As Chinese economy is facing its worst slowdown in recent times, for Africa, Modi's new India might turn out to be the one viable alternative to China. Therefore, the upcoming India-Africa Summit will be an occasion to harness this opportunity and seek a meaningful strategic engagement beneficial to both the countries.
Over the past decades, China has been a major and the largest trading partner of Africa with bilateral trade amounting to $220 billion in 2014. From importing a wide range of products from copper to oil, Africa has become an increasingly important source for feeding the appetite of the consumer rich Chinese economy. However, the dramatic slowdown in the Chinese economy has left the African regions looking vulnerable. The past months have seen a significant deterioration in Africa's trade balance with China. In fact, the lower forecast growth rate of 3.1 percent of China depicts the fragile picture affecting the dynamics of the Sino-African relationship.
According to the researchers at the IMF, "No region may be more affected by the financial meltdown in China than Africa. If China sneezes, Africa can now catch a cold. " China is highly dependent on Africa for its mineral resources, oil and cheap labour. Given the fact that the Exports to China from Africa accounted for 30 percent of the region's total exports between 2005 and 2012, the African resource exporters are going to suffer negative shockwaves to their industries. Lower demand from China will shrink the economies of Africa and eventually heighten the debt burden.
For the top five exporters of China including Angola, South Africa, the Republic of Congo, Equatorial Guinea and the Democratic Republic of Congo - a 1 per cent decline in the domestic investment growth would mean a 0.8 percentage -point decline in the region's growth.
According to Fathom Consulting research, Zambia, which has the large community of Chinese immigrants, having established successful businesses in the retail and the construction industries, followed by South Africa, is most exposed to the Chinese economic slowdown. Last month, with the devaluation of Yuan, South African stock markets suffered heavy losses with the fall in the rand by almost 8 per cent.
In addition to the damage caused on the rand, the analyst also noticed the impact of the slowdown on the South African steel industry which found it difficult to compete against the cheaper Chinese steel exports. Moreover, Chinese firms are finding themselves increasingly at odds with their African hosts over environmental and labor issues.
Additionally, tourism sector of Africa may have to bear the burden of the slowdown. The favourable exchange rate and wildlife have attracted the Chinese tourists to Africa. A devaluation of Yuan would lower the spending from China and thereby impacting the tourism in Africa. In South Africa, the situation is compounded by new complex visa regulations. For that country, the global volatility would create a double jeopardy for the local tourism industry.
Big African opportunity
Given these developments in China, the slowdown may bring benefits to the Indian economy. In this regard, the upcoming India-Africa Forum Summit (IAFS) between 26-29 October will be a testing time for India to seek a proactive and meaningful engagement to make the best out of it. Though, not as strong as China's, India's commercial relations with Africa have seen a considerable progress over the years.
In 2013, the trade between India and the African nations stood at $ 70 billion. With Nigeria and Angola accounting for more than a quarter of India's oil and gas imports, India's private sector has also made a significant presence in many of the African countries such as South Africa, Kenya, Tanzania and Mauritius which has led to strong entrepreneurial ties in sectors such as retail services, mining and commodities trading.
In light of Africa's increasing dependency on and trouble with Chinese actors, African leaders are beginning to look beyond China in an attempt to diversify their foreign partners. Considering that the demand for African resources will get affected from the Chinese slowdown, India and the long-standing presence of Indian business in the continents can help Africa to cover up from the losses. Compared to the Chinese economy, Indian economy is expected to grow more rapidly at a 7.5per cent rate and offers a large consumer market. With growing energy demands and 'Make in India' initiatives further engagement with Africa is quite possible.
India faces a huge energy deficit and imports about 80 percent of its crude oil, and is looking for hydrocarbon assets that can boost its energy security. Africa has huge potential in hydrocarbons, with promising discoveries in East Africa. Energy security is vital for the Make in India project, and hence Africa will be crucial for India. Moreover, coming years will see South African company's participation in the development of airports and seaports in India which could enhance the infrastructure and connectivity vital for Make in India.
Moreover, India provides a useful model for democratic development. In the African-style democracy, the leader is all-powerful, not accountable and cannot be challenged. This in itself undermines the fundamental principles of democracy. Unlike India, Africa has developed a peculiar brand of "democracy" imported and influenced by Western ideology. According to various experts, the imported democracy is partial and not connected with the local realities of the country that undermines the performance of the public institutions.
The resurgence of civil war, violence and manipulation associated with elections, and the trends seen in the political settlement after electoral conflicts through formation of coalition governments are all indicative of the deficit of African new democracies, thereby questioning the feasibility of democracy in Africa
Being one of the largest democracies in the world, India can share its democratic experience and provide training on electronic voting systems, parliamentary procedures and federal governance to its counterparts in Africa that will help in promoting development in the region. This will further help Africa to strengthen its judicial system by encouraging law and order in the country. The judicial systems in Africa have not received much attention and are not independent.
In contrast to India, the rule of law and constitution in Africa is only applicable to ordinary people while the leaders and their families and allies are exempted from the system. Partnership with India can help Africa learn from the essence of the independent judicial system. Indian Constitution has given high importance to the independence of the judiciary. Additionally, India can be a useful partner to support Africa against the rising terror groups that are becoming a major challenge for Africa.
All these aspects reveal that Modi's new India might turn out to be the one viable alternative to China. Therefore, the upcoming IAFS will be an occasion to harness this opportunity and seek a meaningful strategic engagement beneficial to both the countries.
(The writer is a Research Assistant at Observer Research Foundation, Delhi)
Courtesy: www.swarajyamag.com
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