is seeking to boost its economic diplomacy with Africa. India will require more teeth to its bilateral trade with the region, for the joint vision of 2014 World Economic Forum to fructify. Realization of $500 billion in trade between India and Africa by 2020 will necessitate easing tariff and non-tariff barriers, import control duties besides being a key stakeholder in African desire to have a Free Trade Zone by 2017. The Continental Free Trade Area will expand the economic market for the region, with equal emphasis on trade in goods and services. Indian encouragement to develop a conducive environment for economic development with mutual benefits will be embraced. The African uneasiness with Chinese presence is slowly revealing its face in the form of skirmishes between the locals and Chinese companies over its hard labour practices. Chinese Foreign Direct Investment (FDI) in the African continent is over $3 billion. It is harder yet to predict if the slowing Chinese economy would prompt its leaders to concentrate less on Africa. Private sector participation was minimalist in the recently concluded Indo-African Summit. Conversely, it was the other way round in the 2013 Japan-Africa summit. As the 5th largest investor in the region, Information Communication Technology and Hydrocarbon businesses are pitted to flourish in the decades to come. Engagement with the Diasporas will be imperative, as over 13% of global Indian Diaspora are in Africa.
Bloody conflicts, piracy, corruption, ethnic divides, spurt in the terror outfits (Boko Haram, Al-Shabab, & Al Qaeda), and the recent failures of state-building exercises can pose as major irritants. The Indian democratic charisma can be deployed to deepen its engagements with benefits for the African counterparts as well. Indian contribution towards the peacekeeping operations in Africa is always lauded, with the recent being its painstaking efforts in South Sudan. Through its participation in such multi-lateral mechanisms, India is vying for reforms in the UNSC to advance the need for inclusivity in international institutions of governance. A revamped Blue Water Navy is also in the pipeline for allaying the concerns of maritime security and for the protection of Sea Lanes of Communication. This will undoubtedly require a strong East African support.
The African leaders might have attempted to use the summit as a platform to adhere to the goals of the Africa Development Charter 2063, which envisages the region to be an influential global player in the future. Though a bumpy ride awaits them, the erstwhile “Dark Continent” has resurfaced becoming the fastest growing continent in last decade, with the economy projected to expand to $ 2.6 trillion by 2020. It is unlikely to predict which African country will join the race for G-4 (a group seeking permanent UNSC membership), alongside India, Japan, and Brazil as the recent progress by African countries like Nigeria, Ethiopia or other Sub-Saharan African nations are commendable.
The summit identified the need for a joint monitoring mechanism with the African Union to oversee the follow-up of the concessional credit of $10 billion (for 5 years), and a grant assistance of $600 million pledged by India. The Indo-African Development Fund ($ 100 million) and Indo-African Health Fund ($ 10 million) are also part of the grant assistance to the region. With representatives from over 54 African nations, the Summit could provide the groundwork to augment collective efforts to boost trade and investment, technological assistance, anti- piracy & counter-terrorism, UNSC reforms, and capacity building initiatives (human resources development, skill up gradation).
On expected lines, India will be seeking to project an image of a responsible power striving to strengthen peace and development in Africa with its enhanced soft power linkages. It will not be easy for India to step up its ante, as the major power scramble for resources from Africa continues. The dexterity of the African Union will be tested, as international trade and development should not end up compromising economic and political control of the region.
Vinny Davis is Managing Associate at CPPR – Centre for Strategic Studies (India).
This article is published in collaboration with the Center for Public Policy Research (India). It forms part of a series of papers to be produced by IMANI and Center for Public Policy Research as part of the 2015 India Africa Summit
The views expressed in this publication are the author’s and do not necessarily represent those of IMANI.