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Stay on the safari course

India needs to be more aggressive in chasing opportunities by opening more diplomatic missions and companies in a larger number of African nations, writes Rahul Sharma.

india Updated: Apr 08, 2008 22:50 IST
Rahul Sharma

For Americans, Africa is mostly about poverty, aid, terrorism, and sometimes sanctions against rogue regimes. For China, the vast landmass with millions of the world’s poorest is about digging for precious metals and sucking out the oil so desperately needed to fuel its roaring economy. For India, which has had a long history with the continent, it should be about long-term business and strategic interest that would give New Delhi a strong foothold to expand its influence in the years to come. It’s a slow, hard grind. But one that can spell big success.

India has not done too badly in Africa, given that it got late into the game. Railway lines built by the Chinese were already criss-crossing the continent by the time Indian companies tiptoed there seeking opportunities. But of late, Indians, once maligned and thrown out of countries such as Uganda, have found acceptance. This is largely because they work differently than the Chinese who import labour from back home that obviously irks jobless Africans festering under years of wars and poverty. China’s gameplan has largely been investment in infrastructure for rights to mine everything that is possibly available.

According to a diplomat, Indians are respected and the Chinese are suspected in Africa given the difference in their approach towards issues of vital importance for the continent. For many in Africa, India is about private-public partnerships aimed at boosting local economies. China, on the other hand, is more about a ‘colonialist power’ scavenging for resources.

Harry Broadman, economic advisor on Africa to the World Bank, charts out the differences succinctly in an article in the latest Foreign Affairs. According to him, since most Chinese companies on the continent are medium-sized or large State-owned or State-controlled entities and Indian firms are typically either private or public-private partnerships, their commercial strategies are different. “Chinese firms tend to enter new markets in Africa by building new facilities, creating business entities that are vertically integrated, buying supplies from China rather than local markets, and selling in Africa mostly to government entities... most Indian firms in Africa acquire established businesses, are less vertically integrated, prefer to procure supplies locally or from international markets (rather than from Indian suppliers), engage in far more sales to private African entities, and encourage the local integration of their workers,” writes Broadman. He further cites a 2006 study of 450 business owners in Africa that found that almost half of the respondents who were ethnically Indians had taken African nationalities, against only 4 per cent of owners who were ethnic Chinese.

In short, this is fundamentally good news since it provides a strong foundation on which a long-lasting relationship can be built. But the battle for influence and resources is just beginning and it will be tough given China has more money to play with than India. Beijing has never shied away from dangling dollars and writing off debts. It won’t shy away in the future either.

For Beijing, Africa, like Latin America and the Pacific Islands, also ensures diplomatic superiority against Taiwan that has seen its influence wane fast in these regions in the past decade. After spending billions of dollars to buy diplomatic backing of these countries, China can’t afford to see them switch allegiance back to Taipei, which it considers a breakaway province and not an independent country.

India and Indian companies have to quickly realise that there is no way they can match China dollar-for-dollar. The Chinese State funding — Beijing is said to have invested $ 62 billion in Africa — is awesome in its magnitude and by the looks of it, this will only grow. So apart from oil and mining sectors, where Indian State and private firms are more active, there is a case for rapidly increasing investments in telecommunications, pharmaceuticals, health, tourism, transportation, education, agriculture, food processing and information technology — areas that are very generally badly off in Africa.

This would give Indian companies not only an opportunity to make profits — and the scope for that in Africa is immense — but also to link them closely with the local population and economies and help extract long-term benefits.

Trade between India and Africa has grown nearly 30 times since 1991 to about $ 30 billion in 2006-07, according to Indian government officials. But the reality is that India is still way, way behind China that is deeply entrenched with a far bigger diplomatic and business presence. If India wants to engage deeper, it needs to be more aggressive in chasing opportunities by opening more diplomatic missions and companies in a larger number of African nations.

At the heart of all this, of course, lies the need for oil. That was one of the big reasons why India was ready to slug it out there as it is acutely aware of the necessity to tie up supplies because of its need to import 70 per cent of its requirement. It is widely believed that in the next 15 years or so, it is expected to beat Japan to become the world’s third biggest net importer of crude after the US and China. India could probably lay claim on more supply sources in the long run if it can tell Africa that it cares for the continent and its people and is keen to have a longer partnership based on equal opportunities. But that message needs to go down very quickly and widely — before the Chinese take it all.