Unpacking India’s African Engagement
Transcript of Unpacking India’s African Engagement
Unpacking India’s African Engagement
Presentation prepared for the OECD Expert MeetingParis
By Abdullah VerachiaDirector: Frontier Advisory
Faculty: Gordon Institute of Business Science
October2010
Contents
• India’s economy• Drivers of growth• Challenges
India
• Historical ties• Diplomatic and political ties• Drivers of growth• Sectors of focus• Trade• Lessons from India
India- Africa
‘Indovation’ in Africa
1. Tata Nano
2. The Gramateller - an automatic teller machine (ATM) for the rural market
3. Tata Swach (a water filter which retails at USD22 and is geared for poor households with no electricity or running water)
4. Low-cost refrigerator, which is resistant to power cuts
5. Flour mill powered by a scooter
6. USD 35 laptop
And a Young Population
2534 37 38
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9
18
27
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India China US Russia Japan
Yea
rs
Population Median Age (in years): 2008E1
Additions to Working Age Population by 2010
World
India
Africa
China
SE Asia
Lat America
Southern Asia
US
Europe
Japan
Efficiency, speed and HOT
The Dabawallahs
• A 125 year management lesson to all
• Growth of 15 percent
• Why Queue, fresh and on time
• 600 000 dabbahs a day
• Six sigma rating, 1 mistake in 6, 000 000 transactions
• Continuous cycle of employment
• Average dabbah 60 kms and four hands
Diplomatic and political relations
African Asian Bandung Conference 1955Focus on rights to self- determination, mutual respect for sovereignty, non- aggression, non- interference in internal affairs, equality for the third world.
India supports Africa’s liberation movements
1964’s Indian Technical and Economic Cooperation (ITEC)Bilateral programme of financial assistance and mutual cooperation to benefit both India and Africa.
1990s increased focus on economic, education and technical cooperation
Diplomatic and political relations
India- Africa Summit
2008
14 African countries
Economic, political, science and technology, capacity building, infrastructure
Preferential market access to Africa’s 34 least developed countries
Solar panels & equipment for 35
schools in Rwanda
Education project in Namibia
10 vocational training institutions
19 institutions to develop human
resources in Africa
India- Lesotho centre for Advance Education
in IT
Procurement of medical equipment in the
Seychelles
Diplomatic and political relations
India Brazil South Africa (IBSA)
Established in 2004 to present a common front at multilateral gatherings. E.g. The Doha Rounds and the UN.
Annual Conclaves on India Africa
Organised by Confederation of Indian Industry (CII) and India EXIM Bank to encourage Indian exporters to increase their presence in Africa.
Last summit in March 2010 with 1000 delegates and 145 projects (worth US$9 billion) under discussion.
India’s drivers to Africa
1. Energy Security
• 3rd largest economy by 2040
• 15% of the world’s population
• 30% of energy requirements met by oil- 70% imported
• 4th largest net imported of oil by 2025
• 7th biggest importer of natural resources
• May face a shortfall of 189 million metric tonnesof coal per annum by 2015
Strategically vulnerable
India’s drivers to Africa
2. Resource Seeking
• Specifically copper, uranium, iron ore
• 2007: ArcelorMittal signs US$1.6billion for iron ore exploration with the Liberian government
• Vedanta Resources owns a stake in Zambia’s Konkola Copper Mine
• Coal Ventures International comprises of Coal India Limited, National Mineral Development Corporation, National Thermal Power Corporation, Rashtriya Ispat Nigam Limited and Steel Authority of India Limited raised US$2.7 billion to invest in mining interests abroad
India’s drivers to Africa
3. Market Seeking
• High levels of liquidity of Indian multinationals
• Africa’s growing consumer market increasingly attractive (Africa’s population estimated to have reached US$1 billion)
• Market in Africa for Indian pharmaceuticals: US$1.119 billion
4. South- South Cooperation
5. Indian Diaspora in Africa
• 2nd largest Diaspora in the world: 25 million
• Africa: 2.8 million Persons of Indian Origin (PIO)
• 1.3 million in South Africa; 855,000 in Mauritius; 100,000 in Kenya; 90,000 in Tanzania and 90,000 in Uganda.
India’s drivers to Africa
6. Familiar operating environment
• Strong cultural and historic ties
7. Playing Catch up to China
• India is said to have lost out to China in US$12.5 billion worth of contracts in the energy sector in 2009.
• Indian government needs to be increasingly involved on the continent to keep up with Chinese investment.
India- Africa trade
1991 US$1 billion
1999 US$7.7 billion
2009 US$42.8 billion
2014 US$70 billion target set by the Indian government
Top African Exporters to India 1. Nigeria2. South Africa3. Angola4. Congo Brazzaville5. Tanzania
Outbound FDI from India to Africa
1997 US$205 million
2007 US$11 billion
January 2003- July 2009 Indian investors the source of 130/ 3062
Greenfields FDI Projects in Africa
Worth US$25 billion
9th largest source of FDI into Africa
Indian Africa Summit April 2008
•14 Heads of State. African Union agenda
•Delhi Declaration – Blueprint for Cooperation
•New Delhi’s Africa engagement strategy
•“Quid pro quo” approach
•Doubling of Lines of Credit to $5.4 bn
•Duty free access to 34 African LDC’s
Indian Africa Summit April 2008
• Increase in aid packages to US$ 500 million
• JV between state owned MMTC and Tata to bid for mining projects
• Launch of TATA Nano in Africa
• Reshaping global diamond trade
• Direct diamond trading with Angola and Namibia
• Extending trade beyond traditional African partners
• Increased investments in West Africa for energy security
• Development of mining investment strategy
The Second Wave – ‘Beyond the Tatas’
India Inc’s renewed interest on the continent in 2010
Bharat Heavy Electrical to invest in 3 coal based power projects -$2 bn
NTPC to secure 3 million tonnes per annum of LNG (liquified natural gas) in exchange for building three power plants in Nigeria
We don’t need MTN – Bharti’s US $ 10.7 bn bid for Zain telecom
Increased transport links - Jet Airways announces SA – India leg to start in April
Essar Group purchases majority shareholding in Econet Wireless
ONCG to increase investments in West Africa in 2010
Agriculture – The Farms Race
• 80 Indian Agriculture Companies invest £1.5 billion in Ethiopia, Kenya, Madagascar, Senegal, Mozambique
• £500 million loaned from Indian government to these companies
• $2.5bn has already been invested in East Africa’s agricultural sector alone
• Public Private Partnerships between government and Indian Agro companies