FE Editorial: The race for Africa

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The Financial Express: May 26 2011, 02:56 IST

India’s offer of a $5bn line of credit to help Africa achieve its development goals over the next three years, and another $700mn to train and establish the new institutions Africa so desperately needs, is the biggest support programme the government has ever announced. That underscores how serious India is about winning African hearts. In addition, bilateral trade is projected to rise to $70bn by 2015 from $46bn now. Apart from Indian investment of $25bn so far (this includes Bharti Airtel’s $10bn Zain purchase) in Africa, there’s help for medium-range weather forecasting, a collaborative institute for agriculture …What’s important is that India is not operating in a vacuum. Given its higher GDP, the fact that it got into the Africa game earlier, the fact that it actually owns its $3tn forex reserves by virtue of large trade surpluses, China is streets ahead. Its investments in Africa are around $127bn. India’s biggest hope is that while China’s investments are exploitative, India’s are aimed at African people. Investments in Africa’s mines, it can be argued, are aimed at fuelling China’s growth, and do little to help locals —The Economist’s cover story on China’s Africa foray is replete with horror stories of spilled oil lakes, poor mine safety, and the lot. By contrast, lower call rates from Bharti-Zain will benefit Africa’s aam aadmi.

But it isn’t so simple. Infrastructure that stays in Africa helps the aam aadmi — starting from the 1,860-km long Tanzania-Zambia railway, the 58,000-sq mt Cairo conference centre, to a harbour in Mauritania (see Mark Mobius’s article in the adjoining columns) and a lot more, China’s presence is overwhelming. China’s purchase of a fifth of Standard Bank, the continent’s biggest bank, means its Africa influence will rise. Its bilateral trade with Africa is thrice India’s, and it even has a trade deficit with Africa. India’s hearts-and-minds strategy, and leading with private sector firms, may still win—don’t forget India’s GDP growth will be higher than China’s in a few years and is less resource-intensive—but will take some doing. The government track record in building infrastructure is dismal, so it is to be hoped the $300mn aid for the Ethio-Djibouti railway line will be used up by private firms. India’s track record in weather forecasting or creating agriculture institutions in recent decades is equally uninspiring. India’s best hope is its private sector—the ICICIs, the Daburs, the Taj Group, Punj Lloyd, Ranbaxy, Cipla, Bharti Airtel … They were focusing on Africa anyway, but the Prime Minister’s visit has raised the hope the government will do its best to help them venture into Africa—the kind of help that wasn’t forthcoming when Sunil Mittal wanted the government to allow dual listing of firms, critical to the success of the MTN deal he was working on.

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