Strategic competition between

China and India in Africa

Submitted as a part of course

‘Macroeconomics of Competitiveness’

Course Instructor: Submitted By:

Dr. Amit Kapoor Ashwin Sahai: 09PT2-18
Over the last decade or so, China and India have established themselves as increasingly
influential players across Africa, which may turn out to be one of the most significant
developments for the region in recent years.
Let’s look at the opportunities and the challenges arising from this increased presence of
China and India in Africa.
There three things that we should look at:

• Nature and scope of China’s recent engagement with Africa.

• Brief comparison of China and India in their African engagement.
• An overview of the opportunities offered to Africa as well as the challenges posed
by these Asian drivers.

Economic transactions provide the most powerful evidence of China’s increasing

interaction with the continent. The impact of China on Africa operates mainly through
four main channels: trade; foreign direct investment; foreign aid; and migration.

By 2005, China had overtaken the UK as Africa’s third most important trading partner
(after the US and France). African exports to China are predominantly primary products,
mainly oil and metal products. Africa’s contribution to China’s oil imports is already
significant. The majority of China’s oil imports come from Africa, not the Middle East as
some would say. The bulk of China’s oil supplies are from Angola and Sudan. The
Chinese oil imports from Angola have increased by 500% since 2001. Angola exported
117 million barrels to China in 2004, about 13% of China’s total oil imports.
Sudan accounts for 10% of China’s total oil imports. At least eight out of ten of China’s
most important African trading partners are resource-rich countries.

There is no doubt that natural resources are the core of China’s economic interest in
Africa, or perhaps even its overall interest in the region. In 2004, China for example was
reported to have oil stakes in as many as 11 African countries.

China’s growing influence is also a product of the strategies that Chinese companies
pursue in their conquest of African markets. Chinese firms appear to be significantly less
risk averse than their Western counterparts, especially in post-conflict countries such as
Angola, DR Congo and Sierra Leone where a ‘first mover advantage’ plays out in favor
of risk-taking entrepreneurs.
The FDI is mainly from parastatals that have access to low-cost capital, so that the
Chinese investors have long planning horizons. These firms view the challenging
political and economic environment in such African countries as an economic
opportunity. They are able to derive huge profits from rates of return to FDI that are said
to be much higher in politically volatile African countries than elsewhere.
Chinese firms also focus on specific sectors. With government support, Chinese
enterprises have become a major player in the field of infrastructure (transportation,
telecommunications, water conservancy, electricity and so on). Many of the projects are
not commercial and are financed by ‘tied aid’. Others are not profitable because the
Chinese tend to set costs below market rates, although the projects may be profitable in
the long run.
Finally, Chinese firms target countries suffering from Western imposed sanctions,
making China an alternative partner for countries such as Sudan and Zimbabwe.

There are some implications of China’s economic interactions with Africa on

governance. According to some analysts, China’s increased presence in Africa is a
political development that may not contribute to the promotion of peace, prosperity and
democracy on the continent.

There are various ways that China’s economic interaction with Africa may undermine
governance. First, promotion of democracy, for example, is not an objective of China’s
foreign policy. Second, in the light of its rapidly growing dependence on mineral
imports, it is unlikely that China will support recent initiatives (e.g. EITI) to transform
mineral wealth from a ‘curse’ to a “blessing”. Last, China’s support for peace keeping in
Africa is a positive development. However, the support may be undermined by the
country’s other policies which contribute to the eruption or extension of violent conflicts.
China, for example provided a large contingent of peace keeping troops to Liberia, but
perpetuated the rule of Charles Taylor by buying timber from the country for a long
time. China’s increasing involvement as a supplier of arms to Africa is also a source of
concern.

While China does have an economic edge compared to India; India in the long run has a
better political formula.

India lacks the material capabilities and the profile to emulate or directly compete with
China in Africa. At the same time, it cannot ignore Beijing’s formidable influence and
areas where both actors’ interests are increasingly clashing. The solution could reside in a
long-term exploration of specific sectors in which India’s relatively untapped added value
can be transformed into a strategic advantage over China.

Emulationists vs. Singularists

Invite anyone to talk about Africa in New Delhi and you will almost certainly end up
discussing China and listening to a lamenting chorus on India’s incapacity to hold on to
the “dragon’s safari”. These disillusioned voices represent the hawkish emulationists –
those who believe that India should follow and match Chinese moves in Africa step by
step, without any delay or hesitation. For these fans of realpolitik principles, it is all about
competition: Africa is just another strategic context in which India will have to blindly
follow and match China’s man oeuvres, if it wants to keep its great power ambition
intact.

On the other hand, you have the singularists (including an increasing number of
disillusioned emulationists) who, at the other extreme, refuse any possible comparison
with China and underline India’s “absolute uniqueness”. In this perspective, an Africa
policy is actually unnecessary. These liberal Indian optimists take particular pleasure
from African accusations depicting the Chinese as “mercantilist mandarins”. Overtly
confident, singularists therefore refuse the emulationists’ competitive logic and like to
believe that Africans will eventually recognize the costs of the Chinese model and opt for
India as their privileged partner.

Both approaches have failed to serve Indian interests in Africa and have often led to sub-
optimal policy-making. On the one hand, emulationist strategies have paid a high price
because they ignore the fact that India simply lacks the financial and political capabilities
to compete with the Chinese. For example, India’s public oil, gas, mining and
infrastructure companies have a long record of bids and chances lost to the Chinese,
starting with the 2006 Angola debacle and, more recently, in a large Ethiopian rail
project. On the political front, the 2008 India-Africa summit in Delhi attracted merely 14
African heads of state and senior government leaders, as compared to 48 who had been in
Beijing two years earlier.

Nor have singularist strategies proven effective. While encouraging a profound self-
confidence in the merits of a supposed “Indian model” (which no one really cares to
define) this option has often bred strategic inertia. The result is a general disinterest in
looking at India’s presence in Africa in comparative terms and a consequent
undervaluation of the continent’s importance to India’s external interests.

How then to overcome this extremist stalemate and optimize India’s presence in Africa?
China’s clout in Africa gives it an uncontestable advantage over India: trade volume and
preferential tariff lines; quality, speed and effectiveness of aid and credit lines; regularity
of bilateral dialogues or strategic partnerships; intensity of defense relations; scope of
diplomatic influence… Beijing is ahead of Delhi in most, if not all these indicators. Thus,
instead of emulating China or, on the other hand, refusing any comparison with its
Northern neighbor, India should identify attributes that distinguish it positively from
China and that could therefore be explored as a strategic advantage in the long run.

Business model: “teaching how to fish”

Unlike the state-centric Chinese model largely focused on resource extraction and
necessary infrastructure, India’s economic presence in Africa is marked by the
predominance of its private sector, including a significant number of small and medium
enterprises. Beyond resources and infrastructure, India has carved out niches such as
information and telecommunication technologies, education and health services.

The Indian sponsored Pan-African e-Network (in partnership with the African Union)
links 53 countries through tele-medicine, -education and -governance, and plays a crucial
role in fostering skills and human resources that are critical for Africa to develop in a
sustainable way. These projects require considerable investments but, in the long term,
they will pay off as African countries start to recognize India’s added value in
contributing not only to the quantity, but also to the quality of their economic growth.

Moving beyond the narrow Chinese economic focus on resources will also protect
African countries from the “Dutch disease” – the dependence on the export of natural
resources and a high exchange rate that stifles productivity and international
competitiveness of the domestic industrial and services sectors. While China’s economic
relations with Africa are actually fuelling this perverse effect, India’s business model
offers healing instruments by stimulating local productivity, especially in the private
sector. New Delhi should not shy away from underlining and publicizing this in bilateral
and multilateral settings: instead of just “giving fish” and perpetuating Africa’s
dependence on external powers, it is teaching the continent how to fish itself.

African countries are already inclined to recognize Delhi’s added value in fostering
sustainable economic growth: India remains the sole Asian member country of the
African Union’s Capacity Building Foundation. And India’s Technical and Economic
Cooperation program (ITEC) has seen such success among the thousands of African
students and diplomats who have chosen India for training since the 1960s, that it is now
undergoing rapid expansion.

Location: proximity and overlapping security interests

There are no direct flights linking Johannesburg with Shanghai or Beijing, but Mumbai is
less than nine hours away from this major South African air hub. And the only direct
flight connecting Ethiopia to Beijing stops over in New Delhi. India and Africa share a
geographical proximity connected by Western Indian Ocean. There are several contact
points that can be explored.
By 2008, India had emerged as the largest contributor to UN mandated operations in
Africa, with a cumulative effort totaling more than 30,000 personnel involved in
peacekeeping, humanitarian, and electoral missions. But this commitment does not, per
se, offer a direct advantage over the Chinese, who are also building up their military
presence across the continent.

Instead, it is on the East African coast that India faces a specific advantage as a potential
security provider. The piracy threat along the Somali and East African coast, often
stretching wide across the ocean, offers the Indian Navy a superb opportunity to develop
its blue water ambitions. By keeping these crucial sea lanes of communication and
strategic chokepoints (including the Gulf of Aden and the Mozambique channel) secure,
and by developing the naval capabilities of the East African states through increased joint
exercises, creation of new listening posts, and the supply of vessels, India will increase its
delivery capacity and assume a strategic position, at least in the East African security
context.
India’s recent initiative to host the first annual Indian Ocean Naval Symposium in Delhi
(from which China was excluded), as well as its commitment to revive the moribund
Indian Ocean Rim Association for Regional Cooperation are important steps in exploring
proximity to and overlapping security interests with Africa as an advantage over China.
Occasional tactical triangulations with other security partners, such as the IBSA naval
forces, the new AFRICOM, or the EU and NATO naval forces in the Gulf of Aden, could
further leverage this advantage.

Democracy: the regime advantage

At the height of the “China in Africa” hype, African governments were often said to be
keen to replicate China’s centralized and illiberal political architecture.
Delhi’s emulationists often despise India’s democracy as a central obstacle to their
country’s external performance and often envy the Chinese authoritarian capacity in
“getting things done” in Africa. However, little suggests that African governments have
in practice attempted to replicate the political features that sustain the great Chinese
transformation since 1978.

Instead, unprecedented levels of sustained economic growth have actually reinvigorated

Africa’s democratic competitiveness and pluralist institutions. Without falling into the
temptation to export or impose its political institutions on Africa, India could perhaps
shed its traditional inhibitions and start practicing its moralistic foreign policy discourse
on democracy and human rights. As a founding member of the Community of
Democracies, Delhi faces the opportunity to explore this “regime advantage” over China
in Africa, at least in subtle and indirect ways.

For example, nine African delegations attended the International Conference on

Federalism hosted by New Delhi in 2007, including Nigeria’s Vice-President who
expressed his country’s interest in learning from India’s successful experience with
federal democracy. Several African countries have expressed interest in working with the
Election Commission of India to study and replicate India’s unique electronic voting
system. India’s vibrant base of local government institutions and its independent judicial
system based on the rule of law are two other areas in which India can share its unique
expertise through technical cooperation, thus responding to specific African interests and,
at the same time, outflank China.

Diplomacy: Southern power

China and India are both situated in the Northern Hemisphere, but paradoxically are also
competing ferociously to become leaders of the “Global South”, be it during the trade
negotiations at Doha or, more recently, at the climate change summit in Copenhagen. But
as a traditional “bridging” or “positive power”, India has a distinct advantage: in stark
contrast to the radical ideological and interventionist Chinese moves during the 1950s
and 1960s, Delhi played a much more constructive diplomatic role in supporting the
African independence movements in the United Nations.
India’s leading role as a “Colombo Power” in creating the Non-Alignment movement at
Bandung and its central role within the Afro-Asian UN block of the 1960s has thus
earned it a persisting respectability as a “Southern power”. For example, unlike China, it
is a founding member of the G-77 of developing nations and held its presidency twice.

India is also a member of the influential Commonwealth organization and at the heart of
the impressive Southern trilateral (and tri-continental) India-Brazil-South Africa (IBSA)
axis that gives it a strategic advantage to engage with the Southern Africa Development
Community (SADC) and Sub-Saharan Africa. This profile offers Delhi a distinct
advantage that, unfortunately, remains largely unexplored because many of the old
time Africanist diplomats who served in the Ministry of External Affairs have retired
over the last decade.

Diaspora: the privileged access channel

A final potential advantage resides in the cultural proximity between Africa and India.
The large Indian Diaspora plays a vital factor in this regard: a 2001 estimate identified
close to one hundred thousand Indian citizens residing in Africa, with more than half in
Eastern and Southern Africa. On top of this more recent immigrant community, there are
more than one million people of Indian origin who have settled in Africa for many
generations (close to one million in South Africa; 25,000 in Madagascar; 15,000 in
Zimbabwe; and 8,000 in Nigeria).

Unlike the more recent and radically segregated Chinese “labour Diaspora” that has often
led to frictions and protests in Africa, these communities of Indian origin are fully
integrated and often interested in offering their business expertise as consultants to Indian
investment projects. Their local contacts also often present Delhi with privileged
channels to access key political figures and represent Indian interests in moments of
crisis. In Liberia, for example, the local Honorary Indian Consul, for the local
businessmen of Indian origin, stayed on in Monrovia throughout the various civil wars
when most other diplomatic missions had to close down.

At the same time, beyond geographic proximity, India also offers a much more familiar
and open society: racism against Africans in India is not uncommon, but well below the
levels experienced in China. For the increasing number of African investors and students
who seek opportunities abroad, English-speaking India therefore offers a much more
attractive destination: an increasing number of African businessmen permanently reside
in Delhi and Mumbai, and more than 10,000 African students enroll annually in Indian
universities, many of them sponsored by the Indian government.

Exploring the advantage

Shashi Tharoor, the former Indian Minister of State for External Relations, who focused
on relations with Africa, underlined that “we have an opportunity to enjoy a privileged
position in many African countries that we would be foolish not to develop.” This
“opportunity” resides precisely in the five dimensions discussed above; where India
offers Africa an added value that, strategically explored, could lend it a long-term
advantage over China and other competitors.
Focusing on these specific sectors, beyond the options much in vogue with
offensive emulationists or passive singularists, will also help India to clarify its priorities,
optimize its policy-making process and infuse its Africa policy with greater strategic
depth.