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India Eyes African Investments

Prepared by: Lee Hudson Teslik
July 5, 2007

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With China keen to expand its trade ties with Africa and maintaining a controversial energy relationship with Sudan (BBC), discussion of Asian-African relations typically zeroes in on Beijing. Less commonly questioned are India’s substantial and increasing investments in Africa. India’s net investments on the African continent remain small relative to China’s (World Bank), but experts say a burgeoning Indian-African relationship nevertheless holds the potential to redraw economic lines of power in several African countries.

A four-day July trip (Hindu) to Ethiopia by India’s Foreign Minister Pranab Mukherjee spotlights Indian-African ties. Mukherjee’s mission is two-pronged: First, he seeks to expand trade relations—particularly with Ethiopia, Africa’s second most populous country—by establishing bilateral investment protections (DailyIndia.com). Second, he aims to sway African Union (AU) countries behind India’s effort to join the UN Security Council (IPS) through meetings with AU Commission Chairman Alpha Oumar Konare.

India’s private sector now wields significant clout in Africa, as Karen Monaghan, CFR’s national intelligence fellow and an Africa expert, discusses in this new podcast. Monaghan notes that India’s model of private investment differs strikingly from China’s model of state-managed investments. India’s government has been a “reluctant suitor,” Monaghan says. But Indian companies, whether conglomerates like Tata, pharmaceutical firms like Cipla, or automobile companies like Mahindra, have all undertaken profitable projects in Africa. Monaghan notes that Africa gives these companies access to the continent’s emerging markets as well as the chance to set up relatively inexpensive factories.

India’s private-sector investments in Africa traditionally focused in areas where the Indian population was already active on the continent, particularly in countries sharing history as British colonies. Nigeria, for instance, is India’s second-largest trading partner and a significant source for oil imports, according to data from an April 2007 report from the British think tank Chatham House. The report notes, however, that this dynamic is rapidly shifting as Indian companies increasingly seek investments in non-Anglo western African countries. Trade deals with Francophone Cote d’Ivoire, for instance, are forecasted to grow to $1 billion between 2006 and 2011. Indian businesses also invest in some more controversial African operations, similar to those investments that have drawn criticism to China. India’s state-owned oil company, for instance, holds a 25 percent stake in a major Sudanese oil-field (Times of India).

Emerging trade relationships present intriguing options (Sapa-AP) for African nations, which are increasingly turning to New Delhi for help with their own internal development goals—Ethiopia for highway project funding, South Africa for hotel investments in the run-up to the 2010 World Cup, and Niger for cheap imports of Indian rice-milling machinery. Monaghan says that invaluable lessons from India’s own path to development get passed along during the course of trade transactions. She notes the active role Indian companies have taken training and educating African workers and the implicit lessons of the importance of entrepreneurship for “driving and generating jobs, generating income, and generating growth.”

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