Africa's Asian involvement
China, India and the Indian Ocean economy
ASIA-PACIFIC TECHNOLOGY NETWORK
20th June 2013
The Indian Ocean Rim
Africa ‐ China
Africa ‐ India
• Focused on triangulation of business opportunities in and
between high growth markets, including the BRICS
• Established by market specialists, with years of experience
working with corporate and government clients.
• Access to real & qualified business opportunities and projects.
• Provides business intelligence briefings, strategic advice, and
business development support.
The Indian Ocean Rim - Shakeel Mughal
20 Member states of the IOR: - Maritime Safety and Security, Trade and Investment Facilitation,
Fisheries Management, Disaster Risk Management, Academic and Science & Technology
Cooperation, and Tourism and Cultural Exchanges
The Forgotten Continent
Africa – Shakeel Mughal
Sub-Saharan Africa has 30% of the world’s proven mineral resources,
making it a key partner both for the developed world and for the
industrialising economies of China and India.
Decades of underinvestment have left the continent with an infrastructure
ill-equipped to deal with the burgeoning demand for its exports.
Generalised perceptions of Africa’s risk profile do not do justice to those
countries which have made considerable economic and political progress
over the last 15 years.
For those with the necessary regional knowledge and experience, this
mismatch between perceptions and reality affords a real business
Satellite view of the African Continent
illustrates the extent of the
underinvestment in energy
Estimated infrastructure backlog, and
therefore investment opportunities,
currently represent in excess of
US$120bn over the next 10 years.
Abundance of Raw Materials
30% of the world’s proven
Only 12% of land mass had
Asia currently accounts for 32%
of Africa’s exports.
Africa is a key partner for the
developed world and for the
industrialising of economies of
India and China.
Africa - Oil & Gas
New finds in the East Africa and
Chinese and Indian companies
active in exploration.
Both China and India major
importers of crude oil from Africa.
Africa’s Top Trading Partners
China - $109.1 billion
United States - $90.5 billion
India - $49.9 billion
Germany - $31.7 billion
France - $30.5 billion
Africa and the IOR
Africa has a diverse levels of political stability and sovereign risk.
Apart from China and India; Malaysia and Australia have active interests in
A strong Malaysian community exists in South Africa dating back to the late
Malaysian interests have been sporadic; peaked under the Mahathir
Australia is also helping to strengthen rule of law and justice systems in
Africa, by providing capacity building training and international legal
Australian companies active participants in the resources and agricultural
India and China in Africa
China’s exports to Africa grew by 48% annually
between 1994 and 2010, compared to 14% for
India’s Africa policy shows significant differences
with China’s scramble for Africa.
India-African trade pattern appears to be more
The ‘softer Indian way’ in Africa is India’s unique
pathway to power.
Africa - China
China started taking an interest in Africa during the second half of the 20th century.
They initially supported newly independent countries who wished to follow Chinese
socialist ideology with friendship deals.
China is a pragmatic partner, working with a variety of governments, and focusing on
commercial rather than political issues.
Most Chinese investment in Africa are still state sponsored.
The Chinese private sector is becoming increasingly active in Africa.
China has become an active investor in the resources sector to support domestic
demand, but also looks to infrastructure, markets, manufacturing and agriculture.
Chinese funds are also targeting and supporting Chinese opportunities in Africa.
Chinese tourism in Africa is rising
There are significant challenges for China in Africa in terms of perceptions and
• China is going out…
– Policy drivers for strategic reasons
• Resources, supply chain security, new markets
• Trends & Transitions
Economic reform & the private sector
Domestic consumption vs trade & fixed asset investment
Overseas Direct Investment & Going Global
ODI. Up, Up & Away
– Since 2000
– ODI vs FDI
Source: IMF, End 2011
– Developed &
China's overseas investment
Largest recipient of
• Differing drivers
SOURCE: IMF STOCK OF OVERSEAS DIRECT INVESTMENT (END 2011)
• How Much?
• Unreliable numbers
• Hard to measure…
Hong Kong ($262bn)
Cayman Islands ($21.7bn)
South Africa ($4.1bn)
Source: IMF, End 2011
A Numbers Game
– Including official
Source: FT; AidData
Trade. New Horizons
• Broken trade-driven
– US/EU slow-down
– Rising costs
• New resources
– Strategic supplies
• New markets
– Less competition
– Price sensitive
China’s Mixed Offer
• Development Finance
– Cheap money, no strings
• Infrastructure +
– Fund & build
– Resource access + local needs at low costs
• E.g. US$6bn committed to Sierra Leone for development of road,
rail, port, logistics, industrial park…and mining
• China gets markets and supply chain Infrastructure
– Cheap but controversial
• Lack of transparency
• Political risk
• Expectations vs delivery
– Cost overruns, quality issues
• Business and politics don’t mix well
– Different drivers, stakeholders
– Bribery and corruption risk
• Employment / integration
– Conflict risk
• Management, culture & communications
Problems & Prospects
• Problems in the news
Gabon: Oil, iron ore legal disputes
Ghana: Illegal gold mining arrests
Zambia: Coal mining licenses revoked
Zimbabwe: Controversial diamond mining
• Prospects too
Resource & infrastructure development
Special economic zone development
Trade as well as investment
Increased private sector role
• Critical issues
– Political sensitivity, project due diligence, delivery support
Africa - India
India has links with Africa dating back to early 19th century.
Late 19th century, the British brought in skilled and unskilled labour from India to
build infrastructure and develop agriculture.
Indian traders followed into Africa and over several generations have embedded
themselves into local economies. Introduced the concept of “Duka”.
The Indian diaspora in Africa are skilled at building businesses and participating
in local economies.
The Indian diaspora and the local Africans have at times had difficult relations.
Indian companies see Africa as a continent for tapping into mineral resources
in-order to feed the growing Indian economy.
Indian government has not made significant state sponsored investments in
India and China have only become competitors in Africa in the last 10 years.
India – Trade and Investments
Current levels of trade around $50Bn a year.
Lead by the Indian Private sector. Africa is a new
investment destination for the increasing global
profile of India’s multinational corporates.
Total Indian investment in Africa is upwards of US$
Africa recorded 26 new manufacturing projects from
Indian companies in 2011, a rise of 44% from 2010.
Between 2003-2009, 70 Indian companies invested
in greenfield projects in Africa, totaling US$ 25
billion; this represents close to 5 percent of total
greenfield FDI projects in Africa (African Development
India’s Exports to Africa
LDC* vs. NON-LDC
Total Exports to
$ 24.7 bn
USD bn in Africa
$ 17.5 bn
Source: Commerce Ministry, India
*Least Developed Countries
$ 7.2 bn
India’s Imports from Africa
LDC vs. NON-LDC
Total Imports from
$ 43.2 bn
USD bn in Africa
EGYPT A RP
$ 9.4 bn
$ 33.8 bn
Source: Commerce Ministry, India
Indian conglomerates like the Tatas, Kirolaskars,
pharmaceutical firms like Cipla and automobile
companies like Mahindra have undertaken profitable
projects in Africa.
The Tata Group has invested about US$ 300 million till
2012, and plans to triple that amount over the next 3-4
These investments are in the resources, manufacturing,
telecoms and energy sectors.
Other Government initiatives
The Indian government is also financing an "e-network" project to enhance
Internet connectivity in Africa, linking 5 regional universities, 5 specialty
hospitals, 53 regular hospitals and 53 educational institutions across Africa
to Indian universities and hospitals, via a satellite and fibre optic network.
India recently announced a $5Bn loan package for Africa.
An additional US $700 million to establish new institutions and training
programs, in consultation with the African Union and its institutions.
India’s capacity-building programme for African countries. Under ITEC
(Indian Technical and Economic Co-operation) India has provided more
than US $ 1 billion worth of technical assistance & training to African
• The next major growth area in the world.
• Major opportunities but understand and manage risks.