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India’s Modi sets sights on Africa

, October 28, 2015, 0 Comments

modi-india-china-africa-marketexpress-inAs China’s slowdown impacts ties with Africa, India is seeking to step in and boost political and economic relations with the continent. The upcoming India-Africa Summit may offer a key opportunity to do just that.

It is being touted as India’s largest ever Africa outreach. From October 26 to 30, New Delhi plans to host representatives of all 54 African states in the “India-Africa Forum Summit” or IAFS, the third top-level meeting of its kind to be held since 2008 designed to strengthen bilateral relations.

Over 40 heads of state or governments, including South African President Jacob Zuma and his Nigerian counterpart Muhammadu Buhari, have already confirmed their participation in the five-day forum, which was initially scheduled to take place last December but was postponed due to the Ebola outbreak.

About 1000 delegates, including officials and business people, are expected to attend. “The summit will be an occasion to harness new opportunities unleashed by the parallel and interlinked resurgence of India and Africa,” Nivedita Ray, a research fellow at the New Delhi-based Indian Council of World Affairs (ICWA), told DW, adding that sectors such as agriculture, infrastructure, security, blue economy trade and investment, capacity building through training, and institutional building would be given thrust.

How serious is Modi about Africa?

Ever since taking office last year, Indian Prime Minister Narendra Modi has taken a strategic approach to ramp up his country’s foreign policy engagement and expand India’s trade partners. But despite a busy diplomatic agenda over the past months, Modi has yet to visit mainland Africa.

The premier has instead prioritized expanding relations with neighboring countries, improving ties with the US and East Asia, and bolstering trade with economic powerhouses like Germany. So when it comes to defining India’s Africa relations, the current administration has been relatively quiet.

This is why Dhruva Jaishankar, a South Asia specialist at the German Marshall Fund of the United States, argues the summit represents “India’s attempt to show how serious it is about engaging with the region.” Tim Steinecke, a researcher of Asia-Africa relations at the UK-based University of St Andrews, agrees, adding that the IAFS will also force the PM to reveal his vision of future Indian-African ties.

Catching up with China?

The meeting comes at a time when China, one of Africa’s key economic partners, is looking to further upgrade its partnership with the resource-rich continent. In this context, the IAFS will be facing particularly tough competition as South Africa will be hosting in December the sixth Forum on China-Africa Corporation (FOCAC) – a ministerial level meeting that has been particularly popular among African leaders given China’s strong economic role in the region.

In fact, Sino-African trade has increased massively over the past years – from around $10 billion in 2000 to over $200 billion in 2014.

However, the tide is changing. As China’s economy decelerates, data suggest that demand for the region’s resources is withering, with bilateral trade dropping sharply since late 2014, leaving several African economies vulnerable.

“Due to the global slump in commodity prices and the slowdown in Chinese demand for key mineral commodities, African resource exporters are suffering negative shockwaves to their industries,” Rajiv Biswas, Asia-Pacific Chief Economist at the analytics firm IHS, told DW. Moreover, Chinese firms are finding themselves increasingly at odds with their African hosts over environmental and labor issues.

Given this development, researcher Steinecke argues the upcoming New Delhi summit will also be viewed as an indicator of just how seriously African leaders are looking for alternatives to Beijing’s investment model, which tends to involve Chinese state-owned enterprises and low-interest loans in return for favorable access to oil and mining projects.

Commercial relations

But just how strong are Indian-African ties? Economist Biswas explains that although previous Indian governments may have been relatively low key in terms of stepping up trade ties, India’s private sector has been much more dynamic. “The significant presence of an Indian diaspora in many parts of the continent – countries such as South Africa, Kenya, Tanzania and Mauritius – has led to strong entrepreneurial ties in sectors such as retail services, mining and commodities trading,” said the analyst.

In fact, while not as strong as China’s, Africa’s share in India’s global trade rose six percent ($4.8 billion) in 1997-98 to almost 10 percent ($68 billion) last year, far exceeding Japan’s bilateral trade with the region, which amounted to some $30 billion in 2014.

And although only Nigeria and South Africa make it among India’s top 25 trade partners, analysts say New Delhi is keen on diversifying into new regions, especially French- and Portuguese-speaking countries such as Senegal and Mozambique.

A number of Indian multinationals already have significant interests and investments in the region, with strategic sectors including agribusiness, pharmaceuticals, information and communications technology (ICT), and energy.

In fact, African countries, in particular Nigeria and Angola, now account for more than a quarter of India’s oil and gas imports – a diversification strategy aimed at reducing New Delhi’s traditional dependence on the Gulf states, as Constantino Xavier, a researcher at the Washington-based Johns Hopkins University, told DW.

Growing presence in Africa

Indian conglomerates operating in the continent include state-owned oil and gas firm ONGC Videsh Ltd., petrochemicals company Reliance, agribusiness firms such as Karuturi Global, pharmaceuticals such as Cipla and Ranbaxy and ICT companies such as Bharti Airtel.

The Tata Group, for instance, has been operating in Africa since 1977 and is present in 11 countries across a wide range of industries such as automobiles, hotels and telecoms. Africa has also been a focus of India’s small but growing foreign assistance program.

And as Xavier points out, ties are also strengthening on the security front. “East African coastal states from Somalia to South Africa, including also the Seychelles, Madagascar and Mauritius, are all key partners in India’s efforts to establish leadership in the Indian Ocean Region, from combating piracy to securing sea lines of communication and disaster mitigation.”

India is also the largest contributor to UN-mandated peacekeeping and other operations in Africa, with more than 30,000 personnel involved in 17 of 22 total missions in the region since 1960.

India’s African opportunity

So is it New Delhi’s time to shine in Africa? Although Indian state actors and corporations may not yet be a game-changer to Sino-African relations, researcher Steinecke points out that the mood across many African states “may be ripe for a new foreign partner.”

South Asia expert Jaishankar agrees, adding that the South Asian nation’s growth profile and needs are similar to those of many African countries, with local businesses often geared towards low-cost production and services.

Moreover, he says, India provides a useful model for democratic development. Indeed, the world’s largest democracy is increasingly responding to requests from African governments to share its democratic experience, offering training on electronic voting systems, parliamentary procedures, federal governance, and an independent judicial system to strengthen the rule of law.

And with the South Asian nation’s economy expected to grow more rapidly than China’s over the medium to long-term, the long-standing presence of Indian business communities in the continent is set to help firm up trade and investment relations even further.

“As Indian corporations become increasingly international in their operations and business strategies, they also offer a new source of growth for many African countries, with many of them likely to be keen on diversifying their relations to reduce their dependence on China given the country’s current economic slowdown,” said Biswas.

In this context, the upcoming IAFS may serve as a crucial springboard to a more intense and mutually beneficial strategic engagement, agree experts. “PM Modi has promised to make India more competitive in the global economy, and Africa plays an important role,” said ICWA expert Ray. At the same time, India’s development model – particularly its capacity building and infrastructure projects – have become increasingly attractive for the continent, she added.