International air travelers will recognise the tag line from the HSBC campaign in airports worldwide: “In the future, South-South trade will become norm, not novelty”. If it depends on the Mahindra group and other Indian conglomerates, that tag line could become reality with regards to Africa and India.
Taking optimism to a new level, a collection of African leaders and Indian industrialists dared to dream big during a closed session of the WEF India Economic Summit in Delhi, agreeing to an informal ambition of $500bn Indo-African trade by 2020.
If achieved, that would mean about a five fold increase from 2015, in which Indo-African trade is expected to reach $100bn, and a seven fold increase from 2013, when two-way trade stood at $70bn.
While of course this ambition does not reflect the official will of India or African nations, it nevertheless gives a sense of the way some key players are envisaging the future. Participants in the session included Ghanaian Vice President Kwesi Amissa-Arthur, Cote d’Ivoire Prime Minister Daniel Kablan Duncan, Indian industrialist Prakash Hinduja and Mahindra Group’s Shriprakash Shukla agreed to an informal ambition of $500bn Indo-African trade by 2020.
“This could be a watershed moment in Indo-African relations,” Shukla told beyondbrics after the session. “We’ve had meetings with African leaders before, but tonight’s meeting was the symbolical last hit to break the stone.”
According to Shukla, Mahindra Group set an internal target to make Africa the second largest “emerging market” in Mahindra’s operations, after the USA (For Mahindra, emerging markets are markets outside its home market India). “We want to multiply our revenues in Africa, to reach $700m to $1bn there within three years,” he said.
The company would not disclose the exact amount of its current revenues from Africa, saying only that they are between $100m and $300m.
He believes that other Indian conglomerates, such as Tata, and possibly Reliance, see Africa as a similar opportunity. “The moment is right. Growth in Europe has stalled, growth in India has slowed, and Africa is the last great frontier. Now is the time for us to be bullish and optimistic about our presence there,” Shukla said.
Shukla says that several factors make that the Indo-African stars align for Mahindra and other Indian companies:
- · First, India and the African continent share a similar size population: India’s 1.2bn versus Africa’s 1.1bn. That makes them the only other markets, next to China, with such a big size.
- · Second, even though a majority of that 1.1bn in Africa is poor, about 10-15 per cent of the population does have sufficient income to be interesting for companies.
- · Third, the agricultural characteristics of both regions are similar: in India, 50 per cent of the population works in agriculture, in Africa 60 per cent does.
As such, Mahindra Group believes it is best placed to sell, for example, its tractors to customers in Africa, since they are built for small farms. It also sees opportunities in telecom, automotive, and government consulting, even though its synergies seem less clear at first.
“We’re confident because we’re used to working with a myriad of state governments, regulations, and languages. And that’s exactly what is required in a diverse market such as Africa,” said Shukla.
In this regard, and taking into account the other barriers to Sino-African trade relations, India looks like a very appealing alternative for African nations.
- Because of the historical Indian diaspora in Africa, and India’s English colonial background, there is much less of a language and culture barrier.
- Instead of bringing in Indian workers, companies such as Mahindra say they hire about 90 per cent of their employees locally, with the aim to upping that to 95 per cent and more, Shukla says.
- And instead of only selling finished goods, Indian conglomerates are already producing certain products in Africa.
One can understand then, the optimistic atmosphere surrounding the closed session on Indo-African trade and investment in New Delhi this week. But is the aim of $500bn in two-way trade in 2020 really credible?
“We know that as a nation, increasing trade five-fold is achievable, because we’ve done it before: Indo-China trade went up from $15bn to $75bn in the last five years,” said Shukla.