Africa-India trade is alive and well

A general view shows containers stored near the port area in Kolkata, India. Photo: AFP

A general view shows containers stored near the port area in Kolkata, India. Photo: AFP

Published Jul 30, 2023


By Vinesh Kassen

India will be one of the most important trading partners for the African continent over the next few decades.

Testament to this is if we look at the interest expressed at the recent 18th edition of the “CII-EXIM Bank Conclave on India Africa Growth Partnership” – the future is promising for bilateral trade and investment relations between India and Africa.

Launched in 2005, the “Conclave” has been a key business-to-business event aimed at improving trade ties between India and the African continent. This year, the event was attended by over 1500 delegates representing 42 African countries.

For those familiar with historical India-Africa trade, one of the prominent factors this year was the high level of government delegates in attendance. Indian trade activities on the African continent have been business-led for many decades, and the attendance of senior-level government representatives highlights the strategic importance of the trade relationship on the continent.

Africa has long been regarded as the last true frontier market, and its abundance of natural resources is attractive to foreign investors. Historically, these relationships have been extractive in nature and, in many cases, created tension between foreigners and their local counterparts.

The India-Africa relationship is regarded as being different as Africa is home to many people of Indian descent, some of whom have maintained generational ties to India. What arguably distinguishes Indian investment into Africa is that it has been private sector-led and that those investors have not enjoyed the deeper pockets supported by government or Development-Finance backed projects. This has meant that private sector players representing Indian interests have had to take multi-generational views on their investments, in turn benefiting the African continent.

When it comes to trade with Africa, there is a huge amount of interest in infrastructure opportunities – especially outside of the more developed hubs, such as South Africa. Looking across the continent, the likes of China, Japan, South Korea, and India are competing for such opportunities in Africa, given the implicit need.

There is no question that African economies have taken strain. Just as they were emerging from Covid-19 lockdowns, we have seen the global economy rocked by inflation, supply-chain challenges, and sovereign debt issues. These issues often dominate the business media focused on Africa. Success stories such as the Metrorail in Mauritius or the large-scale traffic de-congestion project in Zambia, which both received Indian funding support, receive very little airtime but are material infrastructure projects that will be game-changers in terms of infrastructure investment on the continent.

If one considers that EXIM bank has committed $12.8 billion (R228bn) in funding across 42 African countries already in 2023, with the intention to double the existing $100bn in bilateral trade by 2030, we get a sense of how aggressive Indian expansion on the continent is likely to be.

While that question simmers, the African Continental Free Trade Area (AfCFTA) was another prominent topic of discussion at the Conclave event.

While there has been some criticism around the pace of the AfCFTA rollout from some quarters, the magnitude of this project is hard to ignore. There was general consensus at this year’s Conclave that this was likely to be a major business opportunity for Indian consumer-facing businesses who are looking to export products such as automotives and pharmaceutical products from key manufacturing points across the continent.

Africa is becoming an increasingly important player from both a trade and geopolitical perspective, and these two factors are likely to go hand-in-hand.

On the geopolitical front, Africa is in many ways facing a tug-of-war between the “West” represented by the US, UK, and Europe and the “East” represented by China, Russia and, to some degree, India.

The “BRICS” grouping and the discussion around a “BRICS” currency is growing. A very interesting factor to observe here is how India has positioned itself in the global playing field. While Russia and China appear to have an adversarial relationship with the US, India appears to be skilfully navigating this tension and positioning itself as a neutral but forward-looking partner.

India is positioned well with a dedicated interest in sustainable investment in Africa. India-Africa trade is alive and well, and we believe that India will be a key geopolitical and trade partner for decades to come. From a banking perspective we are clear in our message: Absa is keen to support the growing influence of Indian business in Africa.

Vinesh Kassen is a director: Head of India Client Coverage, Absa