In race for Africa, Indian elephant rivals Chinese dragon

Top Stories

»	India’s export outlook brighter as manufactured goods gain share: RBI
»	Private consumption driving growth in Q3 with rural India taking lead: RBI
»	Indian MSMEs create about 10 crore jobs in 15 months
»	Indian prefer Q-commerce for daily essentials, physical stores for high-value buying
»	Embedded finance to unlock $25 bn revenue opportunity for India’s platforms by 2030

Rohit Bansal | 25 Mar, 2013
Call it a deliberate clash of dates or mere coincidence, the Indian elephant and the Chinese dragon were caught courting Africa on exactly the same dates this month!

New Delhi hosted the CII-Export Import Bank Africa Conclave, an annual converge now in its 9th edition, where more than 500 projects worth some USD 70 billion were discussed by 900 delegates from 45 countries.

Beijing, on its part, set the stage for President Xi Jinping's visit to Africa beginning Sunday, his second overseas, hosting the Forum on Chinese Businesses in Africa and dangling lines of credit worth USD 20 billion. A blunt warning that investing businessmen must learn to behave followed!

The charge of the elephant remains a modest mix of development assistance (India's national budget for next fiscal assigns a modest Rs.300 crore or USD 54 million for Africa), lines of credit via the Export-Import Bank, and hopes that the famed Indian entrepreneurial class will manage to deliver like their predecessors have done over the decades, more often than not without state backing.

The dragon, true to form, hisses loud enough for the world to take notice, with a politico-corporate cabal led by some of the largest contingents of stationed diplomats and state-owned banks loading benign - and often fuzzy - interest regimes to sweeten the deal.

The result? Two-way trade has ballooned from about USD 10 billion in 2000 to almost USD 200 billion in 2012. Africa is now Beijing's second largest project contracting market and the fourth largest investment destination. As per data cited until April 2012, its accumulative investment in Africa had reached USD 15.3 billion, compared to none just over a decade ago.

India's bilateral trade with Africa has no doubt witnessed a five-fold increase in the past seven years. But it still stands at USD 65 billion. The target has been set now at USD 100 billion by 2015, against USD 90 billion earmarked earlier.

Despite the asymmetry between the Asian competitors, Africa isn't eating off Beijing's hand. Evidence lies in the unusual warning from the Chinese vice foreign minister to businessmen Monday.

"Build a better corporate image. Every Chinese company and individual is a spokesperson for China. Chinese businesses in Africa are generally doing well promoting the development of local communities. But they are certainly not without shortcomings," China's Vice Minister for Foreign Affairs Zhai Jun told his audience in Beijing.

"I hope Chinese businesses will further strengthen self-discipline, improve internal management and win the market with integrity and quality, rather than only seeking one-off deals. I want to see a Chinese business community that complies with local laws, respects local customs and traditions, understands the importance of improved labour practices and environmental protection, enables more local participation in operation, and readily gives back to the local communities," he said.

"The practice of abandoning the country immediately after taking some quick returns is nothing but short-sightedness. It is even more unethical to 'drain the pond in order to catch all the fish'."

In contrast, the scourge of near-sightedness and one-off deals is alien to Indian business. But given the dragon's deeper pockets, the pushback from Africa's opinion leaders is increasingly acerbic.

"Africa must shake off its romantic view of China and accept Beijing is a competitor as much as a partner and capable of the same exploitative practices as the old colonial powers," Nigeria's central bank governor warned earlier this month.

Reflecting the shifting views of senior African officials who fear the continent's anaemic industrial sector is being battered by cheap Chinese imports, Lamido Sanusi wrote a scathing essay in The Financial Times. "Africa is opening itself up to a new form of imperialism," he complained.

"China takes from us primary goods and sells us manufactured ones. This was also the essence of colonialism," Sanusi wrote in the essay, the most trenchant yet by a serving African leader.

Sanusi, credited with cleaning up Nigeria's banking system, argued that African countries must respond to "predatory" trade practices - such as subsidies and currency manipulation - that give Chinese exports an advantage. The continent, he said, must build infrastructure and invest in education so that African businesses can compete for continental trade as Chinese labour costs rise.

"I cannot recommend a divorce. However, a review of the exploitative elements in this marital contract is long overdue."

Not everyone agrees with Sanusi. South African President Jacob Zuma even warned western companies to shed an old "colonial" mindset when investing in Africa and to stop warning against the embrace of China.

For a continent parched of capital and infrastructure and the elephant receding in stamina, it's a difficult choice for Africa to stave off the dragon. But many like S.J. Dima, education minister of Central Equatoria in South Sudan, can't forget Beijing's role in arming Khartoum in the gory civil war in the Sudan.

"We trust India more," Prof. Dima confessed, hurt over how China rebuffed the request to build a hydro-electric dam Juba needs over the Nile. Norway seems to be stepping in. India could be that Manna.

(Rohit Bansal is chief executive and co-founder of India Strategy Group, Hammurabi & Solomon Consulting. He can be reached at rohitbansal@post.harvard.edu)
* The views expressed by the author in this article are his/ her own and do not necessarily reflect the views of SME Times.