India Africa Connecting

A Paper for the
5th CII-EXIM BANK

Conclave on India Africa Project Partnership
March 22-24, 2009; New Delhi
Contents
Executive Summary 4
Introduction 5
Section I: The African Economy: Rapid Development and Rising Challenges 5
Section II: India in the African Economy: Trade and Investment Linkages 8
Section III: Africa and India: Integrating Production, Knowledge and Entrepreneurship 13
Section IV: Leveraging the Demographic Dividend: Indo-African Cooperation
in Human Resource Development 24
Section V: Conclusion: Institutional and Business Linkages as a Facilitator of
Indo-African Engagement 26
References 30
Annex: African Regional Groups 31
List of Tables
Table 1: India and China in Top 5 Export Destinations for African Countries 10
Table 2: India’s Exports and Imports from Africa in 2006-2008: Main Product
Groups 11
Table 3: Hourly Compensation in Selected Countries 11
Table 4: Indian and Chinese FDI Stocks in Africa-Main Destinations 12
Table 5: Indian and Chinese FDI into Africa: Form of Investment 12
Table 6: Indian Contribution to African Commodity Demand 14
Table 7: Indian Global Demand and Supply for Key Energy and Raw Materials Resources 14
Table 8: Cotton 16
Table 9: Some Key Infrastructure Indicators in India and Africa 18
List of Figures
Figure 1: Average Growth Rates in Key Macro-economic Indicators 6
Figure 2: African GDP, Trade, and Investment as % of Global Economy and India 6-7
Figure 3: Indian Exports with and Imports to Key African Regional Groupings 8
Figure 4: Growth in Exports and Imports between India and Major African Economic Blocs (2005-2008) 9
Figure 5: India’s Trade Deficit/Surplus with Major African Blocs 9
Figure 6: Indian FDI Outflows 12
Figure 7: Urbanization 19
Figure 8: Per Capita Health Spending: Comparing Averages 21
Figure 9: Tourism Receipts 23
Figure 10: Share of World’s Youth 24
Figure 11: Tertiary Enrollment 25
List of Boxes
Box 1: Examples of Indian Investment Strategies in Africa: Connecting Supply Chains and Trading Networks 13
Executive Summary
The African economy has seen a rapid growth of both its share in the global economy and trade in recent times.
However, it needs to be pointed out that it still remains a relatively minor player in the global economy. As Section I
argues, Africa is not well integrated into global industrial supply chains, other than as a source of raw-materials. Most
of the FDI flowing into Africa today is also natural resource- oriented. As Section II shows, India’s rapidly growing
trade and investment relationship with Africa is also heavily biased towards natural resources, but to a much lesser
extent than other major economic players in the African continent such as the EU and China. Indian firms have
made significant investments in ITES, Telecom, and other value-added sectors. They have also gained a reputation for
leveraging African human-resources and building managerial capacity instead of just importing such skills. However,
despite impressive growth, the Indo-African economic relationship is much smaller compared to the scale of Chinese
and European presence in the continent.
Key impediments to Africa’s growth discussed in Section I are infrastructural bottlenecks, human resource constraints,
and lack of low-cost technology solutions. The discussion in Section III focusing on sectoral Indo-African economic
linkages shows that the challenges that African economies face are in some ways opportunities for Indian entrepreneurs.
Indian investment and trade linkages could provide the solutions for Africa’s lack of capacity to develop significant
trade and business networks and retain higher percentage of the value-added from African production within the
continent. It needs to be pointed out that if Indian private and public sector stakeholders are ambitious and take a
longer-term perspective, they can play a significant role in creating a sustainable and diversified economy in Africa.
Moreover, the development of such a long-term relationship between India and Africa will allow India to integrate
itself with Africa’s growth story and add to India’s own long-term competitiveness and resource security.
A critical area for investment in Africa is infrastructure. Indian firms, given their expertise of operating in tough
environments and working with lower margins can play a big role in connecting Africa through roads, rails, airlines,
and ports. Similar opportunities are to be found in sectors such as telecommunication, health, and tourism. Indian
firms can help Africa integrate into the global economy, and create new markets and production bases for themselves
by bringing in investment, technology and managerial expertise in textiles, agro-industries, jewelry, pharmaceuticals,
IT and ITES, engineering and machinery, chemicals, and metallurgy based industries. India can also play a major
role in helping Africa meet the challenges of growing demands for urbanization with its private sector expertise in
town-planning and large-scale urban development. Africa has a lot to offer in terms of human resources too. IT and
ITES firms can leverage a diverse range of linguistic and technical skills found in various African economies. Africa’s
geographic location with its proximity to Europe and the Middle-East can be leveraged for health-tourism, textiles,
and agro-foods, among others.
A big challenge for Africa today is the continent’s human resource constraints. As Section IV points out, India and
Africa will have the most significant proportion of the world’s youth in 2025. This demographic dividend can be a
major transformational force for both India and Africa. Investment in education and training will unleash a revolution
of creativity, productivity, entrepreneurship, and ambition that will bring millions out of poverty in both regions. On
the other hand, failure to invest in their youth will lead to economic disaster and political upheaval that both India
and Africa can ill-afford. India has a very strong tertiary and secondary educational system, and is making significant
investments into it. India is also investing in Africa’s human-resources development through various channels. Such
co-operation needs to be expedited, and private-sector participation needs to be integrated into the government
to government relationships that already exist. New technologies such as distance learning through internet and
virtual classrooms have to become a central focus of the Indo-African cooperation strategy in education and human
resource development.
The successful implementation of even a fraction of the agenda outlined in this report would require the building
of robust institutional linkages between the two regions, both through government agreements in trade and
investment, as well as private business to business relationships. Section V suggests that India negotiates Preferential
Trade Agreements (PTA) with the major African regional blocs. Such PTA should have an ambitious liberalization
agenda and should not be bogged down by overly complex rules of origin (ROO) that inhibit effective integration
of production between PTA partners. India’s PTA with African partners should also include provisions on trade and
investment facilitation to ensure that not just the barriers are removed, but the means be made possible for a dynamic
economic relationship between India and African countries. The efficient means to facilitate business cannot be
achieved without an active private sector component. The governments in India and Africa need to actively involve
the private sector as equal partners in initiatives for developing logistical linkages and infrastructure. Additionally, the
Indian government should seek the help of the Indian private sector in coordinating aid and development projects in
Africa. For its part, the private sector can take the initiative in developing business networks and institutional linkages
with their African counterparts. Both regions have much to gain from a robust economic relationship. The future
appears bright for a meaningful India Africa economic relationship that will benefit both parties. It will also serve the
key global development goal of drastically reducing global poverty.
4
Introduction
Trade and cultural relations between India and Africa go back a long time to the dawn of human civilization itself.
Archeological evidence found in Gujarat in Western India and Egypt shows the existence of a strong trade relationship
between the two regions from as early as 3000 BCE. Indian and African traders engaged in a robust trade throughout
the middle-ages through networks that connected the ports of Mangalore and Surat in India to Zanzibar, Mogadishu,
and Cairo in Africa. With the advent of colonialism in both Asia and Africa, these deep trade and people-to-people
contacts withered away. As the economy of India and those of the various countries in Africa develop and diversify,
opportunity presents itself for a revitalization of the deep-rooted ties between the sub-continent and Africa.
India’s trade and business relationship with Africa has been growing since the early sixties, and has seen rapid
development in recent years. Trade between the two regions increased from just USD 7 billion to USD 51 billion,
an increase of over 7 times in just 10 years between 1997 and 2007. Indian investment in Africa has also grown
considerably in the last few years. Intra-industry trade between the two regions is growing, and there is a growing
appreciation of the importance of trade and business links between India and Africa among the business communities
of both regions. The presence of a strong Indian diaspora in several African countries further augments the ties
between Indian and African business and trade networks.
However, despite the positive developments in recent years, much work needs to be done to develop the Indo-African
relationship into a truly global partnership, with trade, investment, and production links that enhance each other’s
competitiveness and help increase their stake in the process of globalization. Both regions have very large numbers
of people living in poverty, and need to harness globalization and economic development to raise the living standards
of their people. Both regions need to invest in efficient use of resources in ways to make their development plans
sustainable. Both India and Africa have a huge role to play in the world’s future energy security and ecological balance.
Challenges in transforming growing numbers of young people into productive, educated, and prosperous global
citizens and addressing
significant challenges in health and social justice are also common themes for both the regions. This brief report
attempts to bring together all these multiple themes of development and co-operation, giving more importance to
some of them than others in the interest of brevity. This report is meant as a starting point for a more substantive
discussion on all these themes. The report also stresses more on the role of private sector in collaborating with the
government in addressing the common opportunities and challenges faced by these two regions.
The report is organized as follows:

Section I presents a brief picture of the African economy in a comparative global context.
Section II discusses the Indo-African trade and investment relationship in its current context.
Section III brings out the potential for development and cooperation in the various sectors between Indian and
African stakeholders, especially the private sector
Section IV briefly discusses the criticality of investment in human resources for the future of both regions, and
the role Indian and African governments and private sector can play to facilitate the development of
human resources
Section V concludes this report with some suggestions as to the way forward for the Indo-African relationship,
with special focus on the role of Preferential Trade Agreements (PTA) and business-to-business
contacts.
I. The African Economy: Rapid Development and Rising Challenges

Behind all the mostly negative stories and perceptions about Africa, the continent has made rapid and consistent strides
in development in the last decade and a half. Africa has incrementally been developing a more inter-connected and
sophisticated agricultural sector, a more developed and efficient mining and minerals industry, and a manufacturing
base that combines its competitively priced human resources with its traditional strengths in agro-based and extractive
raw materials. This development story is not one that is common to all African states; many African countries continue
to be hampered in their development trajectory by poor governance and political instability. However, the continent
overall has achieved considerable success in recent years. Figure 1 below compares African1 growth rates in some key
indicators with the global average and India.
5
Figure 1: Average Growth Rates in Key Macro-economic Indicators
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Figure 1 shows that contrary to the popular perception, Africa has outperformed the world average in key aspects of
macro-economy. African growth of GDP, capital accumulation, and FDI have been higher than the global average in
the period 1996-2007. However, Africa’s trade relationship has grown at rates similar to the global average in the same
period. While impressive, Africa’s growth in key macro-economic indicators is lower than emerging Asia. As seen in
Figure 1, India’s growth in GDP, trade, FDI and capital accumulation have been substantially higher than African
average in this period. Growth in trade and final consumption hold the key to understanding the differences in rates
of growth between emerging Asia and Africa. Greater linkages with global supply-chains have accelerated economic
growth in Asia. This accelerated growth in turn has led to a rise of a large-middle class and increase in consumption
of goods and services leading to increase in domestic economies of scale. Increase in economies of scale has in turn
led to improved competitiveness for Asian economies and greater growth in their trade relationships. This virtuous
cycle is critical to development in a globalized economy, and Africa, despite its recent dynamism, still plays a small part
in this global development narrative. Figure 2 below summarizes Africa’s share of key macro-economic indicators in
the global economy and as a percentage of the Indian economy.
Figure 2: African GDP, Trade, and Investment as % of Global Economy and India
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1
6 have also registered strong performances in the various indicators over the same period
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Figure 2 clearly shows that Africa is still a relatively minor player in the world stage, with Sub-Saharan Africa (SSA)
accounting for less than 2% of the global economy, trade, and investment. Sub-Saharan Africa as a region has lower
levels of consumption and investment when compared to India, and critically, lower levels of imports. The lower
level of imports underline Africa’s relative lack of success in integrating itself with global supply chains and achieving
substantial increases in local consumption that lead to economies of scale and therefore competitiveness. The relatively
higher level of exports (and economic growth) are mostly due to extraction of natural resources, especially oil, and
this dependence on extractive industries as a source of exports and hard-currency most often does not translate into
meaningful value-addition and job-creation for African economies.
Despite its many successes in recent years, Africa as a region suffers from some crucial disadvantages. Some of the
critical problems for the African economies are:
• A large percentage of Africa’s population lives in areas with a very poor natural economic base such as arable
land and geography conducive to productive economic activity
• Large geographic distances and natural impediments to development of transport infrastructure such as
harsh deserts, plateaus, large rivers etc make economic integration difficult and expensive
• Africa’s economic growth and economic infrastructure remains confined to a few areas, with vast areas of
the continent still under-developed and extremely poor.
• Political instability and political boundaries that divide natural economic partners (Sub-Saharan Africa has 47
countries, with each country averaging four different states as neighbors) inhibit integration and economic
development
• Population centres in Africa are often cut-off from linkages with the global economy. Forty percent of
Africans live in landlocked countries, compared with 23 percent of the population in East and Central
Asia.
• Low-level of per-capita purchasing power in combination with relatively smaller population (in each individual
African economy) means that the average size of the economy of African states is small, making it a low-
priority destination of technology transfer for most industrialized countries’ multi-national companies.
• Lack of economies of scale inhibits the development of educational institutions that enable absorption of
technology and inculcate large scale entrepreneurial activities. It also acts as a barrier in the development of
private sector institutions that can build networks of trade and investment on a global scale.
In Section III, some of these problems will be revisited in the context of India’s role in helping African economies
overcome such obstacles in their path to development.
The oil exporting African economies have on average grown faster than the African economies that do not export oil
2
Africa’s Silk Road: China and India’s New Economic Frontier, World Bank, pg 33
3
7
II. India in the African Economy: Trade and Investment Linkages
As pointed out in the introduction, India and Africa have an old economic relationship. However, the importance of
Africa in India’s global trade portfolio is relatively small. Africa’s share in India’s total cumulative exports in the period
2006 to 2008 stood at 6.4% and Africa’s share in cumulative total imports stood at 5.2%. Figure 3 below presents
India’s export and import relationship with four key African groups i.e., SADC, COMESA, ECOWAS, and AMU .
Figure 3: Indian Exports with and Imports to Key African Regional Groupings, USD Millions
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Source: Director-General of Foreign Trade (DGFT), Government of India and authors’ calculations
As Figure 3 above shows, India’s strongest import relationship is with the ECOWAS region, with imports of nearly
9 billion USD in 2007-2008. A large proportion of such imports from ECOWAS region is accounted for by crude
oil imports from Nigeria, and Nigerian crude is now India’s second most important source of crude oil in the world.
India also has a significant trading relationship with SADC, especially with South Africa, a key source of diamonds for
India’s gems and jewelry industry. India’s trade with AMU, especially Egypt, Morocco, and Libya is also significant. It is
important to note that irrespective of the regional group in question, India’s economic relationships tend to be deeper
with Commonwealth countries with which India has had historic economic ties dating back to colonial times. In terms
of export markets, India’s strongest ties are with COMESA and SADC, especially Commonwealth member states
such as Kenya, Tanzania, Mauritius, and South Africa. Figure 4 below, that presents the rates of growth of imports
and exports between India and Africa’s key regional blocs, shows that non-traditional trade markets in ECOWAS
and AMU are growing very fast, especially in terms of imports. Imports from ECOWAS grew by a massive 1200%
between 2005 and 2008. One aspect of India’s recent trade policy in Africa is to diversify India’s trade relationship and
to augment trade-flows from non-Commonwealth countries, especially in the Western and Northern African regions,
and Figure 4 clearly shows that the efforts have been showing some results.
Ibid
4
For a full listing of all countries by economic bloc as for the purpose of this paper, please refer to Annex. COMESA is Common Market for Eastern and Southern Africa,
5
8 ECOWAS is Economic Community of West African States, SADC is Southern African Development Community, and AMU is Arab Maghreb Union.
Figure 4: Growth in Exports and Imports between India and Major African Economic Blocs (2005-2008)

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A very important aspect of India’s trade engagement with the African region is captured by Figure 5 below that shows
India’s trade deficit/surplus with different regions. With the exception of SADC, India has in the past enjoyed a trade
surplus with Africa. However, in recent years, India has run a trade deficit with all regions in Africa with the exception
of COMESA, where India’s trade surplus has consistently grown over the last four years.
Figure 5: India’s Trade Deficit/Surplus with Major African Blocs
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A part of the explanation for India’s increasing trade deficit with Africa lies in India’s rapid economic growth and
the concomitant demand for raw materials and energy sourced from Africa. But the trade deficits are also a function
of India’s inability in large part to compete with the success of China in capturing a large segment of Africa’s low
cost manufacturing needs. As seen in Figure 4 earlier, India’s exports have grown far more sluggishly compared to
its imports from Africa. Table 1 provides a listing of all African countries where India or China, or both feature in
top export destinations, and thus presents an overall picture of the importance of Indian and Chinese markets for
different African countries.
9
Table 1: India and China in Top 5 Export Destinations for African Countries
Country Exports - partners (%)
Angola US 32.1%, China 32%, France 5.9%, Taiwan 5.3%, South Africa 4.5% (2007)
Benin China 24.7%, India 8.2%, Niger 6.6%, Togo 5.4%, Nigeria 5.3%, Belgium 4.6%
(2007)
Burkina Faso China 29.6%, Singapore 15.7%, Thailand 7.2%, Ghana 6.4%, Niger 4.8% (2007)
Central African Republic Belgium 22.7%, Indonesia 19.3%, Italy 7.7%, France 7.1%, Spain 6.9%, Democratic
Republic of the Congo 6.8%, China 4.9%, Turkey 4.7% (2007)
Chad US 89.5%, Japan 3.7%, China 3.4% (2007)
Congo, Democratic Belgium 23.6%, China 21.7%, US 9.8%, Finland 9.1%, Brazil 9.1%, France 6.8%,
Republic of the Zambia 6% (2007)
Congo, Republic of the US 41%, China 36.5%, Taiwan 3.6% (2007)
Eritrea Italy 34.4%, China 16.2%, Sudan 15.2%, France 9.4%, Saudi Arabia 5.2%, Australia
4.4% (2007)
Ethiopia Germany 8.2%, Saudi Arabia 7%, US 6.9%, Djibouti 6.6%, China 6.5%, Italy 6.5%,
Japan 5.9%, Netherlands 4.8% (2007)
Gabon US 32.5%, China 15.8%, France 9.4%, Malaysia 6%, Trinidad and Tobago 5%
(2007)
Guinea Russia 10.8%, Ukraine 9.6%, Spain 8.8%, US 7.5%, Germany 7.4%, South Korea
7.2%, France 7%, Ireland 5.5%, China 5% (2007)
Guinea-Bissau Brazil 56.2%, India 33.6%, Nigeria 8.3% (2007)
Mali China 19.6%, Thailand 10.5%, Brazil 4.6%, France 4.5%, Indonesia 4.5% (2007)
Mauritania China 30.5%, France 9.5%, Italy 8.5%, Spain 8.5%, Japan 5.5%, Netherlands 5.3%,
Belgium 5%, Cote d’Ivoire 4.7% (2007)
Morocco Spain 21.2%, France 19%, Italy 4.9%, UK 4.6%, India 4.2% (2007)
Mozambique Italy 19.4%, Belgium 18.4%, Spain 12.5%, South Africa 12.3%, UK 7.3%, China
4.1% (2007)
Rwanda China 8.9%, Germany 6.8%, US 4.9%, Hong Kong 4.8% (2007)
Senegal Mali 18.9%, France 9.1%, Italy 5.9%, India 5.7%, Gambia, The 5.2% (2007)
South Africa US 11.9%, Japan 11.1%, Germany 8%, UK 7.7%, China 6.6%, Netherlands 4.5%
(2007)
Sudan China 82.1%, Japan 8.4%, UAE 2.5% (2007)
Tanzania China 10.3%, India 9.7%, Netherlands 6.5%, Germany 6.3%, UAE 4.9% (2007)
Togo Ghana 16.8%, Burkina Faso 14.5%, Germany 9.2%, Benin 9.1%, Netherlands 5.9%,
Mali 5.8%, India 4.7% (2007)
Zambia Switzerland 41.8%, South Africa 12%, Thailand 5.9%, Democratic Republic of the
Congo 5.3%, Egypt 5%, Saudi Arabia 4.7%, China 4.1% (2007)
Zimbabwe South Africa 33.8%, Democratic Republic of the Congo 8.3%, Japan 8.1%, Botswana
7.4%, Netherlands 5.2%, China 5.2%, Italy 4.1%, Zambia 4.1% (2007)
India in list of top Export Markets
Both India and China in list of Top Export Markets
Source: CIA Factbook China in list of top export markets

10
As Table 1 shows, India is in the top 5 export destinations of just 6 African countries, while China is one of the 5
most important export markets for 21 African countries. Table 2 below compares India’s top exports and imports to
the major regional blocs in Africa in the period 2006-2008
Table 2: India’s Exports and Imports from Africa in 2006-2008: Main Product Groups
COMESA ECOWAS SADC
Exports Imports Exports Imports Exports Imports
Petrochemical Fruits and Cereals Petrochemical Petrochemical Gems
and Vegetables and and (diamonds)
Refinery Iron and Steel Petrochemical Refinery Refinery Petrochemical
Products and Products Products and
Iron and Steel Coffee Refinery Fruits and Auto Parts and Refinery
Products Vegetables Products
Pharmaceuticals Chemicals Pharmaceuticals Wood Products Components Chemicals
Sugar Leather and Iron and Steel Mineral Ores Pharmaceuticals Iron and Steel
Hides
Engineering Cotton Cotton Chemicals Engineering Mineral Ores
Goods Goods
Machine Tools Engineering Cotton Cereals Aluminum
Goods
and Iron and Steel
Components
Cotton
A brief overview of Table 2 shows that India’s exports to Africa have changed, and have become more diversified,
but imports continue to be dominated mostly by agricultural and other raw-materials. However, India’s imports from
Africa have a greater share of value added materials that directly benefit African employment and industrialization
compared to China’s imports from Africa. Implications of India’s relatively diversified African import basket will be
discussed later in Section III. One of the reasons why African imports continue to be dominated by raw materials
as opposed to value-added manufactured goods is that cost of labor is cheaper in India and China, making it very
difficult for African countries to compete with these economies. Table 3 below presents a comparison of some labor
costs in Africa relative to India and China.
Table 3: Hourly Compensation in Selected Countries

Textile Industry Clothing Industry
China 0.4-0.69 0.48
India 0.57 0.38
Kenya 0.62 0.38
Mauritius 1.33 1.25
South Africa 2.17 1.38
Source: Cited in Kaplinsky and Morris (2006), taken from Francis Mwega (2007)
India can help create the supply chains that would allow African countries to export low cost manufacturing thus
adding value to raw materials like agro-products, wood and timber products, minerals resources, and cotton. A detailed
discussion of this aspect of Indo-African relationship would be appear in Section V. It is important to point out
that Africa has gained in recent times due to a terms-of-trade effect, as cheaper manufacturing imports from China,
India, and other Asian economies have replaced relatively more expensive alternatives from Europe and elsewhere,
and Africa’s natural resources have seen increase in price due to demand from China and India. However, the direct
benefits to African economies from such terms-of-trade gains have been limited. A sustainable globalization policy
cannot be built with dependence on raw-material exports, prices of which remain volatile. As a matter of fact the
prices of many raw materials are now on a rapid decline from the highs reached in 2006-2007 given the global
economic slowdown. Figure 6 presents India’s FDI outflow by major destinations and sectors globally.
Francis Mwega (2007), China, India and Africa: Prospects and Challenges, Paper presented at the AERC-AFDB International Conference on
6
Accelerating Africa’s Development Five Years into the Twenty-First Century, November 22-24, 2006, Tunis, Tunisia.
11
Figure 6: Indian FDI Outflows
While the numbers in Table 4 are somewhat dated,
both India and China have increased their investment
in Africa between 2005 and 2008. These are the latest
comparable set of figures officially available, and general
trend that they represent remains true for the purpose
of the current discussion. It is important to note in
Table 4 that India has much more invested in Africa in
terms of its outward FDI portfolio (almost 18% of total
FDI) than China (less than 3% of total FDI). Although
a large chunk of Indian FDI in Africa goes to Mauritius,
which as pointed out earlier does not clearly represent
actual investment in productive assets or entrepreneurial
activity, it is still significant that Indian businesses
accord substantial importance to Africa as a business
Source: World Bank (2007) opportunity. Table 4 also shows that India has heavily
invested in a few countries (Mauritius and Sudan), while
Chinese investment is more evenly spread out among
Figure 6 shows that a bulk of India’s FDI is in more countries in Africa.
manufacturing, non-financial services such as IT and
ITES, and other that mostly represent investment in Looking at the firm-level data for FDI headed to Africa
mineral and energy resources. Two African countries, from India shows that a vast majority of Indian FDI is
Sudan and Mauritius are among the top five FDI in Greenfield projects, though acquisitions of African
destinations for India, both accounting for about 18% of firms also represent an important route for Indian FDI
India’s total FDI flow. In the case of Sudan, it represents into Africa. Table 5 summarizes Indian and Chinese
ONGC Videsh investment in oil related ventures in FDI routes in Africa. It is important to note that Joint
that country. FDI flows into Mauritius cannot really be Ventures (JV) between Indian and African enterprise has
considered as an effective investment into Africa, and is still some way to go.
more a function of re-routing of Indian investment using
the tax benefits in Mauritius. Table 4 below compares Table 5: Indian and Chinese FDI into Africa: Form of
Indian and Chinese FDI stocks in Africa. Investment
Table 4: Indian and Chinese FDI Stocks in Africa-Main Firm Level Entry: Type of Venture Into Africa
Destinations (USD Millions)
New Joint Venture Acquisition
FDI Stock (1996-2004) India China 82 9 9
Africa 1970 India 68 9 23
Mauritius 948 Source: World Bank (2007)
Sudan 912
Morocco 32.5 Much of the Indian FDI in Africa, like Chinese FDI,
Libya 30 is concentrated in extractive sectors, such as oil and
South Africa 23 mining. However, recent times have seen greater
diversification in FDI. Significant Indian investments
Senegal 22 on the African continent have been made in apparel,
Africa as % Global FDI 17.7% retail ventures, fisheries, commercial real estate and
transport construction, tourism, power plants, and
FDI Stock (1995-2005) China telecommunications, among other sectors . Box 1 that
follows presents some key examples. A key differentiator
Africa 1595 between Indian and Chinese FDI is that on an average,
Sudan 351 88 percent of Chinese firms engaging in FDI abroad are
Algeria 171 owned by provincial governments , while a vast majority of
Zambia 160 Indian firms invested in Africa are private firms. Another
key difference is that Indian firms employ a larger number
South Africa 112 of Africans than the Chinese, who import more workers
Nigeria 94 . This has important implications on how Indian FDI is
Kenya 58 perceived by local populations and governments. Indian
Africa as % Global FDI 2.8% companies are seen as much more integrated into African
Source: UNCTAD and authors’ calculations
society and the African economy. The strategies to hire
locally and emphasis put on training Africans on how
to maintain and repair the plants results in the building
7
World Bank 2007, pg 330 of long-term relationships and business networks. Since
Indian investments are generally more equitable for the
8
Ibid, pg 331
locals, locals have a greater stake in Indian projects .
12
• Indian telecom majors, Bharti Airtel and Reliance were in talks to buy a 51% stake in MTN Group,
Africa’s largest mobile player. If the approximately USD 20 billion deal with the South African company
went, it would have created a cellular network with 130 million subscribers.
“India and Africa have similar markets, value systems, and levels of development, emerging markets make sense for us.” Sunil
Mittal, Chairman, Bharti Group
• Indian pharmaceutical major Cipla has invested in capacity for making treatments for HIV and malaria
at a new $32 million plant near Kampala, Uganda.
“The Indians are making a comeback in Uganda, and they are very welcome” Frederick Mutebi Kitaka, Finance Director of
Cipla’s Ugandan partner company, Quality Chemicals
• ONGC has invested in oil-fields in Nigeria, Angola, and Sudan.
• Indian mining major Vedanta Resources is investing $1 billion to double the capacity of Zambia’s
biggest copper mine.
“The gains from Vendanta’s investment in Zambian copper has the potential to double Zambia’s GDP over the long-run”
Kuldip Kaura, CEO Vedanta
• Indian IT and ITES major HCL Enterprises is working on a USD 400 million multiyear outsourcing
contract with Old Mutual, South Africa’s largest insurance company
The brief overview of Indo-African economic engagement presented in this Section points towards a dynamic and
growing relationship between Africa and the Indian sub-continent, and one that has matured remarkably in recent
years. However, there is a huge untapped potential in terms of trade, investment, and capacity building between the
two that needs to be explored. The following Sections (III and IV) flesh out some of the key details of potential
economic linkages in terms of sectors, and in terms of cooperation in areas such as health, intellectual property, and
education.
III. Africa and India: Integrating Production, Knowledge and Entrepreneurship

As the title of this Section suggests, India can be a different type of stakeholder in Africa as opposed to the typical
resource extractive kind of economic relationship that most European, and in recent times countries, China and
Japan have been seen to have established in the continent. This does not mean that Indian entrepreneurs should not
seek supplies of much needed raw-materials, or not strictly follow the logic of profit-maximization. It simply means
that signaling and implementing a trade and investment relationship that is long-term and is integrated into Africa’s
developmental goals of creating sustainable value-added jobs and absorbing technology.
Some of the key sectors where India can emerge as a major player in Africa are:
• Mining, Metallurgy and Oil
• Agro-based Industries, including dairy farming
• Textiles
• Jewelry
• Machine Industry
• Infrastructure, including energy distribution and urban development
• Chemicals
• Pharmaceuticals
• Health
• IT and ITES
• Tourism
Education will be dealt with in little extra detail in Section IV. A brief strategy for each of the above mentioned sectors
follows :
9
Vines and Sidiropolous (2008), Africa: ‘Quiet’ India Could Offer Lessons to Continent, April, Allafrica.org
10
Ramachandran (2007), India pushes people power in Africa, Asia Times, July 13th, 2007, http://www.atimes.com/atimes/South_Asia/IG13Df03.html
13
Mining, Metallurgy and Oil
Given India’s economic growth, need for both raw-materials and value-added metallurgy industry products is expected
to increase substantially over the next decade. Indian demand for oil and mineral resources already plays a significant
role in Africa’s minerals and metals sector. Table 6 below enumerates the India’s contribution to demand for raw-
materials in some major African economies.
Table 6: Indian Contribution to African Commodity Demand
Indian share in
Country commodity demand
Nigeria 12.2
Tanzania 12.0
Gabon 3.9
Ethiopia 3.4
Kenya 3.3
South Africa 1.6
Ghana 1.5
Cameroon 1.2
Congo 1.1
Sudan 0.7
Source: OECD (2006)
Access to reliable and cost-effective sources of energy, raw-materials and value added commodities is essential to any
economy’s level of competitiveness. It goes without saying that India’s sustainable growth and successful globalization
is impossible without assured long-term access to energy, metals, and metallurgy products. Table 7 below presents
India’s demand and supply for some key raw material resources.
Table 7: Indian Global Demand and Supply for Key Energy and Raw Materials Resources
2000 2001 2002 2003
Oil (000 tons):
Production 32426 32032 33042 33373
Export 0 0 0 0
Import 74097 78706 81989 90434
Net unoirt 74097 78706 81989 90434
Consumption (demand) 106523 110738 115031 123807
Import dependence (imports as % of demand) 69.6 71.1 71.3 73.0
Iron Ore (000 tons):

Production 75950 82000 94300 105500
Export 32910 37290 46602 55000
Import 510 300 282 457
Net unoirt -32400 -36990 -46320 -54543
11
Goldstein et al (2006), The Rise of China and India: What’s in it for Africa, OECD Development Centre Studies
14
Copper (000 tons):
Production 3498 3418 3071 2903
Export 87.25 0.01 121.17 0.30
Import 472 828 698 488
Net unoirt 384 828 698 488
Source: OECD (2006)
The story in Table 7 is clear. India is facing declining production capacity in some key raw materials like copper, and
the growth in domestic production will soon fall below domestic consumption in other key materials like iron-ore (and
bauxite). India has an acute dependence on imported oil (73% in 2003). In such a situation, Africa assumes tremendous
importance for India as a source of energy and raw-materials. Another aspect of India-Africa energy relationship
would be uranium. As India invests in new nuclear energy production facilities after the successful conclusion of the
India-US nuclear deal, it will look to Africa as a major source of uranium. However, to build a sustainable relationship
to ensure India’s access to such raw-materials, a long-term view is essential.
Indian stakeholders in Africa’s mineral and oil wealth would have to convince African governments that there are
unique advantages to Africa in doing business with India. This would require that India companies invest in developing
a value-chain that allows African economies to retain a substantial part of the gains accruing from extractive industries.
This would involve Indian stakeholders to partner Africa in the following ways:
• Adding value through production processes: Invest in capacity for refineries and petrochemicals in Africa
itself, so that an export base in value added petroleum products can be created for African economies rather
than them being passive producers of crude
• Adding value through human resources: Invest in training of African workers and keeping a mostly African
work-force in India’s African operations. Ensure that Africans get the major share of management positions
and white-collar jobs that create middle-class stakeholders in Indian projects. Strategies for partnering
African economies in the development of human capital is picked up later in greater detail in Section IV
• Invest in infrastructure that allows more efficient production of raw-materials: Indian investment and
involvement (through Government of India grants) in the construction of good roads that connect
hinterland mineral production zones to ports and major commercial hubs would integrate India to African
production networks of extractive industries. Similarly, Indian involvement in the development of oil and
gas pipelines (especially those that travel eastwards to Indian Ocean ports) would integrate India into Africa’s
oil and gas industry. More detail on infrastructure follows shortly in this Section.
• Transfer of technology: Indian expertise, especially in low-cost and efficient production processes in the
metallurgy sector would add tremendously to Africa’s potential as a hub for advanced industrial materials,
and allow Indian companies to leverage themselves into a rapidly global production network of industrial
materials.
Agro-based Industries, including dairy farming

Africa produces a wide variety of cereals, fruits, vegetables, and agro-based industrial raw materials. India imports
African agricultural products in relatively large quantities (see Table 2). Like in India and other developing countries,
lack of proper logistics, management, and investment is holding back the development of agriculture in Africa. In
general, while high-income countries add USD 180 of value by processing one ton of agricultural products, developing
countries generate only USD 40. Moreover, while 98% of agricultural production in high-income countries undergoes
industrial processing, barely 30% is processed in developing countries .
Agro-processing is mostly non-existent in rural markets of Africa, and as a consequence of this low level of agro-
processing Sub-Sahara countries face huge post-harvest losses. For perishable agro-commodities such as fruits and
vegetables, the post-harvest losses average 35-50% of total attainable production, while such losses for grains vary
between 15 to 25% . The global food-crisis and rising food prices between mid-June 2008 and early 2009 showed that
12
Agro-Industry Development in Africa, Website note by African Development Bank, viewed on 11th February, 2009. http://www.afdb.org/en/topics-sectors/sectors/
agriculture-agro-industries/agro-industry-development/
13
Ibid
Self-Employed Women’s Association
14
15
global demand and supply of food are far from aligned, and the consumer preferences of the growing middle-classes
in India, China, other emerging Asia, and indeed in Africa itself will create demand for a new kind of food industry.
As the Indian companies, both public and private, seek to increase India’s agricultural productivity and develop
effective supply chains by investing in agro-based logistical and commercial infrastructure, Africa can present a great
opportunity for a global strategy. Indian firms can invest in African markets, either by partnering African firms or
through Greenfield investments. Given that Indian firms are used to operating in fragmented rural markets with poor
infrastructure and low margins, Africa would prove less of a challenge for them than many developed country Multi-
nationals. Successful Indian co-operative ventures like Anand (dairy-farming and processing) and SEWA (processed
foods) could also seek to work with African counter-parts to increase their global foot-print. Indian entrepreneurs
could also seek to invest in niches within the agricultural supply-chain where they have built considerable expertise
such as refrigerated warehousing, transport, packaging, wholesale services, IT and telecommunication support (low-
cost SMS from provider such as Airtel), database and information services (ITC e-chaupal).
As a matter of fact groups like the milk co-operative giant Anand are already helping African entrepreneurs build
capacity in many aspects of agro-industry . Another key example of Indian investment in niche agro-processing
market with low-margins is the case of Indian brewery major UB Group that acquired and made profitable the South
African United National Breweries (UNB) that specialized in the production of sorghum beer, a low-cost beverage
that faced stiff competition from informal sector producers. When the UB group took over the company in 1997,
it was running an annual loss of approximately USD 2.5 million. In 2005 when UB group decided to divest in the
company, it was showing profits of around USD 3 million .
The agro-processing industry in Africa presents great opportunities and synergy for many Indian firms, and the
Indian market with its rapidly growing middle-class, represents a huge market opportunity for African agro-industries.
An effective strategy to find right partners and ensure commercial information arbitrage between entrepreneurs can
lead to long-term and profitable partnerships. Since rural Africa depends on the agricultural sector, positive Indian
contribution in this area will create enormous amount of goodwill, add to this the Indian private sectors brand equity,
and make India a strategic partner in African development.
Textiles
Indo-African trade in textiles goes back to antiquity. Indian cotton cloth has been found inside the pyramids of
Egyptian pharaohs. While Africa is a major supplier of cotton, including to India (see Table 2), it has not been able
to make a dent in the global production network of textiles and clothing. Of the approximate USD 400 billion global
textiles market, Africa’s share is just around USD 200-300 million. A major reason, as pointed out in Section I, is that
labor costs remain higher in Africa (see Table 3) compared to Asian producers such as China, India, Bangladesh, and
Vietnam. Another reason for Africa’s inability to make a dent in the global textiles market is the growing integration
of various parts of the textiles value-chain including raw materials such as cotton in Asian countries.
India’s import dependence on cotton has been falling, as evinced in Table 8, and there is a concerted effort to acquire
modern technology, including advanced fibre and multi-fibre technologies.
Table 8: Cotton
Cotton (000 tons):
Production 2380 2686 2312 3009
Export 24 8.5 10.9 119.0
Import 350 519.8 264.9 170.9
Net unoirt 326.7 511.3 254.0 51.9
Consumption (demand) 2706.7 3197.3 2566.0 3060.9
Source: OECD (2006)
15
Africa needs Amul, says World Bank, Rediff News, January, 2006, http://in.rediff.com/money/2006/jan/21amul.htm
16
UB Group to sell beer biz in SA, Times of India, October, 2005, http://timesofindia.indiatimes.com/articleshow/1279032.cms
16
However, Africa presents India’s textile and clothing manufacturers with some clear opportunities. Africa’s population
is growing rapidly, and the demand for low-cost clothing and textiles products will increase substantially. Currently
the low-cost clothing market is dominated by Chinese producers. However, Indian entrepreneurs can explore ways
to manufacture in Africa itself and cut costs to compete effectively with Chinese imports. Given that Africa already
has raw materials, investment will have to be made in logistics and training of human resources to increase the size
of the labor pool and thus reduce labor costs. Partnering with African entrepreneurs and with the Indian diaspora in
different African countries to built trade and distribution networks would be another way to cut costs.
The African Growth and Opportunity Act (AGOA) implemented by the United States gives African country
manufacturers a unique market access. However, African countries have not been able to maximize the benefits of
such preferential access to the US market. Indian entrepreneurs, in partnership with African entrepreneurs can redress
this lack of success through ventures that brings economies of scale to African textiles sector, and also brings in
Indian managerial talent, global marketing networks, and production technology to make African textile production
truly competitive. The Economic Partnership Agreement (EPA) being negotiated between EU and several African
countries also hold promise for substantial market access for African clothing and textiles into the European market.
Thus, the Indian textiles sector can effectively increase their global foot-print by seriously considering Africa as a
production base for US and EU. Given that textiles and clothing are a labor-intensive activity; such strategies will
also create many relatively better paying jobs in the manufacturing sector, and contribute to building a sustainable
economic development program for the African economies.
Jewelry
Surat in India is the global centre of the world’s diamond cutting business, processing 85% to 92% of the global
diamond supply in any given year. Indian traders control about two-thirds of the USD 36 billion annual sales from
the global diamond trade in Antwerp, Belgium , and have a significant presence in other diamond exchanges in places
like Dubai. India is the world’s largest importer of gold and the biggest consumer of gold jewelry. Indian gems
and jewelry is exported the world over, and it remains one of the India’s most significant export items. However,
Indian gems and jewelry sector is facing new challenges from competitors like China, Thailand, and Indonesia. Major
rough diamond producers such as De Beers, threatened by the increasing market power of Indian traders have taken
strategic decisions that would hurt competitive procurement of diamonds for Indian traders.
On the other hand, many African countries, although the center of gold and diamond mining, and the dominant
sources of supply for rough diamonds as well as gold-ore, have been ignored in the global jewelry trade, long
dominated by European companies. Anecdotal evidence points to the fact that a hard-working African miner get less
than .5% of the value of the precious metals they so painstakingly extract from the earth. Indian jewelers, with their
trading networks, deep pockets, and managerial expertise have a vested interest in teaming up with African countries
to create global jewelry value-chain that helps Africa retain a far larger share of the value, while at the same time helps
Indian traders fight for new competition, especially of the unfair variety represented by some European cartels. India
also brings into this mix a huge talent-pool of highly trained polishers, gem-workers, and jewelers, and increasingly
sophisticated fashion designers. This represents the intellectual capital of the global jewelry industry that India needs
to harness much more efficiently. The Indian Diamond Institute and the Indian Institute of Gems and Jewelry (IIGJ)
represent an institutional basis through which Indo-African co-operation in jewelry sector can take-off. Some of the
suggested strategies are:
• Indian investment in African human capital in areas such as design, polishing and manufacturing of jewelry.
Branches of IIGJ and Diamond Institute can be opened in Africa in suitable locations. This would allow
Africa to get a greater share of the global jewelry value chain
• India can help in developing unique African designs and their subsequent marketing to tap into the huge
reservoir of creativity available in Africa
• Special sourcing agreements with African mines. Helping small African miners’ set-up co-operatives and
the development of fair, transparent long-term procurement deals between Indian jewelry companies and
African mine co-operatives.
• Indian firms in the jewelry sector need to come together and invest in the creation of global brands. A part
of the brand strategy would to show the world the Indian brand’s fair and equitable presence in Africa, as
opposed to some of the models in place now
• Invest in large-scale jewelry bourses in major African producers directly linked to bourses in India, especially
in Gujarat and Mumbai.
17
Sudha Ramachandran, Asia Times, February 5, 2008, http://www.atimes.com/atimes/South_Asia/JB05Df03.html
17
Machine Industry
Africa’s rapid industrialization would require cheap but reliable inputs of a large array of capital goods, i.e. heavy
engineering, electronics, machine-tools etc. India today is emerging as a global hub of the machine parts and components
industry and has a mature and competitive heavy engineering industry. Indian businesses in this sector are used to
working in smaller markets with reduced margins, higher risk, and longer repayment cycles. Indian producers are also
used to customization of products for harsh tropical and sub-tropical conditions and for simplified operational needs.
As a matter of fact, Indian presence in machines related products in Africa have been historically strong; machine-
pumps were known as ‘Makana Hindi’ (Indian machine), or simply as Kirloskar, from the name of the Indian major
pump-manufacturing company in Egypt of the late 70s and early 80s . Given these strengths, Indian machine and
engineering companies will naturally have a significant role to play in the industrialization process of Africa.
However, in order to do that, Indian entrepreneurs need to pro-actively seek niches in Africa’s developmental schemes.
Long-term relationships with African public and private players that encourage some element of local production and
technology transfers, training, and joint-development of customized solutions are some ways through which Indian
companies can establish a very large presence in what is surely to emerge as an important growth market.
Infrastructure
An ambitious development agenda for Africa can never succeed without large-scale development of infrastructure.
Indian businesses best opportunity to leverage access to Africa’s raw materials and invest in value-added production
in the continent, can come through embedding itself in the logistical development for such production. This would
mean that Indian firms seek to look at investment opportunities in roads, railways, airports, shipping, pipelines, energy
distribution, and telecommunication. A proactive policy, where Indian government and private sector identify new
opportunities, and comes up with joint strategies in conjunction with African governments would be the best way
forward. The essential goal would be to create an infrastructure network that connects all parts of Africa to the Indian
Ocean. Indian companies can once again play the historic role of connecting Africa’s production networks to Asia. It
would also serve to reduce Africa’s current dependence on Europe, a legacy of the colonial economic infrastructure
that was developed in the early and mid 20th Century.
India has over the years built extensive logistical infrastructure, and its rail and road networks are one of the biggest
in the world. India also has a growing airline and shipping industry and is rapidly expanding its pipeline infrastructure.
Table 9 below summarizes key infrastructure numbers in India and Africa.
Table 9: Some Key Infrastructure Indicators in India and Africa

Kms of Railways Table 9 clearly shows that India has developed key
Africa Total 82,964 infrastructure and achieved economies of scale greater
than the total African market. It is important to point out
Africa Less South Africa 62,092 that a large number of ships are registered in Liberia and
India 63,221 Sierra Leone for tax and regulatory purposes and these
Roads (Kms) ships do not represent tonnage that serves the African
Africa Total 2,368,839 market. As Table 9 shows, African tonnage net of Sierra
Leone and Liberia is very modest. Thus, it is no surprise
Africa Less South Africa 2,006,740 that shipping infrastructure in Africa is very poor. In many
India 3,316,452 cases intra-African shipping, for example from South to
Merchant Marine (Ships) West Africa, or between two different countries in the
Africa Total 2,846 ECOWAS, is more expensive than shipping to Europe
from Africa. The shipping infrastructure in Africa has
Africa less Liberia,
not kept pace with economic development and the
Sierre Leone and Comoros 324 continents’ growth of trade, and is now emerging as a
India 501 serious impediment to Africa’s ability to integrate with
Mobile Phones rest of the world’s economy.
Africa 180112189
Similarly, if one sees Africa’s rail infrastructure without
India 233620000 including the relatively well developed South African
Source: CIA Factbook 2009 and World Development Indicators network, it is very modest for a continent of the size of
Africa.
The Indian Diamond Institute is a project of Ministry of Commerce, Government of India, while the IIGJ is a project of the Ministry of Commerce and Gems and
18
Jewelry Export Promotion Council (GJEPC)

Amitav Ghosh, Confessions of a Xenophile, Outlook http://www.outlookindia.com/scriptur11w2.asp?act=sign&url=/full.asp?fodname=20081222&fname=A
19
mitav&sid=1
18
• Development of Container and pipeline terminals in key points in the Red Sea (Djibouti. Eritrea possible
partners), and Indian Ocean (Kenya, Tanzania potential partners)
• Pipelines connecting production zones in Egypt/Sudan/East Africa and Southern Africa to Indian-African
jointly managed port-hubs (as discussed above)
• Indian private sector, working in conjunction with Commonwealth, African Development Bank, African
private sector, African governments, and the Government of India to develop energy distribution grids
• Facilitating railway development. Bringing in the expertise of Indian companies like RITES (Rail India
Technical and Engineering Services) to connect and harmonize African rail networks that currently run
on different gauges and signaling systems. Help in automation of signaling systems and implementing
containerization and smart freight pricing policies using the Indian Railways recent success in this area.
• India’s army managed Border Roads Organization (BRO) is one of the world’s best when it comes to
building roads through difficult terrain. Recent successes in Afghanistan have highlighted the efficacy of
the BRO to the world. An initiative needs to be taken for program that brings together BRO and the Indian
private sector to build road infrastructure in Africa. Such an initiative needs to be supported by long-terms
loans by the Indian government, or from the market backed by Indian government guarantees. An initiative
like this will go a long way in developing road infrastructure in Africa, and make India a true partner for
African development.
• Investment opportunities in low-cost airlines connecting African cities are bound to increase in the coming
10-15 years. Such growth will be an inevitable by-product of economic integration of the continent, rise of
the new African middle-class, and rapid urbanization (see Figure 7 below).
• Mobile phones have become a development tool. By making information available through low cost phone-
calls and data-transfer (SMS), it has enabled small farmers and entrepreneurs to access information to
integrate previously fragmented markets and to maximize the pay-off from their economic activities. Indian
mobile phone companies can partner African companies to develop new low-cost models to expand the
types of telecom services offered, and reach out to new customers in low-income categories.
As India and Africa rapidly urbanize, there will be a huge demand for planned city development. As Figure 7
below shows, India and Africa will account for large proportions of the global urban populations. India will have
approximately 540 million urban residents and Africa 660 million urban residents by 2025.
Figure 7: Urbanization
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India has seen the rapid development of large-scale urban development projects. New urban hubs like Gurgaon,
Noida, Navi Mumbai, and the new urban developments in Hyderabad, Chennai, Ahmedabad, and Pune to name
just a few, have been developed and scaled up very rapidly. Large-scale urban development companies in India like
DLF, Ambuja Group etc are globally competitive and are in a position to successfully enter the African market and
be a part of the African development story. Properly planned and sustainable urban infrastructure will be one of the
most important development needs of this century, and Indian firms have the expertise and the low-costs to deliver
in Africa.
Chemicals
India has a well developed petrochemical sector and is a successful exporter globally, including to African countries
(see Table 2). On the other hand, several African countries such a South Africa, Egypt, Algeria, and Morocco have
well developed chemicals industry. Some of the northern African countries like Morocco are significant producers
of fertilizers. The growth of emerging economies and new industries in industrialized countries will create a lot of
19
demand for low-cost high quality chemical products. Given the natural resource endowments, African economies
have the potential to become low-cost global production hubs for the chemical industry. Co-operation, in terms
of technology, supply chains and market development between Indian and African countries can go a long way in
building their capacity to emerge as such global production hubs.
There is also a strong possibility of expansion of trade in such chemical products. India currently exports a large
variety of value added petrochemical products as well as other inorganic chemicals. African economies given their
resource endowments sulfur, naphtha, and oil can become exporters to India of different varieties of petrochemical
and fertilizer products. Thus, there are possibilities of both vertical and horizontal integration of chemical production
between Africa and India. However, this would require the development of long-term relationships between private
sector partners in India and Africa. Development of logistics and reduction of transportation costs will also go a long
way in the development of trade and co-operation in this sector.
Pharmaceuticals
India is one of the world’s leading producers of generic drugs and has a cutting-edge bio-technology sector. India
is also a major exporter of pharmaceutical products to Africa.. Given their respective development status and
population size, both India and Africa need large and cost-effective pharmaceutical resources. This provides India and
the African countries with an opportunity for trade, joint-development of drugs, co-operation in Intellectual Property
Rights (IPR) and technology transfer issues. The acceptance of compulsory licensing by WTO was a major victory
for emerging countries and for India and Africa in particular. There is need to do more in terms of development of
simple formulations that specifically target developing country needs (with reference to common diseases in tropical
and sub-tropical regions). Given its competitive edge in research and production of generic pharmaceutical products
as well as niche formulations geared for tropical and sub-tropical climates, India can take the lead in pooling together
of research facilities in various African countries. Indian pharmaceutical firms can seek systematic mergers in Africa
to consolidate drug supply, branding, and enforce greater quality control.
The global market for generics in which India, and to a lesser extent South Africa have a competitive cost-advantage
is expected to be around USD 200 billion by 2020. The current size of illegal generics market, a market that could
be brought within the legal system if India and some of the other developing countries, including major African
economies such as South Africa, Nigeria, Egypt, Kenya etc took the lead in creating a robust global initiative on IPR,
is said to be in the range of USD 60 to 80 billion . Thus, the Indian pharmaceutical companies, with co-operation in
research, marketing, and IPR, in Africa (and other part of the developing world such as South-East Asia and Latin
America) and with a little government help (incentives and financing) can potentially emerge as the leaders in this
roughly USD 300 billion market globally.
Both India and Africa are host to some of the richest bio-resources. A joint protocol on bio-diversity and traditional
knowledge, an area were India has emerged as a pioneer with its Traditional Knowledge Digital Library (TKDL) , is
a priority area for co-operation. Piracy of genetic resources is a major concern for both India and African countries,
and need to be addressed by such a protocol. Given their diverse genetics resources, and India’s relatively advanced
genetic-technology sector, India and Africa need to come up with strategies to partner and maximize the benefits of
their bio-resources.
Health
India has emerged as a major health-tourism destination, and many African countries have great potential in this area.
Countries like Egypt, Morocco, and Tunisia are much closer to Europe compared to India, and are popular tourist
destinations, and can leverage their locational advantage for medical tourism. They are also closer to the Gulf States
and are Arabic speaking. Countries like Kenya and Mauritius are popular tourism destinations, and can combine their
traditional tourist appeal with attractive medical tourism infrastructure. As medical costs tend to rise in developed
economies and as negotiations in GATS and other economic pressures lead to insurance policies becoming more
mobile in terms of billing jurisdiction , medical tourism related services exports can only be expected to rise, especially
from high-cost destinations such as EU and the Gulf States. Also, as African economies rapidly urbanize and the size
of their middle-class increases, the demand for better, more effective health-care will increase. Middle-class lifestyles
will lead to the demand for treatment of new types of ailments that are related to such urban lifestyles. There are great
opportunities for Indian companies to invest in Africa, both to meet middle-class Africa’s health needs, as well as to
tap opportunities in health tourism from EU and the Gulf States.
Rachel Nugent (2008), The Deadly World of Fake Drugs, Foreign Policy, October, pg. 56
20
http://www.tkdl.res.in/tkdl/langdefault/common/home.asp?GL=Eng
21
20
A major initiative would be to create an India-Africa working group of large public and private sector health-care
companies. The agenda for this working group would be to:
• Compare notes on the challenges they are facing
• Seek joint-venture and investment opportunities
• Explore possibilities of strategic mergers. Strategic mergers can be on the basis of their respective areas
of expertise in the health arena, or for seeking investment in the form of venture capital or Initial Public
Offering (IPO) in the global financial marketplace
• To create leveraged partnerships through joint bidding of inputs in the health-sector supply chain. For
example pooling together of support-services (billing, medical transcription, legal support) or for purchase
of technology inputs (sophisticated machines, testing processes, labs).
• Co-operation on research and development activities
Large sections of both India’s and Africa’s populations are poor, especially in rural areas, and the health delivery
systems in place for them are of very low quality. Figure 8 below compares per capita health spending in India and
Africa with global averages.
Figure 8: Per Capita Health Spending: Comparing Averages

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Creating public-private partnerships towards providing relatively high-quality, but low-cost health-care to its citizens
should be a high priority for both India and the African countries. The proposed India-Africa working group on
healthcare should also include in its agenda a knowledge initiative that brings together the grass-root experience of
health-care professionals who are working towards this goal of low-cost universal healthcare. This initiative shall
allow practitioners to learn from each others successes and mistakes. But the initiative should not just be a knowledge
bank. Private sector stakeholders, with government support, can make this initiative a dynamic institution for venture-
capital for sustainable grass-roots private initiatives in health-care. It can evolve as a platform for online exchange of
information, consulting, and raising capital. The exact modalities of how such an institution can come about should
be a priority within the India-Africa consultation process on healthcare co-operation, which as this paper suggests,
should be in the form of a private-public stakeholder working group.
Another primary area for health-care sector co-operation for India and Africa is the fight to eliminate the threat
of AIDS, an epidemic that has the potential to seriously disrupt the social fabric of both India and several African
countries, and thus have significantly negative economic consequences. India and Africa have co-operated on AIDS
related issues, bilaterally as well as multilaterally. However, time has come for a more concentrated effort, one that
takes within its ambit the resources and enterprise of the private sector. Yet again, the exact modalities of such co-
operation on AIDS (that includes private sector stakeholders) should be a priority on the agenda of the proposed
India-Africa working group on health.
22
For example US insurance companies allowing their US customers to use Indian hospital facilities and bill them directly
21
IT, IT Enabled Services (ITES), and Professional Services
The export of professional services, such as consultancies, legal services, education, health and IT enabled services, is
a potential source of growth and employment creation for an increasing number of developing countries. India has
been consistently identified as the leader among all developing countries as an export base for IT and ITES . However,
some African countries like Senegal, Ghana, Egypt, Kenya, Morocco, and South Africa have recently featured as
potential locations for competitive IT and especially ITES exports . The reasons are not hard to see. For example,
Francophone African countries like Morocco and Senegal are ideally placed for leveraging the French speaking market
in Europe (countries like France, Switzerland, and Belgium etc). Arab speaking markets in the Middle-East can be
leveraged from countries like Egypt. Skilled, but lower cost human resources with English language speaking skills are
available in Kenya, Ghana, South Africa, as well as in Egypt.
The Indian ITES companies are seeking to expand their geographical footprint to leverage their successful business-
model and reach out to newer markets. The search for new geographies are driven by cost factors as Indian firms seek
lower cost labor in other countries, by the need for more human resources as the talent in India dries up to a certain
extent, and by the need for linguistic diversity required to enter markets as diverse as Europe (Spanish, German,
French, Italian, Russian), Middle-East (Arabic), and East Asia (Japanese and Korean). In many cases, Indian firms
are moving up the value-chain in IT and ITES, and seek geographies to move the more basic, more standardized
functions to these countries (given lower costs), while retaining the core businesses in India. Thus, Indian IT and
ITES firms have become major investors and job-creators across the world.
Given Africa’s growing competitiveness and Indian IT and ITES expansionary needs, they are a perfect match for
partnerships. The example of HCL’s investment in Africa provided in Box-1 underlines the increasing synergy
between Indian IT and ITES and African locations. However, a few additional strategies can be of great help in
pushing forward this agenda of trade in professional services. These are:
• Evolve a standardized certification mechanism for a host of professional services that remain outside
formal certification standards. Indian professional services bodies like NASSCOM (National Association of
Software and Services Companies) are already working towards this goal, and can take the lead
• Indian and African firms, with regulatory help from their respective governments, work towards common
standards in professions, where standards have already been established, for e.g. nursing, architecture,
medicine etc
• Create Indo-African worker exchange programs that ensure temporary movement of skilled workers. Indian
and African firms and governments need to work together such that movement is temporary and does not
become a source of illegal migration.
• NASSCOM should take a leadership role in establishing relationships between Indian and African companies
to train African workers in IT and ITES roles. This would be in Indian IT and ITES firms’ interest as they
would be embedded in the human resource network in Africa, and would be able to acquire African talent and
integrate them to their work process directly, or through sub-contracting via African partner companies.
Tourism
Tourism is an important activity for both India and Africa, and brings with it the potential to deliver economic
development and foreign exchange earnings, job creation, income distribution and balanced regional development.
However, currently both India and Africa are not doing as well they should in attracting tourists given their potential.
Figure 9 below shows that India accounts for less than 2% of global tourism receipts in dollar terms, while whole of
Africa (which includes major destinations like Kenya, Morocco, Mauritius, and Egypt) accounts for just 3%. Figure 9
also shows that while India and African tourism receipts have increased in the recent years, growing by over 60% and
50% respectively, this growth has not been a trailblazing achievement given that global tourism receipts also grew by
an impressive 40%.
AT Kearney Locational Index

23
Ibid
24
22
Figure 9: Tourism Receipts
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Source: World Development Indicators and Authors’ Calculations
India and Africa have a great culture heritage, diverse natural vistas, incomparable bio-diversity, and a rich variety
of cuisines, art, textiles, and adventure locales. However,what both lack is a tourism infrastructure that adequately
addresses the needs of the well-heeled, value-added tourist visitor. There is an acute paucity of good, safe budget
hotels, good airport facilities in tourist centers, comfortable bus routes, and in many cases physical safety of visitors.
Issues like access to good health facilities at short notice, ATM machines, safe but cheap food etc. also compound
problems for both the countries. In Africa’s case some countries have done tremendously well in terms of building
such infrastructure like Egypt, Morocco, and Mauritius, while others are lagging behind. In the case of India too some
states have done better than others, like Rajasthan, Goa and Himachal Pradesh, while others lag behind. There has
been a surge in investments in the hospitality and tourism industry in India fed not just by the demand from foreign,
but also the domestic tourists. India’s large middle-class is increasingly a big source of tourism revenue, not just in
India, but globally.
Both Indian and African policy-makers need to realize the importance of tourism. There is a direct link between
tourism and ecological preservation, as well as the preservation of culture and the arts. There is much that India and
African can do together to nurture their tourism sectors. Some specific measures that need to be sustained and some
that need to be initiated with reference to tourism are:
• Opening up investment in hospitality sector. Identifying areas where Indian private sector can invest in
Africa
• An Indo-African Tourism Business Council that helps African countries, especially the lesser know
destinations show-case their attractions to the Indian middle-class market
• The Tourism Business Council can also serve as resource to exchange ideas on the best practices of tourism
management and learn from the mistakes and successes of each other.
• India can provide help in development of English language skills for workers in the hospitality sector.
• Work in conjunction with the Tourism Business Council to develop low-cost training modules in hospitality
management, ecological tourism and adventure tourism. 23
• Developing low-cost airline connections between India and Africa
• Help governments promote the shared heritage of India and Africa to attract visitors.
• Jointly develop effective research and data collection to understand the needs of the global tourism sector
that is often under-represented in policy making.
• Help small African states that are over-dependent on tourism to diversify.
IV. Leveraging the Demographic Dividend: Indo-African Cooperation in

Human Resource Development
India and Africa are both on the verge of a huge demographic opportunity. Over the next couple of decades, India
and Africa will have some of the largest numbers of young, potentially and economically active people in human
history. The right kind of investment in human capital for India and Africa’s young can unleash a huge energy of
productivity and creativity, and lay the foundation of long-term global prosperity. However, if such investments are
not made, it will lead to large number of young men and women living on the margins of society and the global
economy with serious negative implications for political stability and social order. By 2025, Africa will have 783 million
of the world’s young, compared to just 360 million in 2005. India will have 605 million of the world’s young in 2025,
up from 592 million in 2005. Figure 10 below summarizes India and Africa’s share of the world’s youth, relative to
OECD countries and China.
Figure 10: Share of World’s Youth

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Source: UN Population Statistics
As Figure 10 shows, India and Africa will account for greater share of the world’s youth compared to OECD
economies and China. Gradual reforms in India’s education sector and increasing participation of the private sector in
tertiary, technical, and professional education have created a large pool of skilled human resources in India that have
added an edge to India’s competitive profile within the global economy. To further enhance India’s competitiveness,
the government has established the National Skills Development Corporation (NSDC), to work with the private
sector to create adequate supply of education services so as to leverage India’s huge youth endowment to transform
its economy. While the most apparent face of such competitiveness is in the IT and ITES sectors, the full-spectrum
of the impact of India’s talent pool is felt across the economy in sectors as diverse as engineering, automotives,
pharmaceuticals, infrastructure, agro-processing, and the media.
However, Indian education sector is facing enormous challenges. It has huge shortage of qualified teachers, most
public universities have poor governance, and thus education quality is very poor, curriculum has remained unchanged
for decades in many cases, causing them to become irrelevant to contemporary global economy and society. The
Indian education system also faces a huge brain drain as most of its best and the brightest often end up in US or
European graduate programs, and their talents absorbed by the US and European economies. Traditionally, very little
attention has been paid in India to intermediate skills creation relevant to manufacturing and agro-processing sectors.
Polytechnic education centers have been suffering from the lack of funds, paucity of qualified teaching staff, and
24
poor infrastructure. As demand for education continues to grow, such challenges will only be exacerbated. Figure 11
below shows that tertiary enrollment in India increased from 9.4 million in 1999 to 11.8 million in 2004. In Africa,
enrollment increased from 5.9 million to 7.6 million.
Figure 11: Tertiary Enrollment
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Source: UNESCO Education Statistics and authors’ calculations
According to Figure 11, tertiary education capacity increased steeply between 1999 and 2004 for both regions; by
almost 28% in Africa and by 26% in India. But despite such a steep increase in capacity, only a small fraction of Indian
and African students can actually avail higher education, and many never get to pursue the academic specialization
they desire.
All of these challenges are all too familiar for Indian and African education practitioners and policy-makers. Given
that investment in education and transformation of their enormous young populations can make or break Indian and
African economies and societies, there are very strong incentives for both parties to co-operate aggressively in this
sector. India has already made a very strong commitment in Africa’s human resources through an investment of USD
1 billion in the Pan-African Network (PAN) that aims to bridge the digital divide in Africa providing e-education and
e-medicine services to the member countries of the African Union (AU). This network will link five regional African
universities, 53 learning centers, 5 regional super specialty hospitals and 53 remote hospitals with each other ,and also
with 6 Indian universities and 5 super specialty hospitals.
However, more needs to be done in terms of proactive India-Africa education co-operation, and the private-sector in
both the regions need to be part of this process. Some of the key areas of intervention are:
• A Mutual Recognition Arrangement (MRA) on degrees and certifications and an India-Africa council for
oversight on syllabi and teaching standards. The oversight council will have the right to take punitive action
against errant institutes
• A public-private initiative to increase investment of successful Indian professional education institutes in
Africa. Indian institutes like NIIT, Amity Group, Manipal Group etc can rapidly expand their presence with
some help from Indian government given that African states give them the right of establishment
• Creation of India-Africa consultative mechanism that includes members of academia and private sector to
identify priority area of intervention. This consultative mechanism will also come up with recommendations
on curriculum reform and suggest investment strategies in the education sector
• Creation of a special scholastic visa regime that allows temporary movement of students and teaching staff
between India and Africa. It should also include the temporary right to work for African students who finish
a full-time degree program in an Africa partner country for up to two years. The added advantage of such
a program would be that it would increase people to people contacts between India and Africa, provide the
exchange of work experience, and create professional networks between Indian and African professionals
• Brain drain of academic talent is even more acute in Africa compared to India, According to the Association
of African Universities over 1000 African universities have watched their learning resources evaporate 25
in recent years. About 23,000 lecturers emigrated each year from African universities to countries where
conditions were more congenial. The vacancy rates in the academic units of African universities range from
34 to 50 per cent. Of the nearly 2,000 African PhD degree awardees in USA and Canadian universities
between 1986 and 1996, less than 40 per cent returned to Africa. India too is facing a huge shortage of
talent. A bilateral treaty that allows African academics to work and do research in India for one semester,
while spending rest of the year in an African campus will be a win-win for both regions. It will allow African
Universities retain talent as they will have African academics spending 6-8 months in African campuses.
It will allow African academics access to India’s relatively well developed education system and research
centers, while helping Indian Universities get access to Africa’s best and brightest to meet their own short-
fall in qualified teachers.
• A protocol on co-operation on secondary and primary education, that allows Indian and African educationists,
NGO working in the grass-root educational sectors, and other policy-makers to learn from each other and
create expertise on dealing with the challenges of bringing low-cost, quality education to large sections of
their respective populations.
• Encouraging Indian stakeholders in e-learning and distance education such as Indira Gandhi National Open
University (IGNOU), Babasaheb Ambedkar Open University, and private sector help players to develop and
deliver Africa-centric course in collaboration with African institutes and Universities. As a part of Indian
economic aid to Africa, India can choose to subsidize the cost of delivery of such programs. Such e-learning
and distance learning initiatives can be synergized with the Pan-African Network for cost-effective delivery.
• Create teacher training programs by creating post-doctoral and post-graduate programs in lead Universities.
Such programs can be through the distance learning mode, combined with a brief on-campus stay.
• Encourage leading Universities to collaborate in offering online lectures and visiting faculty programs to less
endowed institutions.
• Create a ‘adopt a library’ program, where well endowed Universities adopt a less endowed developing
country library and makes available all online material to it (i.e. journals and other research databases). The
Commonwealth can take an important role in negotiating the intellectual property (IP) payments and cost
of material issues, and provide monitoring and assurance system to prevent abuse of IP.
V. Conclusion: Institutional and Business Linkages as a Facilitator of

Indo-African Engagement
Sections I through IV have highlighted the current level of Indo-African economic relationship, the sectors that hold
promise for the future, and some of the strategies by which sectoral engagement can be enhanced. This concluding
section provides a more focused policy recommendations on two important ways forward for Indo-African economic
engagement; the institutional aspect of trade policy and the more private sector led process of business and civil-
society facilitation.
Engaging Africa through PTA: COMESA, SADC, and ECOWAS

India should reach out to the three major African economic blocs, COMESA, SADC, and ECOWAS as PTA partners.
The PTA process should be fast and transparent, and use a negative-list approach so as to liberalize as many product
lines as possible. But such these PTAs should not be just confined to goods, but extended to services, investment
protocols, and movement of skilled workers. The PTA process must also include a comprehensive framework for
trade facilitation and agreements that ensure that the building of dynamic supply chains using integrated Indo-African
production networks are not held hostage cumbersome Rules of Origin (ROO) regulations. Important elements of
these three PTAs should be:
• A negative list approach to liberalization so as to cover as many product lines as possible
• Inclusion of services such as health, education, telecommunication, tourism, IT and ITES, wholesale trade,
media services, and logistics
• A simple ROO structure that rewards instead of punishing intra-industry trade between India and Africa
and rapid integration of production systems
• Protocol on investment
• Protocol on movement of people, including students and business-people
• Protocol on intellectual property rights, including robust measures to protect traditional knowledge and bio-
diversity
Given the importance of reducing costs of trading, Trade Facilitation should feature prominently on the agenda and
include the following elements
26
• Encouraging private sector participation on Indo-African routes
• Promotion of long-term arrangements between shippers and carriers using incentives such as reduced port
and berthing fees for parties with such agreements and tax-holidays for companies that take part in the
initiative
• Direct services and trans-shipment arrangements, especially the development of a India-Africa route via
key transshipment points. Some key transshipment points that can be considered are Mombasa (Kenya),
Zanzibar (Tanzania), Durban (South Africa), Mauritius etc. Feeder overland and sea-routes would bring
containerized cargo to transshipment point before being shipped forward to India.
• Complementary integrated transport services through strategic partnerships between the large domestic
logistics operators such as CONCOR (India), and Transnet Limited (South Africa)
• Development of a Common Container Electronic Identification (CCEI) facility. This would include an
electronic identification (barcode) for every container and an electronic locking system that prevents
tampering with containers that have already been inspected (by pre-shipment inspection facilities). The details
of the container’s cargo, cargo-valuation, rules of origin documentation, health and safety certification,
bill of lading and all other relevant documents will be fed into a central database corresponding with the
container identification. Once the container reaches its destination, scanning the barcode will provide all
relevant information to the authorities. This would allow seamless movement (including trans-shipment) of
cargo between Indian and African countries and would serve as an example to rest of the world. For this
purpose, India’s IT and ITES (back-office support to documentation and logistics) could be leveraged to
create a world-class trading environment.
The development of service-sector trade including tourism would require cheap air-connectivity between the three
countries. Business relationships are also dependent on the availability of regular and relatively inexpensive air-travel
for entrepreneurs of the three IBSA countries. Many smaller players would be discouraged from attending trade-
fairs or business summits if the cost of such participation remains high. Intensive co-operation in research and
development is also dependent on cheap air-travel as scientists and experts need to travel to and fro from each other’s
laboratories and other research facilities and attend conferences.
Robust trade in perishables such as cut-flowers, vegetables and fruits often require inexpensive and expedited shipping
through air-routes. Integrated supply-chains in high-value sectors such as electronics, high-end apparel and textiles,
and sophisticated engineering parts and components also frequently use air-routes for shipping given the time
sensitive nature of their value-chains and production processes. Thus, having an efficient passenger as well as cargo
connectivity through air-routes is important too. Therefore, there is a need to include protocols on airline travel as a
part of these PTAs. Important elements of these protocols are:
• A strategy where Africa based Airlines uses Mumbai as its Asian hub, with Air-India providing onward
destinations to West Asia and South-East Asia, while India based airlines uses select African air-ports as
its African hub and different African airlines provides onward destinations all over Sub-Saharan Africa.
Agreements between Indian and African airlines would provide integrated services (through code sharing
agreements), and provide the passenger volumes to increase connectivity and reduce costs.
• A similar harmonization of regional cargo-movements with the creation of Asian, and African, hubs in
India and Africa with participation and investment of private sector stakeholders.
While the governments of India and the African states can work towards the above discussed institutional mechanisms,
the actual implementation can only be made possible if the business communities of India and Africa show proactive
interest. The following paragraphs outline key areas of intervention for business groups in conjunction with the
government to actually implement sectoral and institutional goals outlined so far in this paper.
Indo-African Cooperation: Private Sector led Trade and Business Facilitation Initiatives
Trade and business facilitation refers to a range of priorities that includes creating market access, ensuring
competitiveness by reducing transaction costs, developing human resources, and creating business partnerships. The
first order of business would be to strengthen the linkages between Indian and African business groups. Fortunately,
the old trade and business ties already exist between Indian and African businesses and the presence of a commercially
important Indian diaspora in parts of Africa enhance these ties further. Thus, there is already a strong institutional
basis for bringing together private enterprise stakeholders in India and Africa. Some of the specific goals of Indo-
African business led initiatives should be:-
Institutional Capacity Building for Trade

The institutional capacity building for trade and business facilitation would include improvement in customs
administration, increasing the efficiency of audit mechanisms for non-tariff barriers, streamlining regulatory
27
bureaucracies, and harmonization of rules and standards. This is a very important area for intervention as many
African countries are lagging behind in global standards of trade facilitation. The work-plan for institutional capacity
building would include
• Training programs through which business associations in India and African countries can share their
experiences and find solutions in dealing with the global trading system.
• The development of a common Pre-shipment Inspection (PSI) for customs can be evolved in partnership
between different Indian and African business associations. A comprehensive PSI system that covers all
trade flows between India and Africa could become the globally accepted model PSI that reduces uncertainty
for businesses, reduces transaction costs for importers, and reduces the burden on customs administration
Training in IT enabled systems, that increase the efficacy of administrative functions that regulate trade is another
area where the Indian business associations, in collaboration with their counterparts in some of the larger African
countries such as South Africa, Kenya, Tanzania, Egypt, and Nigeria can successfully intervene to enhance capacity
in the less developed or smaller African countries. Less developed African countries can take advantage of successful
implementation of IT based governance systems developed in India such as the Indian Customs and Excise Gateway
(ICEGATE). To effectively enable Indo-African business groups to operationalize logistical capacity building, the
following strategies can be useful.
• Custom administrations in India and South Africa can take the lead in providing training programs for less
developed African countries.
• Indian and South African business associations can provide help by hosting the trainees as well as by
providing a private sector perspective on the use and efficacy of such systems. By learning from both the
public as well as private sector, executives from less developed African countries will get a holistic training
that would help them implement reforms in their home countries.
Logistical Capacity Building for Trade

Logistical capacity building would include the development of warehouses, rail and road networks, ports and airports
that would reduce the cost of exporting or importing goods. As discussed earlier in the infrastructure section, the
logistical infrastructure in Africa is inadequate for rapid economic transformation and global integration. A major
constraint for the development of infrastructure in African countries is capital and entrepreneurial resources. Domestic
credit to the private sector accounts for less than 30% of the GDP in several African countries. Some key areas to
operationalize logistical capacity building would include:
• The Indian business associations in conjunction with Indian and African governments can build private sector
linkages that will identify opportunity and transfer capital and entrepreneurial capacity to the developing and
less developed African countries
• A forum of leading Indian infrastructure companies, both public and private, with special focus on African
operations can be set under the aegis of Indian business groups. This forum can serve as the nodal point for
a program through which managerial expertise and experience in the logistical sector is shared between the
business associations of various African countries. This sharing of managerial talent and experience can be
achieved through internships and managerial exchange programs between business stakeholders in different
countries.
Entrepreneurship and Innovation Development

Across India and Africa SMEs provide most of the employment and a first route out of poverty. There is ample
evidence that promoting SMEs is a way of ensuring that the poor benefit from economic growth. SME’s are not
important just in the developing/emerging economy context, but are important growth drivers in developed countries
as well. Several innovations and products come out of small start-up companies that can be best described as SME.
The reduction of transaction costs and creating the infrastructure and institutions that support entrepreneurship are
important for the process of what is described as ‘creative destruction’ by economists such as Joseph A. Schumpeter.
Such creative destruction leads to new technologies, new processes, new managerial techniques, and the creation of
new markets. It is the essence of the constant renewal and growth that drives economies forward.
However, SMEs in general, and innovation in particular, can be hampered by inappropriate government policies,
inadequate managerial skills, low productivity, lack of training and/or access to technology and skills, and inability
to comply with trade standards and regulations. An Indo-African SME Initiative, with some government funding
from Indian as well as African states, but co-coordinated by the business associations can go long way to assist SME
meet global challenges. Such an Indo-African SME initiative should look towards other sources of cooperation and
funding such as the World Bank and the Commonwealth Fund for Technical Co-Operation (CFTC). Some specific
recommendations for the business associations with reference to innovation and entrepreneurship are:
28
• Indian and African business associations take the lead in developing a consultative and research mechanism
that will be an information resource for prospective investors from India who are looking to invest in
promising start-ups in technology or other types of entrepreneurial innovation in Africa
• Business associations should explore means to develop a robust venture capital market. Develop strategies
for targeting institutional investors in financial centres all across the world interested in Small and Micro
credit and venture capital
Civil Society Facilitation

While Trade and Business Facilitation will enable millions of citizens in the poorer African states to improve their
material and institutional condition, and add to India’s long-term economic growth, it cannot be the only focus for
Indian and African business leadership. A holistic model for improving the lives of citizens across India and Africa
will have to take into account civil society and recognize the role that it plays in upholding the principles of democracy,
human rights and ecological balance that are an integral part of the ideological commitment of India and the guiding
principles of the African Union. Businesses associations should come forward to facilitate to offer institutional
support for non-business oriented civil society linkages between India and Africa. The governments of Africa and
India, with help of the private sector should also be able to make best use of diverse civil society groups working in
various specific fields at the grass-roots. Priority areas where civil-society groups can play a pivotal role are
• Gender Empowerment
• Administrative Transparency and Local Self-Government
• Environment
• Health, including issues of HIV/AIDS
• Universal Access to Education
• Micro-credit and Micro-enterprise
All of these areas are crucial for sustaining equitable development as well creating long lasting democratic solutions,
for the several challenges that citizens face across the African continent, as well as in India. To that end, there is
a need to create a mechanism through which civil society groups can come together to exchange their experience
and expertise with each other. Indian and African business groups can work together to create training programs
that would help such grass-root civil society groups to acquire specialized training for their work. The best way to
operationalize both these objectives would be to:
1. For Indian and African governments to identify civil-society groups working in priority areas in different
African states and in different parts of India
2. To create partnership program with leading Universities in India and in African countries, especially members
with considerable resources in higher education such as South Africa, Kenya, Tanzania, Nigeria, Egypt,
Senegal and Ghana to create specialized professional training for civil society groups.
3. Governments should work in conjunction with business groups to develop sources of funding (scholarships,
fellowships etc) to fund such training.
4. Indian and major African business groups can help facilitate forums that enable civil-society groups find
appropriate partners in other countries working in similar fields so that the bigger, well established groups
can play a mentorship role for the groups that are starting out.
The above discussion provides a bird’s eye-view of an agenda that on the face of it looks very ambitious. However,
the potential for trade, business, and institutional linkages between India and Africa is so substantial that it requires
an ambitious vision on the part of government and business policy-makers. On its part, the Indian government will
have to engage the major African economic blocks and take the initiative to negotiate comprehensive PTA with the
elements discussed earlier in this Section. The Indian government will also have to coordinate its various trade and
development initiatives in Africa with the Indian private sector so as to best target the sectoral goals outlined in Section
III, human resource development goals in Section IV, and business facilitation goals outlined in this Section. Indian
businesses need to take the initiative to create business-to-business institutions that act as catalysts for implementation
of this broad agenda. Government and business need to work in tandem; one creating the means, the other meeting
the goals. India and Africa have both suffered colonization, and have struggled to lead its millions out of poverty.
Working together, they have the potential to usher in a new era that is defined by prosperity, liberty, and peace for
their people.
29
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30
Annex: African Regional Groups
The countries highlighted are the ones that were included Cameroon was included in the ECOWAS grouping more
in aggregate data for that group in this paper’s calculations as a member of the region rather than a formal member
of aggregate group statistics. of the group
Common Market for Eastern and Southern Southern African Development Community
Africa Angola
Burundi Botswana
Comoros Lesotho
D.R. Congo Malawi
Djibouti Mozambique
Egypt Swaziland
Eritrea Tanzania
Ethiopia Zambia
Libya Zimbabwe
Kenya Namibia
Madagascar South Africa
Malawi Mauritius
Mauritius Democratic Republic of the Congo
Rwanda Madagascar
Seychelles Seychelles
Sudan
Swaziland Arab Maghreb Union
Uganda Algeria
Zambia Libya
Zimbabwe Mauritania
Tanzania, though is no longer a member of COMESA Morocco
(since 2000), it was included in as a part of the COMESA Tunisia
group, as a representative of the region rather than a
formal member of the regional grouping Egypt was added into the AMU group, more as a
representative of the region rather than a formal member
Economic Community of West African States of the group
Benin,
Burkina Faso
Cape Verde
Côte d’Ivoire
The Gambia
Ghana
Guinea
Guinea Bissau
Liberia
Mali
Niger
Nigeria
Senegal
Sierra Leone
Togo 31
Jayanta Roy
Confederation of Indian Industry
Pritam Banerjee
School of Public Policy, George Mason University
With assistance from
Priyanka Goel
Confederation of Indian Industry
32

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A Paper for the

5th CII-EXIM BANK

The report is organized as follows:

I. The African Economy: Rapid Development and Rising Challenges

$IULFD ,QGLD :RUOG

Source: Authors’ calculations based on World Development Indicators, World Bank

Source: Authors’ calculations based on World Development Indicators, World Bank

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   

Figure 5: India’s Trade Deficit/Surplus with Major African Blocs

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Both India and China in list of Top Export Markets

Source: CIA Factbook China in list of top export markets

Table 3: Hourly Compensation in Selected Countries

III. Africa and India: Integrating Production, Knowledge and Entrepreneurship

Table 6: Indian Contribution to African Commodity Demand

Iron Ore (000 tons):

Agro-based Industries, including dairy farming

Table 9: Some Key Infrastructure Indicators in India and Africa

Jewelry Export Promotion Council (GJEPC)

OECD 900 995

India 326 538

Africa 349 658 2(&'

Source: United Nations Population Statistics

Figure 8: Per Capita Health Spending: Comparing Averages

       

Source: World Development Indicators and authors’ calculations

AT Kearney Locational Index

      

       

Source: World Development Indicators and Authors’ Calculations

IV. Leveraging the Demographic Dividend: Indo-African Cooperation in

Figure 10: Share of World’s Youth

Source: UN Population Statistics

Figure 11: Tertiary Enrollment

Source: UNESCO Education Statistics and authors’ calculations

V. Conclusion: Institutional and Business Linkages as a Facilitator of

Engaging Africa through PTA: COMESA, SADC, and ECOWAS

Institutional Capacity Building for Trade

Logistical Capacity Building for Trade

Entrepreneurship and Innovation Development

Civil Society Facilitation

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