Abstract
Compared to the disputed rise of China in Africa, the emergence of India has been rather neglected. Facing a quasi-absence of reliable data and literature, this article makes an attempt to explore the expanding presence of India in Africa’s agro-food sector. Based on a preliminary collection of information in Eastern and Western Africa, the analysis suggests that India’s corporate sector has been the main driver, with the facilitation of pro-active Indo-African business networks historically established in Eastern and Southern Africa in particular. The role of the government of India has been occasional and subsidiary.
Introduction
Africa’s untapped natural resources and non-cultivated territories have attracted Asian emerging giant economies since the turn of the century. Like food importing in Japan during the 20th century, it is now the turn of China and India due to demographic pressures, decreasing arable land, and diversifying nutrition needs. With a population expected to overtake China’s by 2030, India aims to secure its food supplies through new economic and financial outreach in the developing world, and especially in Africa.
Since the turn of the century, various international sources indicate that India’s economic presence in Africa has increased substantially (UNCTAD, 2012). This trend is attributed to geo-political proximity, historical links, and the presence of Indo-African business networks in Eastern and Southern Africa. Rapid development of manufacturing and services, GDP growth and import diversification have led India to purchase larger volumes of commodities and foodstuffs from Africa.
This article explores the main drivers of India’s economic presence in Africa, with the agro-food sector as a case study. While China’s penetration of Africa has been largely covered in the literature and especially in the international media, and is described as a specific form of state capitalism exported overseas, India keeps a rather low profile in Africa and does not gain much international visibility despite substantial rising international economic interests.
In the quasi-absence of literature on the subject apart from some contributions by a few Indian think tanks and universities, this article is based on a first attempt to collect data. The analysis of the collected information provides preliminary answers to the core research question whether India’s agro-food business presence is directly/indirectly promoted by the Indian state, as in the case of China, or whether it is more market- and private-sector driven.
The article starts with a presentation of the research methodology, followed by a review of existing knowledge related to agro-food trading flows and value chains between Africa and India. It continues with the results of a qualitative research survey conducted in 2010–2012 in Eastern and Western Africa, and in France and the United Kingdom. The conclusions derived from the survey indicate that the private sector, meaning large Indian corporations and local Indo-African business networks, are mainly responsible for the rise of India in the African agro-food sector, even in sub-regions such as Central and Western Africa, where India’s economic presence used to be minimal until the late 20th century.
Methodology
The article first reviews existing knowledge dealing with agro-food value chains and the role of economic cooperation between developing Africa and emerging Asia - taking Japan as a historical reference of a massive food importer from Africa. Indo-African economic relations are then contextualized historically until recent times. Specific focus is put on bilateral trade and investment based on macro data available for agriculture and agro-food.
The second half of the article relies on a qualitative research survey carried in 2010–2013 and sponsored by the French International Agricultural Research Centre for Development (CIRAD: www.cirad.fr) and by the School of International Development and Global Studies, University of Ottawa, Canada. The first phase of the survey reviewed the African media available in British and French specialized academic centres, and collected secondary sources on India’s presence in both Eastern and Western African agricultural sectors. Eastern Africa was the first research target as the number one concentration of India’s business interests, and as the location of significant Indo-African business networks. There are few in Francophone Western Africa, where India had no traditional historical presence. A second research phase continued with the same survey but in two major hubs of Eastern and Western economies, namely Nairobi in Kenya, and Dakar in Sénégal. In addition, with the help of an Indian PhD student at the Institute of Political Science in Paris (Sciences Po Paris), qualitative interviews were conducted in both cities. Questions dealt with trade and investment strategies as expressed by Indian and Indo-African businesses locally, and with foreign business facilitation and regulatory frameworks as expressed by representatives of public administrations and India’s consular/diplomatic missions. The ways and means to approach these different types of local institutions were facilitated by the regional and national offices of CIRAD.
Finally, preliminary results of the research project were presented at the 11th European Conference in International Development Studies in York, UK, in October 2011. They were enriched and further tested in comparison with similar surveys dealing with China in Africa, notably during an international workshop convened in May 2013 at the Institute of Social Sciences in The Hague, Netherlands, with the participation of African and Indian scholars specialized in international development studies.
The research project has faced various constraints. A major one was the absence of micro-level data in both Africa and India regarding India’s agro-food investment and trade in individual African countries. A second constraint was the relative opacity of business relations not only between African governments and Indian business actors, but also regarding the nature of public–private partnerships forged in India in order to facilitate market penetration in Africa. The author was able to document a series of Indo-African intergovernmental summits associating the Indian private sector closely, and to trace India’s federal trade finance provided by the public Exim Bank of India. However, it was not possible to identify sources of information dealing with the role of some Indian states and large Indian municipalities in addition to public support provided by federal institutions. For example, a state like Gujarat or a global city like Mumbai have cultivated close economic and financial relations with Northern and Eastern Africa since pre-colonial times.
The rise of Afro-Asian economic cooperation
Global value chains and the agro-food sector
Since the late 1990s, substantial literature has been devoted to the emerging capacities of developing countries to integrate international value chains. Such chains can be transnational, regional, and even global. Various studies have envisaged inclusion versus exclusion in global value chains of semi-transformed and transformed products from the South (Pietrobelli and Sverrisson, 2004).
There are numerous publications on North–North and North–South value chains covering most tropical products in high demand in the North (Kaplynsky, 2008; McDonald et al., 2008). But good knowledge of local, national and South–South post-farming value chains is still limited despite new explorations from emerging countries like India (Mitchell and Coles, 2011). The Donor Committee on Enterprise Development (DCED) 1 promotes public–private partnerships for small and micro-enterprise integration into global value chains. As food security and employment creation are the two objectives of the G8/G20 since 2011, there is renewed focus on farming and agro-food processing in developing countries. However, Africa tends to sell and export most of its agriculture as bulk commodities. The density and diversity of African post-farming and transformation activities are limited, and the accumulation of savings and skills is insufficient to be invested in their expansion at any meaningful industrial scale.
Asian emerging economies and South–South trade
South–South trade originates from comparative advantages of proximity among developing countries. In principle, it is more specific and local knowledge intensive than North–South trade. Its main validity lies in its substitution capacity to high-cost imports from developed countries. Such imports are often made of high technologies not quite appropriate to local needs. India’s vast experience in rural development and appropriate farming/post-farming technologies is relevant in this respect (Economic and Political Weekly, Delhi, various issues 2011–2013).
Until the 1980s, South–South cooperation was mainly a post-colonial and pro-independence slogan launched in opposition to developed countries and North–South cooperation. With the creation by India and a few other developing nations of the Non-Aligned Movement, and later the Group of 77 at the United Nations, it was put on the international agenda. It was driven in the 1950s–1970s by various regionalization movements in the South. The 1980s–1990s saw the rise of new regionalisms and inter-regionalisms, including some initiated by China, India and Brazil vis-à-vis Africa (Jaffrelot, 2008; Ruet, 2007). In 1993, Japan initiated the first Tokyo International Conference on African Development (TICAD I), followed by TICAD II, III, and IV. The TICAD process put more light on the role of Japanese aid and private sector to boost economic take-off and growth in Africa. TICAD III was also envisaged in 2001 as a contribution to the New Partnership for African Development (NEPAD) initiated in 2002–2003 by the G8 African Action Plan. By 2005–2006, Japanese ODA started to pledge 40% of its total aid to Africa by 2020. As Japan is a global importer of food, its role on international agro-food markets has been substantial, including in Africa. Yet, strangely enough, it has remained understudied, and the role of Japanese agro-food trading houses and transnational corporations has not drawn the attention of the international media (Watanabe, 2008).
Since the 1980s, the rapid emergence of the newly industrializing Asian countries, followed by some in Latin America, has led to sharp economic and social differentiation among developing countries. This process has created new opportunities for cooperation versus competition within the Third World, and it has even challenged its very existence. Agro-business has been one of the key emerging sectors in South–South economic relations, with the rise of major new players, mainly from Asia (China, India, Korea, Taiwan, Thailand, Vietnam), but also including Brazil and South Africa (Bera and Gupta, 2009 : Sridharan, 1998).
South–South economic cooperation can offer many advantages for developing countries. Usually, their products are better suited to their neighbors with similar levels of development. Furthermore, trade among developing countries can help to decrease overdependence vis-à-vis OECD markets. However, South–South cooperation has remained very modest for several decades because of its disconnection from the global economy, and the lack of concrete support from donor countries at least until the 1990s. Obstacles have included divergence between large and small producers, lack of infrastructure (and especially of South–South transportation and trade finance facilities), high level of tariff and non-tariff protection, scarcity of foreign exchange and clearing systems, and lack of after-sale services.
The history of South–South trade can be divided into four periods.
Between 1945 and 1972, it grew in absolute terms but decreased in percentage of world trade.
Between 1973 and 1981, it continued to grow and regained former importance.
After 1981, its relative importance fell, mainly due to the debt crisis and declining oil export revenues in OPEC countries.
In the late 1980s, it expanded again because of the rise of the East Asian industrializing economies, and it reached over 10% of total world trade by 1995, a figure which has steadily increased ever since because of the rapid expansion of Asian economies. About 40% of total Southern trade is currently with other developing countries (UNCTAD, 2012).
Since the early 2000s, analysts have become relatively optimistic about South–South trade prospects due to the continued rapid growth of emerging economies and their strong demand for commodities, including foodstuffs. This is also due to the saturation and ageing profile of the OECD countries. Furthermore, many agro-food products originating from developing countries, including so-called ethnic food, can only qualify for South–South markets as they do not meet international norms and standards.
Developing and donor countries have also become aware of the key role of small enterprises in economic and social development, including in rural and sub-urban sectors where farming and post-farming activities prevail. Rural reforms, new technologies and seeds, and the post-Green Revolution small farm and micro-enterprise development (especially in Asia) have drawn some global attention. In the case of Africa, the importance of the informal smallholder economy and the challenge of the so-called SME “missing link” have been underlined.
Since the 2005 WTO Ministerial Meeting, the OECD countries have stressed their aid for trade priority vis-à-vis developing countries in three main areas: production capacity, access to demand and buyers, promotion of marketing and sales. A number of donors have committed to a more proactive facilitation of trade and finance among developing countries as a second-leg option for developing economies to reach global markets. Transnational corporations have been identified, not as direct beneficiaries of development aid, but as rising providers of business-to-business or public–private partnerships (BBPs or PPPs), with possible South–South market linkages. Local micro-enterprises and SMEs, or at least a fraction of them, have access to South–South cross-border, sub-regional and regional markets in addition to their direct or indirect access to OECD buyers and sellers. Various forms of African microenterprises are mainly active at the sub-domestic, domestic and cross-border levels, but they can also contribute under certain conditions to the up-stream segment of domestic, sub-regional, regional and global value chains (UNCTAD, 2010, 2011).
The rise of India in Africa
Historical context and recent trends
For long, studies have focused—though modestly among non-Japanese observers—on commodity and food import-dependent Japan as the major Asian developing aid and trading partner of Africa (Watanabe, 2008). Afro-Asian trade is very ancient through the Indian Ocean (Vines and Bereni, 2008), but there is little literature on economic cooperation between the two continents, and even less on the agro-food sector (Kregelund, 2008). Since the early 2000s, there has been increasing interest focused on Asia’s rising global investment, including in Africa, but most studies have dealt with China (Kaplynsky, 2008; Lemoine, 2010). Much less has been published on Indian trade and investment (Gutman, 2008) despite the existence of strong Indian business diasporas in Eastern and Southern Africa driving—with the optional support of India’s private and public sectors—their gradual expansion in the rest of the continent (Etienne, 2007; Goldstein et al., 2006; Vines and Bereni, 2008). The rapid expansion of Indian business activities can be observed in terms of its concentration in a few African countries such as Kenya, where “India has toppled the United Arab Emirates as chief exporter of goods’ (Nairobi, Home Money Markets, various issues in 2012–2013).
Furthermore, India has only recently started to promote an ODA policy as illustrated by the 6th India-Africa Forum (2010), which was also aimed at counterbalancing China’s rising competition and visibility (Broadman, 2006, 2008). In 2011, India inaugurated a development aid agency under the Ministry of Foreign Affairs. As underlined by a senior officer of the BOAD (West African Bank of Development) on 17 January 2012: “African countries have become opportunistic. Traditional aid donors impose many conditions for supplying grants and loans. Such conditions are very distant from African realities. Therefore, Africa is able to expose donor countries to the new competition by emerging donors, and traditional aid is not indispensable any more.”
Afro-Indian trades in agriculture
Agriculture represents 16% of Indian GDP but only 9% of its total exports against 3% of its imports (76% being food products). As in the case of China, Africa still plays a minor role in India’s agro-food foreign trade (UNCTAD, various years Most of Africa is still untapped by Indian exporters, even though exports have been rapidly increasing for foodstuffs (cereals, fishery, meat), and for rural equipment (irrigation materials, fertilizers and pesticides, mechanical tools and tractors).
Even though India’s agriculture has been facing fewer geo-climatic constraints than its Chinese counterpart, the combination of rapid demography and urban growth has already produced a rapid diversification in nutrition spending, especially among the Indian middle class. The overall consumption of cereals is expected to diminish in comparison with a rise of meat, fish, fruits, vegetables, and dairy products. Even though India still has potential to increase the productivity of agriculture on several fronts, imports in volume and diversification are expected to grow substantially, and food self-reliance will be affected.
The contribution of sub-Saharan Africa to world trade in agriculture is approximately 6%. Agriculture is the first export contributor for a number of countries: Malawi (85%), Burkina Faso (83%), Uganda (62%), Ethiopia (61%), Mali (56%), Kenya (46%), Rwanda (44%), Ghana (42%), Sénégal (37%), and Niger (14%). In 2000–2008 African food imports doubled, whereas exports progressed slowly and remained concentrated in a few unprocessed or semi-processed commodities.
Tables 1, 2, and 3, show that none of the African countries are among the top ten food exporters to India. Africa exports mainly agriculture commodities, with Egypt, Tanzania, Ghana, and Ivory Coast in the lead. Exports have accelerated since 2004 in major items like cocoa, cork, cotton, fruits, nuts, vegetables, and wood. New African exporters to India include Algeria, Guinea Bissau, Gabon, Morocco, and Togo.
Africa’s exports/India’s imports in agro-food (2008).
Source: FAO, Food and Agriculture Organization (FAO), United Nations, Rome, 2012.
Food export from India to the ten best partners in Africa (in mil. USD).
Source: United Nations Conference on Trade and Development, Geneva/UNCTAD, 2013, Merchandise trade matrix, exports, annual, 1995–2009, food items (SITC 0 + 1 + 22 + 4).
Food import by India from the ten best partners in Africa (in mil. USD).
Source: UNCTAD, Geneva, 2013.
There is little convergence between the first ten export items by Africa and the first ten import items by India. Afro-Indian trade in agriculture represents a very small segment of total bilateral trade. Indian imports have increased less than exports in recent years, a trend following the declining value of cotton imports—not fully compensated by cacao—while Indian exports have progressed (cereals, tea).
India’s trade surplus has widened as African exporters have not been able to tap into India’s gradual foreign trade liberalization since 1991–1992. On the contrary, Indian private companies have expanded rapidly worldwide, including to African markets.
Afro-Indian investment in agro-food
India’s direct investment outflows in 2011 show that agriculture and food processing do not figure among the leading sectors as opposed to other sectors such as equipment, manufacturing, energy, and services. In 2011, Ghana, Mauritius, Niger, and Zambia were the top four destinations of Indian direct investment to Africa, but not in agriculture. However, the public EXIM Bank of India indicates that several dozen credit lines were allocated to support Indian private ventures in African agriculture and agro-food. A total of over 140 credit lines were allocated during this period, with the vast majority (over 95) to Africa.
South Africa and Mauritius have been the main entry points for Indian portfolio investment venturing to Eastern and Southern Africa. But recently, due to concentrated efforts by the Indian federal government, Sénégal has emerged as a new business gateway to West Africa (Sénégal-Jeune Afrique, various issues 2011–2013). Dakar has incorporated a new sub-regional office of the Indian EXIM Bank. Some family members of the Indian business diasporas from Eastern/Southern Africa have started to expand their networks to Central, Northern, and Western Africa. The Indian government has played a facilitating role by appointing some of them as honorary consuls in key trading hubs such as Abidjan, Accra, and Ouagadougou. For instance, the Indian honorary consul in Ouagadougou would declare in an interview in April 2012: “India’s business penetration in Western Africa is rather recent for various historical, cultural and language reasons. However, it is developing fast, often as an expansion of Indo-African business networks existing in other regions of Africa.”
India’s expansion in Africa’s agro-food
The valorization of historical linkages
During the Cold War, India’s high profile in Africa was largely motivated by ideological reasons related to anti-colonialism and non-alignment disputed with China after her separation from the USSR in the late 1950s. India also had pragmatic objectives to stabilize and develop links with its Central, South, and Southeast Asian neighbors, where public Indian aid has long concentrated. Therefore, most of India’s development contributions to Africa have materialized through transnational economic networks established during British colonial rule and after. These business networks have cultivated various links with the Indian private sector, and such links were in place before the Indian federal government started to shape a proper development aid policy since the late 1990s.
Since the 1991–1992 moderate liberalization of the Indian economy (New Economic Policy), India’s development aid has grown as a pragmatic pursuit of its geo-economic interests—including its own food security. It has implied pro-active public support to the rapid internationalization of leading Indian corporations. The Indian Export-Import Bank (Exim Bank of India) has been used more and more as a vehicle to provide concessional credit lines to various African countries to buy Indian equipment and machinery.
Until 2010, the Indian federal government has not produced any comprehensive document regarding its development cooperation policy, not even when the creation of a development aid agency was announced in 2011. In general terms, India’s development aid can be described as a two-front operation giving priority to Asian neighbors, but also to Africa through grants and concessional loans with a focus on infrastructure and equipment, including for agriculture. Technical cooperation and transfers of appropriate know-how have also been on the rise.
The prevalence of the Indian private sector
Compared to Chinese cooperation in Africa, which is led primarily by state-owned companies and the Chinese central/provincial governments, the profile of India’s development presence in Africa seems rather different, as shown below. However, there are several limitations to the collected data.
First, the ventures of the first 20 Indian transnational corporations are not systematically reported in each African country, probably because those acquisitions led by the Indian private sector in Europe and North America have attracted much more global media attention than their smaller scale and less visible ventures in Africa and other developing countries (Broadman, 2008; Goldstein et al., 2006).
Second, a number of unrecorded Indian business families and SME owners have started to invest in Africa’s agriculture and agro-foods, sometimes as subcontractors or suppliers of Indian larger firms. According to the (not “ the ” in italics) Confederation of Indian Industry (representing the Indian employers), over one hundred Indian SMEs have already made their way into the farming sector in Africa, especially in Congo, Ethiopia, Ghana, Kenya, Liberia, and Rwanda.
Third, the business activities of the Indian diasporas historically established in Eastern and Southern Africa remain understudied, and very little is known of their recent expansion toward Central, Northern, and Western Africa.
Academia and the general media tend to focus on new foreign direct investment flows to Africa. However, FDI is only one source of funding in international development finance. Other external private flows may prove to be equally or far more important, considering that financial markets between India and Eastern/Southern Africa are fairly connected, directly or via London, Dubai, Johannesburg, New York, and Mauritius. Such financial flows can be traced by specialized consulting firms, investment banks, insurance companies, and schools of commerce, in addition to a few international agencies like the World Bank Group, the International Finance Corporation, UNCTAD and some research think tanks specialized in FDI and other types of investments.
The sources consulted in France and UK, combined with the empirical research conducted in Dakar and Nairobi, reveal that Indian firms operating in the African agro-food sector are mainly private, and vary in size and in global market outreach capacity (various English language sources in 2011–2013: African Business Magazine, NewAfrica. Various French language sources in 2011–2013: Afrique Expansion Magazine, Economie- Finance Jeune Afrique). Contrary to their Chinese counterparts, most of them have entered African markets by acquisition of locally established businesses, and become part of regional or global export-oriented value chains. The tea sector in Eastern Africa has been a good illustration. Indian investment portfolios have concentrated on Africa’s natural resources (agriculture, energy, mining), whereas Indian FDI projects have started to diversify in infrastructure, food processing, other manufacturing, telecom and ICTs, financial and back-office services, and tourism.
Localized Indian firms contract mainly with African private entities, including local Indo-African business communities. Unless requested, they rarely engage solely with African government agencies, which are perceived as inefficient and highly corrupt. However, as shown in Ethiopia for instance, huge land leasing arrangements have been negotiated informally with the complicity of local governments. Lease or sale of African farmland (often customary owned, and not necessarily cultivated) to Indian investors is not without risk. It can cause land expropriation or lead to unsustainable use of resources, thereby undermining the livelihoods of local populations, and excluding local peasantry/smallholders from low productivity but highly needed income-generating activities.
Indian firms play a significant role in reinforcing links between direct investment and trade in Africa. They contribute to an increase of national exports but not necessarily to better domestic food security. On average, they achieve greater economies of scale and higher productivity than their African counterparts. Their exports are far more diversified and higher up the value chain compared to local entrepreneurs tapping mainly domestic and cross-border markets. More and more Indian firms are looking for large-scale commercial farming in Africa (cereals, oils, tea). Due to the increasing consumption of meat in India, the cultivation of animal feed also stands high on the investment agenda toward Africa. According to the Associated Chambers of Commerce and Industry in New Delhi, with only 18% of total arable land being cultivated, African countries like Sudan, Ethiopia, Tanzania, Mozambique, and Sénégal have already made available huge pieces of land to the Indian private sector on long-term lease (Economic and Political Weekly, Delhi, various issues 2011–2013).
Karuturi Global, among the top 25 global agro-food corporations and one of the largest producers of cut roses, started in 2005 to buy 15 acres of land in Ethiopia for US$2 million to grow roses for export. Today, its total land acquisition for commercial farming stands at 311,700 acres. In 2007, it bought one of the largest flower farms in Kenya for around US$65 million, and it also expanded into the cultivation of sugarcane, palm oil, rice, and vegetables (Nairobi, Home Money Markets, various issues in 2012–2013).
In Uganda, the number one Indian conglomerate Tata has been leasing land for pilot agricultural projects, and the RJ Corporation has bought land for dairy farming. In Ethiopia, two Indian firms Shapoorji Pallonji and Verdanta Harvest have signed an agreement with the Ethiopian Ministry of Agriculture and Rural Development to lease 15,000 acres over 20 years for maize, tea, and other agricultural projects. Another Indian firm, Pongamia Pinnata, will grow bio-fuels for a new chemical plant. McLeod Russel India, the world’s largest integrated tea company, has acquired Uganda’s Twenzori Tea Investments through its British subsidiary. The Jaipurias of RJ Corp has signed a lease for model dairy farms in Uganda and Kenya. Framers Fertilizer Cooperative has bought the Industries Chimiques du Sénégal, a phosphate plant, for US$721 million (Sénégal-Jeune Afrique, various issues 2011–2013).
In order to respond to land grabbing critics by local and international NGOs, Karuturi Global has been claiming to be the largest employer in Ethiopia next only to the government. To enhance its profile as a good corporate citizen, and also to diversify sources of profits, it even owns professional soccer teams in the country, and it was the flower supplier to the FIFA World Cup in Africa. Other Indian firms like Jain Irrigation Systems (JIS), Kirloskar, or Mahindra contribute to the transformation and mechanization of African farming in areas such as irrigation and local production of tractors.
Kirloskar, one of the largest producers of irrigation solutions in the world, is synonymous with hand pumps in many African countries. The company started to deliver customized irrigation systems as early as 1950 in Egypt. Over 100,000 Kirloskar pumps are installed today across the Nile. Such irrigation systems have provided substantial support to Sénégal to become self-sufficient in rice production, and even to have some surplus for exports. With the installation of over 2000 pump sets (worth US$25 million), the area of rice cultivation has increased by 20% in 2005–2010. In 2010, Kirloskar acquired Braybar Pumps of South Africa through its own Dutch subsidiary. In 2011, JIS, the world’s second largest irrigation equipment maker, and a pioneer of drip irrigation in India, has initiated a public–private partnership in Rwanda for the provision of water for farming management solutions. JIS operates in 15 African countries providing irrigation services and technology with minimal water and energy requirements.
Mahindra is present in over 24 African countries and assembles tractors and other farming equipment in Chad, Gambia, Ghana, Mali, and Nigeria, and is considering expanding into Ethiopia, Kenya, Morocco, South Africa, and Zambia.
New Indian financial institutions like the commercial Yes Bank are supporting Indian firms investing in farming projects in Africa. For instance, Alok Industry (textiles) opened a spinning mill in Bobo-Dioulasso in Burkina Faso for enhancing local cotton production (Afrique Avenir, 24 January 2011).
Various Indian tea companies are energetically pursuing the acquisition of existing estates and the creation of new ones. BM Khaitan-owned by McLeod Russel India, the largest integrated tea corporation in the world, has already taken over for US$25 million—through Borelli Tea Holdings UK—the six estates of Uganda’s Rwenzori Tea, producing 15,000 tons of tea annually. McLeod Russel India’s objective is to expand its production capacity and control 8% to 10% of the world tea market. Similarly, BK Birla controls Jay Shree Tea Industries, which has recently acquired three tea estates in Rwanda and Uganda. While acquisitions may work for the tea sector, the right formula for Indian firms looking at commercial farming in Africa in other sectors is through the promotion of value-added products. This is quite ambitious as it means moving away from pure commodity business to a processing strategy taking place partly or fully in Africa (Nairobi, Home Money Markets, various issues in 2012–2013).
Compared to their Chinese competitors, and possibly some American and European firms as well, various interviews with local governments and the medias in Nairobi has confirmed that the overall perception of Indian businesses is generally fair, especially in Eastern Africa. This is facilitated by the existence of well-established local SMEs and business networks mostly owned by second or third generation Indo-African families with homes and interests on site for a long period already. Such networks have remained in place throughout post-colonial political changes, and even under the installation of socialist regimes such as in Tanzania. Furthermore, recent inflows of Indian FDI create employment and income among local African communities, and also contribute—as shown in the case of Karuturi Global in Ethiopia—to informal links with local governments and to various types of sponsorship of civil society events.
Indian public–private partnerships and Africa
With or without the discrete support of India’s official development cooperation and economic diplomacy, the Indian private sector has been moving to Africa in a big way since the early 2000s, and agro-food business has been no exception (Agrawal, 2007; Chanana, 2009). This evolution has been guided by the rise of India’s geo-economic interests after the post-1991 domestic market liberalization reforms, which have induced a rapid development and internationalization of her economy.
India’s development cooperation and presence in Africa’s agriculture is nothing new. As shown previously, it started during the 1950s under the Gandhian arguments of self-reliance, and South–South cooperation with Africa. Before and during the Green Revolution, India put forward the concept of a strong convergence between her domestic situation and Africa’s rural development needs. The key argument was that India’s rural experiences, especially in poor and semi-arid states, would forge appropriate technologies and know-how able to match Africa’s development needs in agriculture, and to reach the low purchasing power of farming populations. As an example, India’s development cooperation has promoted the well-known International Research Institute for the Semi-Arid Tropics (ICRISAT), which was established in the sub-continent to conduct agronomic research in semi-arid regions in Asia and sub-Sahara Africa. One of the most recent ICRISAT South–South initiatives was launched in 2011 through its regional office based in Bamako, Mali. The initiative aimed to promote five highly nutritious drought-resistant crops—chickpea, pigeon pea, pearl millet, sorghum, and groundnut.
However, India’s contribution to Africa’s agriculture development has been mainly driven by private sector interests lobbying India’s public economic diplomacy whenever needed. India–Africa intergovernmental summits have always reserved much space for Indian private sector initiatives. For instance, the Sixth Conclave led by the Confederation of Indian Industry (Indian employers) and the Exim Bank was held in New Delhi in 2010, and it dealt with India–Africa development project partnerships. It covered four themes: India–Africa Partnership, Rural Economies, Africa Tomorrow, and Going Green. It was attended by 34 African countries and discussed 145 projects worth US$9 billion (45 in agriculture, in ICTs, and in the SME sector), to be compared with 193 projects worth US$7 billion at the previous conclave. The Seventh Conclave was held in 2011 and was attended by 40 African countries: it covered 204 projects worth US$18 billion.
Most leading Indian firms mentioned above have been able to penetrate various rural development markets in Africa thanks not only to their marketing capacities, but also to their delivery of appropriate technology, know-how, and good pricing. Water management, pumping, and irrigation are the most frequently mentioned illustrations of so-called appropriate technologies. But seeds, fertilizers, pesticides, and mechanical equipment also rank high in Indo-African cooperation and trade (Gibbon et al., 2010).
The Indian private sector has strongly lobbied the federal government to obtain subsidized credit lines and trade finance guarantees to reduce various types of economic and political risks associated to contracting with most African countries. Such facilities have been mainly delivered by the public Exim Bank of India. It is only in recent years that the Indian commercial banking sector has become more involved in Indo-African trade and investment, including through African financial markets. The supportive role of the federal government has been discrete but real, and it has assisted the agro-food private sector in various ways. Yet, it is far from clear whether such role could be associated to the definition of public–private partnerships (PPPs) in terms of standard Overseas Development Assistance (ODA) as drafted by the OECD Development Aid Committee in Paris (DAC). Instead of forging classical public–private partnerships, the Indian authorities seem to play a kind of subsidiary role in coaching private sector interests in Africa. These interests are mainly driven by a group of 20 major Indian corporations specialized in various agro-food sub-sectors. These business interests are directly or indirectly facilitated by local pro-active corporate networks deployed by the Indo-African diasporas. Therefore, Indian PPPs are more “private–public” than “public–private” in the sense that they are primarily driven by the private sector. They do not necessarily qualify to the Western norms and standards of PPPs, and there is little wonder why India has so far refused to establish any semi-official development aid dialogue with the OECD–DAC, even after the creation of an Indian development aid agency in 2011.
Conclusion
Information on Indo-African investment and trade in agro-foods remains scarce and mostly based on the accumulation of anecdotal evidence, corporate press or web releases, and individual country or enterprise case studies. This article was conceived as a breakthrough contribution based on modest and preliminary empirical research work. In the future, both African and Indian universities together with think tanks should collect more systematic quantitative and qualitative data, but this will be a huge task given the dimensions and heterogeneity of rural space in Africa. Not to mention the rising diversity and numbers of Indian non-governmental and private agro-food actors moving to Africa—as the last global frontier of world agriculture development in the 21st century.
This article has documented the substantial increase of India’s agro-food presence in Africa since the late 1990s due to a series of factors, which relates to India’s demography and agro-food import pressures, geographical proximity, and intimate Indo-African business networks, especially in Eastern and Southern Africa. Such networks are rapidly expanding to other African sub-regions. Since India’s economic reforms in 1991–1992 and the early 2000s, the trend has accelerated as a number of Indian transnational corporations have become interested not only in the potential of African agriculture, but also in using African markets to reach regional and global ones. India’s exports to Africa have increased more rapidly than imports, and they have included so-called “appropriate” equipment and manufactured products for local rural development. Apart from trade, India’s direct investment in local agriculture and post-farming activities has remained modest but concentrated in a few Eastern African countries. African media has reported a rapid increase of corporate and land acquisitions through inflows of equity using financial markets in London, New York, and Mumbai, but also Dubai, Johannesburg, and Mauritius. However, India’s overall investment in Africa has not yet targeted Africa’s agriculture and food processing as a top priority, but equipment, manufacturing, energy, and services. In 2011 for instance, Ghana, Mauritius, Niger, and Zambia were the top four destinations of Indian direct investment in Africa—but not in agriculture.
In addition to the collection and analysis of data, this article has also explored the main drivers of India’s economic presence in Africa using the agro-food sector as a case study. The background question was whether this sector has been promoted or not with the support of the Indian government and of public conglomerates as in the case of China. The findings presented in this article suggest that it has been mainly market- and private-sector driven.
First, the prevalence of the Indian private sector is concentrated in a number of highly influential transnational corporations. They have direct lobbying capacities on the Indian federal government, which plays an occasional subsidiary or supplementing role in providing trade finance support as part of an economic and development aid package for Africa. Such business to government linkages (B2G) have forged specific PPPs of a private–public partnership nature, meaning that the Indian private sector has taken strong leadership in such initiatives. This is why such partnerships can be hardly incorporated under the classical Western literature dealing with Overseas Development Aid (ODA) and Public–Private Partnerships (PPPs). As a matter of fact, India has not yet established an official dialogue with the OECD. One reason among others relates to India’s observation that many disagreements have taken place in relation with the governance of public–private partnerships under the official ODA dialogue established between China and the OECD since 2010. China does not follow the ODA governance principles prescribed by OECD Development Aid Committee (DAC). In the case of China and Africa, direct or indirect subsidies through Chinese state enterprises or semi-privatized conglomerates are at stake in the discussions with the OECD. In the case of India and Africa, the leadership of large private corporations, such as in agro-food, would be possibly less criticized by the DAC as it is mainly private-sector driven, and just occasionally supported by Indian federal funding. In that sense, Indian PPPs are more private–public in nature in comparison with Chinese PPPs, which are strongly public–private.
Second, the rise of India’s private agro-food interests in Africa is facilitated, for both first and second generations of large firms and SMEs respectively, by the historical presence of dynamic and well-integrated Indo-African diasporas in Eastern and Southern Africa. Such business networks are very effective locally and internationally. They can offer excellent intermediation services, and either bypass local governments, or deal with them whenever necessary. In recent years, these networks have rapidly expanded to new sub-regions such as Central and Western Africa. They have also benefitted from a smart pro-business strategy of using new honorary consulate appointments with the blessing of the Government of India and the Indian Confederation of Industry.
By the time of finishing this article in 2013–2014, new international prospective studies have been published regarding the positioning of Africa on the global scene. One highly interesting prediction suggests that both Chinese and Indian investments in agro-food and other sectors in Africa could forge the pillars of a newly emerging mega-economic region during the second half of the 21st century (Boillot and Dembinski, 2013). That mega-region would agglomerate Africa, China, and India into a new entity, which could be called “Chindiafrica,” This mega-region could rise as a new pole of global growth for the benefit of more than half of the world population into the 22nd century!
Whether such a prediction comes true or not is not the most important issue here. But the conclusions of this article indicate that India’s private sector development strategy vis-à-vis Africa seems particularly well positioned to continue and progress. Some argue that it could perhaps overtake China fairly soon, as anti-Chinese critics are rapidly spreading among African governments and civil society, and are much amplified by powerful local and global medias.
Footnotes
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.
Notes
Author biography
His career started in the early 1990s as senior lecturer and then as associate professor at the Graduate Institute of International and Development Studies, Geneva, Switzerland. Philippe Régnier was director of the Institute’s Centre for Asian Studies in 1996-2006. After 2008, he became full professor at the School of International Development and Global Studies, University of Ottawa, a school newly established in the federal capital city as the largest one of its kind in Canada. One of his main contributions was the creation in 2013 of the first Canadian inter-disciplinary PhD program in international development studies. In recent years, he also joined the University of Applied Sciences, Western Switzerland, which has appointed him in March 2015 as the scientific director of its new Swiss research program (2016-2020) in entrepreneurship and appropriate technologies in cooperation with developing countries. This program will be coordinated with local universities, and also Belgian, Canadian, French and Swiss universities, in collaboration with the International Organization of the Francophonie among others.
His past and current professional activities include teaching, training, research and consulting with the private sector, governements, donor agencies, international organizations and NGOs. Since 2009, he has been elected as the Chief Editor of the Journal of Asian and African Studies, published by Brill Publishers in Boston, Leiden and Singapore.