Why Africa Matters To India? The Energy And Agricultural Dimensions – Analysis

By Malancha Chakrabarty*

India shares a glorious political past with Africa, with some of the initiatives going back to Nehru’s ideas of independent foreign policy, Non-Aligned Movement, and Third World solidarity. Compared to our political interactions, India’s economic ties with Africa have been of a fairly recent kind.

Economic liberalisation in India closely integrated the Indian economy with that of the world, putting India on a higher growth path. India’s foreign policy goals have also changed and India now aspires to play a major role as a global economic power.

Positive developments have occurred in Africa as well. Africa is no longer regarded as the ‘hopeless continent’ and is now home to some of the fastest growing economies of the world. It is also an important source of resources, particularly crude oil, which is essential to sustain India’s growth. Moreover, Africa is a huge export market for India. Indian private sector is also investing heavily in many African countries. As a result, India’s approach towards Africa has shifted from the ideological realm to economic diplomacy in the last two decades.

Cooperation in energy and agriculture are the two critical pillars in India’s economic engagement with Africa. Energy imports from Africa increased dramatically from mid-2000s and Africa now accounts for about 18% of India’s oil imports. Nigeria is India’s largest source of oil in Africa followed by Angola. Apart from oil, Africa is also an important source of coal (South Africa and Mozambique), natural gas (Algeria, Nigeria and Egypt) and uranium (Niger, Malawi, South Africa and Namibia).

India’s engagement in Africa’s energy sector is not limited to energy imports. Although widely regarded as a latecomer in Africa’s energy sector which was originally dominated by western companies and now increasingly controlled by Chinese state-owned companies, many Indian companies have made investments in African countries.

ONGC Videsh is the most active Indian company in Africa’s oil market with a total of five exploration projects in Libya, Nigeria, Egypt, and Sudan. Indian private sector companies such as Taurian Resources Private Limited and Varun Energy Corporation have also invested in the uranium sector.

Agriculture is another important sector in India-Africa partnership. Bilateral trade in agricultural goods has also grown rapidly. Agricultural goods currently account for about 11% of India’s total exports to sub-Saharan Africa and about 7% of India’s total imports from sub-Saharan Africa.

India’s agricultural exports grew more rapidly from 2010 onwards mainly on account of the huge non-basmati rice exports from India to Africa. Indian parboiled non-basmati rice is cheaper than Thai rice which makes it more competitive in the African market. Major destinations for Indian rice in Africa are Benin, Senegal, South Africa, and Liberia.

Beef, sugar and fish are other important agricultural exports from India to Africa. About 15% of India’s beef (buffalo) exports are destined to Africa. Africa has also emerged as an important source of cash crops such as shelled cashew, vegetables, nuts (fresh and dried), coffee, tea, and spices for India. Agricultural imports from Africa are likely to increase further in the future as many African LDCs stand to gain from India’s Duty Free Tariff Preference (DFTP) Scheme announced in 2008.

Africa’s agriculture sector presents a unique opportunity to Indian investors. So far, about 80 Indian companies have invested US$ 2.3 billion in Ethiopia, Kenya, Madagascar, Senegal, and Mozambique. Indian investors have also articulated their plans to spend $2.5 billion on millions of hectares of land in East Africa, to grow products such as maize, palm oil and rice for export to India.

Many business enterprises such as Jain Irrigation and Kirloskar Brothers have established presence in several African countries in farm and related sectors. Many African countries have also offered land on lease to Indian farmers and a number of farmers from Punjab and Andhra Pradesh have already migrated to these countries.

The Andhra Pradesh government has also agreed to send about 500 farmers to cultivate 50,000 acres of land in Kenya and 20,000 acres of land in Uganda. Indian and African interests also coincide in multilateral trade negotiations at the WTO. African countries and India have moved several joint proposals such as Agricultural Framework Proposal and Protection of Geographical Indications in World Trade Organisation (WTO) and World Intellectual Property Organisation (WIPO).

Therefore, deeper engagement with Africa is imperative for India. Economic relations between India and Africa have intensified in the last decade but there is an urgent need to consider the role of other big players such as China and Brazil in Africa, particularly in the energy and agriculture sector.

Harping on India’s shared history with Africa may not be in India’s long term economic interest. India needs to do much more than hosting grand events in New Delhi. Its approach towards Africa needs to be much more structured, development cooperation in Africa must be closely linked to India’s economic interests, and financial packages to Africa must be more generous.

*Malancha Chakrabarty is an Associate Fellow at the Observer Research Foundation. She can be reached at [email protected]