African countries have emerged as attractive investment destinations for Indian private sector and public sector companies. According to figures from the World Investment Report 2016, India was the eighth largest investor in Africa in 2014. However, there are few empirical studies on the subject. Taking note of the remarkable growth of Indian investments in Africa and Africa’s growing importance in India’s economic diplomacy programme, Observer Research Foundation, in collaboration with the Department for International Development , organised a round table discussion on “Promoting Indian Investments in Africa for African Development” on June 15, 2017.
Discussion started with an brief introduction on the subject by Dr. Vikrom Mathur. He stressed on the role that India’s private sector and civil society could play in furthering India’s economic diplomacy initiatives in Africa.
Mr Gavin McGilliwray, DFID India Head, highlighted the importance of African markets for Indian companies and said that Indian investment could be a powerful driver of development in Africa. According to him, India needs to solve the conundrum of different objectives by having different organizations/departments in order to optimize workflow and action plans, which will mutually benefit both India and Africa.
This was followed by a presentation by Dr Malancha Chakrabarty. She made the following three observations. First, the bulk of Indian investments in Africa are directed to Mauritius, a tax haven. Second, energy security is the main pull factor behind Indian public sector investment in Africa, and among the leading investors are Indian public sector oil and gas companies like ONGC Videsh, Gujarat State Petroleum Corporation, and Oil India Limited. Third, the Indian private sector has also invested in a range of non-energy sectors, including manufacturing.
According to her, although the private sector has the potential to play an important role in India’s development cooperation efforts in Africa, the correlation between India's development cooperative initiatives and investments in Africa is currently weak. Therefore, she recommended the formation of an institutional vehicle to promote Indian investments to Africa.
Drawing special attention to the limitations of RBI data on Indian overseas investments, Mr. Ashok Dhar, Director, ORF Kolkata, pointed out the importance of studying the annual reports of major Indian companies in Africa for a better assessment of Indian investments in Africa. According to him, for stronger trade and investment linkages between India and African countries, Indian companies must have the freedom to enter and exit the market freely. Further, he said that Indian companies are at an advantageous position in Africa as compared to companies from other countries because they are not risk averse.
The statements of diplomats from the High Commission of Botswana, Embassy of Niger and Embassy of Kenya summed up the event. The political secretary of Botswana High Commission stated that development capital risk is being taken by India, something that was not seen in the previous years. The Second Counselor from the Embassy of Niger explained how Indian transport supply companies are playing a huge role in business in Africa.
The Economic Counselor from the Embassy of Kenya said that two important aspects needed to be considered. First, investments need to be for the long run, hence deeper pockets are more important than smaller firms. Second, there are not many backward linkages, hence there is potential for Indian SMEs to invest in Africa. India needs to strike the right balance between both these aspects in order to channelise a flourishing investment plan that incorporates both public and private sector enterprises.
At the end of the event, all agreed that opportunities needed to be converted into advantages by building strong capacities, environments, institutions and frameworks in the host country. This must be done by eliminating ‘ad-hoc’ tendency of government organisations. Huge skill programme is required in those sectors where investment is likely to come. India needs to build the capacity to identify and create bankable projects in Africa. The money is not a problem for India anymore, but the capacity to use that money is a big issue. The objectives of private investors and public sector must be congruent in order to achieve both welfare and profit.
India must constantly revise its plans and strategies to have an advantage over competitors. There was broad consensus on the fact that this is how progress and holistic development could be ensured in Africa.
This report is prepared by Arpan Chatterji, Research Intern, Observer Research Foundation, Delhi
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