India and China, the two leading economies of Asia; in the last decade made significant inroads in Africa keeping aside their past patchy relationships, restricted to some African nations. In current scenario, while China is in progressive advantage in terms of investment in Africa, their key challenger India has announced an all-out investment expansion agenda for the same. Indeed, the squabble between those two Asian giants for greater control and articulation in Africa, emulate their history.
Modern day bilateral ties between nations have evolved from mere trade, cultural relationships to more strategic, infrastructural development where the economically feeble nations try to advance in shorter possible time. Europe and USA are the traditional tycoons in foreign investment (FDI) in Africa. However, the mutual interest between African nations and the emerging economies, like China and India has craved the path of growing investment and trade relationship from the East. Africa is concentrating to reap the advantages of these new-fangled relationships while each of their partners pursues their own diplomatic, political and economic welfare.
Unambiguously, Africa nowadays is very much a part of international relations, economic cooperation, and international trade. It has emerged as a most promising investment destination regarding its high growth rate and discovery of oil. The situation thus attracted China and India to bolster their bilateral ties by lending their investment hand towards Africa. Meanwhile, numerous domestic policy changes within the two Asian giants also assisted the growth of investment in African countries.
From 2000, Beijing has adopted India and China, the two leading economies of Asia; in the last decade made significant inroads in Africa keeping aside their past patchy relationships, restricted to some African nations. In current scenario, while China is in progressive advantage in terms of investment in Africa, their key challenger India has announced an all-out investment expansion agenda for the same. Indeed, the squabble between those two Asian giants for greater control and articulation in Africa, emulate their history. with a priority focus in Africa, thus encouraging overseas Chinese investment in Africa. Although, China’s overall investment in Africa is still behind of Europe and US but with its aggressive FDI trend, it may soon supersede them (three-folded from $9billion in 2009 to $52billion in 2013 to $200billion in 2014). The Sino-African trade is projected to be double by 2020, totalling $250billion, more than twice the US-African trade. The three utmost reasons of rapid Chinese intervene in African market are:
- Extraction of Natural Resources: African nations are packed in natural resources (platinum, cobalt, gold, manganese uranium) and vast oilfields (particularly in Nigeria, DR Congo, Tanzania). China has pragmatically recognized the ever-increasing necessity of these natural resources for their nation’s continued growth. Thus, one third of Chinese FDI is directed towards mining and O&G industries.
- Geopolitical Influence: China is widely blemished for its directives or influencing internal politics of a nation. By diversifying its investment in forms like infrastructure, utilities, port construction, transportation in underdeveloped countries of Africa, China foresee an opportunity to expand its global presence and influence. Concessional loans of $30 billion to African nations in forms of large scale infrastructure projects are classic examples of such Chinese voracity.
- Expanding Business Market: Chinese businesses, for e.g. electronics, telecommunications have swelled exponential over the last two decades capitalizing emerging markets like, South-East Asia, Latin America etc. With once China’s favourite European market is gradually being saturated, expanding business in Africa appears to be a sagacious choice for excellent growth opportunities.
On the other hand, India is an emerging investor in Africa with a trade turnover of $70 billion- far outstripped by Chinese $200 billion. The scenario of Indian FDI in Africa has seen an exponential growth in past two decades, particularly in the last five years. Indian companies are currently investing at different parts of Africa, like Mozambique, Sudan, Kenya, Tanzania, Uganda, Rwanda, DR Congo, South Africa etc. Indian FDIs are expanding to sectors, like- natural resources (metals and oil and gas) automobile, telecommunications, manufacturing, affordable generic drugs, pharmaceuticals etc.
To bolster the Indo-African bilateral ties, the current Indian Prime Minister Mr. Narendra Modi decided a further step-change and arranged the third Indo-African summit (IAFS) in Delhi last year that gathered 54 African countries together in one platform for the first time where two major Indian interests was spurred:
- To persist country’s economic development through FDI in Africa, to secure ever increasing energy resource and to access overseas market;
- Build up a quotient – to counter China’s unmatched juggernaut of money, authority and supremacy in the continent in order to secure IAFS’s future.
The summit was a grand success. India here clearly illustrated its interest to enhance state owned and private company’s investment in IT, defence, sports, healthcare, food security, manufacturing etc. in Africa. Modi also announced concessional credit line offer of $10 billion. Nonetheless, visits of Indian President followed by PM Modi in July in Uganda, Rwanda and South Africa prior the BRICS summit have reinforced the historical Indo- African bonding and credence. While addressing the Ugandan Parliament, Modi said: ´ “Africa will be at the top of our priorities. We will continue to intensify and deepen our engagement with Africa. As we have shown, it will be sustained and regular”. Those words and steps signify India’s aspiration to build up the so called ‘Blue Economy’ with African nations through friendship and assistance.
In a nutshell, it is translucent that China surged much ahead of India and India cannot play catch them up. Rather, India should use its strength of soft power prowess by strengthening the Pro-people model of developing human resources by education, vocational training, and skill development. India also should encourage private Indian companies to invest in Africa and explore the huge market potential by facilitating with loans or by tax relaxation. Similarly, India will have to brace the newly built ‘Asian African Growth Corridor (AAGC)’ along with Japan to confront China’s aggressive project of ‘One Belt One Road’ (OBOR), restricting Africa from getting swallowed by the Dragon geo-strategically. India may also utilize China’s awful reputation in job creation, low wages and abysmal working conditions for its own good by providing best facilities and opportunity. However, for Africa, the continent is big enough to accommodate both these competitive powers.