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

India

India

June 2006 March 2008February 2007

India

May 2009March 2008 December 2008

India

August 2010August 2009 April 2010

‘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

India’s economy

India’s drivers of growth

A Rising Middle Class …

And a Young Population

2534 37 38

44

0

9

18

27

36

45

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

But the Spirit of Entrepreneurship continues …

Global Technical Support from Rural Rajasthan

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

India- Africa

India and Africa Historical relations

Historical relations

Trade relations established in the 16th century

India and AfricaDiplomatic and political relations

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

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- AfricaTrade

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

India- Africa trade

India- Africa trade

Top SSA Exporting Countries to India

India- Africa trade

Top SSA Importing Countries from India

India- Africa trade

Total trade between India and selected African countries

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

Bilateral Trade

Indian Exports to South Africa

Indian Imports from South 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

India- AfricaSector focus of Indian investment

India- Africa deals in 2010

Footprint of select major Indian in Africa

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

Abdullah H Verachia

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