India steps up trade ties in Africa

With its booming economy and growing demand for raw materials for construction and energy, India has turned its eye to a continent most of the West has given up on: Africa.

In South Africa alone, India's commercial relations have grown to more than $2 billion, and African nations have begun traveling to New Delhi and Mumbai (Bombay) to seek the kind of investment and expertise that they used to seek from the US and Europe.

"This is a resource war," says Francis Kornegay, a senior analyst at the Center for Policy Studies in Johannesburg. "You've got the war in Iraq over oil. You've got pipeline struggles in Central Asia. And you've got mineral and energy resources in Africa. It's not necessarily a shooting war, but a competitive environment of international diplomacy where countries like China and India are acting in their own national interests to acquire resources."

In the great 21st-century resource grab, India is still a relatively small player, dwarfed by China. But it has shown recent aggressiveness. For every state-owned African mine that China invests in, India is usually the next-highest bidder, and Indian firms have agreed to nearly $11 billion in investments, with more than $320 million worth of foreign direct investment already in place.

"Today, the scale and pace of China's and India's trade and investment flow with Africa ... are wholly unprecedented," concluded Harry Broadman, Africa-region economic adviser for the World Bank, in a recent report called "Africa's Silk Road."

Unlike China, where all major industry is state-owned, India is not able to order its businesses to invest in Africa. But Navdeep Suri, consul general for the Indian Consulate in Johannesburg, says that Africans find India's model for agriculture and small industries quite attractive. India's own development is often closer to what Africans are used to than China's larger-scale, capital-intensive approach.

"Wherever I've traveled, from Senegal to Ivory Coast to Angola, there is a respect for the Indian model," says Mr. Suri, noting that the Indian government has begun actively encouraging Indian companies to invest in Africa, and even offers African governments a cheap line of credit to hire Indian companies for projects of their choosing. "We can encourage Indian industry to go in, instead of having the state handle it. There are economic opportunities, and there are development goals for African governments, which you can meet best by using the private sector."

India's relatively cheap prices – an irrigation pump from the Pune-based company Kirloskar is one-tenth the price of a similar pump made by the German electronics firm, Siemens, for example – also give India a leg up.

Perhaps for that reason, African nations have begun to make annual pilgrimages to New Delhi, seeking up to $17 billion in Indian investment in everything from oil, infrastructure, telecommunications, agriculture, mining, food-processing, pharmaceuticals, and information technology.

Among a 350-member African delegation that visited India last month, Togo topped the list of investment seekers, requesting $4.6 billion. Following Togo were South Africa's $4 billion request, Ghana's $3.7 billion, and Nigeria's $2.6 billion.

Other than unstable regions like Sudan, Ivory Coast, and Congo, "the rest of Africa is peaceful," says Shipra Tripathi, director of Africa programs for the Confederation of Indian Industries in New Delhi. "Countries like Botswana have a Standard and Poor's credit ratings equivalent to some European nations. Besides, the return on investment in Africa is more."