Africa is a Changing: Optimism, Growth and Change
It has been a time of great change in the world in the last few years. There is also great change in Africa with greater democratisation, political stability, economic growth and regional integration. There is more movement towards trade and investment and a greater consciousness to use aid with responsibility and not overdo borrowings so that debt management can be well-ordered. A more business-like approach is visible in Africa and among its partners.
The Africa day marks the formation of the Organization of African Unity (OAU) in May 1963, at the Congo hall in the present building of the UNECA in Addis Ababa. In 2002 following the discussions at NEPAD and the ideas emanating from the African renaissance, the African Union was born in July 2002 in Durban. As someone present on that occasion as part of the Indian delegation and one often wondered if the winds have changed which took the OAU into the AU would also change the celebration from Africa Day in May to the Union Day in July. However, Africa Day on 25 May has crossed the transition to the African Union and is now more widely celebrated.
It is important that Africa Day should not become another day of mutual admiration and bonhomie alone. It should be an occasion to certainly recall our history and partnership but also to seek further avenues for partnership in the years ahead. Today Africa as an opportunity is considered much more positively and is seen as conducive to bankable projects. Positive socio-economic indicators, increasing growth rates, improved human indices and political stability have given impetus to positive considerations for Africa. Optimism, growth and change are the significant buzz words when we think of Africa now.
Six Drivers of Change in Africa
Six significant facts about Africa need attention to give our thinking a new impetus on Africa.
First, by 2050 75% of global growth in the number of people in the working age group will be in Africa. This is a significant fact. Conversely, about 200 million people will need employment annually in Africa which is a challenge. Labour growth in Africa, in the current century, is faster than in India or China. This indicates that there will be significant challenges to ensure that the addition to the labour force have a proper education, good access to health care, nutrition and proper skills so that they can become a comforting factor of the demographic dividend that Africa could earn. Thus, education, health, nutrition and skilling are all opportunities for investment, be it by government, civil society, impact investors or private investors.
Second, poverty has reduced in Africa by 15per cent in the 21st Century. This adds to the factors pointed out above and shows that positive socio-economic impact has taken place due to development policies of African governments, the positive role of partnerships and the better use of funds for development cooperation. Certainly, there is scope to do more but poverty elevation and reduction need to continue to grow at the pace and contribute to rising of Africans into the consuming middle class.
Third, it is expected that smart phone ownership in Africa will reach 700 million by 2030. Of these 300 million phones are likely to have Fintech applications. There is a huge demand in Africa as manifested in this one item and its services. Africa calls for new business models, which need not only subscribe to appropriate technology. It is significant that while Indian companies are participating in the telecommunication sector in Africa, India’s penetration in the Fintech market in Africa is very low and not commensurate with India’s digital prowess .
Fourth, by 2050, Africa is likely to have 90 cities of population of 1 million or more. In 2015, when IAFS-III was held, Africa had six cities with a population of 5 million or more. By 2030, there will be 20 such cities in Africa. Thus, along with a rapid increase in population and the youthfulness of it, there is a strong trade towards urbanisation. Besides nearly 30 per cent or more of the African population lives within 100 kilometers of the sea. These provide opportunities for smarter cities, waste management, e-mobility, city transport systems, sustainable environment, and the like.
Fifth, it is significant that Africa has nearly 700 companies with earnings of trillion dollars annually. 13 have revenues over 10 billion USD while 300 have turn over between 500 million USD and 1 billion USD. This shows that successful business and profits can be generated in Africa.
However, of these 700 companies, half are in South Africa and 25 per cent in the countries of North Africa, mainly Morocco, Tunisia and Egypt. For the rest sub-Saharan Africa there are only 175 such companies in about 50 countries. Thus, there is an immense scope for building more successful companies for sub-Saharan African countries particularly using regional integration of markets.
The sixth significant point is that of Africa’s 25 top brands, the Nigerian company, Dangote, is at the top position. Six companies each are from South Africa and Kenya while 4 are Nigerian. Two companies each are from Ethiopia and Zimbabwe according to the African business magazine. 10 countries in Africa get tourist arrivals of over 1 million annually. Morocco, South Africa and Tunisia are the lead tourist destinations. This indicates that there are individual countries and brands in Africa which are built for commercial success; however, they are not evenly spread over the Continent, and sometimes are also visible in countries not normally associated with good business opportunities. Thus, a change in mind set, an open view of opportunities and a new intensive engagement keeping in view changing facts would be a good starting point for the third decade of the 21st century.
India and Africa Together
India and Africa have had a steady history of being mutually respectful partners. For the common fight against decolonisation and apartheid, we went into the successful utilisation of the ITEC programme. India and Africa have a common desire for a better place in the international order which could be more responsive to our requirements. India and Africa have engaged more intensively since the launch of the processes of the India Africa Forum Summit (IAFS)since 2008. Indian trade investment and development cooperation in the 21st Century has been far higher than envisaged at the turn of the Century.
In the vast agenda of cooperation, India and Africa collaborate at 3 tiers. The traditional bilateral tiers remain the more vigorous and well pursued with the decision to open 18 new Embassies in Africa, India will be far better represented and be able to take the bilateral agenda deeper. India has a unique system of collaboration with the Regional Economic Communities, eight of which are recognised by the African Union. India’s engagement with African Union has been quite exemplary and among the best of all Africa’s partners. The Chairman of the AU Commission, Mr. Jean Ping, who was part of the IAFS-II often said that the India’s model of cooperation with Africa was perhaps the best because we operated at 3 levels which gave African institutions the responsibility to take decisions and not be faced with projects given to them. With this positive background as we head towards IAFS-IV, five ideas can be further pursued to bring greater diversity in the agenda.
First should be climate change. India and Africa are fully aware that whatever fate of climate change negotiations, the impact of climate change on our countries and peoples will be severe. Adaptation and mitigation, as well as sharing of experiences irrespective of what international negotiations achieve, can be an important asset in our engagement. Building smart cities, waste management in growing urban conglomerations dealing with air and water pollution and to prevent desertification remain extremely important areas. The United Nations Convention on Combating Desertification (UNCCD) has evinced India’s interest and later this year India will, for the first time, host the conference of parties of the UNCCD. While desertification is important for India, much of the work of UNCCD needs to be focused on Africa.
Similarly, while fossil fuels are an important part of India Africa trade and contribute to Africa’s trade surplus in India it is the development of solar energy which India is supporting in Africa that will give a new meaning to India Africa partnership and bring significant contribution to the amelioration of climate change. The unique initiative of Prime Minister, Narendra Modi to launch the International Solar Alliance at the climate change in COP in Paris in 2050 and India’s decision to host the ISA Secretariat in Gurugram are important leads. The mandate of ISA includes many African countries who fall within the Tropics of Caner and Capricorn. Significantly, several African Heads of States or Government participated in the launch of ISA in Delhi last year. India has decided to commit 1 billion USD from its total commitment of 10 billion USD credit for African projects for the development of solar power in Africa. These ideas need to be built upon and expanded.
Secondly, terrorism is not merely an Indian problem but now afflicts several African countries. Nairobi witnessed the Al Qaeda bombing of the US Embassy there in 1998. Terrorism had truly come to Africa that day when a similar attack also took place in Dar-es-Salaam. Subsequent movements of Al Qaeda, ISIS and Boko Haram in Northern Nigeria and the Sahel countries remains a challenge. In between piracy was the major challenge around the Gulf of Aden and the western Indian portion. India has collaborated closely with African countries particularly with Eastern and Southern Africa on these issues. And the time is right for more treaties for mutual legal assistance, so that criminal dealing with drugs, money laundering, etc. which feed terrorism can be arrested.
Third, the time for converting aid to business is upon us. More private investment, reduction of debt, cost effective investments and conversion of G2G and B2G into more B2B activity is the call of the time whether it is in infrastructure, agriculture, manufacturing or services. In the case of India itself, about 10 billion USD in credit lines are in operation in 44 African countries. Another 10 billion USD is available as a pipeline for further projects. However, as compared to government soft loans of about 20 billion on offer, Indian investment in Africa is about 54 billion. Thus, what has happened quietly without much publicity is that private FDI from India in Africa is nearly 2.5 times bigger than government credit lines. It is this idea which needs to be further pursued particularly because the Indian model of investing in Africa is better appreciated than that of many partners. It is due to this that several countries wish to engage with India for trilateral partnerships. The Indo-Japanese idea of the Asia Africa Growth Corridor, the German initiative for the Compact for Africa and some bilateral dialogues which India has with other partners of Africa like UK, France and the UAE have given rise to a greater focus on trilateral partnerships. The CII has brought out an initial report on India in Africa: developing trilateral partnerships which give some ideas on how these could be developed and focuses on expanding of manufacturing and services where B2B operations can be taken up more easily.
Fourth, related to this is the utilisation of grant-in-aid models and converting them to business opportunities. The movement for social impact investment has caught on and many African youth seek support for such investment where they can bring change to their communities by providing localised solutions through new business partners. Social entrepreneurship funds are attracting traditional donors to putting money into them so that grants become business oriented. India’s own PAN African E-network project with its tele-medicine and tele-education component have been re-launched in a digital version as e-VidyaBharati and e-ArogyaBharati Network Project. But these remain grant models. How do we convert the large commitment that India has for grant-aid projects in Africa to becoming self-sustaining unless we give them an impact investment style so that they become sustainable and not remain dependent on Indian assistance? More partnerships are indeed the call of the hour.
The fifth area of enhanced cooperation is to revive engagement with the Regional Economic Communities. From the beginning of the IAFS process, the RECs have been an integral part of the Indian engagement. In the follow-up of IAFS-I & II, three special meetings for representatives of RECs were held in India but since IAFS-III, no such engagement has been undertaken in the four years since. The benefits of engaging with the RECs are now increasing since the Africa Continental Free Trade Area (AfCFTA) has been approved by the AU and its implementation will start soon. The AfCFTA in any case is the result of successful negotiations for a combined FTA among 3 RECs, namely COMESA, EAC and SADC. The real impact of the FTA will be on reduction of regional barriers which are more likely to be the leaders of expanded Intra-African trade. India has had a natural relationship with most of the RECs and needs to revive and nourish it in this new context.
