Today, Africa has positioned itself as a key partner in the global arena, a global investment and trading hub, a US$ 2.2 trillion market and a population base of over 1 billion, Africa offers a great market potential . With a largest arable landmass in the world, housing 30% of global minerals reserves, and 8% of the world’s oil reserves , the continent offers promising long-term sustainable growth prospects which would be further enhanced by deeper integration of Africa into the global economy. In fact, in the coming years, Africa is to benefit from strong fundamentals including a young and growing population, the world’s fastest urbanization rate, and accelerating technological change . The continent’s young population with a growing labour force is a highly valuable asset in an ageing world. By 2034, Africa is expected to have the world’s largest working-age population of 1.1 billion. Urbanisation is a common feature of most economies in Africa, according to estimates, an addition of 187 million Africans are expected to live in cities. This urban expansion is contributing to rapid growth in consumption by households and businesses. Further, penetration of smart phones is expected be more than 50% in 2020 from only 2% in 2010. In Sub-Saharan Africa, cellular-enabled machine-to-machine connections are expected to grow by around 25% per annum to 30 million by 2020, thus changing the prospects for a many sectors ranging from healthcare to power.
These will help drive rapid growth in consumer markets and business supply chains. According to McKinsey, African household consumption is expected to grow at 3.8% a year to total US$ 2.1 trillion by 2025; and business spending is expected to increase to US$ 3.5 trillion by 2025 from US$ 2.6 trillion in 2015 . Further, Africa is expected to increase its manufacturing output from US$ 500 billion today to US$ 930 billion in 2025. Currently, Africa imports one-third of the food, beverages, and similar processed goods it consumes. Potential industries in the manufacturing sectors include wholesale and retail, food and agro-processing, light manufacturing, and construction. Among the services sectors that have a potential in Africa and having backward linkages with the manufacturing sector include healthcare and financial services5. In spite of such promising growth prospects, Africa continues to face the challenge of infrastructure gap, need for enhancing capacity building and moving up the value chain, among others. Further, there is a strong desire among African economies today to move away from excessive dependence on extractive industries to a more sustainable balanced economy.
India and Africa have had a long-standing relationship that is marked with historic, cultural, economic and political exchanges and cooperation. The recent years have witnessed tremendous increase and deepening of economic and cultural exchanges and cooperation between India and Africa.
With a view to significantly enhance India’s trade with Africa, the Government of India (GOI) launched an integrated programme ‘Focus Africa’ from the year 2002-03. The main objective of the programme is to increase interactions between the two regions by identifying the areas of bilateral trade and investment. The ‘Focus Africa’ programme has been extended to cover the entire African continent.
These developments can be attributed to the growing prowess of African and Indian companies, with GOI playing a pivotal role in creating an enabling environment. Moreover, Africa has emerged as one of India’s major export destinations (from US$ 14.8 billion in 2008-09 to US$ US$ 25 billion in 2015-16), on account of GOI’s Initiatives such as Focus Market Scheme, among others.
Effectiveness of the bilateral initiatives that exists between India and Africa can be gauged from the recent robust trends in Indo-Africa trade relations, wherein bilateral trade has increased around five-fold in the last decade, which stood at US$ 56.7 billion in 2015-16. African region has now accounted for nearly 10% of India’s global exports and supplies 8.3% of India’s global imports. At the same time, Indian private investment in Africa has surged with major investments having taken place in the telecommunications, IT, energy, and automobiles sectors . According to the RBI, Africa accounted for nearly one-fifth of Indian overseas direct investments during April 1996 to March 2016, with Mauritius, Mozambique, Sudan, Egypt and South Africa being some of the major investment destinations.
India’s partnership with Africa has been driven by the aim of empowerment, capacity building, human resource development, access to Indian market, and support for Indian investments in Africa. The Pan Africa e-network Project, a joint initiative with India and the African Union is testimony to this partnership.
International Solar Alliance (ISA), one of the recent major initiatives of the Government of India, was conceived as a coalition of solar resource rich countries to address their special energy needs and will provide a platform to collaborate on addressing the identified gaps through a common, agreed approach. The proposed ISA members would include solar resource rich countries lying fully or partially between the Tropic of Cancer and the Tropic of Capricorn. GOI would support ISA by hosting its Secretariat for an initial period of five years and thereafter it is expected to generate its own resources and become self-financing.
With many African countries being part of over 120 prospective members for ISA, there exist scope for further alliance between India and the region on solar energy.
This is especially so, given the strong focus of the governments in the region on rural electrification and the inadequate grid connectivity which renders cooperation on decentralised solar power an attractive proposition. India pledged to add 100 GW of PV capacity by 2022 under its National Solar Mission.
Africa’s development is a huge opportunity for India, just as Africa’s resources play a key role in driving India’s economic growth, while creating wealth and jobs in Africa. The continent’s progress will add great stability and momentum to the global economy and benefit India as well.
(This is an extract from Mr. Debasish Mallick’s speech at the 12th CII- EXIM BANK Conclave on India Africa Project Partnership, held at New Delhi on March 9-10, 2017.)