India-Africa: Renewing Old Ties

With 48 countries in Sub-Saharan Africa, each with its own share of uniqueness, strengths and resources, Africa is definitely a huge playing field for international companies. Therefore, it is no surprise to see global entrepreneurs progressively trying to get a portion of this lion’s share. However, the true key to success in doing business in Africa is that you need to think globally, but act locally.

Both India and Africa share a common past which, includes– struggle against colonialism, poverty and illiteracy. This, in turn, has laid a strong foundation for a long-lasting relationship between the two nations which started more than five centuries ago. he abundance of natural resources, similar demography and large domestic markets have created a natural synergy between these two developing countries, and the economic tie-up also witnessed exponential growth in the last few decade. The partnership between India and Africa goes well beyond economic terms; it extends to both the private and public sectors.

India is currently the fourth-largest trading partner for Africa, right after the European Union, China and the United States. Given the extensive opportunities on the African continent, many countries, including India and China are in the race to reap the returns. India, in a bid to compete with the aggressive Chinese expansion in Africa, pledged $5.7 billion in loans and grants for development projects, in addition to investing in capacity building.

Despite its richness in both natural and human resources, the growth of African countries has often been hampered by local political issues, lack of infrastructure, and high poverty rates. This trend however has started to reverse; and over the past two decades, Africa has slowly become home to one of the fastest growing economies in the world. Foreign direct investment (FDI) and trade have become vital sources of economic development for Africa. India has also played a role by contributing significantly to the growth of African economies. India is currently the 21^st largest investor and the 9^th largest source of FDI into Africa – investing in a range of sectors from services through to manufacturing. The Indian private sector is now looking into making more strategic investments in African markets.

Interestingly, both India and Africa have the youngest population in the world. About 65% of the total population in Africa is under 35 years old and current trends indicate that the figure will only double by 2045. The youth bulge has created a need for investments, increased trade, and urgent job creation in Africa.

One of the most innovative sectors in Africa has been communications, specifically in regards to mobiles. The African middle class has been growing at a rapid pace and this has led to an increase of consumption and use of technologies. In 2012, 450 million mobile handsets were sold in Africa, making it the second largest mobile market, after China. Smartphones sale in Africa is expected to grow on an average by 40% a year until 2017.The smartphone industry is likely to account for 15% of the mobile market in Africa in 2014, 23% of the market in 2015, and 40% of the market in five years’ time.

Telecommunications has been a key driver for Africa’s economic growth over the past few years; with high investment rates in the sector.

In parallel with impressive mobile innovation, technology has also gained momentum in Africa. Small and Middle sized Enterprises (SMEs) have been growing rapidly and have the potential to significantly contribute to the growth of local economies. Governments and private investors have cottoned on to this trend, leading to the creation of new policies to nurture SMEs. Entrepreneurs are creating innovative solutions to African everyday problems, and according to the World Bank, there are now more than 90 tech hubs across Africa. These startups are tackling issues ranging from education to transportation and will act as a catalyst for change in the technology landscape of Africa. There is a great deal of excitement around bringing Silicon Valley to Africa, but it is time to create innovation on the continent and take Africa to Silicon Valley.

With all these key developments and the central undivided focus on Africa's fast growing economies, the continent is poised for massive development. Although India and China are in an advantageous position, they will soon be joined by other countries.

The objective however, is to create true positive social impact and moving beyond the surface. Entrepreneurs and SMEs are at the forefront of creating lasting change in Africa, they are true advocates of social impact at grassroots levels.


About the author: The article has been written by Ashish J Thakkar, Founder & MD-Mara Group

(Image: ww.zatilaqmar.com)