Delhi hits the scene

[ By Matthias Jobelius ]

In light of its own economic progress, relations with Africa have become increasingly important for India. The government in Delhi needs access to markets as well as to commodities and energy. Deepening relations with Africa serve these purposes.

Three characteristics mark the change over the past five years.
– Relations have become more intense. After a phase of relative quiet, there are now a number of major initiatives.
– The initiatives serve strategic goals. Anti-colonial solidarity no longer drives India’s relations with African countries. Today, Delhi is focusing on economic interests.
– Indian diplomacy has become more selective, concentrating on African states that can directly help Delhi reach its foreign-policy goals. These states fall into three categories: oil-exporting states, such as Nigeria and Sudan; countries with a large population of Indian origin, such as Tanzania, Kenya and Mauritius; and partners that are crucial for trade and political alliances, especially South Africa.

Furthermore, India has begun playing a large, conspicuous role in UN peacekeeping missions. Today, Indian soldiers take part in almost all UN peacekeeping activities in Africa. Obviously, the government in Delhi is not pursuing its own military goals in such campaigns; rather, it wishes to present itself as a major and reliable player on the international stage. In doing so, it is emphasising its demands for a leadership role in the UN and other multilateral settings.

A colourful patchwork

Overall, relations between India and Africa have always been a colourful patchwork of economic, political, cultural, and military fields of cooperation. Any comprehensive assessment still does not reveal a consistent Africa strategy, but the Indian government is apparently striving for greater coherence. On the one hand, there is cooperation in the fields of trade and energy; on the other, development assistance is becoming a focal point.

Since India embarked on policy of liberalisation in 1991, trade between India and Africa has greatly increased. According to the Indian Trade Ministry, the volume has risen from $ 573 million back then to the current level of almost $ 4 billion. Since 2000, the value of goods traded has increased by an annual average of 10 %.

However, that growth is concentrated on individual countries and sectors. 61 % of all African exports to India are ores and metals. 68 % of all deliveries to India come from South Africa alone. And while India does not make up more than 10 % of the total exports of any single African country, a number of subsectors in some countries are geared primarily to serve Indian needs. For instance, almost half of the metal exports from Sudan and Cameroon go to India, and so do almost 100 % of the phosphoric acid exports from Senegal.

To diversify its economic cooperation, Delhi utilises multilateral trade agreements and promotes investments of Indian companies. In 2002, the government started an initiative called “Focus Africa”, with the goal of intensifying trade with, and investments in, a select group of states. The campaign initially focused on Nigeria, South Africa, Mauritius, Kenya, Ethiopia and Tanzania. In the meantime, it has been expanded to include seventeen additional countries.

The Indian government is also looking for new energy suppliers, as it wants to reduce its dependency on a small number of oil-exporting states while expecting continued growth in the years to come. Recent estimates (India does not publish any reliable statistics on this matter) say that 24 to 50 % of India’s oil imports stem from sub-Saharan Africa, with Nigeria and Sudan being the most important partners (Beri 2005, Broadman 2007).

India’s fiercest competitor in this field is China, which has been investing more than ten times as much money (40 billion dollars since 2000) in energy projects abroad as India has. Indeed, China has completely sidelined India in Angola. In January last year, however, the two rivals signed a Memorandum of Understanding to cooperate in the field of energy. Since, their first joint ventures have become operational on the African energy market.

Indian development aid

As India intensifies its trade, it is also expanding its development aid for Africa. India is among the few nations that both give and receive ODA (official development assistance). As a result, India plays a prominent role in the discussion on “emerging donors” (Jobelius 2007).

India has granted a credit line worth $ 500 million as part of its “Team9 Initiative”, designed to improve relations with resource-rich countries in western Africa. Furthermore, Dehli is providing $ 200 million in support of the NEPAD (New Partnership for African Development) process. India’s Export-Import Bank currently has 27 credit lines for African states, even for politically controversial and difficult partners such as Sudan or the Democratic Republic of Congo. India has also signed the multilateral debt-relief treaty HIPC II. It has exonerated a number of states (Mozambique, Tanzania, Uganda, Ghana, and Zambia) of debts of a total worth of $ 24 million.

Economic ties and development cooperation are closely interwoven. Though the one does not directly cause the other, the government of India explicitly states that its development assistance is geared towards supporting Indian interests and boosting the domestic economy. Indeed, a number of individual cases show that India’s ODA speeds up the process of foreign trade and investments. For instance, India granted Sudan $ 10 million in bonuses and promised credits to the tune of $ 100 million when ONGC Videsh, one of its government-controlled oil companies, became a major player in that country.

In Senegal, Indian automotive firm Tata became the greatest benefactor of a programme to modernise public transport. At the same time, India is the largest importer of Senegalese products, in addition to being one of the country’s most important non-Western donors. In Mauritius, no other country matches India’s sum of foreign investments. India has granted the country $ 10 million in loans over the past seven years.

It thus only seems natural that Delhi does not adhere to the OECD's DAC (Development Assistance Committee) principles. The DAC serves conventional donors for coordinating rules and policy. India, however, continues to couple its aid to orders for goods from India. Moreover, the Indian government refuses to incorporate such prerequisites as the promotion of democracy or good governance in its development assistance.

Uncertain future

As China and India expand their presence in Africa, there is much room for speculation. Some experts believe that the emergence of these two “rising powers” will trigger higher commodity demand, which, in turn, would transform African economies into suppliers for China and India. On the other hand, some worry that Indian products will push African competition off the market. In addition, DAC donors fear that Indian ODA might become an exit option for receiving countries, and thus undermine the established donor conditionalities.

While all of these considerations have a point, they remain quite speculative (Goldstein et al., 2006). Whatever will happen, it is clear that neither the volume nor the pattern of Indian cooperation – be it in terms of trade or aid – with Africa are substantial enough so far to leave a mark on the conditions for development south of the Sahara. Trade between India and Africa still remains slight in absolute figures. Despite impressive growth rates, its share in the total volume of Indian exports and imports has not risen. Furthermore, trade has hardly become more diversified in terms of partners and products. In the midterm, India’s ODA – unlike China’s – will not reach a level allowing it to compete with major DAC donors.

However, there is one major difference between India, on the one hand, and other donors, including China, on the other. Entrepreneurs of Indian descent do business in Africa, and they have a great impact on the economies of several of sub-Saharan countries. In the past few years, Delhi has been working to intensify contact with its various Diaspora communities all over the world. No doubt, one major goal is to find investors for projects back home. After all, non-resident Indians (NRIs) and persons of Indian origin (PIOs), especially those in California, have contributed greatly to the growth of high-tech industries in India.

Every year, non-resident Indians transfer $ 15 billion home. These remittances exceed the volume of foreign direct investments. Moreover, Indians in diaspora tend to be well organised and to have a voice in civil society. They may thus yet become an important lobby for promoting India’s interests. Accordingly, Delhi’s trade, development, and diaspora policies could very well foster some synergies in Africa, reinforcing the effects of its still somewhat limited trade and ODA.

Whatever the case, India has entered the African stage, and its role in Africa will only increase in the years to come. Identifying the opportunities and risks that this process entails is something that development debate will have to focus on.