India, a key to access the growing African Market Articles in English / In the Air

It is a ubiquitous statement that the world’s economic activity has shifted to the East, with economists and companies harping about the tremendous growth achieved by India and China in the last few decades. Amidst all this rhetoric, Africa has not been a priority in spite of the rising disposable income, rapid urbanisation and connectivity that have triggered an unprecedented economic activity. But it’s about to change.

India & Africa : some common points

To begin with, Africa and India have not only forged strong trade and cultural ties for many centuries but also have experienced a common struggle against colonisation. The experience of fighting colonisation has constituted India and African (southern and eastern) countries with a common language, law, and the desire to break free from the cycle of poverty and backwardness. India and Africa constitute one-third of the world’s population, with 50% under 25 in most of the countries1,2. These youngsters will enter workforce and provide a large tax base for their respective countries. The solutions to many challenges that companies have developed or are developing for India, could also be relevant in the African context.

Indian Presence in Africa

It is estimated that 3 million Indian origin people live in Africa, with a major presence of the community in Anglosphere Africa3. Even though they have settled there for many years, they continue to create strong commercial bonds with their country of origin. The total foreign direct investment outflowing from India to the world from 2008 to 2016 is assessed to be US $250.9 billion, out of which the African accounted for 21%4. India’s private sector is mainly responsible for the huge influx of investment due to the continent’s high growth market and mineral rich reserves. Back in 2010, Airtel (Indian Telecommunications Services Company) completed its $10.7 billion acquisition of Zain’s mobile operation in 15 African countries, making it India’s second biggest overseas acquisition and the world’s fifth largest wireless carrier by subscriber base. Digital India initiative started by the government of India, has inspired many entrepreneurs, institutions and governments in Africa. For instance, Indian-African entrepreneur, Ramesh Awtaney, has a similar vision for Digital Africa by supporting and incubating innovative digital start-ups. From life-saving generic drugs to low cost fuel efficient cars, Indian companies are spearheading to Africa due to familiarity of landscape and challenges back home.

Africa, the next Silicon Valley ?

Africa’s main asset has been its ability to provide energy and mineral resources. Whether it is with European countries, India or China, international trade agreements are about raw material-producing countries : Nigeria for oil and uranium, Mozambique for gas… Nonetheless, it’s time for Africa to build a new model.

African economy has been rising. Indeed, 9 out of the 20 fastest growing economies in 2017 are expected to come from Africa5. In 2016, Ethiopia or Ivory Coast showed higher GDP growth than India and China6. One reason lies in the scarcity of some resources – mainly lack of investment – which is fostering innovation. Frugal innovation is one answer : it’s about improving while reducing costs or means of production. For instance, in Togo, one can buy a $100 3D printer, built from parts of broken scanners, computers and other electronical waste that are dumped by western countries.

One of the most famous example of frugal innovation is the M-PESA mobile banking service for people without bank accounts. In 2007, Safaricom (Vodafone’s subsidiary in Kenya) launched a service enabling Vodafone’s users to send and received money via SMS. This money can also be cashed in shops. Today, this Kenyan innovation is used by over 25 million people in 11 countries (mainly in Africa and Asia). And this is only the beginning : mobile penetration is exploding in Africa. In 1999, only 500,000 people were connected (less than 1% of the continent’s population) and today they are over 500 million unique users (46% of the population) ! By 2020, 10% of the African GDP will provide from mobile, either from mobile-related activity or thanks to mobile solutions (like M-Pesa)7.

Similar frugal innovations in pharmaceuticals, transport, solar heating and lighting, and other domains have driven growth in Africa and will continue to do so in the decades to come.

China : India’s challenging neighbour

However, India is far from being alone in the continent. Indeed, China is Africa’s first trading partner and India comes third (after the USA). Around 17% of foreign investment for African infrastructures comes from China– Tazara, the 750-km long railway in East Africa. In 2015, trading between Beijing and the continent added up to $200 billion, against $70 billion for India7. Over 2,500 Chinese companies are settled in Africa in various domains. Huawei – China’s largest telecommunication company – has already established partnerships with MTN (South Sudan), which operates in more than 20 African countries. Also, the model of trade between Africa and China is shifting: from exploitation of the raw materials to developing industries. Aware of Africa’s growing digital expansion, Huawei operates in more than 40 countries across Africa and is among the top 3 telecom companies of the continent. “I’m so excited by Nigeria, so many young people using mobile” said Jack Ma – founder of Alibaba – in 2014.

So far, India’s soft power strategy has helped it to win over Africa. In the context of the Commonwealth, India takes part in social development, mainly in education focused programs in 18 countries. Through shared language, Indian diaspora and some common history, India has some strong assets over China. But a series of attacks against African nationals in Indian cities has casted a shadow over the cooperation between the two entities. Racism against dark-skinned people is still a big issue in India9.

Indiafrica: the next growth axis ?

The recent economic boom has made the world take notice of India and develop innovative solutions that meet the requirements of the Indian consumers. Similarly, as Africa is the next engine of growth for the global economy and since it shares common features with India, the solutions that applied there can be easily translated into the African market.


Sources

  1. http://news.bbc.co.uk/2/hi/south_asia/6911544.stm
  2. http://worldpopulationreview.com/continents/africa-population/
  3. http://theindiandiaspora.com/news-details/Spotlight/primary-news/indian-diaspora-in-africa-strong-binding-factor-in-ties.htm
  4. http://www.orfonline.org/research/indian-investment-africa-scale-trends-and-policy-recommendations/
  5. http://www.fin24.com/Economy/african-countries-among-fastest-growing-economies-south-africa-below-potential-20170330 
  6. http://www.imf.org/~/media/Files/Publications/WEO/2017/April/pdf/c1.ashx

Avatar de Ronak Hegde
Ronak Hegde

Ronak joined Equancy India as a junior consultant. Prior to joining Equancy, he graduated from Masters in Communication from Sciences Po, Paris and worked in Social Media Management and Strategic Planning for Tata Nano, SBI Mutual Funds and Reliance Brands Limited

Avatar de Marie Mallein
Marie Mallein

As a student of HEC, Marie started her internship at Equancy in July 2016. After a first experience in the Customer Marketing Team in Paris, she joined Equancy Mumbai in January 2017 as a Digital Marketing and Webanalytics intern.

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