India’s West African safari gathers steam
More than 100 large, medium and small Indian companies across industries have set up operations in West Africa, generating goodwill for India that is helping the country’s energy security needs.
Most Indians are not very aware about West Africa beyond the fact that Nigeria, the major economy in the region, is a major producer of oil. A vast majority of Indians have only a very hazy idea of countries such as Côte d’Ivoire, Ghana, Benin, Burkina Faso, Liberia, Mali, Mauritania, Niger, Senegal or Togo, among others. Even fewer know that this region enjoys a per-capita income of about $2,000, which is comparable to that of India.
The government of India’s new-found interest in the region is based primarily on its huge crude oil reserves, which has made it a critical component of India’s energy security matrix.
Partnership model fuelling growth
In keeping with Indian Prime Minister Narendra Modi’s vision of emerging as a partner in the development of Africa – as opposed to the exploitative model adopted by some others – India’s engagement with West African nations, though still heavily skewed in favour of crude oil imports, is fast expanding to other products.
Over the last decade and a half, India has developed strong ties with the Economic Community of West African States (ECOWAS), which counts 15 West African countries as members.
To allow easy access to goods from this region, India has put in place a Duty Free Tariff Preference Scheme, wherein India provides preferential market access to exports from 48 least developed countries, of which 12 are in West Africa.
Trade basket is expanding
Over the last decade, India has emerged as a major supplier of capital goods for the rising number of large infrastructure development projects, supported by international development agencies, coming up in this region.
Then, in keeping with India’s reputation as the world’s pharmacy, Indian pharmaceutical companies are major exporters of drugs and medicines to the ECOWAS countries. Then, these countries are India’s largest customer for non-basmati rice. Other items of exports are chemicals, iron and steel, plastic and linoleum products, cotton fabrics, electronic goods and motor cars.
Major items of import, besides oil, which accounts for more than three-fourths of the total, are raw cashew nuts, which are processed in India for re-export as well as domestic consumption, crude fertilisers, timber and wood products, inorganic chemicals and metal scrap.
Oil still dominates
The West African region, and Nigeria in particular, has emerged as an important source of crude oil for India. Côte d’Ivoire and Ghana are the other two countries in this region which export large quantities of crude oil to India.
India imported as much as 12 per cent of its total crude requirements, or 23.7 million of crude and 2 million tonnes of LNG from Nigeria in 2015-16.
But since the Modi government came to power in 2014, the buyer-seller relationship has changed to one where the two countries have become partners.
On a visit to India, Nigeria’s Minister of Petroleum Emmanuel, Ibe Kachikwu, and his Indian counterpart, Dharmendra Pradhan, agreed “to work on a memorandum of understanding to facilitate investments by India in the Nigerian oil and gas sector and include areas such as term contract, participation of Indian companies in the refining sector, oil and gas marketing sector, upstream sector, development of gas infrastructure and training of oil and gas personnel in Nigeria… The Nigerian minister requested a potential investment by India of $15 billion,” an official statement said.
“Both agreed to strengthen the existing cooperation in oil and gas sector, and in particular to explore investment opportunities for Indian public and private sector companies in Nigeria,” the statement added.
Beachhead in West Africa
Over the last decade, Indian private sector companies have increased their engagement with Nigeria, the largest economy of the region, as well as other members of ECOWAS. It is not an uncommon sight, therefore, to see Tata cars and Bajaj motorcycles zooming down the streets of Nigeria’s capital Lagos even as large hoardings of Bharti Airtel’s African subsidiary stare down at them.
Indian companies have invested more than $2 billion in FDI in Nigeria. The country of 188 million is Africa’s largest economy, having overtaken South Africa’s GDP in 2014. It is the world’s 20th largest economy and is considered an emerging market by the World Bank. It is also considered a regional power in Africa and a middle power in international affairs.
Bilateral trade with India has grown significantly over the years and stands at about $17 billion. Nigeria’s main export is crude oil and exports engineering goods, cars, motorcycles, power equipment, fertilisers, commercial vehicles and a host of knowledge products.
More than 100 Indian companies have set up base in Nigeria. These include Bharti Airtel, Bajaj Auto, Tata Motors, Mahindra & Mahindra, Dabur, Aditya Birla Group, NIIT, ApTech, New India Assurance and IndoRama, among many others.
The attraction: its large and relatively developed domestic market and easy access to other ECOWAS members
Airtel is the biggest Indian company in Nigeria following its 2010 takeover of African telecom operator Zain. Since then, it has invested $1.2 billion on improving the network and service quality and now provides data and voice services across the country that makes it Nigeria’s largest telecom operator.
“Airtel Nigeria is proud to celebrate its milestones and efforts towards achieving robust and extensive network coverage across the country for both voice and data services. Airtel Nigeria has invested enormous resources to the upgrading of its network infrastructure and has made significant capital expenditure investment towards improving network quality. Currently, Airtel Nigeria has the widest and largest 3.75G coverage in the country,” says the company’s website.
It has contributed significantly to Nigeria’s economy by rolling out 3.75G platforms that offer high speed mobile internet across the 36 constituent states of Nigeria.
Tata Motors and Bajaj Auto have also been around in Nigeria for more than 10 years and have established themselves as leading players in the country’s fledgling auto industry.
The Tatas marked their presence with the establishment of Tata Africa Services (Nigeria) Ltd in 2006. The investment: $10 million. The company serves not only Nigeria but all of West Africa.
Tata Africa Services (Nigeria) Limited sells passenger vehicles, light commercial vehicles, medium commercial vehicles, heavy vehicles, material handling equipment such as forklift trucks, stackers, tire handlers, etc, heavy equipment like excavators, back-hoes, graders and cranes, tires, construction equipment like concrete mixers, steel and chemicals.
Thus, it serves as a one-stop shop for a wide range of goods and services that meet the requirements of both private individuals as well as businesses.
Bajaj Auto Ltd (BAL), the world’s third-largest motorcycle manufacturer and the world’s largest three-wheeler manufacturer, has a more dominant presence in Nigeria, which is the company’s largest export market, accounting for almost a third of its export revenues.
In 2014, the company sold half a million motorcycles in Nigeria and accounted for as much as 44 per cent of the market.
Growing interest in the entire region
To tap the growing Indian interest in the region, the Ministry of Commerce & Industry, Government of India, and apex industry body, the Federation of Indian Chambers of Commerce & Industry (FICCI), organised a three-day conclave in August last year titled Namaskar 2017 in Accra, Ghana’s capital, to improve India’s brand image as a leading and dependable economic partner and to boost bilateral trade with the region.
The conclave included an exhibition on construction, textiles, agriculture and food processing, power technology and education to showcase areas where India could help Ghana and its neighbouring countries and was organised as part of Namaskar Africa, a regional flagship programme of the ministry and FICCI.
“Looking at the strong response from African as well as Indian industry, and the demand for increasing the scale of the programme, it expanded to include three critical components of exhibition, conference and business-to-business with an objective of reflecting India’s engagement cutting across trade, investment, technology transfer and capacity-building,” FICCI said.
Incidentally, Ghana and India plan to boost bilateral trade to $5 billion by 2020, with the trade balance in favour of the African nation.
“Import commodity matrix of Ghana with the top global partners when compared with India’s export matrix clearly indicates the potential of Ghanaian market to absorb increased exports from India as well as the ability of Indian industry to export the same,” FICCI added.
This will become easier once Ghana implements the ECOWAS Common External Tariff (CET), a customs union that will facilitate global trade and ensure greater regional economic integration.
Under Modi, India has expanded its outreach in Africa. But it would be a fatal strategic mistake to view the continent as a monolith. Experts say Africa can be divided into at last seven distinct regions and India has to tailor its policies to suit the requirements of each different bloc.
The West African region is home to Africa’s largest population and fastest growing economies with largest proven reserves of energy resources.
So, it is imperative that India continues its engagement and partnership with this region. But it has to contend with growing Chinese influence here as well. But analysts say Modi’s partnership model, an extension of his evocative domestic credo Sabka Saath, Sabka Vikas (Development for all) is helping India make deep inroads in the continent despite being a late starter.