Open the door to Africa

Viewing a recent CNN television programme on how the ancestors of today’s illustrious Indian business community in Kenya arrived in the east African country a century ago as indentured railway workers brought in by the British colonialists to construct the “lunatic” railway line across Kenya, from Mombasa to Kisumu was a poignant reminder of the close historical relations between India and Africa.

That relationship goes back much longer, in fact, to the thousands of years over which Indian merchants and Africa have traded.

But India’s recent decision to postpone the India-Africa summit, originally scheduled for this month, over fears of Ebola risk, is not a great indicator of the seriousness India attaches to its relationship with Africa.

China’s rising economic engagement in Africa is today the dominant reference point. China’s trade with Africa hit $210 billion in 2013, with 2,500 Chinese companies operating in the continent.

India-Africa trade is playing catch-up, projected to get to $100 billion in 2015. India is now the largest trading partner of Nigeria while India is now the largest importer of Nigerian crude oil.

But Africa has far more in common with India. An increased strategic economic engagement between the two partners has the potential to be much more genuinely beneficial to both parties than the increasing criticisms of a certain lopsidedness in China’s relations with the continent.

As the next India-Africa Forum Summit prepares to hold in 2015, it is worth repositioning India-Africa economic relations along some deeper contextual commonalities than merely transactional activity.

This approach will enable African countries gradually emerging in the global economic consciousness to achieve transformational outcomes beyond simply being a stage for global economic competition between rising powers, such as India and China.

The common challenge that confronts India and Africa is their struggle against poverty. In India, these tensions are represented not only in the economic philosophies of the previous and present national governments but is also evident in the criticism of the late Indian management guru C.K. Prahalad, who highlighted “the fortune at the bottom of the pyramid”, by Raghuram Rajan, the RBI governor who recently said that micro-lenders should not seek to make a fortune off the poor.

Put differently, this argument is about inclusive business. Should the guiding hand of the state be dropped completely off the steering wheel on growth? One would think not.

Private capital goes to where it sees a profitable market, which means that public policy must provide incentives for investments. It also means that if the bottom of the pyramid is where profit is to be made, business will go there.

But, is profiting from the pyramid’s base the same as creating wealth for the bottom billion? There are no easy answers.

Both India and African countries need to consider carefully the trade-offs between the different kinds of capitalism the crony capitalism of India’s “robber barons” and the oligarchs of Russia and Nigeria, “state capitalism” as practiced by China, the welfare capitalism of Europe, and the entrepreneurial, small-business capitalism that built the US also cemented trade between Indian merchants and Africa.

The path to real economic transformation in Africa does not lie in the export of its raw materials and imports of finished goods.

It lies, first, in developing the continent’s human capital and making manufacturing as a basis for trade. These are all areas in which India has developed significant capacity.

The Africa-India relationship should thus be anchored on investments by Indian firms in African countries.

Developing investments in online education that transfers technical skills to African countries, hospitals, agribusiness investments that create local employment as against the heavy use of imported Chinese labour by Chinese investors in many African countries should be the focus of India-Africa ties. Just as India now sees its path to global leadership running through a turn-around in its economic fortunes, so Africa must prioritise economic transformation beyond GDP growth figures if the continent’s emergence is to lead to progress similar to the rise of Asia.

Kingsley Moghalu, former deputy governor of Nigeria’s reserve bank, is the author of Emerging Africa: How the Global Economy’s ‘Last Frontier’ Can Prosper and Matter