Articles

African soil: Indian footprints

Isiza June 2010
By Zarina Kellerman & Sanusha Govender

A review of Indian programmes, projects and partnerships across Africa
The perception of doing business in Africa as “risky business”, is fast diminishing as India looks to Africa as a favourable destination for trade. The link between South Africa and India can be traced back to the days of Mahatma Gandhi who had his roots both in India and in South Africa.

India had been in the forefront of the international community in supporting the anti-apartheid struggle in South Africa. Against the background of India’s consistent support to the anti-apartheid struggle, there has been a steady consolidation of close and friendly ties with South Africa.

Trade agreements between certain African countries and India extend over many years. But the competition is strong as other developed and developing countries seek to get into the African markets, which is not as easy as it may seem. Various trade agreements exist between certain African countries and India and due to these fruitful relationships, India has been keen to invest in other developing countries by extending its expertise. As a result thereof, the Government of India has engaged in various programmes with other African countries as set out below.

Indian Technical and Economical Cooperation (ITEC)
ITEC was established in 1964. Under ITEC and its corollary SCAAP (Special Commonwealth Assistance for Africa Program) 156 countries in Asia, East Europe, Central Asia, Africa and Latin America have benefited from Indian’s experience in technical and economical cooperation.

Trade Africa Focus Program
In 2002, the Government of India announced the “Focus Africa Program”. Firstly the programme focused on seven countries, being South Africa, Nigeria, Mauritius, Tanzania, Kenya, Ghana and Ethiopia, but later on was extended to all the other sub-Saharan countries: Angola, Botswana, Ivory-Coast, Madagascar, Mozambique, Senegal, Seychelles, Uganda, Zambia, Namibia and Zimbabwe, North Africa viz. Egypt, Libya, Tunisia, Sudan, Morocco and Algeria.

Under this programme, the Government of India extends assistance to exporters, Export Promotion Councils, etc to visit these countries, organise trade fairs and invite African trade delegations to visit India. In order to boost the trade, the Government of India has decided to take the following measures: (1) Preferential Trade Agreement/Free Trade Agreement, (2) Enhanced Interaction with important trading partners (3) Institutional Mechanisms such as Joint Trade Committees (Joint Trade Committees already exist with Senegal, Kenya, Zimbabwe, Ghana, Uganda, Ivory Coast, Namibia, Ethiopia and Tanzania and Joint Economic Commissions with Algeria, Egypt, Libya, Morocco, Sudan and Tunisia), and Joint Business Councils.
The salient features under the Focus Africa Program are, Economic indicators, Top 20 Product Groups of Global Imports and India's Share, Principal Commodity-wise India's Bilateral Trade, List of Trade Fairs & Exhibitions, Key Contacts and Websites.

India-SACU Preferential Trade Agreement (PTA) negotiations
South African Customs Union (SACU) comprises of South Africa, Lesotho, Swaziland, Botswana and Namibia. In December 2005 it was agreed that a comprehensive Free Trade Agreement providing for exchange of tariff concessions on select list of products between India and SACU would be concluded. Accordingly, the next meeting is scheduled to take place in the first half of 2010.

Indian–Africa Summit
The Africa-India Forum Summit is held each year to discuss projects like the expansion of railway networks, development of regional capital and stock markets, food and health security, agriculture (food security, eradicating poverty and improve people’s livelihood) and rural development, pilot project on establishment or micro, small and medium enterprise and science and information, communication and technology for development among others.

Pan-Africa e-Network
The Pan-African e-Network is a shinning example of a south–south cooperation agreement. It is a joint venture between India and the African Union. The purpose of this network is to provide educational facilities and affordable healthcare in many developing countries. The network aims to connect all 53 nations of the African Union by satellite and fibre optic network to provide for communication for tele-education, tele-medicine, internet, video conferencing and voice-over-the internet services which have been funded by India.

As discussed above, India has initiated programmes that would benefit and enhance the African community. Over the past decade or so, India has entered into various trade agreements with some of the countries on the African continent, that have been identified as having great potential and investment opportunities. Some of the African countries that have experienced mutual benefit of their relationship are discussed briefly below.

Egypt
A bilateral trade agreement exists between India and Egypt and has been in operation since March 1978 as well as a Bilateral Investment Protection Agreement. Egypt’s exports to India comprises of oil and gas, coal, raw cotton, rock phosphate, and marble constitute and Indian exports items include frozen meat, cotton yarn and synthetic yarn, rice, diesel, tobacco, electrical machinery, soybean, chemicals, automobiles and components, sugar, pharmaceuticals and tea.

The following Indian companies have a presence in Egypt in the following sectors: Niletex in the manufacture of PVC water-storage tanks, M/S Auto Tech Engineering manufactures auto valves, Kirloskar Brothers assemble diesel engines and irrigation pump sets in Egypt; Ranbaxy has an Egyptian subsidiary for manufacturing pharmaceutical formulations; together with Engineering Automotive Manufacturing Company of Egypt, TATA Motors have an office in Egypt and, in 2007, they launched their entire range of vehicles in the Egyptian market; Marico an Indian consumer goods company has acquired two hair care brands from Egypt’s Ready Group.

Ethiopia
To further the trade and cooperation between Ethiopia and India, a trade agreement was signed in March 1997. It requires that Joint Trade Committee meetings are held every two years to review the implementation of the trade agreement and to promote trade and cooperation. In 2006, 184 private Indian Companies obtained investment approvals from the Ethiopian government, which covers various sectors, like, pharmaceutical, healthcare, agriculture, floriculture, engineering plastics, water management, and cotton, textile, education, hotel and restaurant management. Great investment opportunities exist in the agricultural and agro-cultural industry (eg: production and processing of crops, fruit, and vegetables), manufacturing (eg food and beverages, leather products, baby food, building materials) and products and services (eg international marketing and distribution of local products, construction management, and hotels).

Various other bilateral trade agreements have been signed between the countries, which include, Cooperation Agreement between Ethiopian Export Promotion Agency and the Indian Trade Promotion Organization, Bilateral Investment Promotion and Protection Agreement, and various MOUs, include the Ethiopian Investment Authority and Indian Investment Centre; Federal Micro and Small Enterprises Development Agency of Ethiopia and the Federation of Indian Micro and Medium Enterprises (FISME); The Ethiopian Private Industries Association and Confederation of Indian Industry (CII); Addis Ababa Chamber of Commerce and CII; and, Addis Ababa Chamber of Commerce and Indo-African Chamber of Commerce.

Some of Ethiopia’s exports to India include semi-processed hides and skins, pulses, natural gum, oilseeds and spices, and there is a potential to expand in the exportation of raw coffee, tea, marble, minerals, cotton, textile, leather products, gemstones, sugar etc.

Ghana
Ghana and India have entered into various trade agreements, include, the Accra of a Centre of Excellence for Training in Information Technology, Bilateral Investment Promotion and Protection Agreement; Protocol on Consultations between MEA and Ghana’s Ministry of Foreign Affairs, and a Cultural and Scientific Exchange Program. Ghana is included as one of the nine West African countries under the GOIs TEAM 9 initiative, and GOI extended a Line of Credit (LOC) of US$ 60 million, under TEAM 9, for projects of construction of the presidential complex and rural electrification. India has been participating in Ghana’s development by providing assistance in setting up projects in the spirit of South-South cooperation. The India-Ghana Kofi Annan Centre of Excellence in ICT is an example of this cooperation. India has also been providing concessional credit for development projects, which include supply of tractors, rural electrification, construction of presidential complex and more.    

The exchange of business delegations have led to an increase in investments by Indian companies in Ghana in sectors like construction, manufacturing, trading, services and tourism and in areas such as steel, cement, plastics, pharmaceuticals, ICT, agro-processing and agricultural machinery, electrical equipments, chemicals, etc. A number of Indian companies are establishing a presence in Ghana, both from the public as well as from the private sector. From the public sector, the TCIL has an office in Ghana, Bank of Baroda started operations in Accra in February 2008. The private sector is represented by Tata, Ashok Leyland, Mahindra & Mahindra, Escorts, Larson & Toubro, NIIT as well as several pharmaceutical companies.

Kenya
The Indo-Kenya Trade Agreement was signed in March 1981. Main imports from India to Kenya are drugs and pharmaceutical, chemicals and machinery, and major imports from Kenya are raw cashew nuts, leather, leather products and scrap metal. Kenya is a major exporter of agricultural and horticultural products. Other areas of promising cooperation are infrastructure development sectors like road, railway, telecom, energy. Kenya is one of the world’s largest exporters of tea. Various Indian Export Promotion Councils regularly visit Kenya to expand their cooperation for the mutual benefit of both countries.

Some of the Indian investments in Kenya, include, the Essar Group which has invested millions of dollars in the launch of a fourth GSM network. The Essar Group has also purchased a 50 percent stake in Kenya Petroleum Refineries Limited. Other investments have been in LPG plant in Nairobi and the horticulture sector.

Mauritius
There have been many Bilateral Joint Commission on Economic, Technical and Cultural Cooperation meetings between India and Mauritius over the past few years. The countries have various agreements in place in the security, economic, technical and commercial cooperations, and hydrocarbon. In 2003, a Joint Study Group was established for establishing a Comprehensive Economic Cooperation and Partnership Agreement. Major exports from Mauritius are petroleum products, yarn, woven fabric, textile, bovine meat, meat, fish, organic chemicals, pharmaceuticals, plastic, footwear, ceramic products, aluminium, and toys. Some of Mauritius’ major imports are non industrial diamonds, scrap metals, multiple yarns, glycerine, and PVC products. Air Mauritius has a code sharing agreement with Air India, Delmas Shipping Company provides direct shipping route between Mumbai and Port Louis. Some of the Indian Companies in Mauritius are Bank of Baroda, Life Insurance Cooperation, New India Assurance, Telecommunications Consultant India Limited, Indian Oil (Mauritius) Ltd, Mahanager Telecom (Mauritius Ltd). The IT sector is the most promising sector between these two countries.

Mozambique
Mozambique and India have a cooperation agreement in the coal sector, which was signed in 2007 and a MOU was signed in 2008 among EXIM Bank, the Indian and Mozambique governments, in respect of line of credits for US$20 million for the water drilling projects in the Nampula and Zamezia provinces.

Nigeria
In 2007, the Abuja Declaration on Strategic Partnership was issued and MOU between Foreign Service Institute and the Nigerian Foreign Service Academy, MOU between Indian Council for World Affairs (ICWA) and Nigerian Institute of International Affairs, MOU on Defence Cooperation and Protocol for Foreign Office Consultations were signed between India and Nigeria.
     
Some of Nigeria’s import include, pharmaceutical products, machinery and mechanical appliances, electrical machinery and equipment, rice, automobiles, iron and steel, cereals, plastic and articles thereof, rubber and articles thereof, paper and paper products and cotton textiles. India’s major imports include crude oil, metal scrap, wood, cashew nuts, iron and steel, cotton and gum Arabic.
    
Nigeria is a major oil producing country. There are many Indian companies that have investments in textiles, chemicals, electrical equipment, pharmaceuticals, plastics, fishing etc. The first Indian company, viz K Chellaram Company, was set up in Nigeria in 1923. MECON, RITES, TCIL and NSIC have been involved in consultancy and management projects in steel, railways, telecom, and small-scale industry sectors in Nigeria for several years. Indian IT companies like Infosys, Satyam, NIIT, and Aptech have signed agreements with local companies to set up training institutes and to promote their products. Other sectors include, power, infrastructure, and defence.

Sudan
India’s relationship with Sudan extends to more than 150 years ago. The countries have entered into Bilateral Investment Promotion and Protection Agreement, Double Taxation Avoidance Agreement, a MOU on cooperation in Information Technology. An Indo-Sudanese Joint Committee was established in 1995 and upgraded to Joint Commission in 1997. India and Sudan has many further agreements and MOUs on Economics, Technical and Scientific Cooperation and Cultural Cooperation, Small and Medium Industries, Foreign Office Consultations. In 2006, Central Electronics Ltd installed complete solar electrification system funded by the Indian Ministry of Non-conventional Energy sources in some of its remote villages, who saw light for the first time. Sudan is also a beneficiary of ITEC programme.
    
Major imports of Sudan are engineering goods, drugs and pharmaceuticals, agro-chemicals, machinery, transport, vehicles, textiles, and major exports include raw hides and skin, gum arabic, cotton, leather and metal scrap. India has supported Sudan’s development in energy, cement, railway and sugar sector and its main focus areas identified are infrastructure, agriculture, human resources, development, information and technology and energy.

Tanzania
Tanzania and India have created avenues for mutually beneficial business and cooperation. The two countries have entered into Bilateral Trade Agreement and Joint Trade Committee was established and Avoidance for Double Taxation Agreement, Defence Cooperation Agreement. Tanzania is one of the beneficiaries of the ITEC programme. Major exports are mineral fuels, pharmaceuticals, cotton, textiles, engineering goods, iron and steel, motor vehicles, consumer goods, and its major imports are raw cashew nuts, gemstones, raw cotton, timber. Some major Indian companies in Tanzania are, Reliance Industries Ltd, Bank of Baroda, Bank of India, Air India and National Mineral Development Cooperation.

South Africa
After the apartheid era, India and South Africa’s relationship was restored with the opening of a Cultural Centre in Johannesburg in 1993. Thereafter India and South Africa have entered into various trade agreements and MOUs which makes provision for the promotion of two-way trade between the two countries and the establishment of a joint inter-governmental committee to review trade relations and facilitate the effective implementation of the agreement. Various other bilateral agreements are concluded in the areas of defence, culture, heath, human settlements, public administration, science and technology and economic cooperation.

Some of the agreements in place include Cooperation in Railways and Education, Cooperation in Governance, Administration and Related Matters, Cooperation in Defence. In 1994, the Indo-South Africa Joint Commission was established. Major exports of South Africa to India are vehicle and components, transport, equipment, drugs and pharmaceutical, computer software, engineering goods, textiles, rice, gems, jewellery, and major imports include rock phosphates, precious stones and minerals, fertilisers, steel, coal, transport equipment, pulp and pulp manufacturing.

Indian companies investing in South Africa, include UB Group of India (beer manufacture and hotels), Tata (vehicle and IT), Mhindras (vehicle), pharmaceutical companies (Ranbaxy and CIPLA), insurance, diamond exploration and infrastructure sectors. South Africa’s chain stone Shoprite has established an outlet in Mumbai and in 2006, Airport Company of South Africa won the contract to upgrade Mumbai Airport.

India–Brazil-South Africa (IBSA)
South Africa also adopted the New Delhi Agenda for Cooperation and made room for south-south co-operation agreement with India and Brazil resulting in IBSA. IBSA is a development co-operation agreement which has been in existence for six years and is directed at trade facilitation and trade agreements. It encourages dialogue among members which promotes cooperation and improves trade through this connectivity channel. Various working groups have been formed where knowledge and experience is exchanged between the countries. For example, Brazil now has a revenue model based on the South African model. IBSA has a development fund, which each member contributes $1million dollars as an annual fee. These funds are used in facilitating joint projects in impoverished parts of the world. Some of the areas of cooperation are inter alia agriculture, culture, defence, education, energy, environment, health and trade.

Conclusion
Trade has certainly increased since the conclusion of the various agreements and is increasing in leaps and bounds. The only deterrent to India's growth could be the Chinese, who seem to be determined to control Africa. Nonetheless, India has over the last few decades set its footprint in many African countries and are expanding into the other Sub-Saharan regions. Hence for the launch of India’s “Focus Africa” programme. Indian companies are availing their expertise and experience in various sectors that they have identified and are actively participating in a number of projects to develop African countries. These are just some of the sectors that India has managed to gain entry too, however Africa as an emerging continent has enormous prospects for investors.