India and Africa

India's Relationship with Africa

In 2009 China surpassed the US as Africa’s largest trading partner and trade between China and Africa’s 55 countries (including the island nations) now amounts to over US$220bn. The problem is that China’s slowing economy and structural shift to services-driven growth are now regularly flagged as key drivers of pain in Africa’s resource economies (see below). Fortunately, some optimistic analysts now argue that India could replace China as the most important metals buyer for Africa. It will also help Africa’s oil exporters that India is the world’s largest energy consumer after China and the US.

Annual trade between Africa and India currently amounts to a respectable US$72bn and is more heavily weighted towards the private sector (which is usually better for skills development). Unlike China though, India’s economy is either meeting or exceeding expectations and grew a robust 7.3% year on year in in 4Q15. India has longstanding trade and migration relationships with Africa, particularly on the eastern and southern coasts, but up until now its diplomatic efforts have been focused on island nations. India has a US$500m line of credit with Mauritius and leases the Seychelles island of Assumption for commercial development. However India is now taking advantage of the slow-down in China to offer itself as an alternative trading partner to the rest of the continent.

The 3rd India-Africa Forum Summit took place in Delhi in October 2015 with the participation of 40 African heads of state. India promoted its expertise in agriculture, ICT and business services and offered credit of US$10bn over 5 years, US$600m of grant assistance, US$100m for a development fund and 50,000 scholarships for African students to study in India. Greater cooperation makes sense – both geographies are “solar-rich”; India’s technology is specialised for tropical conditions and much of Africa already relies on India’s cheap generic drugs. Overall, India would like to position itself as a fairer partner to Africa than China, which some accuse of exploiting Africa’s mineral and energy wealth. It will help Africa to have an alternative destination for its commodities, but the continent still needs to improve its levels of beneficiation or else growth of trade with India will be a case of simply kicking the commodity can further down the road.

There is a darker side to all of this as well. In 2015 China announced plans to build a military base in Djibouti on the horn of Africa. This move to project power into the India Ocean clearly did not go down well with India, which fought a brief border war with China in 1962 and which relies on sea transport for 90% of its energy needs. India, for its part has already announced a naval base in the Seychelles. Africa played host to unwelcome cold war proxy wars between the 20th century’s super powers, lets hope the same thing doesn’t happen again with the 21st’s. Watch this space.

(Sources: United Nations, Africa Confidential, This is Africa, Trading Economics, The Indian Express, Aljazeera) 

ANDREW R LOUW CFA

OpinionAndrew Louw