This has been something significant on the economic and trade diplomacy front that has largely gone unnoticed. But for a few mandarins in the Indian commerce and foreign ministries and some officials in the CII headquarters, the story has remained under wraps. It started around three years back and it is about India and West Africa. A new paper by Chatham House titled “India and West Africa – A burgeoning relationship” brings out some startling facts.
India’s involvement in West Africa is expanding beyond its traditional Commonwealth partners (Nigeria and Ghana). Although Nigeria is India’s largest trading partner (worth $3 billion in trade – mostly oil), Indian investment in Côte d’Ivoire will grow to $1 billion during the period 2006 to 11 – 10% of what Indian companies have invested abroad in the last decade.
Benin accounted for more than half of India’s exports to francophone Africa in the 1980s; its main import – the so-called real Madras handkerchief or ‘Madras George’ – was, in fact, handloom material cut in strips measuring 8 yards x 1 yard, which were used to make women’s dresses.
At present, India is the largest investor in Ghana, the second largest trade partner of Senegal and the third largest export destination for Nigeria, after the United States and Spain; it obtains about 20 percent of its oil requirements from Nigeria. More than half of India’s imports of cashew nuts are from Côte d’Ivoire and Guinea–Bissau, while Mali, Benin and Burkina Faso export high-quality cotton to India.
Moreover, of the twelve fastest-growing emerging markets in the world, six are in Africa and no fewer than five in West Africa. Thus, India launched an initiative in 2004 called Techno-Economic Approach for Africa–India Movement (TEAM–9), together with eight energy- and resource-rich West African countries, including Senegal, Mali, Guinea–Bissau, Côte d’Ivoire, Ghana, and Burkina Faso. Within the framework of TEAM–9, India extended lines of credit totalling $500 million to the eight West African countries. [It] has become so successful that at least six other countries are interested in joining the initiative.
India faces fierce competition from the West and other Asian countries to secure West African resources. India’s quest for energy in West Africa is not a core component of the government’s energy security policy; rather, it is part of its bid to diversify energy sources. India is prepared to offer package deals offering infrastructural investments in addition to cash bonus payments on signature of contracts. There has also been controversy in Liberia over a $900 million deal to mine ore with Mittal, whose contract allowed the company to opt out of national human rights and environmental laws. The contract is currently being reviewed by the Liberian Senate.
The United States currently derives 15% of its oil supplies from Africa as compared to 22% from the Persian Gulf. Within the next ten years, the United States could be depending on Africa for a quarter of its oil supplies, according to the US National Intelligence Council. Nigeria alone is the fifth biggest source of US oil imports, with the United States accounting for half of Nigeria’s oil exports. In recent years, China’s political, economic and military relations have been subordinated to its quest to secure energy resources in the African continent as energy resources are being secured in exchange for aid, arms or infrastructure investment.
A major deal that India lost to China in 2004 illustrates the intense Chinese-Indian competition over energy in Africa. Angola’s state-owned Sonangol reportedly blocked an Indian move to buy Anglo-Dutch energy giant Shell’s 50% share in Block 18 for about US$620 million. India’s state-run Oil and Natural Gas Corporation (ONGC) had almost closed with Shell, but the Chinese evidently cut a deal with the Angolan government at the last minute, resulting in Sonangol exercising its pre-emption rights. This stymied Shell’s move to sell its stake to ONGC, a deal which would have yielded about 5 million tonnes of crude oil daily for New Delhi from 2008 to 2009. It is widely believed that China managed to swing the deal by offering aid to the tune of US$2 billion for a variety of projects to Angola, compared to India’s offer of US$200 million for developing railways.
To date, African leaders have responded to China’s interest in West Africa positively, seeing it as an alternative source of investment and countervailing force to Western interests and influence. But when the tide turns against China, India may be more welcome in the region for similar reasons vis-à-vis China as China is against the Western powers. India also has the relative advantage that English is one of its official languages. While the ‘softness’ of the Indian state and its democratic procedures as well as its incoherent approach are considered liabilities today, they may prove its biggest assets. Indeed, India should guard against blindly copying the Chinese model in West Africa and allow its own distinct policy towards the region to evolve.
In January 2005, the US National Intelligence Council (NIC) convened a group of leading US experts on Sub-Saharan Africa to discuss likely trends in the region in the medium term. The NIC report assumes that India has no Africa policy – ‘Over the next 15 years, there is probably a greater possibility of India developing a distinct foreign policy with political interests toward Africa’.
Today, the growth in economic ties between India and West Africa seems dramatic because it started from a very low base; indeed, it is likely to flatten in the coming years. India is in direct competition not only with the old colonial masters in the region (such as France) but also with cash-rich China for a share of the West African pie. The unstable security climate, the patterns of conflict, the fragile political state, weak democratization, religion, terrorism and the high prevalence of HIV/AIDS all have the potential to derail the Indian success story.
Whatever role India ultimately plays in West Africa, perhaps the most important element it introduces is competition. ‘For Africans, it is quite a welcome change from the approach they get from Western governments that manages to be both patronizing and demeaning at the same time’, Duncan Green, head of research at the British aid organization Oxfam, commented recently.
The immediate reaction is to compare it to the IT revolution in India– substantial, silent and largely unnoticed. But there is a significant difference – the government has played a major role in kickstarting this process; and that too over two different ruling formations and under three different foreign ministers. Will it sustain and lead to something significant? The jury is still out on that.