From the Economist: India and Africa / When trade winds smell sweet

[Guy Berger]

India and Africa

When trade winds smell sweet

Apr 10th 2008 | DELHI AND NAIROBI

From The Economist print edition

A new scramble for Africa means that an old historical relationship is taking on a fresh significance

AFP

WITH a munificence that accompanies 9% growth, India recently played host to some South African development experts, who were invited to inspect sanitation and low-cost housing. Alas, their experience—of a country where 700m people lack indoor lavatories and half the biggest city's inhabitants live in slums—did not impress. According to one insider, the South Africans laughed all the way back to the rainbow nation.

But a more serious bid to woo African hearts and minds took place this week. Guests at an inaugural Indian-African summit, complete with an exuberant cultural programme (see picture), included many of the continent's bigwigs, from South Africa's president, Thabo Mbeki, to Ethiopia's prime minister, Meles Zenawi. Even Uganda, whose expulsion of all Asians in 1972 was a low point for Indian-African ties, was volubly present—in the person of President Yoweri Museveni, who has welcomed Indians back.

Thanks to the trade winds that gust across their common ocean, to the delight of merchants and shark fishermen, Africa and India have enjoyed close relations since time immemorial. Islam intensified the link, as did the Portuguese, who colonised both Goa and Africa's coasts. Starting in 1895, the British shipped thousands of Indians to east Africa to build a railway; they became station-masters, artisans, clerks and shopkeepers. India's biggest diaspora, by some counts, is formed by the 1m or so citizens of South Africa who descend from labourers brought over in the 19th century.

But it is not the past which haunts Indian strategists. It is a future dominated, many fear, by competition with India's vast, commodity-hungry and increasingly Afrophile neighbour, China. A decade ago India's two-way trade with Africa was worth more than China's. In recent years, partly thanks to investments in Nigerian oil, the Indian total has surged, to around $25 billion last year. But China's, now topping $55 billion, has grown even faster.

China and India both want access to African natural resources, and both see Africa as an outlet for their manufactures. Of the Asian giants, China's diplomatic profile in Africa is higher, after a series of tours by President Hu Jintao. But India wants to catch up. For example, it is keen to sell Africa its high-tech products, particularly in cheap telephony and mobile internet services. One of the success stories on show in Delhi this week was India's donation to several African countries of tele-education and tele-medical care systems, as well as video-conferencing facilities.

Given that their needs overlap so clearly with China's, the Indians are no less anxious than the Chinese to impress the Africans with their hospitality and charm. Although Indians hate direct comparisons, China hosted an even bigger gathering for African leaders in 2006. (For good measure, a Japanese-African summit will be held in Yokohama in May.)

India is no more squeamish than China about dallying with dictators. It happily does deals with the tyrants of Sudan; one recent contract was for a $200m pipeline linking Khartoum to Port Sudan. Like China, India has refrained from criticising misrule in Zimbabwe.

But India also does good in Africa: it has helped out many UN missions there, with some 9,000 blue helmets now in the field. Over the past five years it has offered lines of concessionary credit to Africa worth $2.5 billion. Now it is talking about a $10 billion investment fund for the continent.

So far India has escaped the abuse heaped on the Chinese for their dealings in the worst-governed bits of Africa. The main reason is that, hitherto, India's transactions have been on a more modest scale. But the free pass may not be valid for long. The human-rights advocates who berate China for complicity in the plight of Sudan's Darfur region are already beginning to turn their attention to India.

In the field of commerce a different set of factors comes into play. When Indian firms have competed in Africa with China's much bigger corporations, they have often lost out. In 2004 India's oil and gas corporation, ONGC, bid $310m for an Angolan oil block; its Chinese rival offered $725m. To hold its own in Nigeria—which accounts for 20% of India's crude-oil imports—ONGC formed an alliance with a Dutch-based compatriot, Mittal Energy.

Yet Indian firms in Africa also have advantages, such as the continent's ethnic Indians, who form a useful bridge. Take east Africa's best-known industrialist, Manu Chandaria, who was born in Kenya nearly 80 years ago to Gujarati parents. “Indians have been dealing with Africa for centuries, and we are here to stay,” says the entrepreneur, whose manufacturing empire ranges from aluminium to software to steel to household utensils. With his easy access to the elites of Africa, India and the other parts of the English-speaking world, Mr Chandaria does not, as yet, have any obvious Chinese equivalent.

The existence of a diaspora also reassures investors in India. “Where we find Indians living, we feel at home,” says Sanjay Kirloskar, chairman of the Kirloskar Group, an Indian firm that is building pumping stations in 25 African countries. As a result, Indian companies tend to be more integrated into the local economy than China's. They employ more Africans than do Chinese firms, who often import workers. Indian firms may thus be less vulnerable to a populist backlash.

As so often with awkward neighbours, India dislikes being mentioned in the same breath as China. And in any discussion of geopolitics and Africa, where China's race for resources tends to be called neo-imperial, any mention of parallels makes India squirm. So the talk at this week's summit was not about resources but about India's contribution to African development. To make it clear that this was not a rerun of the Beijing shindig in 2006, the format in Delhi was as different as possible. For the visitors, though, these distinctions mattered little. Treated to some fine luxury, far from any sanitation project, all they smelt was opportunity.

[The Magnificent Goldberg]

Interesting. Thanks, Guy.

This is kind of your subject, isn't it, Guy?

MG

[Guy Berger]

Interesting. Thanks, Guy.

This is kind of your subject, isn't it, Guy?

MG

My research in grad school was in international trade and development economics so I find this stuff fascinating. And especially sub-Saharan Africa, where the #1 tool for lifting large numbers of people out of poverty - the market - is not doing its job very well.

For what it's worth I should've mentioned -- while India is far, far superior within its own borders in obeying its citizens' rights, in both Myanmar and sub-Saharan Africa its behavior is little better than China.

[The Magnificent Goldberg]

For what it's worth I should've mentioned -- while India is far, far superior within its own borders in obeying its citizens' rights, in both Myanmar and sub-Saharan Africa its behavior is little better than China.

I must say I'm torn on this. Thinking of the harm that Europeans - well-meaning or malign - have done in Africa, I think it's best to leave them to get on with it and sort things out themselves. I doubt what's going on in Darfur or Zim is a lot worse than what went on in Guinea under Sekou Toure, and Guinea seems to be putting that behind it now, without much in the way of outside intervention.

But when I look at what's happening, that attitude seems hard and unfeeling and I want something done about those governments.

MG

[The Magnificent Goldberg]

My research in grad school was in international trade and development economics so I find this stuff fascinating. And especially sub-Saharan Africa, where the #1 tool for lifting large numbers of people out of poverty - the market - is not doing its job very well.

We like to think that the colonial period cut Africa off from its past, but I'm not sure that's really so. Unlike Europe, Africa never developed a feudal system. One of the feudal system's by-products was an attitude amongst aristocrats that "trade" was a dirty word. So trade was carried on by the lower classes - and eventually gave rise to the middle classes.

In Africa, instead of a feudal system, the various kingdoms and empires developed a tax and tribute system. Indeed, the Sahelian empires had a cash-based society, but it was one in which the aristocrats were deeply involved in trade - as monopolists. It seems not to have been until the third quarter of the nineteenth century that trading middle classes started developing in various states such as Asante, Kongo, Buganda and among the Igbo. And that development was deliberately cut off by colonialism, which, of course, imposed its own monopolistic practices. (The exception appears to have been along the east coast, in which trade was carried on by Swahili merchants. But much of the Indian Ocean trade - and particularly its African infrastructure - was destroyed by the Portugese in the early sixteenth century, then the British finished it off a bit later.)

The way in which markets seem to be organised in Africa today doesn't look all that dissimilar from the monopolistic practices of the ruling classes in pre-European days. (Of course, there are two levels of market - the everyday, street markets, which in Africa are no different to Newark NJ; and the big markets, particularly commodity markets, which are what look like the old monopolistic markets - though these do feed through into the street markets.)

The more I think about economic development in Africa, the more I'm inclined to the view that what we developed in the West is actually just a special case - though it's dominant. While it may well be the right way to organise things - and I'm pretty sure it is - cutting through a couple of thousand years of culturallly ingrained market habits may prove to be a difficult job.

MG