A new trajectory for India-Africa ties

India now sees Africa as a promising market for Indian goods, services, and investments. This is evident in the government’s recent concerted focus on the India-Africa relationship—high profile visits by top leaders to African countries, a recasting of India’s development diplomacy, and an attempt to match action to past promises

India’s relationship with Africa has been through an unprecedented intensification in June 2016. In the first week of the month, Vice President Hamid Ansari visited Tunisia and Morocco. In the second week, President Pranab Mukherjee embarked on a tour of western and southern Africa, covering Ghana, Cote d’Ivoire, and Namibia. And in July, Prime Minister Narendra Modi is scheduled to visit Kenya, Mozambique, Tanzania, and South Africa.

The present renewed outreach is also unabashedly about business, and a good example of geo-politics combining with geo-economics. India views Africa as a promising market for Indian goods, services, and investments. So far though, any follow-up on promises had remained anaemic. Now, Indian leaders are seeking out fresh investment opportunities for Indian public and private sector companies in different African countries.

The vice president’s visits to Morocco and Tunisia are crucial because India imports phosphate—a critical raw material for fertiliser production—from these countries. Ansari also inaugurated an India-Morocco Chamber of Commerce during his trip to Rabat.

The president’s three-country tour provided an opportunity to further India’s business interests. At the India-Ghana Business Forum, Mukherjee said: “…the Indian Government would be ready to work with you in key sectors and areas of common interest and encourage Indian private as well as public entrepreneurs to bring more investments into Ghana.”[1] India’s cumulative investments in Ghana are over $1 billion and two-way trade during 2015-16 amounted to $3 billion.[2]

In Cote d’Ivoire, Mukherjee said: “…your country is blessed with fertile soil and abundant agricultural and mineral resources. Our public and private sectors are keen to join you in exploring these resources efficiently and in setting up agro-based industries.”[3]

At the same time, India’s development diplomacy for the continent has been through a strategic shift. Exim Bank, for example, is now likely to focus more on service exports, rather than compete with China for infrastructure projects in Africa.

The bank is looking to disburse close to Rs. 10,000 crores in Africa over the next three years as both commercial and concessional credit.[4] Service exports aim to build on India’s traditional strengths in Africa and will include healthcare, education, and information technology services. Exim inaugurated an office in Cote d’Ivoire during Mukherjee’s visit. The office is expected to widen the bank’s footprint in West Africa.

Exim Bank is also looking to sharpen its focus on another area of India’s traditional exports to Africa: project exports. It has requested the Reserve Bank of India to ease regulatory and compliance guidelines regarding minimum equity capital, leverage (the multiples—3X, 4X or 8X—of share capital that a company can borrow) and the maximum that the bank can lend to a single borrower.[5] These will be necessary if the bank is to make project exports one of its thrust areas.

These actions are in line with promises made during the Third India-Africa Forum Summit (IAFS) in October 2015. The first two editions of the summit—in 2008 and 2011—made numerous pledges but fell short on follow-up and delivery. Both sides were responsible for the indifferent implementation.

The last IAFS, held in October 2015, saw a strategic shift in focus—apart from the usual rhetoric, there was a better alignment of India’s global ambitions (both political and geo-economic) and traditional strengths.[6] [7] Importantly, the third IAFS created a formal monitoring mechanism to regularly review the progress of various projects at different stages of completion.

The summit aimed high—it also sought to create a global alliance of solar-rich countries.[8] Such an alliance will help create goodwill for India among Africa countries, and generate solidarity through collective bargaining when accessing IPR-protected technology from rich countries.

It’s starting with this summit that Modi has been building bridges with different African countries and soliciting support for a host of multilateral initiatives. These include backing for India’s membership of the UN Security Council along with a united front of emerging and poor economies at the World Trade Organisation.

The high-octane official Africa engagements will also help assuage concerns regarding India after recent allegedly racist incidents involving African nationals living in the country. But it is now up to India to ensure that its belated recognition of the critical role Africa can play in our strategic calculus, as well as in India’s trade and investment expansion plans, is not just a temporary spurt.

This feature was exclusively written for Gateway House: Indian Council on Global Relations. You can also read it here.

References
[1] Mukherjee, Pranab, ‘Address at the India-Ghana Business Forum Event’; Speech delivered at Accra, 13 June 2016, <http://presidentofindia.nic.in/speeches-detail.htm?531>

[2] Press Release, Ministry of External Affairs, Government of India, Visit of President to Ghana (June 12-14, 2016), 6 June 2016, <http://www.mea.gov.in/press-releases.htm?dtl/26872/Visit_of_President_to_Ghana_June_1214_2016>

[3] Mukherjee, Pranab, ‘President of India; Speech in response to welcome speech by President of Cote d’Ivoire’ Speech delivered in Abidjan, Ivory Coast, 14 June 2016, <http://presidentofindia.nic.in/speeches-detail.htm?534>

[4] S, Arun, ‘Exim Bank’s African credit to boost service exports’, The Hindu, 12 June, 2016, <http://www.thehindu.com/business/Economy/exim-banks-african-credit-to-boost-services-exports/article8721312.ece>

[5] Lele, Abhijit, ‘Commerce ministry, RBI to review regulatory norms for Exim Bank’Business Standard, 24 May 2016, <http://www.business-standard.com/article/economy-policy/commerce-ministry-rbi-to-review-regulatory-norms-for-exim-bank-116052400042_1.html>

[6] Documents, Third India-Africa Forum Summit, India Africa Framework for Strategic Cooperation, 29 October 2015, <http://www.iafs.in/documents-detail.php?archive_id=323>

[7] Documents, Third India-Africa Forum Summit, Delhi Declaration 2015, 29 October 2015, <http://www.iafs.in/documents-detail.php?archive_id=322>

[8] Speeches, Third India-Africa Forum Summit, Speech by Prime Minister Shri Narendra Modi at the Inaugural Ceremony, 29 October 2015, <http://www.iafs.in/speeches-detail.php?speeches_id=276>

India Resets Africa Strategy

Changes in how India plans to approach its relationship with Africa were evident at the recent India-Africa Forum Summit, including the wider representation of African countries, and Modi’s push to forge a united front with Africa at multilateral institutions on trade and other issues. But beyond these, gaps in the India-Africa alliance remain to be addressed.

Four changes or incipient trends were noteworthy at the third India-Africa Forum Summit last month. These spell out the contours of the engagement that India will pursue with the African continent, its constituent countries, and regional organisations, as well as the government’s desire for a course correction in the traditional trajectory of the India-Africa relationship.

In the first change, a departure from the approach of previous Indian governments, the October event dispensed with the practice of following the Banjul formula, under which only a few African countries participated in the summit [1]. This time, the government invited all 54 African countries to New Delhi, and among those who came were 40 heads of state. While the shift in policy could be ascribed to this government’s predilection for spectacular optics, it is also true that the multilateral summit gave India an opportunity to engage with each country—Prime Minister Narendra Modi and External Affairs Minister Sushma Swaraj held numerous bilateral discussions with individual leaders and representatives.

This extensive bilateral exercise is tied to a second new policy stance—Modi’s push to forge a united front with African nations for a common, but differentiated, negotiating framework in multilateral institutions. India’s previous desires to build such a platform had remained nebulous; the most long-standing of these relates to reforms in the United Nations Security Council. In his inaugural speech at the summit [2], Modi said: “…our global institutions reflect the circumstances of the century that we left behind, not the one we are in today…That is why India and Africa must speak in one voice for reforms of the United Nations, including its Security Council.”

Beyond this, PM Modi has sought African support on two other critical multilateral fronts — climate change negotiations and trade talks. For the first, Modi wants to create a club: “I also invite you to join an alliance of solar-rich countries that I have proposed to launch in Paris on November 30 at the time of the COP-21 meeting.” A combined front such as this will be necessary when negotiating with rich countries for resources to shift to clean energy technologies because, “the excess of [a] few cannot become the burden of many.”

Modi also wants to align African countries to India’s concerns with the global trading regime. This becomes important given the forthcoming World Trade Organisation (WTO) ministerial in Nairobi in December, where developing countries are likely to make a last-ditch effort to save the Doha Development Round. The threat comes from developed nations, specifically the U.S., which in October has signed the Trans Pacific Partnership with 11 other nations and is lobbying to bury the development round.

Modi said as much in his inaugural speech: “India and Africa seek also a global trading regime that serves our development goals and improves our trade prospects. We must ensure that the Doha Development Agenda of 2001 is not closed without achieving these fundamental objectives. We should also achieve a permanent solution on public stockholding for food security and special safeguard mechanism in agriculture for the developing countries.”

India’s desire to construct a common bargaining platform is probably driven by the embarrassment of July 2014, when it was isolated while blocking the Trade Facilitation Agreement at WTO’s General Council meeting. India’s other attempts to get developing countries on board—to provide Duty Free Tariff Preference (DTFP) to least developed countries on 98% of its tariff lines, including in services— have also produced mixed results, prompting the government to now fast-track the entire scheme.

These points of common and joint multilateral action have been re-emphasised in the India-Africa Framework for Strategic Cooperation, which was released at the end of the October summit [3].

The third outcome is a public acknowledgement of the partial success in implementing India’s marquee development cooperation programmes—concessional lines of credit (LOCs), grants, and capacity building through the Indian Technical and Economic Cooperation Programme as well as the Pan Africa E-Network—and the need to improve the current processes.

Modi announced enhanced allocations for the programme—$10 billion under concessional LOCs (double the $5 billion announced at the 2011 summit), $600 million of grants, and 50,000 scholarships in India—but also admitted, in a departure from convention, that, “There are times when we have not done as well as you have wanted us to. There have been occasions when we have not been as attentive as we should be. There are commitments we have not fulfilled as quickly as we should have.”

The problem with LOCs is well documented [4] including a widening gap between sanctions and disbursements. In a pre-summit media briefing [5] in New Delhi on October 17, Secretary (West) in the Ministry of External Affairs, Navtej Singh Sarna, gave an update on LOCs: of the $7.4 billion on offer so far, $6.8 billion has been approved and $3.5 billion disbursed. In effect, disbursals are only 51.47% of sanctions.

Both India and recipient African countries are responsible for the low disbursal rate. In India, a multi-tiered and multi-agency framework for sanctioning and disbursing these loans creates delays. Additionally, a non-transparent process engenders attendant distortions. Exim Bank, which finally disburses the loans, has complained to the Prime Minister’s Office about malpractices [6]. On the African side, capacity gaps in drawing up detailed project reports, essential for the Indian side to conduct a proper appraisal and assessment, cause enormous delays.

The Framework for Strategic Cooperation has promised to introduce a “regular formal monitoring mechanism” to review the implementation of, and progress in, areas of cooperation and identified projects.

The fourth change was the absence of an announcement of trade targets, a departure from the accepted practice at such forums. This was probably necessitated because India-Africa two-way trade has fallen short of the $90 billion 2015 target [7]. But such ambitious targets tend to overshadow otherwise admirable progress in trade relations. In fact, trade between India and Africa has been remarkable. According to government data [8], two-way trade touched $72 billion during 2014-15, which is a vast improvement over the $4.5 billion of 1996-97.

But beyond these four directional indicators, interlocutors still need to address some persistent gaps in the India-Africa alliance.

One, there is little data in the public domain about the development and progress of projects, especially those under the LOC umbrella or under other initiatives announced from time to time. For instance, there is no report card on the promise to help build 100 institutions that India made during the second India-Africa Forum Summit in Addis Ababa in 2011.

Two, with similar and competing summits being hosted by China, Japan, Turkey, and the U.S., India should work on upgrading the status of its India-Africa Summit by including sub-fora on labour representatives, think tanks, civil society, academia, and women’s rights groups, in addition to the existing India-Africa Business Forum.

References

[1] Chand, Manish, ‘India and Africa: Sharing interlinked dreams’, Ministry of External Affairs, Government of India, 28 January 2015, http://mea.gov.in/in-focus-article.htm?24742/India+and+Africa+Sharing+interlinked+dreams

[2] Modi, Narendra, ‘Inaugural Ceremony Speech’, speech delivered at the Third India-Africa Forum Summit, New Delhi, 29 October 2015, http://iafs.in/speeches-detail.php?speeches_id=276

[3] Third India-Africa Forum Summit, India-Africa Framework For Strategic Cooperation, 29 October 2015, http://pmindia.gov.in/wp-content/uploads/2015/10/p2015102903.pdf

[4] Qadri, Asgar & Rajrishi Singhal, ‘Development and Diplomacy Through Lines of Credit: Achievements and Lessons Learnt’, ORF Occasional Paper 53, August 2014, Observer Research Foundation,http://orfonline.org/cms/export/orfonline/modules/occasionalpaper/attachments/op_53_1411638542827.pdf

[5] Ministry of External Affairs, Government of India, Media Briefings, 17 October 2015,http://www.mea.gov.in/media-briefings.htm?dtl/25945

[6] Iyer, P V, ‘Exim Bank’s red flag: Why most Africa deals go to so few firms?‘, The Indian Express, 20 October 2015, http://indianexpress.com/article/india/india-news-india/exim-banks-red-flag-why-most-africa-deals-go-to-so-few-firms/

[7] Ministry of Commerce and Industry, Government of India, Joint Statement of 2nd India-Africa Trade Ministers Meet (2012),http://commerce.nic.in/trade/Joint_Statement_2nd_India_Africa_Trade_17_03_2012.pdf

[8] Ministry of Commerce and Industry, Government of India, Export Import Data Bank,http://commerce.nic.in/eidb/default.asp

Courtesy: Gateway House