India Africa Relations: Building A Strategic Partnership

          India’s foreign policy in lately has become more assertive in forging cascading relations with her strategic partners and strengthening bilateral relations with African countries is an important component thereof. Prime Minister Narendra Modi’s recent visits to the African countries in 2014 and 2016 signalled not only an extension of India’s influence in the Indian Ocean region, but also a deepening of India-Africa partnerships in areas of mutual interest.

          India and Africa share a long and rich history of interaction dating back to ancient civilisations, including the trade ties between the Nile and Indus valley civilisations. India’s shared colonial heritage with many African countries has significantly contributed to this connection, as has the migration of hundreds of thousands of Indian workers to Southern and Eastern Africa, establishing large Diasporas in these areas.

          India’s links with the struggle for freedom and justice in Africa date back to the period during which Mahatma Gandhi started his Satyagraha movement in South Africa over a century ago. India worked consistently to put the issue of apartheid on the agenda of the UN, NAM and other multilateral organizations and for the imposition of comprehensive international sanctions against the then apartheid regime.

          India’s attitude towards its relations with Africa in the post–World War II era has been informed by the principles of South–South cooperation including respect for state sovereignty, non-interference, mutual benefit and equality. Originally adopted in 1955 at the Bandung Conference, this approach was reaffirmed in the New Asian-African Strategic Partnership of 2005. The India-Africa Forum Summits (IAFS) have been playing a major role in defining India-Africa relationship.

          The IAFS, guided by the Delhi Declaration and the Africa-India Framework for Enhanced Cooperation, was established in 2008 to enhance India’s cooperation with Africa on three levels: continentally, through the AU (African Union); regionally, through regional economic communities; and bilaterally, with individual countries. The summits were designed to enhance this interaction by encouraging cooperative business ventures, human-capital and infrastructure development, cultural knowledge and academic interaction.

          The summits are attended by heads of state and although they are primarily political, and not sector-specific, they have led to other initiatives for improving economic diplomacy between India and Africa. IAFS II (Addis Ababa, 2011) placed a particular focus on technical assistance and human-capital development in Africa. Another achievement of IAFS II was the establishment of the India-Africa Business Council in March 2012. The council met in Johannesburg in September 2013 to focus on building business partnerships through technology transfers and joint ventures and to identify business opportunities between Africa and India.

          Augmented diplomatic relations were a focus of the 2015 third Africa-India Summit, which had the largest representation of African heads of state since the summit began in 2008. The summit culminated in the 2015 Delhi Declaration, which outlined shared values and commitments between India and African states. The new Indian foreign policy strategy aims at increasing assistance to African countries while simultaneously building linkages with the African continent for increased trade, access to agricultural land, and cooperation on maritime security.

          The 2015 IAFS saw a strategic shift in focus, apart from the usual rhetoric, there was a better alignment of India’s global ambitions (both political and geo-economic) and traditional strengths. Importantly, the third IAFS created a formal monitoring mechanism to regularly review the progress of various projects at different stages of completion. The summit also sought to create a global alliance for generating solidarity through collective bargaining when accessing IPR-protected technology from rich countries.

          Matters concerning political and energy security, the fight against terrorism and development cooperation in trade, investment, education and health figured in discussions at the 2015 summit. On the whole, the summit did create an atmosphere of partnership, where the emerging Indian economy successfully forged ties with the rapidly growing economies of Africa on a vastly different scale.

          In addition to the $7.4 billion concessional credit pledged in 2008, India announced credit of $10bn over a period of five years at the 2015 summit. Besides, India offered grant assistance worth $600 million, which would include $100mn for the India-Africa development fund and $10mn for an India-Africa health fund. India also announced 50,000 scholarships for African students to pursue their studies in India. In broad terms, Indian and Africa are guided by a focus on the principles of South–South cooperation and India is viewed by Africa as a partner that shares similar development challenges with the potential for mutual learning and cooperation.

          The bilateral cooperation between India and Africa has been increasing in several areas, including trade, investment, food security, information and communication technology (ICT), peace and security and good governance. Even though business is seen as a key driver of economic relations, greater engagement with non-governmental organisations and rural-based civil-society groups could provide guidance for African governments engaging with India, both as a commercial partner and as an emerging donor.

          Civil society linkages more broadly should also be included to represent its interests and ensure sustainable development, transparency and good governance. This could best be done through field studies on the development priorities of the continent and India’s expected contribution to the same. The relatively narrow approach of Western aid, with its implicit donor–recipient relationship contrasts with India’s broader approach of economic, technical, and cultural cooperation for mutual benefit.

          Until now, India’s trade with Africa has been dwarfed by that of China, despite India’s favourable geographic proximity to East Africa and longstanding cultural, political, and economic ties with the continent. Indian overall trade with Africa stood at around $75 billion in 2015, while China continues to lead at around $225 billion, followed by the US at $90 billion.

          India’s Africa policy has, therefore, aimed at countering the increasing Chinese influence in the region. Both China and India have established roles as increasingly important players in sub-Saharan African trade and development. While India’s trade with Africa has increased from $25 billion in 2006 to over $75 billion in 2015; China-Africa trade was valued at an estimated over $225 billion in 2015.

          India might turn out to be the one viable alternative to China’s seeming omnipresence on the African continent. And while both Beijing and New Delhi never tire of emphasizing their friendly relations with Africa, Beijing will also have a keen interest in keeping a close eye on India’s approach to Africa. India is not yet a game changer, but with an assertive and proactive foreign policy, it will likely become a contender to China’s economic hegemony across Africa.

          Collaboration with Africa was a strategic imperative for India in establishing its role as a significant international player.   Indian policymakers have aimed at achieving this goal by contributing to international peace and security through UN peacekeeping efforts on the continent, participating in multilateral groupings, such as BRICS (Brazil, Russia, India, China, South Africa) and the India-Brazil-South Africa Dialogue Forum, and through its efforts to become a permanent member of the UN Security Council.

          Today, India considers itself a key ‘development partner of Africa and has placed a growing emphasis on this and other tools of economic diplomacy to ensure the relationship continues to develop and grow in a sustainable manner. India’s economic-diplomacy strategy has subsequently grown in three main areas: grants, technical assistance and lines of credit (LOCs).

          In the first area, in 2009, the Indian government gave a large grant to launch the Pan-African e-Network. This allowed India to provide educational and medical support to African countries by means of satellite technology. It is notable that three of the four top African trading partners with India are major oil producers while important learning centres in Africa have been connected to Indian universities.

          India’s development cooperation policy rests on the twin foundations of economic and technical cooperation, the former focusing on trade facilitation and business regulation, and the latter on capacity building and human-resource development. This has its roots in the 1964 Indian Technical and Economic Cooperation Programme, which saw many Africans receiving education and training in India. In the area of food security there is potential to explore the adaptation of Indian agricultural technologies to the small-scale farming sector in Africa.

          India has always aimed to better influence international institutions such as the International Monetary Fund, World Bank and UN Security Council by giving ‘goodwill grants’ to African countries that could be counted upon as allies in multilateral negotiations. Accordingly, dedicated lines of credit (LOCs) were established under the Indian Development and Economic Assistance Scheme (IDEAS) in 2004 backed by the Export Import (Exim) Bank of India.

          They support developmental projects identified by the Indian Ministry of External Affairs. In 2012-13, LOCs were valued at US$5.1 billion and often focused on agriculture and energy-based projects. The Exim Bank has been a major source of LOCs in African countries. Exim Bank loans are tied to the purchase of Indian goods and services. Indian business has, therefore, been instrumental in the transfer of technology from India to Africa. India’s official aid and loan programmes to Africa amounted to US$22.4 million in 2011-12, which accounted for 3.6% of India’s total overseas development assistance.

          The concerted focus on India-Africa economic relations has resulted in a more diversified commercial engagement with some parts of the African continent, including the export of manufacturing and pharmaceutical products, as well as ICT services. Although India already had good ties with Anglophone countries in southern and East Africa, India has aimed at deepening ties with Francophone and Lusophone countries in an effort to improve resource security, particularly with regard to oil and gas.

          With only 0.3% of the world’s oil reserves yet possessing a staggering one-fifth of the world’s population, India has been importing over half its crude-oil requirements since 1965. The acquisition of energy is a dominant goal in India’s economic diplomacy. It is, therefore, unsurprising that three of the top four African trading partners with India (Nigeria, South Africa, Angola and Algeria) are major oil producers.

          Trade between Africa and India more than doubled from US$25 billion in 2007 to US$57 billion in 2011. By 2015, trade figures had already reached over US$75 billion. Projections forecast that the level of trade could further increase to US$80 billion by 2020. However, Indo-African trade is concentrated in a select few African countries with South Africa, Nigeria, Angola, Egypt and Tanzania being India’s top trading partners in 2014. Most of this trade entails primary commodities exported from Africa, while African countries mostly import manufactured goods from India.

          Despite the rise in the absolute value of technology-intensive exports to India, the share of these exports in terms of total African exports to India has been decreasing over time. Exports from the extractive industries (mining, quarrying and crude oil) have seen the largest increase in share of total exports, while the share of total technology-based exports to India has decreased from 74% in 2001 to slightly over 20% by 2016. However, the predominance of primary commodity exports, such as unrefined oil, has resulted in African countries holding a significant trade surplus with India (around US$5.4 billion).

          Beyond the commodities trade, significant Indo-African trade ties exist in the automobile sector. And in the pharmaceutical industry, several Indian companies have increased their sales in African markets. India’s services exports to Africa began at roughly the same level as those of Africa in 2001, but grew at a rapid pace (with annual average growth of 23.3%) to a level of US$136.5 billion in 2011 from a level of US$16.8 billion in 2001. Of particular note is the growing level of Indian investments in Africa in the telecommunications and IT sectors.

          The increase in Indo-African trade is partly the result of official coordination between India and its African partners, such as the launch of the Duty-Free Tariff Preference Scheme for Least-Developed Countries (DFTPI-LDC) in 2008. This scheme provides duty-free entry on about 85% of India’s tariff lines for global exports to LDCs. This has helped to encourage the export of cotton, cocoa, aluminium ores, copper ores, readymade garments, fish fillets and non-industrial diamonds from African LDCs. In 2013, 21 out of the 33 African LDCs were making active use of the DFTPI-LDC scheme.

          Africa is an equally important source of precious metals and gemstones, especially gold and diamonds. India is the world’s major jewellery maker. The gems and jewellery sector consti­tuted 13 percent of India’s total exports in 2008- 09. Furthermore, India is the world’s leading processor of diamonds, accounting for 85 percent in terms of volume on the total world market. Gold in particular defines In­dia’s economic relations with South Africa, the latter being the world’s leading supplier of gold.

          The trend of Indian investment in Af­rica is also positive. Overall, In­dian investment in Africa is believed to be around $33 billion. African multinational enterprises are also present in India, particularly South African multinational enterprises that have invested in India’s infrastructure development, breweries, and financial and insurance services.     Of all African countries, Mauritius is the largest investor in India, with total FDI flows of US$64.17 billion, accounting for approximately 40% of total inward FDI flows to India. The reason behind this, is said to be US companies routing their investments to India through Mauritius to take advantage of an exemption in a capital-gains clause.

          Along with trade, Indian investment in Africa has markedly increased in recent years. During the 1960s, many Indian investments were made in Kenya, Uganda and Nigeria, among others. Indian investors have been most active in the areas traditionally considered to be India’s comparative advantage, such as agriculture, ICT, communications infrastructure and petroleum refining. Although data on Indian investment in Africa remains sketchy, it is estimated that the total stock of Indian investment in Africa stands at upwards of US$10 billion.

          Furthermore, the high quality and relatively low cost of medical services in India have seen many African citizens using India as a treatment destination. Patients from African countries such as Burundi, Côte d’Ivoire, Democratic Republic of the Congo, Ethiopia, Kenya, Mozambique, Nigeria, Rwanda, South Africa, Tanzania and Zambia have accessed medical services from India since the late 1990s.  

          It has been a failure of Indian diplomacy that a continent with which India has enjoyed substantive ties ever since independence now no longer views India as a priority nation and often complains of indifference on the part of New Delhi. With some of the fastest growing nations in the world, Africa of today is not the ‘dark continent’ of yore. That is why, India has attempted to build a “developmental partnership” with Africa as the cornerstone of its economic ties with the region.

          This also allows India to differentiate itself from the principles on which countries belonging to the Organization for Economic Cooperation and Development (OECD), the traditional donors of foreign aid, have based their relations with the recipient nations. While the Indian private sector, including big names like Tata, Bajaj, Mahindra and Airtel, has made significant investments in Africa, it needs to be bolder and more imaginative in seizing the initiative on the continent.

          India’s focus over the last few decades has largely been on capacity building on the continent, providing more than $1 billion in technical assistance and training to personnel under the Indian Technical and Economic Cooperation (ITEC) program. India has committed $7.5 billion to African infrastructure, covering 137 projects in more than 40 countries. India has also offered duty-free market access to Africa’s least developed countries. But India’s extant trade with Africa at $75 billion remains far below potential.

          There are other strategic convergences between India and various major African states. From Boko Haram in Nigeria to the growing footprint of the Islamic State, terrorism and Islamist extremism is threatening Africa like never before. India and African states can jointly address this common challenge. India is already working with the littoral states in the Indian Ocean region to ensure the security of the sea lanes. The Indian government is also seriously trying to become a permanent member of the UN Security Council and Africa’s 54 states will be crucial in supporting that endeavour.

          Today all major powers including the United States, China, Japan, and the European states are wooing Africa with investments and trade linkages at a time when Africa is beginning to engage the world on its own terms. India will have to ensure that it remains relevant to Africa’s rapidly changing needs. India’s relationship with Africa, like the continent’s relationship with China, has its opportunities and challenges. But the nature of those potential benefits and drawbacks are not identical. Therefore, the economic relations between India and Africa should be approached on its own terms to build a mutually beneficial partnership to face up to the newer challenges with confidence.