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Worldcrunch

India Follows China In The Rush To Do Business In Africa

This week's Africa-India Forum Summit in Ethiopia shows how hungry India is for Africa's energy resources and minerals. Twenty years after China began to arrive on the continent, this reportage shows how large Indian companies are eager to follow into the heart of Africa.

Article illustrative image Partner logo Indian telecom Airtel has 50 million subscribers in Africa (Jurvetson)

CHENNAI - Here in one of India's biggest cities, the massive headquarters of Apollo Hospitals dominates the downtown skyline. Based in this southeastern city of Chennai (formerly called Madras), Apollo - a private hospital chain - is renowned for its high-level medical specialists.

And only a minute's drive from HQ there is a small annex where non-medical high-tech materials are stocked: multizone screens and high-speed Internet connections, among other things. On a screen wall, we can see a doctor seeking advice from a specialist from Chennai who is looking over the patient's image and medical records. But what is particular is that the sick people and doctors are calling from hospitals located in the heart of Africa.

Welcome to one of the Pan-African e-Network centers, created and financed by the Indian government to provide hospitals and universities from 47 African countries with access to Indian expertise in their fields. A typical operation of India's “soft power diplomacy” with Africa, which matches the best Indian expertise in scientific, medical and telecommunication services, to the African countries' daily needs. And it doesn't cost a fortune. 

India has taken a very clear interest in Africa. After the first Africa-India Forum Summit, which took place in New Delhi in 2008, a second one is being held this week in Addis-Ababa, Ethiopia's capital city and home to the African Union. The Indian Prime Minister Manmohan Singh has joined 15 African heads of state and government at the summit. Right away, one draws a parallel with China, which engaged with the African continent in a serious way starting about 20 years ago.

“These two Asian powers take an interest in Africa for fundamentally the same reason:  first and foremost because of their strategic needs for energy and raw materials,” notes one Western diplomat.

India has another specific, more political reason: it is pushing for a permanent seat on the UN Security Council. "The African bloc's votes are essential for them,” the Western diplomat adds. African countries are paying close attention to India's interest in their continent. At March's “conclave," the prime minister of Mozambique, Aires Bonifacio Ali, listed some of the prime assets that Africa has to offer: “petroleum, ores, raw materials and arable lands.”

As far as India is concerned, it has the innovative technologies that fit emerging countries' needs. Sekou Sylla, UN secretary-general of the West African Development Bank, agrees: “Africa is now facing development problems that India overcame in the past. India is capable of understanding our fundamental needs.” Indian Secretary of Commerce Anand Sharma also underlines the concerns the two have in common: “Both countries need a lasting and inclusive growth, they both need to feed their peoples, to fight pandemic diseases, to introduce security in terms of sanitary conditions and to launch a knowledge revolution.”

Though some of its biggest problems are far from being resolved, India could be considered a model for Africa. India also has the advantage of a longstanding diaspora on the continent: some 1.5 million Indians settled in South Africa and in the eastern part of Africa. Oil industry contracts, including those with the Indian public giant ONGC in Sudan, are in great demand. The oil industry represents 63.5% of the 25.4 billion dollars of Indian exports from Africa, mostly from Nigeria and Angola, from 2009 to 2010. Indian companies are also investing more and more in the African mining sector to exploit coal, iron core and manganese.

Besides, India intents to invest in arable lands. According to a study published by Ernst & Young, about 80 Indian companies are going to invest 2.3 billion dollars in commercial agriculture in countries such as Ethiopia, Kenya, Madagascar, Senegal and Mozambique. The most striking example is this company from Bangalore called Karuturi, which cultivates roses for the European market in 60 hectares of greenhouses in Ethiopia and 135 hectares in Kenya. The company's long-lasting success is obvious: Karuturi owns 311, 000 hectares of agricultural lands in Ethiopia where rice, corn and palm oil have been cultivated.

India wants to buy energy and natural resources from Africa, but it also intends to sell its own products and services in return. For the big Indian companies, Africa is a huge market that needs to be conquered. In 2010, the leading Indian telecommunications company Bharti Airtel signed a 7.8 billion euro contract to take over mobile phone operations in 16 African countries from the Kuwaiti firm, Zain.

Tata Group, another famous Indian company, is well-established in 13 African countries, with interests in energy, communications and information technology. Senegal was able to afford 500 buses made by Tata Motors thanks to credits granted by the Indian public bank Exim Bank. The Indian conglomerate Godrej Consumer Products also counts on Africa. “We have made several purchases in Africa: a hair coloring agent manufacturer in South Africa, a soap business in Nigeria... Now, we are also exporting hair coloring agents all around Sub-Saharan Africa and we are going to start exporting insecticides from India to all around Africa,” explains Nadir Godrej, the Managing Director of Godrej Industries. Today, business links in Africa represent 10% of their turnover.

India has a strong foothold in the pharmaceutical sector, and in general Indian business leaders think they have products and services that fit Africa's needs. “Africa is reaching the state of development that we had a few years ago,” says Godrej. “We can help them, because we know how to produce things for emerging countries,” he adds. The potential of cooperation is still modest, but it can be big. Bilateral India-Africa trade is expected to grow from 45 billion dollars  to 70 billion dollars by 2015, according to Anand Sharma.

The key role played by Indian private companies in the development of the bilateral India-Africa trade is a specific characteristic of India, because China has adopted a much more statist approach: “Bharti Airtel and Reliance can do much more than the Ministry of Foreign Affairs to transfer Indian skills in Africa,” says Basudeb Chaudhuri, a Franco-Indian economist.

All the same, India lags far behind its eternal rival China in terms of bilateral trade with Africa. China is building highways in return for oil supply agreements. India does not have enough money to do the same and thus prefers to fall back on its Pan-African e-Network, on giving grants to 20,000 African students in India, or on creating personal training centers in Africa.

According to figures compiled by JP Morgan Cazenove, China invested 2.5 billion dollars in Africa each year from 2006 to 2008, whereas India only invested 332 million dollars annually. But the Indian model may be the one with legs, says Sekou Sylla of the West African Development Bank. “China is much more forceful. Chinese companies go to Africa and become well-established, but there is no skill transfer," says Sylla. "When India will have a strong foothold in Africa, India-Africa bilateral business links will endure and will be more profitable." 

Read the original article in French.

 

Photo - jurvetson

 

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About this article source Website: http://www.lesechos.fr/

France's top business daily, Les Echos covers domestic and international economic, financial and markets news. Founded in 1908, the newspaper has been the property of French luxury good conglomerate LVMH (Moet Hennessy - Louis Vuitton) since 2007.

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