The Indians are coming

April 30, 2008

Like China, India is looking for raw materials and new markets for its goods. New Delhi hopes that a nuanced, south-south relationship will give it the edge.

In late April it was reported that Indian mobile-phone company Bharti Airtel was considering a bid for South Africa’s MTN. MTN, which has more than 68 million subscribers in 15 African and six Middle Eastern states, has long been considered an attractive acquisition target—indeed, there has previously been speculation about an offer from China Mobile, the world’s largest mobile-phone company in terms of subscribers.
MTN has denied receiving formal offers, but the rumored courtship by Indian and Chinese corporates encapsulates a growing trend in Africa. India’s relationship with the continent is long-standing and fast-growing, but has become increasingly overshadowed by China’s thrust for influence and resources. India is now trying to fight back, and in late April hosted the first India-Africa Forum Summit. Attended by 14 African countries (selected by the African Union), the summit is supposed to herald a new era of co-operation by offering additional credit, project financing and trade preferences.
Indian officials insist that this is not a matter of competing with China, but the summit mirrored a far larger gathering convened by China in Beijing in 2006, and there is little doubt that the two countries are potentially fighting for the same spoils. Both have rapidly growing needs for imported oil and raw materials (especially minerals), and view Africa as a key source of supply. India currently imports 11% of its oil from Africa (mostly Nigeria), but is seeking more—especially from Angola—leading in some cases to direct competition with China. India is also searching for secure, long-term uranium supplies to feed its nuclear reactors, as well as other strategic minerals, meaning that South Africa is emerging as a key partner. Finding African markets for Indian finished goods is also important, but less of a priority in the short term. However, India appears to be lagging behind China in the trade stakes at present: Indian-African trade climbed to $30 billion in 2007, but Sino-African trade was nearer $60 billion.
The Delhi Declaration and the Africa-India Framework for Co-operation that emerged from the summit offer a concrete boost: India will double credit availability to $5.4 billion and provide project financing of $500 million over the next five years (2008-12), and will grant extensive trade preferences, covering a wide range of primary commodities and finished products, to 50 less-developed countries (34 in Africa). Trade and investment will undoubtedly benefit if the pledges are implemented in full, although—as noted by some African leaders—there is a risk of delay, partly because of India’s stifling bureaucracy.
India nevertheless accepts that it cannot compete directly with China’s substantial financial clout, and is instead aiming for a more nuanced partnership, based on “south-south” reciprocity, as opposed to a colonial-style “north-south” relationship, which is seen as more typical of China and the West. India claims to want to help Africa add value to its products, rather than simply extract resources, but may find it difficult to develop a truly distinct approach, especially as African and Indian interests will clash in some cases. Diamonds are one example: Africa’s desire to expand domestic diamond cutting is not compatible with India’s aim to protect its dominant global position in the sector. In India’s favor, however, is a commitment to skills-building in Africa, including the use of local workers on Indian projects (in contrast to China’s pattern of using Chinese workers) and an expansion in the number of Indian higher-education places available to Africans. India’s case for partnership is also bolstered by a willingness to supply low-cost, generic drugs, and by major ongoing investment in information and communication technologies, especially in the health and education sectors.
------------------The political dimension
India’s renewed interest in Africa extends beyond trade and investment to the geopolitical arena. This includes a drive to secure the backing of Africa’s 54-strong voting block for a permanent Indian seat on the UN Security Council. In return, New Delhi is now backing Africa’s call for a similar permanent slot. India continues to maintain a particular interest in the Indian Ocean region (as almost 90% of India’s trade is sea-borne), which has lead to ever-closer security and defense ties with several states, including Mauritius, Seychelles, Madagascar, Kenya, Tanzania, Madagascar, Mozambique and South Africa, sometimes in direct competition with China. India’s focus on Indian Ocean security is partly behind the country’s resistance to the inclusion of China in the India, Brazil and South Africa trilateral partnership (and for keeping Pakistan out of the Indian Ocean Rim grouping).
It is clear that both India and China will continue to compete for influence on the continent, and that Africa will seek to extract the maximum benefits. With a 2.8 million strong Indian diasporas, India views Africa as its natural partner, and the bilateral relationship is likely to have developed substantially by the time of the next India-Africa summit, in 2011.
(Source: The Economist)