India-Africa Project Partnership: 9th CII- EXIM BANK Conclave March 17 - 19, New Delhi

Africa Proposes, GoI Waits...& Waits


India`s Africa slips: country by country

The affable and courteous Balumuene Francois starts off diplomatically, when asked about the current state of Indian policy in Africa, and especially about investments by the Indian government there. “India is making all possible efforts for the economic development of Africa,” intones the 58-year-old ambassador for the Democratic Republic of Congo to India. He then goes on to list the sectors where letters of credit have been granted by the Indian government across Africa—India is funding dams, roads, cement and even sugarcane.

And then the ambassador, who is also the dean of the African heads of mission here in New Delhi, introduces a note of caution. “But what we have noticed, and needs improvement, is the slow administrative process that the government follows,” he says.

It takes just a little more probing for him to loosen up a bit more and give details. Back in October 2009, he says, the Indian government had agreed to fund a hydroelectric project in Katende, Democratic Republic of Congo (DRC) to the tune of $168 million (60% of the project costs). “Till date we have not yet started implementation,” he says. “We are still in the discussion phase.”

Contrast that with the Chinese government, he points. Three months back, the Chinese had agreed to provide funds of up to $360 million to the DRC to fund another hydro project near the capital Kinshasa. “Even as we are talking now, the execution of the project has already started,” he says.

That the Chinese government is far more aggressive in Africa than the Indian government, is little surprise. It has also been much more single-minded. “China is very clear that its strategy is about access to resources,” says an executive who has worked for years in Africa. “India’s approach has been been more broad-based. “

“The Indian government’s way has been to approach African countries, let them set the agenda, and go by what their requirements are. And we do not compete with the Chinese,” says Shashi Tharoor, former minister of state for external affairs. “There is place for both of us to do business on the continent.”

Even in the case of the private sector, the investments have been less in mineral-intensive sectors, where Chinese firms have been active, than in other areas such as infrastructure. Indian FDI in the region, seems to be actually comparable to China’s—both were around $1.4-$1.5 billion in 2009-10. This was before Bharti’s $10 billion acquisition of Zain’s telecom assets in Africa.

But in the case of India, almost all that money was in Mauritius, a tax haven and a country used solely to route money to other investment destinations. In contrast, China’s investments in Africa have been far more extensive and varied—$228 million each in Algeria and the DRC, $171 million in Nigeria, and $111 million in Zambia. Many of these investments were made by the government or companies linked to it. The only country, other than Mauritius, where Indian investment was in the double digits as of 2009-10 was South Africa ($69 million).

In 2008, Prime Minister Manmohan Singh, at the first India-Africa forum summit, which represented the first serious attempt to engage with the continent for several years, announced a $5.4-billion credit line to be invested in projects across Africa between 2009 and 2013. What has been the progress? Since 2009, around $1.7 billion has been allocated to various projects, including urban transport in the Ivory Coast, rural electrification in Mali, cement factories in the Democratic Republic of Congo and a railway project in Angola. However as the case of the hydro project in the DRC demonstrates, it is critical to go beyond the headline numbers.

The Ugandan government had approached the Indians for a partnership whereby the Indian government would train engineers from that country in the field of nuclear energy. The payoff? Access for the Indians to the substantial uranium reserves in that country. Given the excitement over the Indo-US nuclear deal, and the struggle to tie up sources of uranium for Indian plants, you would think that the Indian government would jump at the offer.

a chance. “I’ve been writing for four years to your atomic energy department proposing that in return for training engineers from our country, we would provide access to the uranium reserves in Uganda,” says Nimisha J Madhvani, high commissioner for Uganda in India. “For four years I can’t get an answer. I’ve tried numerous avenues and approaches. Everyone promises to help but it goes nowhere.”

“I’m like a jalebi. I’m going round and round,” she says. “We would like the Indian government to be more aggressive in Africa.”

Madhvani points out that the Chinese also offer better loan terms: 30-year loans with a 10-year moratorium on repayment at 2% interest. The Indians offer 20-year loans with a five-year moratorium at 1.75%. “Even Indian companies will compete for Chinese money,” she says.

The other Indian failing in Africa is its inability to leverage its financial assistance. “The problem is that India is content with just handing out money to an African government and asking for nothing in return,” says Sachin Bajla, chief executive of Dharni Sampda, which owns mining leases in Sierra Leone, Ivory Coast, Senegal and Gabon, as well as uranium mining rights in Niger. While all lines of credit in general require the beneficiary to source 85% of business from India, Bajla is talking about more intangible gains, such as the goodwill that is earned from the grant of such funds. The ideal strategy, points out Bajla would be to use any goodwill earned to get better terms on behalf of Indian companies looking to do business in the country. But this does not happen.

This approach seems in fact, to be explicit policy. “The government of India’s stance is clear,” says Shipra Tripathi, vice-president and head of corporate and international business at Kirloskar Brothers. “The funding is unconditional and the Indian government in fact will not negotiate when it hands over funds.” Tripathi had spent years in Africa as part of the Confederation of Indian Industry’s initiative to expand Indian business links with the continent.

“There is no mechanism to convert goodwill earned into concrete gains,” says Tripathi. “Even if China gives $2 billion and India gives $10 million a smart government could do much more,” says Bajla, adding, “it’s about building networks in Africa to boost Indian business investment and trade”.
(Economic Times )



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