The Indian response to the Covid-19 pandemic could serve as a blueprint for economic recovery for the African continent.
While there is a major focus on the Chinese expansion into Africa, there is often less appreciation of the importance India plays in Africa. Countries like Nigeria, Mozambique, Ghana and Tanzania all count India as their single biggest export trading partner while South Africa is India’s largest trade market on the continent.
Of the top 1000 Indian corporates, nearly 100 have operations in Africa. These are primarily focused around pharmaceuticals, motor vehicles, and consumer goods.
The importance of these bi-lateral trade relationships cannot be overstated, and at Absa International we believe that this mega-trend will be a highlight of economic growth for at least the next decade.
As one of Africa’s leading Pan-African banking groups with strong relationships with Indian corporates and institutions, we are fortunate enough to be able to engage with commercial partners across both Africa and India and we believe there is an important dynamic playing out post the Covid-19 lockdowns and the associated supply-chain disruptions which have subsequently been exacerbated through events in Ukraine.
A lesson for Africa
According to official statistics out of the World Health Organisation (WHO), India has been the second hardest hit country in terms of infections after the United States. This in turn drove an inward focus from the Indian government and business community where there was a heavy investment in local capacitation of sectors such as healthcare and pharmaceutical activities.
Post the Delta Covid-19 strain in India, there was a noticeable shift where the country adopted a more outward-focused message: India was open for business and was going to lead a global resurgence through investment in infrastructure and ultimately become a key player in global supply chains.
To achieve this, India has invested both domestically in infrastructure and Africa has been a natural beneficiary, exporting coal and steel to fund this drive.
In the past, Asian expansion into Africa has typically been government-led but over the last 12 to 18 months this has been driven by the private sector.
This series of events is important for African governments who are still trying to rebuild their domestic balance sheets. By collaborating with the private sector, it is sensible to do business with better infrastructure and lesser red tape that will convert into economic growth.
Longevity, consistency and bi-directional benefits is a key part of the Indian strategy
One of the key features of Indian investment on the continent is a focus on patient capital rather than extractive, quick wins. If one looks at the history of Indian businesses, they are accustomed to competing in low-margin, competitive economies with young populations.
This means they are ideally positioned to succeed in Africa.
Many of our clients have made long-term commitments to the development of their operations on the continent.
Organisations across automotive and consumer products, as sector examples, have spent significant time and money investing in the integrity of their brands and have built loyal followings across multiple African countries. In line with their long-term commitment to the continent, they have also been significant investors in infrastructure that will benefit the continent for years to come.
This long-term approach is starting to pay dividends and in February 2022, Mahindra announced that it had achieved record sales in South Africa – a market which is characterised by intense consumer competition in the automotive space.
Countries like Kenya and Nigeria are benefiting from the establishment of technology hubs in their respective regions and one of the interesting developments has been how East Africa has “exported” the concept of mobile money. This bi-directional transfer of technology perfectly encapsulates the nature of the relationship between Africa and India.
These investments are being supported by Exim Bank which has established a presence in South Africa, Ethiopia and Ivory Coast. Exim have sanctioned significant credit across multiple industries and projects and they estimate that the continent offers $3.6. trillion in business opportunities each year.
India and Africa enjoy a long-standing historical relationship that incorporates social, economic and political exchanges. These relationships are the springboard for an economic recovery which will be a key driver of economic growth and as a banker to multinationals exploring the African continent we would like to send one message: “We are open for business”.
Cheryl Buss is Chief Executive of Absa International