Africa's Asian involvement
China, India and the Indian Ocean economy
ASIA-PACIFIC TECHNOLOGY NETWORK
20th June 2013
2
Presentation Agenda
Internex Partners
The Indian Ocean Rim
Africa - China
Africa - India
Summary
3
Internex Partners
• Focused on triangulation of business opportunities in and
between high growth markets, including the...
4
The Indian Ocean Rim
20 Member states of the IOR: - Maritime Safety and Security, Trade and Investment Facilitation,
Fis...
5
The Forgotten Continent
Johannesburg, SA
Cairo, Egypt
Nairobi, Kenya
Lagos, Nigeria
6
Africa
• Sub-Saharan Africa has 30% of the world’s proven mineral resources,
making it a key partner both for the develo...
7
Fastest Growing Economies
8
Population Growth
9
The African Middle Class
10
Infrastructure Backlog
• Satellite view of the African Continent
illustrates the extent of the
underinvestment in energ...
11
Connectivity
12
Abundance of Raw Materials
• 30% of the world’s proven
mineral resources.
• Only 12% of land mass had
been prospected.
...
13
Africa - Oil & Gas
• New finds in the East Africa and
Namibia.
• Chinese and Indian companies
active in exploration.
• ...
14
Recent Oil and Gas Activity
15
Africa’s Top Trading Partners
• China - $109.1 billion
• United States - $90.5 billion
• India - $49.9 billion
• German...
16
Africa and the IOR
• Africa has a diverse levels of political stability and sovereign risk.
• Apart from China and Indi...
17
India and China in Africa
• China’s exports to Africa grew by 48% annually
between 1994 and 2010, compared to 14% for
I...
18
China – Jeremy Gordon
19
Africa - China
• China started taking an interest in Africa during the second half of the 20th century.
• They initiall...
20
China’s Drivers
• China is going out…
– Policy drivers for strategic reasons
• Resources, supply chain security, new ma...
21
ODI. Up, Up & Away
• “Going
Global”
– Since 2000
– ODI vs FDI
• Targeting
– Resources
– Strategic
Assets
– Tech
• Brand...
22
China’s ODI
China's overseas investment
Region Total
Largest recipient of
investment
SOURCE: IMF STOCK OF OVERSEAS DIRE...
23
A Numbers Game
• ODI+
– US$260bn
committed?
• US$75bn
invested?
– Including official
and unofficial
• ODI
• Grants/Aid
...
24
Trade. New Horizons
• Broken trade-driven
growth model
– US/EU slow-down
– Rising costs
• New resources
– Strategic sup...
25
Sino – African Trade
26
China’s Mixed Offer
• Development Finance
– Cheap money, no strings
• Infrastructure +
– Fund & build
– Resource access...
27
China’s Challenges
• Lack of transparency
• Political risk
• Expectations vs delivery
– Cost overruns, quality issues
•...
28
Problems & Prospects
• Problems in the news
– Gabon: Oil, iron ore legal disputes
– Ghana: Illegal gold mining arrests
...
29
India – Jeet Jandu
30
Africa - India
• India has links with Africa dating back to early 19th century.
• Late 19th century, the British brough...
31
India – Trade and Investments
• Current levels of trade around $50Bn a year.
• Lead by the Indian Private sector. Afric...
India’s Exports to Africa
LDC* vs. NON-LDC
Total Exports to
Africa
$ 24.7 bn
To LDCs
$ 7.2 bn
(29.1%)
To non-LDCs
$ 17.5 b...
India’s Imports from Africa
LDC vs. NON-LDC
Total Imports from
Africa
$ 43.2 bn
From LDCs
$ 9.4 bn
(21.8%)
From non-LDCs
$...
34
Investment determinants
• Indian conglomerates like the Tatas, Kirolaskars,
pharmaceutical firms like Cipla and automob...
35
Other Government initiatives
• The Indian government is also financing an "e-network" project to enhance
Internet conne...
36
Summary
• The next major growth area in the world.
• Major opportunities but understand and manage risks.
37
Thank You
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Africa's Asian Involvement

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Presentation exploring issues around China and India's trade and investment in Africa. Delivered at Fasken Martineau in London at an Asia Pacific Technology Network seminar in June 2013.. By Jeremy Gordon (China Business Services / Internex Partners), Shakeel Mughal (Tricolom / Internex Partners) and Jeet Jandu (India Trade & Investment).

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Africa's Asian Involvement

  1. 1. Africa's Asian involvement China, India and the Indian Ocean economy ASIA-PACIFIC TECHNOLOGY NETWORK 20th June 2013
  2. 2. 2 Presentation Agenda Internex Partners The Indian Ocean Rim Africa - China Africa - India Summary
  3. 3. 3 Internex Partners • Focused on triangulation of business opportunities in and between high growth markets, including the BRICS economies. • 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.
  4. 4. 4 The Indian Ocean Rim 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
  5. 5. 5 The Forgotten Continent Johannesburg, SA Cairo, Egypt Nairobi, Kenya Lagos, Nigeria
  6. 6. 6 Africa • 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 opportunity.
  7. 7. 7 Fastest Growing Economies
  8. 8. 8 Population Growth
  9. 9. 9 The African Middle Class
  10. 10. 10 Infrastructure Backlog • Satellite view of the African Continent illustrates the extent of the underinvestment in energy infrastructure. • Estimated infrastructure backlog, and therefore investment opportunities, currently represent in excess of US$120bn over the next 10 years.
  11. 11. 11 Connectivity
  12. 12. 12 Abundance of Raw Materials • 30% of the world’s proven mineral resources. • Only 12% of land mass had been prospected. • 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.
  13. 13. 13 Africa - Oil & Gas • New finds in the East Africa and Namibia. • Chinese and Indian companies active in exploration. • Both China and India major importers of crude oil from Africa.
  14. 14. 14 Recent Oil and Gas Activity
  15. 15. 15 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
  16. 16. 16 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 Africa. • A strong Malaysian community exists in South Africa dating back to the late 19th century. • Malaysian interests have been sporadic; peaked under the Mahathir government. • Australia is also helping to strengthen rule of law and justice systems in Africa, by providing capacity building training and international legal assistance. • Australian companies active participants in the resources and agricultural sectors.
  17. 17. 17 India and China in Africa • China’s exports to Africa grew by 48% annually between 1994 and 2010, compared to 14% for India. • India’s Africa policy shows significant differences with China’s scramble for Africa. • India-African trade pattern appears to be more diversified. • The ‘softer Indian way’ in Africa is India’s unique pathway to power.
  18. 18. 18 China – Jeremy Gordon
  19. 19. 19 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 operations
  20. 20. 20 China’s Drivers • China is going out… – Policy drivers for strategic reasons • Resources, supply chain security, new markets • Trends & Transitions – New government – Global role – Slower growth – Higher costs – Economic reform & the private sector – Urbanisation – Domestic consumption vs trade & fixed asset investment – Overseas Direct Investment & Going Global
  21. 21. 21 ODI. Up, Up & Away • “Going Global” – Since 2000 – ODI vs FDI • Targeting – Resources – Strategic Assets – Tech • Brands – Markets Source: IMF, End 2011
  22. 22. 22 China’s ODI China's overseas investment Region Total Largest recipient of investment SOURCE: IMF STOCK OF OVERSEAS DIRECT INVESTMENT (END 2011) Asia $303.4bn Hong Kong ($262bn) Latin America $55.2bn Cayman Islands ($21.7bn) Europe $24.5bn Russia ($3.8bn) Africa $16.2bn South Africa ($4.1bn) North America $13.5bn US ($9bn) Oceania $12bn Australia ($11bn) • Where? – Developed & Developing Markets • Differing drivers • How Much? • Unreliable numbers • How? – Official – Unofficial • Hard to measure… Source: IMF, End 2011
  23. 23. 23 A Numbers Game • ODI+ – US$260bn committed? • US$75bn invested? – Including official and unofficial • ODI • Grants/Aid • Loans • Private export credits • NGOs • Portfolio investments etc. Source: FT; AidData
  24. 24. 24 Trade. New Horizons • Broken trade-driven growth model – US/EU slow-down – Rising costs • New resources – Strategic supplies • New markets – Less competition – Price sensitive
  25. 25. 25 Sino – African Trade
  26. 26. 26 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 • Labour – Cheap but controversial
  27. 27. 27 China’s Challenges • 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
  28. 28. 28 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
  29. 29. 29 India – Jeet Jandu
  30. 30. 30 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 Africa. • India and China have only become competitors in Africa in the last 10 years.
  31. 31. 31 India – Trade and Investments • Current levels of trade around $50Bn a year. • Lead by the Indian Private sector. Africa is a new investment destination for the increasing global profile of India’s multinational corporates. • Total Indian investment in Africa is upwards of US$ 33 bn. • 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 Bank).
  32. 32. India’s Exports to Africa LDC* vs. NON-LDC Total Exports to Africa $ 24.7 bn To LDCs $ 7.2 bn (29.1%) To non-LDCs $ 17.5 bn (70.9%) KEY PLAYERS 2011-2012 USD bn % Share in Africa SOUTH AFRICA 4.7 19.2 NIGERIA 2.7 10.9 EGYPT 2.4 9.8 KENYA 2.3 9.2 TANZANIA ^ 1.6 6.5 TOTAL 13.7 55.6 *Least Developed Countries Source: Commerce Ministry, India ^LDC
  33. 33. India’s Imports from Africa LDC vs. NON-LDC Total Imports from Africa $ 43.2 bn From LDCs $ 9.4 bn (21.8%) From non-LDCs $ 33.8 bn (78.2%) KEY PLAYERS 2011-2012 USD bn % Share in Africa NIGERIA 14.7 34.0 SOUTH AFRICA 9.9 23.1 ANGOLA* 6.6 15.3 EGYPT A RP 3.0 7.0 ALGERIA 2.2 5.0 TOTAL 36.5 84.4 Source: Commerce Ministry, India *LDC
  34. 34. 34 Investment determinants • 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 years. • These investments are in the resources, manufacturing, telecoms and energy sectors.
  35. 35. 35 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 countries.
  36. 36. 36 Summary • The next major growth area in the world. • Major opportunities but understand and manage risks.
  37. 37. 37 Thank You

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