Africa and India
Mills Soko (Business Day)—Africa and India together make up half of the world’s humanity. More notable than the numbers, however, is their emerging synergy, both bilateral and global. India’s position as a major world player and potential partner is being acknowledged by Africa, while Africa’s increasing market strength has been noted by India, contributing an exciting element to south-south co-operation.
In all, India-Africa bilateral trade rose from $967m in 1990-91 to $9,14bn in 2004-05. India’s exports to Africa have risen from $394m in 1990-91 to $5,4bn in 2004-05, accounting for 6,8% of India’s total exports.
Technology, trade, agribusiness, financial services, telecommunication services, mining, metals and energy, automobiles and tourism all hold significant potential for creating commercial synergies between African and Indian businesses.
Africa has become the emerging market for Indian products and enterprises and an alternative source of energy for India, while African exports, including natural resources, agricultural goods and household consumer items, have grown exponentially.
India also contributes to training and education programmes in Africa. More than 1000 officials from sub-Saharan Africa receive training annually in India under the Indian Technical and Economic Co-operation Programme, while more than 15000 African students are studying in India.
“Ideology, redolent of an earlier era of a shared struggle against colonialism and imperialism, has been tempered with pragmatism and a sober realisation of new challenges facing both India and Africa as they get ready to take their place under the global sun,” says Rao Inderjit Singh, Indian Minister of State for External Affairs.
“There is a mood of buoyancy and optimism as modern India seeks to collaborate with a resurgent Africa to create a new world order.”
Yet doing business in African markets has for decades been seen as adventurous or high risk. While this perception is beginning to change, many investors and potential partners are either hesitant about or ignorant of African markets. Of course, there are some challenges associated with working in a developing economy, including underdeveloped capital markets, unstable macroeconomic conditions and the high cost of financing due to country risk premiums.
MD Ramesh agrees. He is the regional head, east and southern Africa region for Olam International, a Singapore company specialising in sourcing, processing, and trading agricultural commodities. Olam has branches in 22 African countries and 55 worldwide, and Ramesh has worked in Nigeria, Benin, Ghana and SA. He argues there are additional risks, or challenges, for the list.
“Lack of a developed infrastructure, political instability and an unfavourable exchange rate can challenge investors,” he says. “But the larger the risks, the larger the potential return. Ultimately, if you master the risks and learn to survive in this environment the margins could be favourable.”
Ramesh says it is important to get the right people in place, with preferably a mixture of local and imported skills.
“You need to engage the correct staff with the appropriate abilities. Local people know how to deal with sociocultural complexities.”
Ethiopian Prime Minister Meles Zenawi views closer trade relations between Africa and India as a significant driving force for economic change on the continent. “India’s extraordinary economic achievements serve as a valuable lesson for Africa,” Zenawi said recently.
India’s strengths in information technology, biotechnology, pharmaceuticals, railways and space research are relevant to Africa, while India stands to benefit from African advances in agribusiness, mining, the sugar and alcohol industry and coal-to-fuel energy technology.
Other sectors that could benefit from technology transfer, trade, investment and joint ventures in Africa and India include food processing, automotives, retail, engineering, minerals and metals, petroleum and financial services.
“There are global trade issues that come into play. For example, one of the largest hindrances to independent farmers in Africa, which prevents them from moving beyond a subsistence level of operating, is inefficient middlemen and agricultural practices,” says Ramesh.
He refers to Benin, where cashew-nut growers were selling their product at $200 a ton and the country was exporting 1200 tons a year. After trade policy altered and Olam established local trade partnership, the cashew farmers receive a fair compensation of about $600 a ton and the country’s exports have risen to 40000 tons a year.
Ramesh believes investment in the local infrastructure is beneficial to all. “Obviously, one is not a charity. But if you develop a community you are making an investment in the future.”
He cites an example in Tanzania, where 4000 workers, mainly women, have been employed at Africa’s largest cashew-nut processing plant. The company provides medical-care facilities and meals through an extension facility through approved vendors, and will shortly open a day-care crèche.
“Before we arrived the women were unemployed, there was no child care and very basic medical facilities. Ultimately a more developed community becomes a more profitable community. And I am not talking about handing out aid,” said Ramesh.
The possibilities for mutual growth and development are immense. As Singh says: “If India and Africa are able to synergise energies and initiatives and adapt to a changing world, the 21st century could surely belong to them.”
Dr Mills Soko is a senior lecturer at the UCT Graduate School of Business (GSB) and directs a GSB conference promoting Africa-India economic and business co-operation on September 20- 21.