G20’s compact with Africa: How beneficial for Africa is it really?

The emphasis on Africa, a hitherto marginalised region in G20 summits, was one of the most prominent features of Germany's G20 Presidency. Germany launched the Compact with Africa (CwA) initiative under the G20’s finance track in 2017. The main objective of the CwA initiative was to encourage private investment in Africa, particularly in the infrastructure sector, for high growth and job creation within Africa. Domestic pressures to stem migration from Africa also played an important role in the formulation of the CwA initiative. It was felt that creation of adequate economic opportunities for Africa’s youth within Africa would deter young Africans from seeking a better life in Europe.

Under CwA, African countries willing to join the initiative commit to an investment compact and engage with international organisations (World Bank, IMF, and AfDB) to discuss the initiative’s objectives and national priorities. Thereafter, the compact countries focus on reform measures and implementation. The three main reform areas under the CwA are as follows:

1. Macro-economic environment for investment which covers economic policies in African countries to main macro-economic stability and ensure adequate infrastructure provision.
2. Business environment which includes the general environment in which firms operate, regulatory practices and predictability, state capacity for management of public-private partnerships, project preparation etc.
3. Financing environment for investors which includes development of local capital markets and support from long-term institutional investors in major financial systems.

So far only a handful of African countries: Benin, Burkina Faso, Cote d’Ivoire, Egypt, Ethiopia, Ghana, Guinea, Morocco, Rwanda, Senegal, Togo, and Tunisia have joined the initiative. According to a recent report by Rob Floyd, Kapil Kapoor and Laura Sennett, 101 commitments have already been made by nine participating African economies out of which 43%, 37%, and 21% were related to macro-economic stability, business and financial environment respectively.^[i] While 33% and 22% of the commitments under the macro-economic and business environment pillars were achieved only 5% of the commitments under financial environment has been achieved so far. Thus, one can say that there is some progress in reform process in the Compact countries but given the long-term nature of the reform process it is not clear to what extent the African countries will succeed in attracting private capital from these reforms. The following paras discuss some of the main issues with regard to the CwA and what the initiative holds for the African continent.

One of the first questions that emerges with respect to this initiative is how invested are other G20 members in this initiative or is it just a German initiative? So far not many G20 countries have involved themselves deeply in the CwA initiative. Only Germany, France, United Kingdom, Japan, Canada, Spain, Netherlands, and the United States have participated in this initiative.^[ii]In fact Katherine Keil argues that the CwA is more like a G7 initiative because apart from Spain and Netherlands, all other countries are a part of the G7.^[iii] Many of the G20 members have their own programmes with Africa and may not be very keen to get closely involved in the CwA process. In fact, Chinese funding for African infrastructure exceeds the contributions of other countries and international organisations and comes without any additional conditionalities or reform requirements.

Secondly, although the initiative claims to be demand-driven, one of the major problems with the initiative is that it continues to look at Africa as a problem and adopts the age-old prescriptive approach to address development challenges in the continent. Currently, South Africa is the only African country which is a G20 member. Although the African Union and New Partnership for Africa's Development (NEPAD) attend G20 summits, the continent as a whole has little say in global development issues discussed at the G20. Under such circumstances, an initiative like CwA which essentially tries to facilitate reforms in African countries to boost private investment for higher growth and more jobs for Africans perpetuates the historical relationship that the continent always had with the West.

Thirdly, the initiative assumes that promoting private investment and development of physical infrastructure through domestic reforms is the panacea for all of Africa’s development challenges. There is little evidence to support this view though. In order to address poverty, inequality and youth unemployment in Africa, it is not only important that the continent attract private investors but also that such investments lead to the creation of decent jobs for Africans. The central question is - Will Africa profit from private industries or will the private sector profit at Africa’s expense? Africa’s development history suggests the latter is more likely without adequate safeguards. While African governments are committing to domestic reforms to attract the private sector, there is no guarantee that the private sector will meet environmental or social standards. What will be the role of G20 members and international organisations like the IMF and the World Bank? They will provide technical assistance, help in project preparation and encourage their private sector to invest in Compact countries. Unfortunately, the issues of fair wages, decent working conditions, environmental standards, sustainable development goals are completely absent from the CwA narrative. African governments will be responsible for ensuring these on their own. Moreover, overemphasis on the creation of physical infrastructure through public-private partnerships (PPPs) ignores the importance of social infrastructure like health and education which are essential for poverty alleviation and development.

Another key feature of the CwA initiative is that it reinforces the activities of the IMF and the World Bank. Directing private investment to the infrastructure sector has been the focus of these institutions for a long time. However, the fiscal, legal, regulatory, and institutional challenges with regard to PPPs have been completely neglected. PPPs often cost more in the long-run and expose governments to financial risks. In case of private financing of large infrastructure projects in immature financial markets, there are high risks that the private returns come at the expense of long-term fiscal costs. The CwA framework also includes business arbitration courts and Systemic Investor Response Mechanisms (SIRM) which often prioritise investor interests over public interest. In a nutshell, although launched with a lot of fanfare, the actual benefits for African countries from the initiative is still not clear and offers nothing new to African countries. In fact, the G20 members must realise that they would contribute more to Africa’s development by focusing the issues like fair trade practices, climate change, global financial architecture etc.

(This article originally appeared in the Observer Research Foundation's website)

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^[i] https://t20japan.org/policy-brief-g20-compact-with-africa/

^[ii] https://us.boell.org/2017/12/13/g20-compact-africa-innovative-partnerships-or-business-usual

^[iii] Ibid.

Weddings bells for frogs as climate change looms over India

It is heartening to see that citizens are finally waking up to the acute water crisis that the country is facing. The most notable achievement has been that of the Udupi Citizen’s Forum which organised a grand wedding of two frogs to please the God in charge of rains. The Udupi Citizen’s Forum did not stop at just the wedding. The newly married frog couple has also been packed off for a honeymoon. Unlike my Marxist husband (yes, there are still a handful of them left in India) who hates gala weddings, I love them. Good food, sarees, dance and selfies (in a frog wedding selfie may be a bit difficult though) are the true essence of my life. Not just God and me, but I have a feeling the Citizen’s Forum has managed to please Rabindranath Tagore as well.

The young Tagore, as the manager of the family’s zamindari, was moved by the poverty and helplessness of the villagers and resolved to provide an example of rural reconstruction in his own zamindari. In his estate, the river was faraway and water scarcity was the main concern of the villagers. Young Tagore, keen to help the villagers, proposed that the villagers get together and dig a well while he would bear the costs of cementing it. Rationality, as any micro economics textbook would have us believe, would make the suffering villagers jump at such a proposal. But the villagers reasoned that such a collective action to address the water problem would help Tagore get an easy ticket to heaven. They firmly believed that by helping the villagers access water, Tagore would go to heaven, something that they felt they needed to prevent at all costs, even at the cost of their own inconvenience. So, the well never got made and they continued living in hell.  

Many such experiences with villagers deeply disappointed Tagore and subsequently led him to question the politics of the day around home rule and self-reliance. But had Tagore been alive today, he would surely have been very happy to see that people in India are at least bothered about their own welfare now and are also uniting to solve their own problems. Finally, self-reliance is here. Now that we have collectively managed to marry off two innocent frogs, off course without their consent, let us spend the next hundred years on working out rules of frog weddings. Firstly, we need to classify frogs according to castes and gotras. Marriage between a brahmin frog and low caste frog will surely annoy our Gods and worsen the water crisis. Secondly, dowry needs to be worked out and all the wedding expenses must be borne by the bride frog’s village or city. If two frogs dare to fall in love and decide to have a good time on their own then such frogs should be killed honourably and anti-Romeo squads must be formed immediately to make sure inter-religious and inter-caste frog unions don’t happen. We must do all this at once to please the Gods who will then address our water woes.

It will take another century for us to be able to collectively decide that in addition to lavish frog weddings, we need to better manage our water resources by recycling water, increasing the water-use efficiency in irrigation, water harvesting etc. What? We don’t have another century? The worst impacts of climate change will be felt in the next few decades itself? Majority of India’s river basins are vulnerable to droughts because of shifting rainfall patterns? Climate change and water stress would displace thousands of people in India in the coming decades? India’s food security is under severe threat because the frequency of droughts will increase? Shut up. Will you please? We will not let climate scientists, hydrologists, social scientists and others of that kind desist us from the holy duty of organising lavish frog weddings. All that these researchers ever want is to go to heaven. What exactly is the purpose behind their research? Heaven? More funds for their research? Awards? Money? No matter what their interest, we shall focus on frog weddings to please Gods. Let’s pray that the newly married frog couple falls in love in their honeymoon and they quickly have a baby frog. The frog offspring must be male off course. Thereafter, we will send the baby boy frog to Kota for coaching classes to crack the IIT entrance exams. A corporate job after IIT for the baby boy frog and then we will put him up for sale in the marriage market. What next? An even more lavish frog wedding. All to please the Gods for adequate rainfall. God helps those who help themselves? Shut up.

Selling pakoras on the pavement – Whose dream job is it?

I love pakoras and also roadside tea. I have spent enough time of my life eating pakoras and having tea in and around Delhi to know who these people are, where they are from, and what their aspirations are. By conversing with these friendly ‘bhaiyyas’ who create magic with besan and oil which we can’t replicate at home no matter how hard we try, I have learnt that they really are ordinary people with hopes and aspirations. Our politicians who live a luxurious life at our expense have clue about these people. They come like monarchs of the yesteryear's before the elections in their fancy cars or even helicopters protected by security forces (again paid for by our taxes) and make long insincere promises. These obnoxious people know very little about what they are talking. The latest salvo by ‘he who must not be named’ with regard to roadside pakora stalls as gainful employment options for India’s youth may go down as one of the most cruel statements in history after the “Let them have cake” by the French queen.

Roadside pakora sellers in and around Delhi usually hail from rural Bihar or Uttar Pradesh. Driven out of the rural areas due to the crisis in agriculture, they are eking out a living in Delhi with hopes of educating their children so that their children can have a better life. If only our Prime Minister could listen to the ‘man ki baat’ of these men, he would find out how hard these people work for upward mobility. They are very concerned about their children’s education. Most of their children go to private schools and also private tutors. If you ask them what they want to become once they grow up, the answer always is ‘sarkari naukri’. Unlike Indian politicians, none of them want their children to follow their footsteps and become pakora sellers. Then who actually wants to take up the great job of a pakora seller that is being offered. Nobody. It is a distress options for those driven out of agriculture. Some please inform ‘he who must not be named’.

India needs a systematic overhaul in agriculture to ensure food security

Food insecurity continues to be one of the most pressing challenges before India. Despite high rates of economic growth, the prevalence of undernutrition declined marginally from 210.1 million in 1990 to 190.7 million in 2016. Currently over one-fourth of the children are stunted in large states like Gujarat, Jharkhand, Karnataka and Madhya Pradesh, and over 40 per cent of the children are underweight in Jharkhand, Madhya Pradesh and Bihar. On the other hand, due to rising incomes, the rich and middle classes in urban areas are demanding a more diversified and protein-rich diet. The composition of the food basket is increasingly shifting away from cereals to high-value agricultural commodities like fish, eggs, milk and meat. As incomes continue to rise, this trend will continue and the indirect demand for food from feed will grow rapidly in India.

Will India’s food production be able to meet the growing demands of its population? The current agrarian situation does not present a particularly optimistic picture. Agricultural productivity in India is extremely low. According to World Bank figures, cereal yield in India is estimated to be 2,992 kg per hectare as against 5,401.4 kg per hectare; 5,362.6 kg per hectare; 7,318.4 kg per hectare and 4,453.2 kg per hectare in East Asia and Pacific, Euro area, North America, Central Europe and Baltics respectively. A study by Praduman Kumar, P.K. Joshi and Surbhi Mittal suggests that India will face a net deficit of three to five million tonnes in rice by 2030 and the deficit in pulses and oil seeds will widen rapidly.

The deep crisis, which afflicts India’s agriculture sector, is not unknown. Farming has become an unviable occupation. About one-third of the farmers in India do not like farming because it is not a profitable activity and 40 per cent are willing to give up farming if they could find a better source of livelihood. Despite this, agriculture employs about 49 per cent of the labour force in India. Indebtedness, the main reason behind the rising number of farmer suicides in India, has increased dramatically. According to figures from the 70th round of the National Sample Survey, about 52 per cent of the agricultural households in India are indebted with an outstanding loan of `47,000 per household. The states of Andhra Pradesh, Telangana and Tamil Nadu have the highest share of indebted households at 92.9 per cent, 89.1 per cent and 82.5 per cent respectively.

Research on agrarian distress has proliferated and most studies agree that a combination of policy-induced, technological and ecological factors is responsible for India’s agrarian crisis. Despite the fact that agrarian distress has been a favourite topic for economic research and the subject is now slowly getting the attention of India’s media, which has so far callously ignored the issue, long-term food security is no one’s concern. Policy actions have typically been in the form of loan waivers for agitating farmers. There have been counter reactions from the brigade, which is against any form of government spending in favour of the poor and destitute. The deep crisis in India’s agriculture sector indeed requires immediate measures but ignoring the ecological crisis and the challenges that climate change poses for India’s long-term food security is likely to be a grave policy mistake.

As a large developing country with a growing population, which is dependent on rain-fed agriculture, India is particularly vulnerable to climate change. The most significant impact of climate change will be felt through its impact on the country’s already stressed water resources. Several studies indicate that climate change will cause significant changes in inter-annual and inter-seasonal variability of the monsoon. The number of dry days and wet days has steadily increased since the 1970s. Currently about 54 per cent of the ground water wells are receding. Fluctuation in rainfall due to climate change will adversely affect India’s already depleted groundwater resources. The World Bank predicts that with a global mean warming of 2°C, above pre-industrial levels, India’s food water requirements will exceed green water availability. A mismatch between demand and supply of water will have far-reaching consequences on the country’s foodgrain production.

Climate models also predict an increase in the frequency of droughts in the north-western region. Increased frequency of droughts will have adverse impacts on foodgrain production, particularly kharif output. Rice, India’s staple food crop, is found to be most sensitive to extreme climate events. According to a report by the Intergovernmental Panel on Climate Change, water shortage and thermal stress will severely impact rice yields in India. Impacts on foodgrain productivity will be particularly severe in unirrigated areas. However, full impacts of climate change on agriculture are still not known to researchers. That is what makes climate change a particularly “wicked” problem.

Unfortunately, India is completely unprepared to tackle the impending crisis. Public investment in agriculture has declined steadily and policy approach towards the sector has been piecemeal. India’s long-term food security concerns must feature more prominently in the policy discourse. Given the challenges that climate change poses and the country’s vulnerability, India needs a systematic overhaul in its agriculture. Indian agriculture cannot afford to rely on unsustainable ways. Sustainable agriculture, which applies less pressure on natural resources, is the need of the hour. Small farmers also need support from the government to adapt to climate change and public investment in agriculture and research also needs to be stepped up. But is anyone listening?

A ‘women-centric’ approach for gains in nutrition

India has won significant battles against malnutrition. Unlike a few decades ago, instances of severe malnutrition such as kwashiorkor and marasmus are now rare. Latest figures from the National Family Health Survey revealed that there has been a ten percentage point decline in stunting from about 48 per cent in 2005-06 to 38.4 per cent in 2015-16. However, national figures mask regional variations. On the one hand, there are states like Kerala and Goa which have a low burden of undernutrition. On the other hand, there are states like Bihar, Uttar Pradesh, and Madhya Pradesh which have a high incidence of undernutrition.

Within the states also, there is considerable variation. Despite stunting levels in Odisha being 34.1 per cent (also known as “high prevalence”) certain districts such as Cuttack (15.3 per cent) and Puri (16.1 per cent) are among the top 10 “low stunting level” districts in the country. Similarly, in Karnataka, districts like Mandya have stunting rates as low as 18.6 per cent while others like Koppal have levels as high as 55.8 per cent. However, overall India’s record in addressing undernutrition has been much poorer when compared to other countries in South Asia such as China, Thailand, and Vietnam. Thus, the war against undernutrition is hardly over and meeting the World Health Assembly targets will be an uphill task for India. Moreover, the problem of undernutrition in India coexists with the problem of overweight and obesity and associated non-communicable diseases for a small section of the population which is affluent. The Observer Research Foundation and the Bill and Melinda Gates Foundation organised a consultation on malnutrition with some of the best experts in the country to explore the reasons behind India’s poor performance in addressing undernutrition and suggest appropriate policy interventions.

Although India has a plethora of policies and schemes to reduce undernutrition, there has been a basic flaw in our approach. The discourse on undernutrition in India has been “food-centric” or in recent years, “ICDS centric”. Social determinants of undernutrition have largely been ignored, particularly, the role of women. India needs a more “woman-centric” approach towards tackling undernutrition for it is not food but birth which determines whether a child will be stunted or not. In Purnima Menon’s words, “the biggest risk factor for being stunted is who you are born to”. Stunted children are born to mothers who are also stunted, uneducated, and not empowered enough to take care of their children. Therefore, nutrition policies must try to address the key determinants of undernutrition such as women’s body mass index, women’s education, early marriage, and access to ante-natal care.

A multi-sectoral approach towards nutrition is the need of the hour because narrow departmentalism has been a critical constraint in case of India. It is important to understand that nutrition does not belong to any one ministry. Nutrition outcomes tend to be better in areas where public investments have also been made in primary education and health centres along with nutrition interventions.

Amarjeet Sinha, secretary, ministry of rural development, stressed that a whole range of initiatives: better sanitation, clean drinking water, and trained rural medical practitioners are required in Indian villages for better nutrition. China offers a good example for India. In China, there was a dramatic reduction in child undernutrition and infant mortality between 1949 and 1979. Not one but a number of initiatives were behind China’s success.

First, the green tea kettle in school enforced the habit of making everyone drink boiled water. Public health facilities were improved through immunisation against diseases and training of traditional doctors. Lessons must also be learnt from better performing states and districts of India. Sinha also underscored the role that communities play in improving the nutritional status of the population by highlighting the successes of women’s self-help groups in states like Tamil Nadu.

Moreover, over half of the Indian population is deficient in micronutrients. This is mainly because of a cereal-based diet. Carbohydrates account for over 80 per cent of the diet along with small portions of fat. The bulk of the population is completely deficient in proteins and micronutrients. Thus, promoting dietary diversity through nutrition literacy and widening of the food basket under the public distribution is of utmost importance.

Here are four recommendations for India. Firstly, nutrition policies must take into account the role of social factors, particularly gender inequality. It will be next to impossible to address the challenge of undernutrition without addressing the key issues of early marriage, lack of control over child birth, and poor health of mothers.

Most nutrition interventions must be targeted to two age groups: children between 0-1,000 days and adolescent girls. This is so because the first 1,000 days are crucial for the baby. Undernutrition during this period can have profound implications on the development of the baby into a healthy adult. Similarly, it is important to target adolescent girls because they are likely to be the future mothers. Second, to address the issue of diabetes and micro-nutrient deficiency, it is important to invest in improving nutrition literacy in India. Thirdly, the basket under public distribution system must be widened to include pulses, and processed fruits and vegetables to ensure dietary diversity. Lastly, linking agriculture to nutrition is critical. Farmers must be encouraged to produce nutritious crops and vegetable not only for the market but also for household consumption.

This article originally appeared in The Asian Age

I really need to be sent off for re-education

I really need to be packed off for re-education. I am finding myself to be quite unsuitable to live in ‘modern’ India. My education, a PhD in economics from Jawaharlal Nehru University (Oops!) has rendered me completely incapable of understanding what the hell is happening in this country. A very highly qualified woman scientist, Medha Khole (we routinely complain that there aren’t many women in STEM) working for the Meteorological Department in Pune had filed a police complaint against her domestic help for hiding her caste and her marital status. In her police complaint, she said she needed a Brahmin married woman, whose husband is alive, to cook food at her house for religious ceremonies. Wow. I mean really…Wow. I am not oblivious to India’s reality. I know discrimination on the basis of caste and gender is quite common in India even among the so called educated urban elite. Most Brahmins do not eat food prepared by dalits especially during religious ceremonies. I am also aware of the discrimination that exists on the basis of gender. Married women whose husbands are alive and have borne sons are on top of the social hierarchy. What went against her the cook was not only the fact that she was not a Brahmin but also that she had lost her husband. As an informed social scientist, I am aware of the low status of widows in India but what astonishes me is that she went a filed a police complaint! I mean, just what happened to the good old Indian hypocrisy? Such a blatant caste and gender discrimination! Hail our education system. One can actually become a scientist without knowing anything about the struggle against caste and gender discrimination and the Indian constitution. Just what kind of educated women is this system creating? 

The story doesn’t end there. Apparently there is an organization called the Akhil Bhartiya Brahmin Mahasabha which decides to support her. A certain Mr Dave from Akhil Bharatiya Brahmin Mahasabha, speaks in her favour and feels that she has every reason to feel cheated because her family tradition goes back to 80 years. He also insists it is the government which is keeping the caste system alive through reservations in government jobs. The solution according to him lies in getting rid of the reservation system. I mean really, just what weed are all these people smoking???

There really is no point in educating women if they have to grow up to be like Medha Khole. We also don’t need any more women in science who have an unscientific mindset. I am more ashamed to know that a widow had to lie about her caste and marital status to earn a livelihood. This is really a denial of the right to life. But then scientists like her who spent hours mugging theorems and formulae and conducting experiments inside laboratories are not as vella as us social scientists are. They really don’t care about India’s constitution anyway. They have better things to do. But Mr Dave is actually right. There should be no reservations in jobs. And here by jobs I mean, not only the government jobs which he and other upper caste snobs of his ilk aspire for, but also the kind of jobs that poor dalit widows apply for. There should be no reservation for jobs to clean, cook etc even in religious places and ceremonies.

Do I make sense? No? I definitely do need re-education. I want to know where Ms Khole and Mr Dave studied.

China’s rapid growth in Africa: Lessons for India

China’s rising economic interest in Africa has caught the attention of scholars, journalists, and policy makers all over the world. Although the literature on China’s role in Africa has proliferated remarkably, most studies present a dichotomous understanding of China’s role in Africa, either as a ‘threat’ or as an ‘opportunity’. In fact, some scholars have even labelled Chinese economic engagement with Africa as the ‘new scramble’ for African resources. On the other hand, there are scholars, who regard China as the new economic frontier which is making a great contribution towards African development. Within India, many experts routinely emphasise the need for India to counter China’s growing influence on the African continent by building closer links with Africa. Others have expressed concerns over ‘China’s deep pockets’ and India’s inability to match China’s soft loans for infrastructure. Sadly, there is very little Indian scholarship devoted to the issue of China-Africa relations. Given the importance of both China and Africa for India, this is indeed quite disappointing.

This article tries to highlight some features of Chinese economic engagement with Africa which are often ignored by Indian scholars.

Firstly, Chinese economic engagement with Africa is not limited to resources. Although trade in resources such as crude oil and copper account for the bulk of trade between China and Africa and China has sanctioned infrastructure for resource loans worth billions of dollars to countries resource-rich countries such as like Angola and Democratic Republic of Congo, it would be wrong to dismiss China’s growing economic engagement with Africa purely as a means of acquiring resources. There are many African countries which lack resources, yet their economic ties with China are growing like never before. Ethiopia, an agricultural country in East Africa, is a case in point. The Ethiopian case completely rebuts the argument that China’s interest in Africa is limited to resources. Bilateral trade between Ethiopia and China grew at a rate of 63 per cent per annum between 2002 and 2012 and currently China is the country’s largest export destination. It is interesting to note that sesame seeds, a product, which has been, introduced in Ethiopia recently, accounts for about 85 per cent of the exports to China followed by leather and leather goods. Moreover, contrary to the belief that only oil producers like Nigeria, Angola, Sudan, and Equatorial Guinea, have been major recipients of Chinese soft loans, Ethiopia has also received huge volumes of Chinese loans for infrastructure. According to figures from China Aid Data, the total value of Chinese official financial flows to Ethiopia was about US$ 3.6 billion in 2012. Ethiopia has also been a major recipient of Chinese foreign direct investments. Chinese investment in Ethiopia is dominated by the private sector and is primarily directed towards the manufacturing sector, particularly the leather sector.

Secondly, China is making a huge economic impact on Africa through trade, development finance, and investment flows. Demand for African exports was one of the most direct channels through which China penetrated Africa. Chinese demand had a huge quantitative impact on most African countries and led to an unparalleled growth in exports from countries such as Angola, Democratic Republic of Congo, and Ethiopia. In fact, Chinese demand was significant enough to affect world prices, and led to improvements in terms of trade for these countries. Therefore, the emergence of China as the main export destination played an important role in reviving their economies during the 2000s. Sub-Saharan Africa’s exports to China grew remarkably from 2000 onwards, at a compound annual growth rate of over 22 per cent and by 2013, it exceeded sub-Saharan Africa’s exports to the United States.

Indian experts rarely regard Africa as a market for Indian manufactured products and prefer to focus on India’s long-term commitment to African development, development cooperation initiatives like Indian Technical and Economic Cooperation (ITEC) and Lines of Credit (LoCs) as well as the need for African votes for a permanent seat in the United Nations. On the other hand, China has effectively penetrated the African market. Imports from China overtook the US in 2004 and by 2013; China’s share in sub-Saharan Africa’s imports was about 14 per cent. There was a dramatic growth in imports of Chinese manufactured goods early 2000s onwards and China is now sub-Saharan Africa’s largest source of manufactured products. There was a dramatic growth in Chinese manufactured exports to countries such Angola and Democratic Republic of Congo, countries known for the huge ‘infrastructure for resource’ loans from the Chinese Export Import Bank. In 2009, China accounted for just 2.9 per cent of Angola’s manufactured imports but by 2013, China replaced Portugal as the largest source of manufactured goods for Angola with a share of 38.9 per cent. Similarly, Democratic Republic of Congo’s imports of manufactured goods from China have grown tremendously and China now accounts for over a quarter of the country’s manufactured imports. Ethiopia’s case is particularly unfortunate because India has lost market share to China. In 2000, India was the largest exporter of manufactured goods to Ethiopia with a share of 19.1 per cent followed by China at 13.1 per cent. However, China overtook India in 2003 and by 2012, it accounted for over 31 percent of Ethiopia’s manufactured imports, whereas India’s share declined to 14.9 per cent. China currently accounts for over 50 per cent of Ethiopia’s imports of leather manufactures, textile yarn and fabrics, and cork and wood manufactures and nearly 90 percent of Ethiopia’s footwear imports.

Similarly, Chinese investment flows to Africa have also increased rapidly in recent years. According to the World Investment Report 2016 published by United Nations Conference on Trade Development (UNCTAD), China was the fourth largest investor in Africa in 2014. China’s foreign direct investment stock increased more than three-fold from USD 9 billion in 2009 to USD 32 billion in 2014 and China overtook South Africa as the largest investor from a developing country in the region. While most of the Chinese investments in Africa are indeed led by large state owned enterprises which typically invest in infrastructure and resource sectors, increasingly a large number of private Chinese enterprises have also set up operations in many African countries. Scholars like Jian-Ye Wang and Jing Gu assert that increasingly it is the Chinese private sector, rather than government ministries, which is the leading China’s economic intercourse with Africa. Chinese private sector enterprises typically invest in the manufacturing and service sectors.

Proximity to Europe and access to cheap labour are important pull factors in the case of African countries like Ethiopia. The presence of India’s private sector has also grown very rapidly but the actual volume of Indian investments in Africa is much less than reported by the Indian media. This is largely because the bulk of the Indian investments in Africa are directed towards Mauritius, a tax haven, and is round-tripped back to India.

However, the most striking feature of China-Africa relations is the unprecedented growth of official finance from China to Africa. Although conceptual differences make comparisons between Chinese development finance and official development assistance from Organisation of Economic Cooperation and Development (OECD) countries difficult, many estimates suggest that Chinese financial flows to sub-Saharan Africa are now comparable in scale to traditional Official Development Assistance (ODA) from OECD countries. Chinese finance is predominantly channeled through China’s Export Import Bank in the form of concessional loans for infrastructure development. Chinese companies are also building vital infrastructure including, dams, ports, roads, railways, and bridges in Africa. According to a study by the World Bank, over thirty five African countries have engaged with China on infrastructure finance deals. Given sub-Saharan Africa’s critical shortage of infrastructure, this is China’s biggest contribution towards African development. Indian LoCs are largely directed towards infrastructure development in Africa, but it is quite clear that India cannot match China in terms of scale. Therefore, India’s development cooperation must be directed towards a few niche areas. India also needs to ensure better implementation of its lines of credit which often suffer from project delays.

In a nutshell, potential gains from closer economic ties between India and Africa have not been realised fully. To revive its manufacturing sector and create jobs for the youth, India needs a more active strategy to expand its manufacturing sector. India’s ailing manufacturing sector really can’t afford to ignore the Africa’s growing middle class. Secondly, given that India can’t match China’s deep pockets, its development cooperation must be more strategic. India needs to focus on a few niche areas and ensure better implementation.
(Originally published in China Chronicles, ORF)