Infrastructure as an Emerging Sector: Mutual Interests of India and Africa.

Dr. Suresh Kumar, Dr. Prahlad Kumar & Mr. Rajnish Kler

Africa Review, May 2012

Dr. Prahlad Kumar is the Assistant Professor in the Department of Political Science, Moti Lal Nehru College, University of Delhi.

Mr. Rajnish Kler is the Assistant Professor in the Department of Commerce, Moti Lal Nehru College, University of Delhi.

Introduction

Average growth rates among Sub-Saharan economies are projected to be higher over the next two years, compared with 2011, supported by sizeable government infrastructure investment. Robust private and public consumption underpin this strength, as many countries use macroeconomic policies to speed up the recovery from the crisis-induced slowdown. ‘However, the Maghreb economies reliant on Europe as a source of tourism, remittances, and FDI flow. The current volatile economic environment in EU thus poses significant policy challenges for this region’ (Background Note, 2012: 52). The economic arrangement of the region is closely linked to global developments, primarily through the impact of global economic activity on oil prices and demand of select commodities. The effect of economic melt down is felt in most of the African countries that are related to global financial markets (e.g. South Africa and other), oil exporting countries (Algeria, Angola, Libya, and Nigeria), manufacturing products (Morocco, Tunisia) and commodity exporting countries (Botswana). The market policies in Africa should focus to mitigate the impact of the global slowdown on economic activity and poverty, while continuing to strengthen the foundations for sustained growth (Background Note, 2012: 54).

India and Africa being a part of South-South world is in the process of close collaboration in areas of technology, trade and investments. The bilateral trade of India and Africa increased from US$ 25 billion (2006-07) to US$ 53.3 billion (2010-11) that shows the special relationship between them. The post forum summit 2011 and declaration of Dr. Manmohan Singh, Prime Minister of India about USD 05 (five) billion as assistance to Africa have deepened the relations from bilateral to regional one. The regional linkages through associations such as AMU, COMESA, EAC, ECOWAS, ECCAS, IGAD, SACU, SADC and AU are serious about their region’s infrastructure requirement in construction, healthcare/Pharmaceutical, Small & Medium Enterprise (SMEs) tourism and others that will facilitate with employment opportunities, raised additional source of income and revenue. Most of the African states are working with inadequate infrastructure facilities and are looking towards the developing countries like India to build partnership

The infrastructure sector deals with different varieties of sub-sectors as per the need includes cement, construction, iron & steel, real estate, general machinery, machine tools, technology, turnkey projects, drilling equipment, earthmoving equipment, minerals, hotels, resorts, shopping malls, food courts, amusement parks, automobiles (bus, cars, trucks), bicycles, auto parts and ancillaries (Table-1), railway construction and rehabilitation, construction and rehabilitation of power stations to develop rural electrification, energy transmission and distribution, rehabilitation of existing facilities and addition of new infrastructure to supply potable water, sewage drainage and treatment, building hospitals and set up the health system, manufacturing of pharmaceutical products, diagnostic & Medical services and Diagnostic centre, constructing Pharmaceutical industries, mineral water and other liquid food hygiene, cement production, paper and technical maintenance, building radio and T.V. stations and digitalization of the terrestrial television transmission network.

Dr. Manmohan Singh about the progress of India’s infrastructure finance stated during the India Economic Forum November 2012, “We need to develop long-term debt markets and deepen corporate bond markets. This, in turn, calls for strong insurance and pension sub-sectors” (Issues for parliamentarians, 2012:5). These are critical to attract private capital flows to fulfill infrastructure plans.

‘The proposed policy would need to establish and implement dedicated rail freight corridors, national expressways, last-mile roads/rail, multi-modal logistics parks, road maintenance, technology adoption, skills development and equipment and service standards. Creating more power and infrastructure in absence of people’s participation would not help. Rather than restrict the role of people in Indian democracy to voting once in five years, people ought to have a direct and continuing say in the decision-making’ (Issues for parliamentarians, 2012:5). India supports and convinces the African partner on the same infrastructure finance policies mentioned above and pursues to implement it as per the requirement. How the question of India acting as ‘New Colonialism’ in Africa is one-sided thought sponsored by Euro-Dollar philanthropists. The post 1990 with the collapse of Berlin wall, there is a need to move the policy approach from one of being about reforms for the formal sector and entitlements for the poor to one of reforms for all in India on the one side and the country’s adopted the economic reforms as pursuance by World Trade Organisation (WTO) on the other side. One may opine that-

• Is the WTO policy that encourages India to act as ‘New Colonial power’ in Africa?
• Do the Euro and dollar market are on the verge of collapse that policy-maker of WTO are supporting India to act as New Colonizer?

The answer to these thoughts is that India has witnessed high growth in the last decade and half due to external factor and changed the pattern from India’s economic development (known as Bombay Plan of 1944-45) since first five year plan (1951) to WTO market economy of 1990s. The Indian industrialist, entrepreneurs and political economist on Africa have witnessed intensive and extensive discussions and debate on India-Africa partnership (eight India-Africa Conclaves and two Forum Summits since 2004).

The infrastructure requirement in Africa connects the SMEs of India by “introduce the credit rating system followed in India, for SMEs in Africa to improve the access to credit, set up a virtual business portal to manage India-Africa cooperation, to help promote matchmaking between Indian and African SMEs and organize an India-Africa Skills Development mission. The Human Capital interaction helping African governments create robust eco-systems that promote entrepreneurship and job opportunities by leveraging Indian expertise in this field and providing African governments key lessons from India’s experience in engaging the Diaspora for development initiatives. This conclave is expected to be another milestone in the India-Africa cooperation drive. Strengthening India-Africa partnerships will give impetus to South-South cooperation and a fillip to the states goals of G20-meaning, the engagement is of interest not just to the Indian and African audience, but to the world at large as well” (Background Note, 2012: 10).

Infrastructure Opportunities and India’s Line of Credit (LoC)

India has offered 5 billion US dollars for the next three years under lines of credit to help Africa achieve its development goals during the Forum Summit 2011. India has announced an additional 700 million US dollars to establish new institutions and training programmes in consultation with the African Union and its institutions. The list of Line of credit as on January 2012 has been allotted to different African countries as mentioned in Table-2. Exim Bank of India acts as catalyst in enhancing the bilateral trade and investment relations in Africa. The LoC are working with the objective of Focus Africa programme of the Government of India and are extended especially to priority sector. Exim Bank of India has representative offices in Addis Ababa, Ethiopia, Johannesburg, South Africa, Dakar and Senegal to facilitate economic cooperation in the region. The bank’s strategy is to promote and support two-way trade and investment and perform as a partner to promote economic development in Africa. Exim Bank’s vision has evolved from financing, facilitating and promoting trade and investment, to a conscious and systematic effort at creating export capabilities in Africa.

Infrastructure Opportunities in Different Sector

The infrastructure spending needs for Africa highlights the requirements in construction, healthcare/pharmaceutical industry, SME’s & training, agro, tele-communication, power, urban drainage system and buses, railway and air transport infrastructure. The experiences of Indian Railway (IR) taking care of more than 20 million passengers per day will be useful for the needs of African countries. Indian companies shares their experiences in the supply of transmission line towers, laying of power transmission lines, sub-stations, rural electrifications, power distribution and industrial electrification, tele-communication, power, urban drainage system and buses, railway and air transport infrastructure, construction of a water-treatment plant, construction of an International convention center, the construction of high towers, utility buildings, cement factory, acquisition of buses, rehabilitation of Manganese mine and acquisition of equipment, soda ash plant and turnkey projects. Indian investors are involved on the agenda of infrastructure development in Africa such as:

“Benin– Supply of railway equipments/ agricultural equipments and Cyber city project;

Congo DR– Hydroelectric project/ Setting up a cement factory, acquisition of buses, rehabilitation of Manganese mine and acquisition of equipment;

Djibouti– Supply of diesel generator sets and mini cement plant;

Gabon– Construction of housing project;

Gambia– Setting up of tractor assembly plant/ National Assembly Building Complex;

Guinea Bissau– Electricity project;

Kenya– Power Transmission Lines;

Mauritius– Supply of offshore patrol vessel;

Mozambique– Gaza electrification Project/ water drilling project/ IT park project/ Technology park and administrative facility/ research & learning centre/ rice and wheat productivity enhancing programme;

Seychelles– Export of vehicles, spare parts, automobile tyres, cables, medicine etc;

Swaziland– IT project;

Institutions:

Afrexim Bank- General Purpose

Eastern and Southern African Trade and Development Bank (PTA Bank)- cement plant, paper plant, pharmaceuticals, weaving machinery, sugar plant spares, capacitor power panel, HVAC power panel, Aux, contracts, machineries & accessories for drugs manufacturing unit and air-conditioning equipments;

Ecowas Bank of Investment and Development- Public sector projects;

Indo-Zambia Bank- General purpose;

Nigerian Exim Bank– General Purpose

Seychelles Marketing Board– supply of vehicles, spare parts, automobile tyres, cable and medicines;

West African Development Bank– General Purpose” (Background Note, 2012: 71-73)

Infrastructure Opportunity in Different Sector

1. Construction

The construction investment opportunities in Africa are tremendous that starts with the building and development of road, railway, air network, shipping routes, logistics infrastructure, warehouses, transport centers, ICDs, cold chain infrastructure, multi-story housing and other in Africa. Table-3 highlights the different construction sector activities in different African countries.

2. Road, Railway, Air & Ship Route & Transport Sector

The tremendous market opportunities in Africa persuade the region to develop inter and intra connectivity via road, railway, air, river and sea routes. This sector connects all the remote centers of villages to the cities that will initiate the process of sharing goods, material and culture. The connectivity will raise the demands and opportunities of investment, people to people movement and cheaper transport to cross the border countries either via road or via railway. The rehabilitation of road and railway network will connect the different zones of Africa and give a shape of Pan-Africa in real terms. Along with it, there is a need to strengthen river transport and exploitation of the river network, restoration and management of various river ports, currently in dilapidation, establishment of river transport companies, equipment with modern facilities (passenger merchandise boats), construction of storage structures with cold storage room in all principal river ports, purchase of refrigerating vessels for the passage of the big rivers and its tributaries, completion of studies and construction of port facilities, completion of rehabilitation and equipment of secondary ports and dredging of river ports. Table-4 highlights the different route and transport infrastructure investment opportunities in Africa.

3. Water Management and Health Sector

The safe potable water production and its distribution is one of major concern in Africa. Government and private hospitals and clinics in Africa provide health care. The private hospitals have earned a reputation as providers of good quality health care. Major surgery facility is not available in most of the countries. Investment opportunities for establishing specialized hospitals to treat such referral cases are, therefore, unexploited. Table-5 shares the investment opportunities in these sectors.

Conclusion

The India Africa Forum Summit 2011 has focused upon regional integration and infrastructure development in different sector. The regional integration approach of India put a check on the proponents of declaring India as new-colonial power. India is working against the well known colonial ideology of Divide and Rule and rather supporting Pan-African approach of real union. India recognizes the infrastructure development that is prerequisite to the economic growth of the Africa continent. The EXIM Bank of India supports the infrastructure projects through the LoCs in Africa and propagating Africa’s Look East Policy under the banner of South-South cooperation. It strengthens India-Africa mutual needs and development to move with dignity in the open market and building world class infrastructure is the only way to strengthen the sustainable development.

Table-3 Construction Investment Opportunities in Africa

Source: Project Opportunities, 2012. CII and EXIM Bank of India: 7-115.