Indian Investment in Africa: In the Shadows of China

Although India is an economic powerhouse in its own right, in the West we don't hear that much about India's recent economic progress because so much of this growth has taken place in the shadow of China's advances.

Even when we begin to steer this conversation towards India's African investments, India again seems to be playing "catch up" with China.

This article was inspired by an article that appeared in The Daily Monitor titled, "Indian investment in Ethiopia reaches $1.8 bln".  Reading the article caused me to ponder the fact that for every one article that I have read about Indian firms doing big deals in Africa there seem to be five more articles highlighting even larger deals between China and Africa.  Is India's investment in Africa really that minimal compared to China's or is this a a reflection of something else?

To me the only answer-a little bit of both. 

On the one hand, we hear so little about India in Africa because the stories are not sensational.  India has adopted a more passive or laid back approach to expanding into Africa that just doesn't sound as interesting as China doing business with Sudan or sending arms shipments to Zimbabwe. 

One could almost assume that because India is one of Africa's oldest trading partners that India would have the leg up on China, in terms of African investment.  And when one begins to aggregate some of the deals taking place between India and Ethiopia, Uganda, Nigeria, Kenya, South Africa, and some of the other African countries it does trade with that the number could get quite robust.

For instance, The Daily Monitor recently reported, "The total investment in Ethiopia by 351 Indian companies has become 1.8 billion USD as at April 2008, in a sign of marked surge in number and size of investment from the emerging economy."

And in the prelude to this year's India Africa Summit Anjana Pasricha (VOA) reported, "India will invest $500 million in development projects in Africa, in the next five years. It will also double financial credit to African countries from about two-billion dollars during the past five years to $5.4 billion."

Figures like these are nothing to sneeze at, right?  But at the heart of the matter is that India's African deals pale in comparison to what Beijing does annually. China invests approximately $60 bln in Africa and India only does about half that amount on an annual basis.  What follows below is a good explanation as to why China's investment in Africa has eclipsed India's.   

In his Foreign Affairs review of Harry G. Broadman's book, "Africa's Silk Road: China and India's New Economic Frontier" Nicolas van de Walle makes a rather insightful point.  He states, "The relationship between India and the African continent relies on private networks, linked to long-standing Indian populations in the region. The relationship between China and the region, on the other hand, is more recent and more often mediated by formal government-to-government agreements."

This is why even though India does some respectable trade with Africa, we are only hearing about their Asian neighbor-China's trade with Africa.  It leads me to believe that in order for India to catch up to China's recent achievements in Africa, India must either begin to focus on Africa's smaller countries that have been too small to register on China's radar (like the Seychelles and Mauritius), they can continue to rely upon their old ties in East Africa like Mauritius, Tanzania, Kenya, Uganda, and Ethiopia (although China has made substantial inroads in Eastern and Horn regions of Africa within the last decade), or it must change its strategy and go more formal like China has done.