Motivationfor choosing the topic Africa and India havehad a long relation and are only separated by the Indian ocean. Africa Indiarelation has a very long and profound history in terms of economic, military,political, cultural and other connections. The history of Africa and Indiadates back to eighth century when Africans had arrived to India. MahatmaGandhi, the father of the nation arrived in South Africa in 1893, had served aslawyer in SA and also stayed for a long time there and visited other countriesas well in Africa. Indira Gandhi, Manmohan Singh, and Prime Minister Modi haveall visited the African continent not once, but many times to boost andincrease the relation between India and Africa.
The Indian diaspora insoutheast Africa is over 3 million people South Africa having the highest of1.3 Million followed by Mauritius, Kenya and Tanzania. Africa and India havehad a long economic relation especially since both India and the entire Africancontinent is currently going through exponential growth rates, both willbenefit from each other through international trade.
The trade between Indiahas grown five times from the years 2005-06 to 2015-16 and is at $90 Billion asof March 2016-17. A total of 7.5% Indian imports came from Africa and India isthe 4th largest trading partner of Africa and exported goods of over$25 Billion to African countries and is growing at 5.6% rate. FDI from India toAfrican countries has increased from $12 Billion in 2006-07 to over $35 Billionin March 2016-17 and additional $53 Billion are in the pipeline of investment.Many Indian Multinationals are eyeing the African market due to rich naturalresources and outstanding growth potential. The governments ofAfrican countries and the Indian governments are working collaborativelytogether to fight problems such as terrorism, money laundering, economicproblems and others.
Indian Government in the Africa India summit has statedthat it will invest in over 350 projects across the continent. 125 agricultureprojects, 177 infrastructure projects, 40 energy projects and other projectssuch as water, education and others. Along with this the aid from India toAfrica has increased to over $5 Billion and LOC have been increased by theIndian government and is expected to increase more due to strong economicgrowth.
Both the governments of countries in Africa and the Indian governmentnow have strong relations and are supporting each other to build a strong bond. Originand Nature Africa and Indianeconomic relations goes back to when Gujrati traders use to export spices fromAfrica to India in the 1800’s. Economic trade between India and Africancountries have had a long history and many challenges have come up due to differencesin policies, cultural heritage, nature of working and others. There have been various problems of Moneylaundering by Indian companies and people and send the funds to India. Anotherproblem has been India sending low quality products to African Countries thathave disrupted the relations and Indian companies dumping products into Africancountries. A big problem that has occurred is that Indian mining companies havenot declared the minerals and have exported them illegally without declaringand paying the taxes and duties to the respected government. Currently, there isstill a huge inflow of from India to Africa because both need each other togrow and prosper and benefit.
These problems are still there, but are reducingdue to the strong ties between the government and now strict laws that eachcountry have made to protect them. Also due to the PM Narendra Modi visiting Africatwice now the relation has become stronger as he has shown full commitment andsupport to the African countries through granting Aid and bringing otherinvestments into the country. Also the Indian government now has Exim laws thatpromote export to countries in Africa like Kenya, Tanzania, Mozambique andother countries. The government of India gives incentives to those countriesthat export there. So currently even though there are these problems India isstill very keen to invest in India as the potential and growth rate is veryhigh and also Africa still has a lot of untapped resources that India canbenefit from such as Oil, Gas, Gold, Copper, Diamonds and other minerals aswell.
LiteratureReview On May 2017, MalanchaChakrabarty published a research paper on “Indian Investments in Africa: Scale,Trends and policy recommendations” stated that most of the private sector gotonly involved in manufacturing sector and 63% of the FDI was done in EastAfrica, which are countries such as Tanzania, Rwanda, Kenya, Uganda and others.The author stated that there was very minimum research done in this topic andvery little information was available, due to many African countries notmaintaining or uploading data regarding FDI in flows. To conclude, the authorstates that a big bulk of the investments were done in Mauritius and it being aTax haven most of the investment does not contribute to the African countriesmeaning that a huge part of the investment hasn’t helped in developing thecountries as the money earned is sent back to India. The author recommendedthat there should be an institutional body that can help support the ties andclearly help each other develop. Ruchita Beri published aresearch paper on November 2014 “India and Africa: an evolving partnership”stated that the relation of India is not just of an economic one, but ofcultural one too. There has been an increasing and significant partnership thathas helped two way visits of leaders, businessmen, officials, students,workforce and others.
The trade has increased from $967 Million in 1990-91 toover $68 Billion in 2011-12. The continent of Africa and India will both workhand in hand to fight global issues such as global warming, terrorism and otherproblems and help each other to gain in the world. To conclude, India will playan integral and key part in transforming African countries especially in fieldsof manufacturing, which is what Africa needs now Industrialization so that itcan prosper and people can get jobs. On March 2008, SKMohanty and Sachin Chaturvedi published their research paper on “India-AfricaEconomic Partnership: Trends and Prospects” stated that most of the governmentprojects focused on agriculture in Africa because it having lots of fertileland, its potential for crops is very high also being that it grows pulses thatmany Africans do not eat such as Daal, Moong but there is a high demand ofthese pulses in India. So India and many African countries such as Tanzania canbenefit from this.
Also the author states that majority of the spices are notused by the people of Africa such as red chilies and these are also exported toIndia. The author concluded that India will emerge as an important exportdestination for many countries in Africa because of the demand Indians have forsuch products not just agriculture but also goods such as gold, precious stonesand others. Also these African countries have the ability to produce them ofthe best quality due the natural resources. Sukalpa Chakrabarti andIshita Ghosh in 2014 published a research paper on “FDI in Africa: A comparisonof the Indian and Chinese Experience” stated that FDI that was traditionallydone by western countries have now shifted to the BRICS especially China andIndia leading the way forward for investment in Africa. The problems that arefaced are of exploitation of natural resources and dumping done by China andIndia into the African markets. The slowdown of the western countries has ledto the increase in investment by the BRICS in Africa. To conclude, India andChina will both benefit investment into the continent and the support of BRICSwill benefit the world economy overall as many countries will grow at anexponential rate in the African continent. On April 2007, Sushant KSingh published his research paper on “India and West Africa: A BurgeoningRelationship” stating that there has been a growth in India’s interest in WestAfrica particularly in Nigeria and mostly due to the increase in trade comingfrom Oil exports from Nigeria to India.
Also there is rich natural metal oresthat are being mined by MNC’s such as Mittal are now facing problems as thegovernment are not happy with the working conditions or the taxes that they arereceiving. The author has said that many problems have happened in west Africaand Indian companies aren’t very keen in entering and investing as many giantssuch as Mittal have faced problems like a $900 Million mining deal in Liberia.Also due to huge theft and terrorism by militant groups in west Africa due toits oil Indian companies avoid investing there.
To conclude, that despite thereare so many problems, there has been an increase in investment in FDI largelybecause Nigeria produces crude oil and India will benefit from this. CurrentSituation The current situation ofIndia and Africa relations is very prosperous and developing in a positive wayforward, however this is not the case with all the African countries, but it iswith a very good number of countries especially in sub-Saharan Africa. Thereare many issues that are happening such as many Indian companies have doneillegal practices in various sectors such as mining, by under declaring goodsand exporting. Also many have opened their head offices in Mauritius and thenoperate in other countries to save tax. There have been various incidences ofIndian origin people being caught money laundering and committing economicoffences and illegal practices, which has caused hindrances in the India –Africa relation. Another problem is therising relation between Africa – China leading to problems for India. China hasalso invested heavily into the African and much more than what India has. AlsoChina has a more hold on the continent and a larger presence in Africa.
Chinahas also tried to take over some of the projects that India are currentlyundergoing so that they would benefit from the rich natural resource continent.A major challenge and threat for India – Africa relation is China if Indiadoesn’t step up its game then India could miss the huge untapped market ofAfrican countries. China Africa trade is of over $200 Billion. China has alsofurther forgiven debt of over US $10 Billion that African countries owed tothem, furthermore creating a stronger relation. A major problem is thatIndia dumping old goods into African countries because they are cheap and theAfrican people will buy them as most of them lack the knowledge. Also cheapgoods of not very good standards are exported to Africa which isn’t very goodand is using Africa to dump and send cheap products. Bajaj for example afterthe demand of its 100cc bikes in India went down they went and startedexporting the same model with old technology and no new innovation into theKenyan market where it had received a good response as it was cheap and thetechnology was very old. Many MNC are still scared of entering into the Africanmarket due to economic problems such as fluctuation of exchange rate, securityproblems, infrastructure problems and many other.
Many MNC have beenfacing problems in operating in Africa. A recent MNC going under investigationof illegal and improper practices is Bharti Airtel Africa. One of the biggestdeals was when Bharti Airtel acquired Zain Africa for $10.7 Billion in 2010 andthis the biggest takeover of an Indian company into Africa, however now thereare problem and acquisitions being held that Airtel in Tanzania was undervaluedand that the Government of Tanzania had a stake in previous Zain, also it hadnot received any payment over its stake in Zain over the years. Now thegovernment of Tanzania is demanding rights of ownership over Airtel Tanzaniadue to the fraudulent events that have been claimed.
Jindal, Mittal, Tata andvarious other MNC’s of India have faced problems in operating in Africa, due tomany reasons. However, despite all the problems there is still an exponentialgrowth and increase of India – Africa relation because both will benefit fromeach other. Despite all theseproblems there is still huge scope and opportunity in the India-Africarelation. The trade between India has grown five times from the years 2005-06to 2015-16 and is at $90 Billion as of March 2016-17.
Indian Government in theAfrica India summit has stated that it will invest in over 350 projects acrossthe continent. 125 agriculture projects, 177 infrastructure projects, 40 energyprojects and other projects such as water, education and others. The Indiangovernment has passed over $7 Billion in aid for Africa. most of the privatesector got only involved in manufacturing sector and 63% of the FDI was done inEast Africa, which are countries such as Tanzania, Rwanda, Kenya, Uganda andothers Many corporates have increased investment in Africa. FDI from India toAfrican countries has increased from $12 Billion in 2006-07 to over $35 Billionin March 2016-17 and additional $53 Billion are in the pipeline of investment. The government of Indiais also supporting exporting to countries in Africa such as it has amended Eximlaws and created a better environment by providing incentives to thoseexporters to countries such as Tanzania, Kenya, South Africa and others whohave strong ties with India and are working efficiently and effectively withIndia hand in hand.
With many new projects set to come and more and more tradebetween the two there will be a better relation in the future. Also many morecompanies are still trying to enter into the African markets, but there arestill hurdles that are present however over time these hurdles will reduce andboth will bring huge economic, social, political progress to each other andmake a stronger relation. LessonsLearned The India-Africa is avery critical important for both India and Africa, but more for India becauseif it doesn’t strengthen its ties with Africa then China will further go into becomingstronger economically as they will earn huge amounts from the natural resourcesin Africa. Many Indian companies are exploiting Africa in a wrong manner andnot following the laws and environmental regulations.
This is very wrong as ifthis continues to happen India will face problems with its relation of Africa. Many Indian companiesare investing only in Mauritius due to it being a Tax haven. More than 40% ofthe private sector of India have invested there and then rerouted their fundsto India, which hasn’t helped the development of the African continent and thatalso means that the figure of actual investment is lower by India in Africa. Alsomany Indian companies have used this tax haven for money laundering and savingtax in India as well. Most of the Investmentsdone in Africa are in East Africa. This is mainly due to the reason that thesecountries are only of the fastest growing in the world and also because theyhave been politically stable over the years and these nations are more peaceful.Rwanda, Tanzania, Kenya, Mozambique, Uganda are the countries that havereceived huge FDI from India.
Rwanda being small and corruption free is a hugereason India is interested in investing there. All these countries also have agrowing population by 2025 Tanzania will have the 14th largestpopulation in the world and not just Tanzania, but the entire East Africannations has a growing population and most of them being under the age of 25meaning it’s a youthful population. The Africa and Indiarelationship is growing and growing and will keep on doing so because both needeach other to grow as India has expertise in Manufacturing and Technology overthe African countries and these countries have rich natural resources that canbe utilized to grow their economy. India is helping Africa now to manufactureand export finished and semi-finished goods rather than exporting raw materialso that they can gain from value added goods and earn more in foreign exchange. Overall, India andAfrica will help each other and in the coming years India will become a biggerpartner as the growth rate of trade is growing at over 6% year on year and ispredicted to grow at 8% in the coming years, which will benefit and helpprosper both India and African country goal and development. Recommendationfor the future India and Africa need tocome with an individual body that will help support the investments of IndianMNC’s in Africa. If such a body is made there will be an increase in the inflowas many Indian companies are struggling where to invest and how to invest. Alsothis body should keep records and statistics regarding those countries and thedemand for products so that Indian companies can invest there as they will knowhow much to Invest.
This is because most of the African countries don’tmaintain this, so it becomes hard to know the trends and prospect of variousindustries. Another body has to bedeveloped to fight the illegal activities that are being done. This body willplay a crucial role as it will support Africa and India both as many try to notpay taxes in both India and Africa so this body will control it. Also they willset laws that help support both India and African countries. The body shouldalso take into consideration and teach the Indian companies to operate in aclean and efficient manner as it causes problems to the relation ofIndia-Africa if it continues this way. This body should also educate the Indiancorporates of the working environment, culture, benefits, opportunities, taxlaws and others to help guide the Indian companies so they operate effectivelyin Africa. Indian companies shouldalso focus on what Africa wants and what its people want rather than justdumping old cheap products.
Once they understand this they can develop andcreate products that will help them grow and sustain in Africa more because nowthe trend is changing and even the population of Africa is changing from low tomedium class and the medium class population is the fastest growing in Africaand will grow faster in the coming years. So for Indian corporates to succeedand tap into the middle class population, which is very important for sectorssuch as household, FMCG and others to succeed in. Overall, India and Africahave to work together and a body has to be kept and set whereby Investmentswill be supported and companies will get educated and a single portal forinvestment to ease the FDI inflow and to make Africa an Investment destinationfor Indian corporates. References Alden, E.
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CHAKRABARTY, M. (2017, May). Indian Investments in Africa: Scale, Trends, and Policy Recommendations. Chaturved, S. K.
(2008, March). India-Africa Economic Partnership: Trends and Prospects. GUPTA, G. (2017). The India-Africa Relationship is Beyond Strategic Considerations’. Retrieved from THE WIRE: https://thewire.
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