India’s Growing African Strategy: Competing with China

Presentation to Royal Geography Society Conference

29 August 2007London

Sanusha NaiduResearch FellowCentre for Chinese StudiesStellenbosch UniversitySouth AfricaEmail: snaidu@sun.ac.za

‘India’s keenness is evident from the fact that TERC [Trade and Economic Relations Committee] has decided to club Africa with the progress on India-US economic dialogue…add to that the increased attention being given by China…the government thinks that it’s time to

step up trade flows if not invest more’

The Times of India (11.07.2007)

‘Chinese model is a government led model, not a commercial model. When they develop infrastructure, most of their labour comes from China, cost is low and Africa benefits but process of commercialisation doesn’t take place. There is not much capacity building. Local people are not involved. Meanwhile, Indian model will be private sector-led growth facilitated by governments will be better appreciated by Africans. It will enhance development of local entrepreneurial skills. It’s India’s model. They said they want to build projects themselves and did it. That’s Indian’s approach: create local capacity and sustainable development’

Dr. Mohan Kaul, Director General, Commonwealth Business Council, London, 2007.

PRESENTATION OVERVIEW

• Purpose of the paper

• Historical Relations with Africa

• Broadening political and economic engagements after the Cold War

• Conclusion: Is The Elephant riding the Dragon’s tail in Africa?

Purpose of the Paper:To assess the balance of relations between Africa and China through the lens of India’s growing African strategy and determine to what extent does it reflect a competition for strategic political and economic leverage across the continent.

Historical Relations Ideologically located within the context of the Non-Aligned Movement and the Spirit of Bandung in which its global role was based on championing the struggles of anti-colonialism and anti-racism.

Aligned to its Principles of Peaceful Co-existence that it developed with China.

Africa considered to play as a significant role in Prime Minister Nehru’s non-aligned force

Historical Relations Continued…… Because of the large Indian Diaspora living in the Continent. Underpinned by Cold War Polemics and the border dispute with China where Africa’s mixed reaction to the conflict forced New Delhi to realise that “it did not have a strong ally it had hoped for…and therefore actively worked towards countering Chinese penetration in Africa” (Serpa 1994). Led to a) increased material support to the liberation struggle in Southern Africa i.e. anti-apartheid struggle in South Africa and b) expanding economic co-operation with the Indian communities Some analysts argue that as a partial response to China’s burgeoning relations with newly independent African states, the difficulties experienced in accessing markets across the continent and the need to develop leverage (result of Sino-Indian tensions) New Delhi launched the INDIAN TECHNICAL AND ECONOMIC CO-OPERATION (ITEC), which emerged from a meeting convened of its head of trade missions from Africa and West Asia in 1963. But the military humiliation in the Sino-Indian border dispute, confronting the Cold War on its doorstep and the death of Nehru saw India’s role in global system becoming marginal and India’s engagement with Africa becoming negligible.

Contemporary Engagements: Broadening Political and Economic interactions after the Cold War

Whereas India’s foreign policy during the Cold War was mainly guided by Nehruvian principles aimed at non-alignment, an alternative order and South-South co-operation, in Africa this appeared to be motivated by it own polemic with Beijing for leverage.

All of this changed following the Cold War where policy mandarins considered how new impulses in the global arena should reshape its Post-Cold War foreign policy ambitions.

Propelled by Economic liberalisation of the 1990s, which aligned itself to a shift in foreign policy thinking by the Ministry of External Affairs which emphasised that ‘in the future new relationships based on concrete economic, technological and educational cooperation will assume enhanced significance’.

In Africa this was about reinventing and rejuvenating the old relationship and aligned to a confluence of interests around justice in the global order leveled at promoting a new international order, fighting against underdevelopment and poverty and finding export markets, and attracting foreign capital and technological know-how.

India’s economic footprint vis-à-vis China in Africa

Indian Energy & Mining Investments in Africa

Key

Chrome/ Ferrochrome

Cobalt

Copper

Diamonds

Iron ore

Oil Refinery

Oil Exploration/Prospecting

Natural Gas

Steel Refinery

Oil Pipeline

Phosphate

Carbon

Source: Centre for Chinese Studies

Chinese Energy Investments in Africa

Key

Oil

Gas

Future Investments

Exploration

Source: Centre for Chinese Studies

Chinese Infrastructure Investments in Africa

Key

Road & Bridge

Rail

Housing/ Schools/ Hospitals

Airport

Telecoms

Stadium/ Ministry Buildings/ Conference Buildings, etc

Power Stations/ Dams

Irrigation/ Water Projects

Oil Pipeline

Business Park/ Enterprises/ Factory

Radio/ Broadcasting Station/ Cinema/ Theatre

Source: Centre for Chinese Studies

Chinese Mining Investments in Africa

Key

Aluminium

Chrome/ Ferrochrome

Coal

Cobalt

Copper

Diamonds

Iron ore

Manganese

Nickel

Platinum

Silver

Tantalum

Tungsten

Zinc

No official Chinese investment but top export to China in 2006

Source: Centre for Chinese Studies

The overlap in China and India’s economic footprint into the continent reflects similar interests across the Continent as the maps above illustrate.

Although China reflects an embedded dominance, Peter Pham argues that India mirrors China’s “quest for resources, business opportunities, diplomatic initiatives and strategic partnerships” globally and in Africa.

Energy Security is an overriding priority, especially as India is oil dependent and demands in the domestic economic increase.

To guard against the vulnerabilities of volatile oil prices, instability in oil rich regions and geopolitical uncertainties that fuel possible supply disruption to diversify its energy sources and secure lines of supply

Therefore India’s energy footprint in Africa is becoming increasingly apparent.

The main investor is Oil and Natural Gas Company (ONGC) through its overseas arm ONGC Videsh (OVL)

Between the period 1995-2005 ONGC increased its acreage holdings from 2 to 14. These included investments Sudan, Nigeria, Ivory Coast, Libya, Egypt, Gabon.

In 2005 OVL entered into a joint venture with Mittal Steel to form ONGC Mittal Energy (OMEL), which entered into a US$6 bn infrastructure deal with Nigeria in exchange for 2 offshore acreages.

ONGC/OVL Investments in Africa

Country Type of Investment Size of Investment

Nigeria Oil pipeline Not stated (25% stake in the Greater Nile Petroleum Oil Company (GNPOC) project

Sudan Oil production Not stated (24% share in Block 5A & 24% share in Block 5B)

Sudan Oil refinery US$ 1.2 bn

Sudan Multi-product export pipeline US$ 200 mn

EgyptConcession agreement to explore for oil in North Ramadan Block

Libya49% participating interest in 2 onshore exploration blocks

Ivory Coast23.5% interest in offfshore bloc C1-112

SudanOil pipeline (part of the Greater Nile Petroleum Operating Company)

US$ 750 mn

Source: Various Newspaper articles

Other Indian NOCs in Africa

Country Indian Company Type of Investment Size of Investment

Côte d’Ivoire Unknown (various companies acting as a consortium)

Oil Prospecting US$1 bn

Nigeria National Thermal Power Corporation (NTPC)

Liquefied Natural Gas US$1.7 bn

Nigeria Indian Oil Corporation (IOC)

Oil refinery US$ 3.5 bn

Nigeria Indian Oil Corporation (IOC)

Liquefied Natural Gas (LNG) plant & Oil refinery

US$ 2 – US$ 4 bn (proposed)

Nigeria Oil India 25% stake in Sunetra Nigeria OPL 205 Ltd.

Gabon Oil India 45% stake (including operatorship) in an onshore block

Sudan Videocon Group Oil Prospecting US$ 100 mn (76% stake)

Source: Various Newspaper Articles

The Trade Dimension INDIA AND CHINA’S TRADING RELATIONSHIP WITH AFRICA, 1999-2005 (US$ millions)

0

5 000

10 000

15 000

20 000

25 000

1999 2000 2001 2002 2003 2004 2005

India: Exports to Africa India: Imports from Africa

China: Exports to Africa China: Imports from Africa

Source: World Trade Atlas (2006)

India-Africa trade has jumped from US$967 million in 1991 to over US$9.5 billion in 2005 (The Nation 2007).

For the period April 2006 – January 2007 India’s trade with the continent was estimated at US$19.3 billion. In 2006 exports to Africa amounted to US$9.4 billion while imports from the continent were US$12.5 billion.

In the past five years, India’s exports to Africa grew by 120%, compared to 76% export growth with the world (Ahmed 2007)

Yet Africa’s share of India’s global exports trade remains negligible despite India’s export market shifting southwards. Out of a total of US$103 billion for the FY 2006 Africa only constituted 7% of Delhi’s export market whereas Asia and Oceania constituted the lion share of 47% (www.eximbankindia.in).

Indian exports to Africa consist mainly of manufactured items (49%), chemical products (11%) and machinery and transport equipment (10%) (Ahmed 2007).

In terms of the main export partners, South Africa features prominently with exports totalling US$2 billion in 2006, followed by Kenya with US$1.3 billion, Nigeria at US$936 million, Egypt at US$739 million and Mauritius with US$539 million.

Fig 1: India trade with Africa, US$ bill

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2000 2002 2004 2006

Dec year

US

$ b

ill

Imp from Africa

Exp to Africa

Source: World Trade Atlas

Indian imports from Africa are mainly primary goods. In 2006 oil (61%) was the largest import followed by gold (12.9%), phosphate chemicals (6.5%), nuts (2.9%) and copper ores (2.1%). Nigeria was the largest import partner for India in 2006. Imports totalled US$5.6 billion followed by South Africa with US$2.5 billion, Egypt at US$1.4 billion, Algeria with US$532 million and Morocco at US$517 million. But India’s trading relationship with the continent is still negligible when compared to China’s trade relationship with the continent which topped US$55 billion in 2006.

Increasing Market Traction Despite perceptions that India is ‘sleeping walking in Africa’ when compared to China’s trade partnership, signals are that New Delhi is awakening to the reality that Africa represents a strategic market and priority in its global commercial expansion.

This is being mobilised through:

→ The Conclave ‘India Africa Partnership Project’ – a joint initiative between EXIM Bank of India (EXIM) and the Confederation of Indian Industries (CII) promotes economic ties with the continent.

- In 2005 160 delegates from 32 African countries attended a meeting entitled ‘Expanding Horizons’ in Indian where over 70 projects estimated to more than US$5 bn were discussed.

- In 2006 a similar meeting took place in October where over 300 African participants and 375 Indian businessmen discussed over 300 projects worth US$17 bn.

-In 2007 three Regional Conclave meetings took place in Ivory Coast, Mozambique, and Uganda to strengthen business linkages.

→The ‘Focus Africa Programme’ under the EIBI

-Provides financial assistance to various trade promotion orgs., export promotion councils, and apex chambers in the form of Market Development Assistance.

- Under this programme total lines of credit extended to SSA by the EIBI is over US$550m (The Nation 2007) targeting regional blocs like ECOWAS and COMESA.

- Have also extended Lines of Credit to ECOWAS Bank for Investment (US$250m), PTA Bank (US$5m), the Industrial Dev. Bank of Kenya (US$5m), and EADB (US$5m).

→ Other Initiatives:• US$200 million line of credit to NEPAD under the India-Africa Fund designed to promote African economic integration;• US$500 million line of credit for the Techno-Economic Approach for Africa-India Movement (TEAM-9) which is an initiative with 8 Francophone countries;• US$1 billion investment in a joint venture with the African Union to build a Pan African e-Network to provide telemedicine and tele-education through integrated satellite, fibre, and wireless connectivity;• Letters of intent signed between the State of Andhra Pradesh and Kenya and Uganda to send 500 Indian farmers to cultivate land in the respective countries

Emerging presence of Indian Companies

The outreach of these companies extend beyond the resource sector to include:

- Hotel and Leisure (Tata renovating the Taj Pamodji Hotel in Zambia for US$800m)

- Pharmaceuticals (Ranbaxy, Dr. Reddy’s & Glenmark Pharmaceuticals)

- Vehicle Assembly and supply (Provision of 250 Tata Buses in the DRC, TATA plant assembly at Ndola, Zambia, Mahindra & Mahindra trucks and vehicles in Southern Africa).

- Infrastructure, Engineering & Power transmission (KEC International Ltd, Rites Railway, Ircon, Kamani Engineering Corp.)

- IT, Software & Telecommunications (Infosys Technologies, Ramco Systems, Hinduja Group)

More than Business…..Becoming a significant development partner to the continent.Under the ITEC programme has provided more than US$1 billion worth of technical assistance and training of personnel. Also provides scholarship opportunities for AfricansIn 2005 India became the first Asian country to become a full member of the African Capacity Building Foundation (ACBF) and pledged US$1 million towards the foundation’s sustainable development and poverty alleviation capacity building initiative. Contributed to UN peacekeeping operations in Africa - largest contingent of peacekeepers to the continent with 3,500 troops in the DRC; 1400 Indian military contingent constitutes the largest contribution to The UN Mission in Ethiopia and Eritrea; also supplied its peacekeeping missions with helicopters, medical and communication equipment.India has also joined the HIPC II initiative and to date has written off debts totalling US$24 million to Mozambique, Tanzania, Uganda, Ghana and Zambia.Food donations to Namibia in 2003 as well as to Chad and Lesotho in 2004.200, 000 mosquito nets to the Republic of CongoConstruction equipment and materials to Seychelles as part of the reconstruction process following the Tsunami

Conclusion: Is the Elephant Riding the Dragon’s Tail in Africa?

Cursory level India’s growing engagements in Africa cannot be ignored.

But does it constitute competition with China?

Depends whether one wants to see it in this context or view India’s growing African strategy through the lens of its independent foreign policy engagement.

Yet one thing is certain: India’s burgeoning relations with Africa reflects critical considerations for China’s deepening involvement across the continent.

Immediate future signs are that China will remain the dominate power in Africa’s international relations

See India as non-threatening to its strategic interests because of Beijing’s entrenched political and economic largesse

But in the long-term could be considered seen as a competitor once India builds up its influence and augments economic engagements with Africa

At the COLD FACE…….. - Developing a similar like FOCAC institution with the first possible meeting in early 2008 - Instituting a Development Agency to monitor and augment the aid partnership with Africa - Leading the charge of the Doha Development Round and greater equity in multilateral trade issues affecting the South - Challenging the exclusivity of the G8 and contemplating initiating a similar institution to boost the strength and voice of the South - Engaging more actively with regional multilateral agencies i.e. observer status in COMESA, member of the AfDB, engagements with NEPAD and ACBF - The Indian democratic history and experience i.e. issue of governance - Indian firms accountable to private shareholder versus Chinese firms accountable to political stakeholders - Pushing competitive advantage in pharmaceuticals and telecommunications - Lobby the Africa bloc for support in its bid for a permanent seat in the reformed UN Security Council

The Big Policy Questions How will Africa respond to China and India competing for influence and economic leverage?

Will African countries compete with each other to try and court China and India for trade and investment deals?

Which of the two will Africa see as the better partner?

What will be the impact of geo-politics i.e. the West’s engagement vis-à-vis China versus India for Africa’s engagement?

How will Africa leverage its relations with China and India to increase its own position in the global system?

Who will be the real winners (i.e. Africa’s citizens or African elites)?

What will be the role of continental institutions i.e. African Union and NEPAD in developing a cohesive engagement with China and India?

Will Africa use the challenges experienced in its engagements with China to develop better relationship with India?

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