Hello, Africa! It’s India calling

2011-01-10 08:50

Nairobi – Millions of cellphone subscribers in Africa saw the icon on their phone screens change from Kuwaiti company Zain to Indian company Airtel last autumn. The change means little to the average customer, but for the continent, it’s another sign that India is moving in.

The expansion by Bharti Airtel into 16 African countries underscores the rise of India in Africa at a time when much of the focus on foreign investment here has been on China.

The Indian government is raising its diplomatic profile in Africa, with Prime Minister Manmohan Singh and his Cabinet leading several business delegations in recent years. And Indian companies are striving to keep up with China’s business profile in Africa, taking advantage of historical ties with the continent.

“I think one of the things that India doesn’t want to allow to happen is to get behind in this kind of engagement,” said Sanusha Naidu, research director at the Fahamu organisation, an advocacy group based in Britain that tracks African issues.

Naidu said India’s renewed interest in Africa had not received as much attention as China’s because India was not seen as a threat.

“It is seen as a democratic state,” said Naidu, a South African. “It doesn’t have a communist regime. All that plays in favour of India.”

India and China are vying for Africa because of the bottom line: Africa represents new growth.

“This is the last growth continent in the world. Europe is a done industry. The US is a done industry. Southeast Asia is old,” said Sunil Mittal, founder and chairman of Bharti Airtel.

“Our model is not suitable for a matured market. We need growth and Africa is the right place to grow.”

The International Monetary Fund (IMF) said in October that sub-Saharan Africa would register the second-highest growth rates in the world in 2011, behind only Asia. The IMF said sub-Saharan Africa’s economic growth rate would be 5% in 2010, compared with 2.5% in 2009. This year, the IMF projects Africa’s rate will be 5.5%.

The relations between India and Africa is centuries old. In the 1960s and 1970s, India helped newly independent African states by training them at Indian universities and other institutions. Indian conglomerates such as the Tata Group have had a presence in Africa for decades.

But India is now changing its relationship with Africa from the political, such as advocating an end to colonialism, to the economic. In recent years, some Indian companies have expanded their business in Africa, propelling what were once small operations into major players. New companies have also moved in:

» In October 2008, Indian conglomerate Essar Group launched a mobile telephone company in Kenya – its first investment in Africa. Since then, it has acquired mobile telephone companies in Uganda and the Republic of Congo.

» Essar Oil, India’s second-biggest private oil firm, entered an agreement in 2009 to acquire 50% of Kenya Petroleum Refineries, which serves three countries in east and central Africa. Last year, Essar won the bid to acquire a 60% share in the state-owned Zimbabwe Iron & Steel Company.

» In 2005, Karuturi Global, an Indian agriculture company, bought 15ha in Ethiopia to grow roses for export, an investment of about $1.9 million. Karuturi has since grown that investment to 75ha of roses. In 2007, it bought one of the largest flower farms in Kenya in a deal valued at about $65.5 million. In the past two years, Karuturi has acquired another 311 700ha in Ethiopia.

» Indian drug companies Cipla and Ranbaxy have been a lifeline for years for millions of Africans who are HIV positive because they produce far cheaper generic antiretroviral drugs than the branded drugs from European and American companies. Ranbaxy, which moved into South Africa in 1996, now has 10 full-fledged subsidiaries or offices across Africa. This year, it is opening its second manufacturing facility in South Africa. Cipla opened a new manufacturing facility in South Africa in September.

Along with business, India is playing a philanthropic role in Africa, while at the same time raising its profile. During a summit with African leaders in April 2008, India pledged more than $500 million in grants for development projects. It also pledged to increase by more than $2 billion its lines of credit to African countries and regional economic groups.

The summit was India’s first with African leaders. However, China has held three such summits since 2003, where it has pledged loans and infrastructure projects much bigger than what India has promised. In its most recent summit in November 2009, China pledged $10 billion in loans over a three-year period.

In October, India’s Commerce and Industry Minister, Anand Sharma, led a trade mission to East Africa. He said India was exploring whether African farmers could be encouraged to grow legumes and export them to India, the world’s largest market for legumes.

“I think at this time, India is taking off in terms of industrialisation, so definitely they are looking for a market,” said Jacob Mignouna, the technical director at the Nairobi-based research organisation the African Agricultural Technology Foundation.

“Of course, there may be some philanthropic aspect to it, but the bottom line is, they are looking for trade, for opportunities, for the Indian industries.”

The close relationship between India and Africa is reflected in trade. Between April and July 2010, India exported $4.8 billion worth of goods to Africa – a 51% increase from the same period in 2009. India imported about $7.8 billion worth of goods from Africa between April and July 2010, a 40.7% increase from the previous year.

The Bharti Airtel investment in Africa is so far one of the biggest from corporate India. Last year, Bharti Airtel, India’s largest mobile phone company, tried and failed to acquire South Africa’s MTN, one of the continent’s largest communication companies.

This year Bharti Airtel bought the Africa operations of Kuwait operator Zain for $10.7 billion, and immediately began slashing prices. Call prices dropped 50% or more in 11 countries to attract more customers.

Founder Mittal said he wanted to more than double the company’s Africa business in the next two-and-a-half years to 100 million subscribers. At the end of September, Bharti Airtel said it had about 40 million subscribers in Africa.

Africa, for its part, needed to look more critically at its developing relationship with India, Naidu warned.

“Is Africa gaining technical experience? Is it gaining development experience? We need to interrogate the relationship much more clearly,” said Naidu.

“I think we need to ask those questions. If Africa is not gaining from this relationship, then what needs to be done?”

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