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African Region: Recent Economic Developments And Potential For Enhancing Commercial Relations With India

In recent years, underpinned by global economic growth momentum and sustained demand for gas and oil, as also for other products of the extractive industries such as minerals and metals, the African region has witnessed sustained rise in economic activity. Considerable progress has been achieved through improved macro-economic management and continued structural progress in many countries, which has resulted from the strong commitments of many African governments to prudent fiscal, monetary and exchange rate policies. According to the IMF, Africa’s real GDP registered a rise of 5.7% during 2007, up from 5.6% during the previous year, the highest in almost a decade. Underlying the pickup in growth have been the strength of the global economy, including high oil and commodity prices, improved macroeconomic stability and progress with structural reforms. During 2008, real GDP growth of the African region is projected to be sustained at a higher 5.8%.

Country specific developments have also boosted overall developments in the region. These positive developments include new production facilities in Angola and Equatorial Guinea, growth in non-oil GDP in Nigeria and recovery in agricultural output in Ethiopia and Rwanda. Further, structural reforms have also contributed to the resilience of the region, resulting thereby in moderate inflation in many countries in the region.

While growth has been resilient, Africa continues to face a wide range of development challenges, including factors that undermine macroeconomic stability and the long-run growth potential; adverse weather conditions and natural disasters that generate high output volatility; infrastructure and health conditions that hold back productivity growth. As stressed in the New Partnership for Africa’s Development (NEPAD), a multi-faceted strategy is required to address these issues, including policies aimed at reducing conflict and improving political governance; promotion of competition, trade and foreign investment, underpinned by measures to strengthen macroeconomic policy frameworks; and a policy focus on developing the pro-poor sectors of healthcare, education, infrastructure and agriculture. Stimulus to sustained growth would emanate from the deepening of reforms, structural transformation, rebuilding institutional capabilities and sound as well as efficiently managed macro-economic policies.

Trends In Indo-African Trade

Synergy that exists between India and Africa can be gauged from the recent trends in Indo-African trade relations, wherein bilateral trade has risen to as much as US$ 25.0 billion in 2006-07 from that of US$ 967 million in 1990-91, due to rise in both exports to and imports from the African region (Table 1). India’s exports to Africa have reached US$ 10.3 billion in 2006-07 from a relatively low figure of US$ 394 million in 1990-91. As a result, the share of Africa in India’s total exports has risen from a marginal 2.2% in 1990-91 to a healthy 8.2% in 2006-07. Concomitant rise in imports from Africa during the comparable period attest to increased two-way trade relations, wherein India’s imports from Africa have risen from US$ 573 million in 1990-91 to US$ 14.7 billion in 2006-07, with a resultant 7.7% share in India’s total imports, up from 2.4% share in 1990-91.

Table 1: India Trade with Africa

(US$ mn) 2002-03 2003-04 2004-05 2005-06 2006-07*

Exports 3137.9 3861.7 5578.4 7013.6 10255.7

Imports 3444.4 3202.1 4006.4 4878.8 14722.8

Total Trade 6582.3 7063.8 9584.8 11892.4 24978.5

Trade Balance -306.4 659.6 1572.0 2134.7 -4467.1

As regards major trading partners in the African region, South Africa remains the leading destination for India’s exports during 2006-07, accounting for 22% of total exports to Africa. Other major export destinations include Kenya (12.8% of total exports to Africa), Nigeria (8.8%), Mauritius (7.2%), Ghana (4.5%), Sudan (3.9%), Algeria (3.3%), Djibouti (3.0%) and Tanzania (2.9%).

As regards India’s imports from Africa, Nigeria dominates with a significant share of 47.6% of India’s total imports from Africa during 2006-07. South Africa is the second largest import source with a share of 16.7%, followed by Egypt (11.8%), Algeria (5.1%) and Morocco (3.3%) during 2006-07.

The African region is an important source for India’s imports of several items. Nigeria is the second largest source, after Saudi Arabia, for India’s imports of petroleum crude, accounting for 12.2% (US$ 6.9 billion) of India’s global imports (US$ 57.04 billion) during 2006-07. South Africa is the fourth largest source, after Switzerland, Australia and the UAE for India’s gold imports. Morocco, Senegal and South Africa are leading sources for India’s global imports of inorganic chemicals.

India-Africa Project Partnership Conclave 2008 & India-Africa Summit 2008
The India-Africa Project Partnership Conclave, initiated in March 2005, by the Confederation of Indian Industry (CII) and Export-Import Bank of India, in partnership with Ministry of Commerce and Industry, Govt. of India and Ministry of External Affairs, Govt. of India, has achieved credibility as a business-to-business platform between India and the countries in Africa, and has created benchmarks for the engagement of Industry and Governments from India and the African region. The Conclave has also created a platform for information, dialogue and better understanding to propagate and build long-term sustainable economic relations, which in turn has been instrumental in increased private sector dialogue between Indian and Africa.

Building upon the achievements of the past Conclaves, the India-Africa Project Partnership Conclave 2008 would focus on, among others, catalysing Indian participation as a key partner in Africa’s developmental processes. In the current scenario, there is increasing acceptance by countries in Africa of Indian technical consultancy and manufacturing industry to participate in a major way in their developmental activities. This is compounded by the fact that the Government of India is also making a concerted effort to direct its developmental cooperation programmes in a major way towards Africa. In light of these, the Conclave proposes to supplement the efforts of the Government of India to ensure that relevant industry position is articulated for the benefit of Summit level dialogue, while also serving as precursor to the first India-Africa Summit scheduled to be held in India during April 2008. The India-Africa Summit 2008 is set to redefine India’s relations with the African continent by enhancing engagement, particularly in economic field, and would focus on enhancing the role of India as a key partner in capacity building and empowerment towards Africa.

Enhancing Commercial Relations: Some Observations

The continued growth in many African countries witnessed in recent years has been due primarily to the sustained rise in global prices of oil and non-fuel primary commodities, in which many African countries are relatively well endowed. While such windfalls from non-renewable natural resources have served to boost short term economic development in Africa, what is imperative for African countries is to ensure that such windfalls are productively invested in sectors which would have long term growth impact on the economy. In this regard, India, with its vast experience in entrepreneurial development and capacity upgradation, and technology which would be relevant and applicable in African countries, could partner with countries in Africa in their growth process.
With a view to further enhance two-way trade and investment flows, some measures and endeavours to enhance bilateral commercial relations between India and countries in Africa could encompass an integrated approach comprising, among others:

• strategic investments and linkages by Indian companies with counterpart agencies and partners in Africa;
• increased cooperation for contributing to the development of natural and mineral resources, with bilateral arrangements such as buy-back arrangements, with a view to achieving sustainable development, value addition and employment generation;
• enhancing linkages with banks and financial institutional institutions in Africa to foster increased bilateral trade and investment flows;
• broadening linkages with trade promotion institutions in the region to enhance bilateral trade flows;
• strengthening linkages with investment promotion agencies in Africa to enhance Indian participation in potential investment sectors;
• enhanced cooperation in agriculture sector development in the African region to foster sustainable and equitable development;
• contributing towards entrepreneurship and human capability development in Africa, particularly in the SME and agri-related sectors;
• Setting in place institutional mechanism and support system to facilitate trade and investment related activities from Africa into India.
Such endeavours could be supplemented by measures such as: focus on IT development; increased participation in multilateral funded projects; institutional building; setting up regional business hubs in line with regional trading arrangements in Africa; cooperation with chambers of commerce and industry in the region.


For India, with countries in the African region emerging as important trade and investment partners, and the need of African countries for strategic partners in their developmental and growth endeavours, sharing of experiences in capacity building, investments and cooperation in growth-inducing sectors in Africa could prove to be strategic in fostering and enhancing long term commercial relations as also presence in the African region