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A new bazaar

What matters to India is that African economies are breaking free of an earlier cycle of crushing debt payments that hampered development.

india Updated: Apr 27, 2006 01:47 IST

For much of the Nineties, Africa was a diplomatically dark continent for India. Through much of the decade, New Delhi actually reduced the number of missions it had in Africa, transferring personnel to man new embassies being set up in Israel and an array of Central Asian countries.

Today, the picture could not be more different. Two-way trade between India and Africa rose by 40 per cent in the first quarter of this year alone. Hundreds of Indian firms flock to the Confederation of Indian Industries’ Africa business conclaves. Symbolically, the Indian government will soon reopen its embassy in Kinshasa, capital of the Congo, that it shut down 14 years ago to benefit an ex-Soviet republic.

Pundits may mark March 2004 as the turning point in India’s fortunes in Africa. That was when India launched an aid initiative for eight African countries. Under this, dubbed Team 9, New Delhi opened a $ 500 million line of credit to help private Indian firms carry out development projects in Africa. The fallout of this move has been the transformation of India’s influence and image in Africa. Though the gap remains the size of a rift valley, India can contemplate an alternative to the Chinese latter-day scramble for Africa.

The Team 9 initiative was followed by two conclaves in which African governments came forward with projects. If the plans passed muster, Indian firms were to be contracted to bring them to reality, with New Delhi providing small loans to cover the risk. The result of this small loan strategy has been remarkable. Consider the field of urban transport.

In Abidjan, 150 Indian-made buses ply the roads. Another 250 will arrive this May thanks to a $ 21 million line of credit. Nearly 350 Tata buses are at work in Dakar, Senegal. The Tatas beat off stiff competition from European car-makers Renault and Volvo. The Tatas then went on to win a World Bank-funded contract to build a minibus assembly line in Senegal. The original seed loan: $ 18 million.

Only ten Indian buses run up and down the main boulevards of Kinshasa. But they already earn their keep. Another 240 are on their way, thanks to an $ 11 million line of credit. Kinshasa’s urban transport chief told Volvo why they had lost the contract, “Your 36-seat bus is for $ 250,000. The Tatas provide an 80-seater for $46,000.”

Indian buses are such an icon that when new African ambassadors come to New Delhi, they want to know when they can start sending buses back home.

The Indian railway services firm, Rail India Technical and Economic Services Ltd (Rites), has bagged contracts to refurbish and run railways in Mozambique, Angola and Tanzania.

The next success story New Delhi hopes for is irrigation pumps. In a few months’ time, Kirloskar engineers will finish installing 700 pumps along the Senegal river. If all goes well, the pump will revive a defunct irrigation network and double Senegal’s rice harvest. An excited Senegalese President announced the deal on national television. Kirloskar, wary of entering the African market until New Delhi put up a $ 27 million line of credit, is now making powerpoint presentations to other West African governments.

Indian firms are now putting up cotton mills in Chad, cement plants in the Congo and even remaking the home of the late African statesman, Kwame Nkrumah. Appropriately, the house is on Jawaharlal Nehru road. All this, and only half the Team 9 funds have been used.

A few weeks ago, impressed by India’s ability to establish an economic footprint in Africa, the 15-member Economic Community of West African States negotiated a ‘strategic relationship’ with India. Not only did it want Indian help in various regional development projects, but it also threw in support for India’s bid for a permanent Security Council seat.

New Delhi has used the small loans to encourage private Indian firms to take a baby step on African soil. This innovative approach recognises the thin pockets of the Indian government as well as the dynamism of the private sector. Indian officials believe it is already starting to give India an image edge over China.

Beijing’s strategy has been to bowl over African leaders by citing some humungous amount of money. This is then used to extract economic concessions. The actual money, if it comes at all, subsequently comes in dribs and drabs. A year after China declared it would invest $ 250 million in Sierra Leone, officials of the iron-rich African nation tell Indians, “We haven’t seen any money yet.”

Even when Beijing does come through with the money, African officials complain that it then does whatever it takes to get the money back. One common trick: When constructing, say, a stadium, the Chinese contractor orders far more cement than is required and sells the excess on the black market. Duty-free clauses are used to bring in container-loads of goods which are sold through local Chinese traders. Kenya, Ghana and Senegal have complained that this hurts local African businessmen-- Senegal experienced anti-Chinese demonstrations.

Chinese labour practices unnerve many host nations. In Angola, Chinese and Indian firms are rebuilding the railway network. The Chinese bring hundreds of their own labourers, keep them in secluded camps and don’t interact with Africans. The Indian firms bring a handful of engineers who supervise local workers. Angolan officials fret Beijing may be using prison labourers. “African public opinion is probably more sympathetic to us,” say Indian officials familiar with Africa.

Bollywood helps. “We would have a riot in Timbuktu if we ever took Shah Rukh Khan there,” says one diplomat.

But India’s advantages still pales in comparison to the sheer economic muscle that China can bring to bear on the continent. Oil-rich Angola is a particular favourite of China. China has already granted a $ 2 billion loan to Angola and has announced another of $ 3 billion. India has yet to fully institutionalise its innovative use of small loans.

India is about a decade behind China in Africa. Its diplomatic presence is stretched thin-- with only five embassies covering 25 countries in west and central Africa. Its competitive edge lies in the Indian private sector. Decades of civil war and images of starvation have driven away even the Sindhi and Gujarati trader networks that once covered Africa.

But Africa has changed for the better. The civil wars are dying out. Two-thirds of Africa now has stable democratic regimes. “A Pervez Musharraf would be a rarity in Africa,” says an Indian official.

But what matters to Indian businessmen is that African economies are breaking free of an earlier cycle of crushing debt payments that ensured there was no money for development. Thanks to successive debt-forgiveness campaigns and tight fiscal monitoring by the World Bank, nearly half of Africa’s most indebted countries are solvent again. Another third will soon achieve financial freedom.

The results are already showing in the numbers. Africa’s economy is growing at nearly 6 per cent a year. Half of the 12 fastest growing developing economies are African. China has already recognised that there is gold for the picking. The Indian government is trying to open the eyes of its private sector to the same. A continent of opportunity awaits.

First Published: Apr 27, 2006 01:47 IST