Indo-African export relations date back to the Bronze Age period of the Indus Valley Civilization (3300 BCE to 1300 BCE). From trade in cotton, glass beads, gold and carved ivory, Indo-African commerce has evolved to include thousands of modern age products and services.
Presently, a rapidly changing global economic architecture has created new external economic opportunities for both India and Africa. India sees an enduring partnering role in Africa’s economic transformation, given that it has demonstrated a deep stakeholder interest in Africa’s economic transformation. These trade relations with Africa are multi-faceted, with the Indian Government extending timely grant aid to African countries, capacity building and technical assistance to support major projects in Africa, the establishment of industrial units and concessional lines of credit (LOCs), among others. These instruments of commerce and cooperation are crucial in developing trade relations. Let’s explore these in greater detail.
Lines of Credit are demand-driven and are extended on the principle of mutual benefit — recipient countries make development gains, while the LoCs help creates new markets for Indian companies, foster export growth, build good relations with countries that are important sources of food, energy and resources, and contribute to the exporting country’s image abroad. According to an article in The Diplomat, so far India has sanctioned 182 LoC projects in Africa through the Export-Import (EXIM) Bank of India, with a total credit commitment of about US$ 10.5 billion. Indian LoCs have significant development impacts in Africa. For instance, India’s irrigation project in Senegal led to a six-fold increase in rice production and currently over 30% of Senegal’s consumption is covered by domestic production, as compared to 12.1% before the implementation. Similarly, India’s LoC worth US$ 640 million to Ethiopia helped the country become self-sufficient in sugar production and had major spill-over benefits.
Another instrument for fostering growth and bolstering long-term relations is investing in capacity building. India’s efforts to build capacity in Africa date back to as early as 1949, when India announced 70 scholarships for students from other developing countries to pursue studies in the country. In 1964, India launched the Indian Technical and Economic Cooperation (ITEC) programme to provide technical assistance through human resource development to other developing countries, with African countries the greatest beneficiaries of it. Currently, about 98 Indian institutions run training courses in fields such as agriculture, food and fertilizer, engineering and technology, and environment and climate change. In addition to civilian training programmes, ITEC also conducts and oversees defence training programmes, study tours, aid for disaster relief, the deputation of Indian experts abroad and project-based cooperation. Africa is a key beneficiary of the programme with nearly 50 percent of the ITEC slots reserved for countries from the region. The article in The Diplomat also emphasized the importance African leaders attach to ICT development considering the role of the sector in India’s impressive growth story over the past decades. Thus, skill development and capacity building featured prominently in all the India-Africa Forum Summits as India-Africa export/import trade cooperation has focused on techno-economic capacity building. To this measure, India’s scholarship programme also grew rapidly. At the third India-Africa Forum Summit in 2015, India pledged to provide 50,000 scholarships to African students over a five-year period and set up institutions of higher learning in Africa. Over 42,000 scholarship slots have already been utilized in the last five years.
“At the third India-Africa Forum Summit in 2015, India pledged to provide 50,000 scholarships to African students over a five-year period”
In a speech to the Ugandan parliament in 2018, Prime Minister Narendra Modi reiterated India’s commitment to building African capacity: “Our development partnership will be guided by your priorities. It will be on terms that will be comfortable for you, that will liberate your potential and not constrain your future. We will rely on African talent and skills. We will build as much local capacity and create as many local opportunities as possible”.
This relation was formalized with the inception of first India–Africa Forum Summit (IAFS): the official platform for African-Indian relations. Via the IAFS, India pledged to support health and education-related projects in Africa. For example, in 2009, the Government of India launched the Pan African e-network project that seeks to connect the 55 member states of the African Union through satellite and fibre-optic networks to India and each other. The aim was to enable access to and sharing of expertise between India and African states in the areas of the-education, telemedicine, Voice over IP, infotainment, resource mapping, meteorological services, e-governance and e-commerce services.
Similarly, in October 2019, India’s Ministry of External Affairs launched the e-VidyaBharti (Tele-education) and e-ArogyaBharti (Tele-medicine) Project (e-VBAB) that provides access for African students to over 500 courses in various disciplines including engineering and technology, education, mathematics and sciences, education, humanities and arts and teacher training. The portal would also offer 15000 scholarships to Africans to pursue undergraduate and postgraduate courses from premier public and private universities of India.
“Our development partnership will be guided by your priorities. It will be on terms that will be comfortable for you, that will liberate your potential and not constrain your future. We will rely on African talent and skills. We will build as much local capacity and create as many local opportunities as possible”.
Smaller investments in Africa include establishing IT centres in South Africa, Egypt, Morocco, Ghana, Namibia and Tanzania; a Centre for Geoinformatics Applications for Rural Development (CGARD) Technology Centre in Madagascar, vocational training centres in Ethiopia, Rwanda, Burundi, Burkina Faso, Gambia, Zimbabwe, and Egypt; a Technology Centre in Zimbabwe; and entrepreneurship centres in a few countries. In pursuance of trilateral cooperation with Africa, India is collaborating with Japan and Kenya to build a cancer hospital and is collaborating with UAE to set up a centre of IT Excellence in Ethiopia. Energy cooperation is also a key subset of India’s development export partnership with Africa. Under the International Solar Alliance (ISA) a sizeable share of India’s concessional credit has been earmarked to Africa.
Strategy in Influence
Not only are these projects indicative of the growing alignment between India and Africa’s growth agenda, but are also seen as examples of India furthering its economic and strategic interests in Africa through the use of soft diplomacy and cooperation. India is only one among a list of countries endeavouring to partner with developing African nations. However, it is vital to note that one nation presents an element of competition in its attempt to fashion bilateral and regional approaches: China. Both India and China have growing stakes in Africa as they seek to align themselves with the continent’s growth story. Thus, they are increasingly competing with each other geopolitically. While Beijing has thrown its immense economic heft into developing manufacturing capacity and extracting natural resources, New Delhi has focused on its core competencies of human resource development, information technology, education, and health care. While China’s drive to build infrastructure throughout the continent has been welcomed, mega-scale infrastructure projects will have the desired transformative effects only if they can create jobs, generate revenue, attract investments, and contribute to the development of local production capacities. Yet Chinese firms are often accused of employing mostly Chinese workers and offering little training and skills development for African employees. Some infrastructure projects thus run the risk of turning into economically unviable vanity projects. This is where India comes in. Unlike China’s efforts, Indian project construction and financing in Africa is aimed at facilitating community participation and development. Indian firms rely more on African talent.
Some infrastructure projects thus run the risk of turning into economically unviable vanity projects. This is where India comes in. Unlike China’s efforts, Indian project construction and financing in Africa is aimed at facilitating community participation and development. Indian firms rely more on African talent.
India hopes that its sustained engagement with African nations over the last few years will yield foreign-policy dividends. And for both India and its African partners, if their engagement pays off, it could mean a relationship that is based on a partnership model.
COVID-19 (EXPORT IMPACT)
The pandemic has visibly disrupted the international economic architecture, creating in its wake a multipolar world, where a greater number of countries play an instrumental role in determining world trade patterns, investment flows and development cooperation. Development in both Africa and India was severely affected by the socio-economic consequences of the COVID-19 pandemic. Though the pandemic has disrupted Africa’s growth, there is an expectation of accelerated economic growth in the region once the health crisis is brought under control through mass vaccination programmes. Given the enormity of the challenges before India and Africa, closer cooperation is essential.
The following initiatives may help India make its aid to Africa more impactful, given the restrain the pandemic has presented on the budget:
- Focused strategy: Unlike China and the West, India does not have substantial resources to support Africa. Therefore, it should prepare a focused Africa strategy for the next decade and identify a few areas for closer cooperation. Targeting a few important areas like food and health security, climate change adaptation and gender equality will help improve development outcomes and make India’s development cooperation programme more effective. This may entail benefit for budding export entrepreneurs.
- Investment in capacity building: A simple focus on building physical infrastructure and economic growth will not contribute to a stable and prosperous Africa. Investment in human capital is the key to development in Africa. The current focus on capacity building is in line with Africa’s needs given the continent’s huge youth population that need skills and jobs.
- Development-friendly private investments: The presence of Indian companies in Africa has grown rapidly in the last two decades. For example, Koshambh Multitred Pvt. Ltd., an exporter initially, started business in Africa in 1995 and has grown to become a Multi-functional business model that caters to not only exporter needs but has started their biscuit manufacturing plant which is the second-largest exporter of biscuits from India to Africa (In a matter of 5 years). Thus, given the emphasis on mutual benefit in its strategy, India’s development cooperation should be aligned to its commercial interests in Africa. Therefore, India should try to support Indian companies like the ‘export experts’ Koshambh Multitred that are making an investment in development-friendly projects for mutual benefit.
- Schedule: India must improve its historically poor project implementation. Efforts must be made to expedite the LoC projects. Lessons should be drawn from other countries that have a much better record in implementation.
- Improve academic experience: India’s record in providing higher education to African students has been patchy. Initial results of the ‘Study in India’ programme do not seem to be promising as very few African students prefer to come to India. However, one might say it is too early to judge since the programme is in its infancy. Merely extending scholarships to African students will not be enough to increase the flow of African students to the country. India must make large-scale investments in its own higher education sector to project itself as an education hub for neighbouring countries and Africa. Furthermore, factors like a wholesome academic experience which includes living conditions, quality of education, exposure, the institution’s global ranking and cultural experience must be considered and improved.
- The Indian experience: Incidents of race attacks on African nationals have severely dented India’s image. The Indian government should ensure that Africans studying or working in India are safe and enjoy their stay in the country. Efforts should also be made to educate Indians about Africa so that people-to-people connections between India and Africa flourish.
These initiatives might go a long way in solidifying an already sturdy relationship between the African continent and India. The fact that India kept its supply lines open for much of the COVID-19 pandemic and ensured that critical supplies of medicines and medical equipment reached countries in need in Africa is a testament to India’s desire to become a steadfast and reliable partner.
The Ukraine Crisis (EXPORTERS HAVEN)
Russia’s invasion of Ukraine on February 24, 2022, is casting a long shadow across Africa. Not only is it putting the more than 8,000 Moroccans and 4,000 Nigerians studying in Ukraine under danger, but also over $4 billion in exports from Ukraine to Africa. However, according to an online article in Brookings (2022), some states may benefit from the shift in global export markets away from Russia.
For example, Tanzania’s president, Samia Suluhu Hassan, stated in an interview that the tensions in Ukraine are generating growing interest in the country’s gas reserves, which are the sixth-largest in Africa and can potentially reduce Europe’s dependence on Russian energy. Similarly, reserves of 40 trillion cubic feet of natural gas were discovered between 2014 and 2017 in Senegal. Nigeria, already an exporter of liquified natural gas (LNG) to several European countries, is also embarking with Niger and Algeria on the Trans-Saharan Gas Pipeline to increase exports of natural gas to European markets.
The African nations within the Maghreb region i.e., the Northwest African nations encompassing the Sahara Desert, rely on Russian and Ukrainian wheat export, with more than 50% of the demand being imported. According to Comtrade (2022), Egypt is Russia’s biggest importer of wheat, followed by Nigeria, Sudan and Tanzania, among the African nations. This could be an opportunity for a wheat-exporting country like India. Sanctions imposed by the international community will create a gap in the agro-export industry that India should benefit from by stepping up and filling. Wheat prices have increased, as according to Business Line (2022), “Russia-Ukraine make up 35-40% of global wheat exports”. The Maghreb countries also import corn and sunflower oil from Russia, both agro products that India exports to other countries. For instance, according to Connect2India, we exported sunflower oil to over 93 countries in 2021. India should be proactive about penning down long-term deals with African nations that sever trade ties with Russia on humanitarian grounds.
“Sanctions imposed by the international community will create a gap in the agro-export industry that India should benefit by stepping up and filling. Wheat prices have increased, as according to Business Line (2022), “Russia-Ukraine make up 35-40% of global wheat exports”.
These are only some of the possible shifts in international exports trade dynamics that India can benefit from. After all, it has been less than a month since the crisis started and shows no signs of when it will end. The practical policy would suggest that as a growing power, India should utilize this crisis to strengthen its sphere of influence on the African continent.
According to the Confederation of Indian Industry (2021), Indo-African relations are also displaying immense potential for new opportunities in the future. The Government of India identified 18 African countries including Burkina Faso, Cameroon, Cape Verde, Rwanda, Somalia, among others where new missions would be opened. The initiatives would be based on a model of cooperation, that is responsive to the needs of African countries.
India’s Duty-Free Tariff Preference Scheme (DFTP) for Least Developed Countries (LDCs) has benefitted 38 African countries and contributed to the expansion of India-Africa bilateral export trade, yet, there is significant scope for more geographical diversification of India-Africa trade flows. The partnership also has immense potential in the area of addressing key environmental risks including climate change and loss of biodiversity. Similarly, cross border initiatives may also be undertaken toward promoting a circular economy that advocates the re-use and recycling of goods for a greener tomorrow. The current government appears to have a coherent African strategy – one that, in these times of geopolitical rivalry, remains a key priority. Lastly, India should present a more energetic African strategy that helps private Indian companies to establish and expand in Africa. How the Indo-African trade relations pan out in this geopolitically infused, post-Covid era remains to be seen.