Now’s the time to invest
Apart from short trips to the island nations of Mauritius and Seychelles, mainland Africa is one region that jet-setting prime minister Narendra Modi has yet to set foot on in the 16 months he has been in power. Yet, in a diplomatic coup, Modi managed to get 41 of the 54 African heads of state and government to attend the 3rd India-Africa Forum Summit in New Delhi. Wooing Africa is crucial for India that has all along had strong trade links with the continent. With an annual trade of $70 billion, India is still behind China ($221 billion) and the European Union ($228 billion). In 2104, Africa accounted for 11% of India’s exports and 9% of its imports. Here, the import of petroleum, gold, coal and diamonds accounted for 82% of India’s imports from Africa. Nigeria is India’s biggest trading partner in Africa primarily due to oil imports.
The big advantage is that Africa is flush with natural resources—oil & gas, iron-ore, manganese and coal. The other reason is that India has been investing in Africa for quite sometime. In 2013, while 16% of India’s outbound FDI was in Africa, the continent accounted for 26% of India’s inward FDI. India has till now invested around $30 billion in Africa. At the summit, the big announcement was the $10 billion line of credit over the next five years to Africa. The other area where India can help Africa is in agriculture. While the latter has 60% of the global arable land, it accounts for just 10% of the world agricultural produce. There are also areas where India needs Africa’s support.
Furthering the Indian plan to have 175 GW of renewable power by 2022, the country is seeking African support at the forthcoming climate change talks in Paris to join an alliance of solar-rich countries. Ghana has already evinced interest to join.
The big-ticket item for India and Africa is the expansion of the UN Security Council. Modi stressed that the institution cannot be representative of the world unless there is a voice for Africa, which accounts for a quarter of UN members, or for the world’s largest democracy with a sixth of the world population. That’s longer play. But now that Modi has met almost all important African leaders, it is time he led a team of Indian businessmen looking to invest in Africa. That could be the beginning of a long-term business relationship beneficial to both sides.