China, India and the Indian Ocean Economy - Shakeel Mughal, Jeremy Gordon, Jeet Jandu

1. Africa's Asian involvement
China, India and the Indian Ocean economy
ASIA-PACIFIC TECHNOLOGY NETWORK
20th June 2013

2. Presentation Agenda
Internex Partners
The Indian Ocean Rim
Africa ‐ China
Africa ‐ India
Summary
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3. Internex Partners
• Focused on triangulation of business opportunities in and
between high growth markets, including the BRICS
economies.
• Established by market specialists, with years of experience
working with corporate and government clients.
• Access to real & qualified business opportunities and projects.
• Provides business intelligence briefings, strategic advice, and
business development support.
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4. The Indian Ocean Rim - Shakeel Mughal
20 Member states of the IOR: - Maritime Safety and Security, Trade and Investment Facilitation,
Fisheries Management, Disaster Risk Management, Academic and Science & Technology
Cooperation, and Tourism and Cultural Exchanges
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5. The Forgotten Continent
Johannesburg, SA
Cairo, Egypt
Nairobi, Kenya
Lagos, Nigeria
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6. Africa – Shakeel Mughal
•
Sub-Saharan Africa has 30% of the world’s proven mineral resources,
making it a key partner both for the developed world and for the
industrialising economies of China and India.
•
Decades of underinvestment have left the continent with an infrastructure
ill-equipped to deal with the burgeoning demand for its exports.
•
Generalised perceptions of Africa’s risk profile do not do justice to those
countries which have made considerable economic and political progress
over the last 15 years.
•
For those with the necessary regional knowledge and experience, this
mismatch between perceptions and reality affords a real business
opportunity.
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7. Fastest Growing Economies
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8. Population Growth
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9. The African Middle Class
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10. Infrastructure Backlog
•
Satellite view of the African Continent
illustrates the extent of the
underinvestment in energy
infrastructure.
•
Estimated infrastructure backlog, and
therefore investment opportunities,
currently represent in excess of
US$120bn over the next 10 years.
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11. Connectivity
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12. Abundance of Raw Materials
•
30% of the world’s proven
mineral resources.
•
Only 12% of land mass had
been prospected.
•
Asia currently accounts for 32%
of Africa’s exports.
•
Africa is a key partner for the
developed world and for the
industrialising of economies of
India and China.
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13. Africa - Oil & Gas
•
New finds in the East Africa and
Namibia.
•
Chinese and Indian companies
active in exploration.
•
Both China and India major
importers of crude oil from Africa.
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14. Recent Oil and Gas Activity
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15. Africa’s Top Trading Partners
•
China - $109.1 billion
•
United States - $90.5 billion
•
India - $49.9 billion
•
Germany - $31.7 billion
•
France - $30.5 billion
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16. Africa and the IOR
•
Africa has a diverse levels of political stability and sovereign risk.
•
Apart from China and India; Malaysia and Australia have active interests in
Africa.
•
A strong Malaysian community exists in South Africa dating back to the late
19th century.
•
Malaysian interests have been sporadic; peaked under the Mahathir
government.
•
Australia is also helping to strengthen rule of law and justice systems in
Africa, by providing capacity building training and international legal
assistance.
•
Australian companies active participants in the resources and agricultural
sectors.
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17. India and China in Africa
•
China’s exports to Africa grew by 48% annually
between 1994 and 2010, compared to 14% for
India.
•
India’s Africa policy shows significant differences
with China’s scramble for Africa.
•
India-African trade pattern appears to be more
diversified.
•
The ‘softer Indian way’ in Africa is India’s unique
pathway to power.
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18. China – Jeremy Gordon
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19. Africa - China
•
China started taking an interest in Africa during the second half of the 20th century.
•
They initially supported newly independent countries who wished to follow Chinese
socialist ideology with friendship deals.
•
China is a pragmatic partner, working with a variety of governments, and focusing on
commercial rather than political issues.
•
Most Chinese investment in Africa are still state sponsored.
•
The Chinese private sector is becoming increasingly active in Africa.
•
China has become an active investor in the resources sector to support domestic
demand, but also looks to infrastructure, markets, manufacturing and agriculture.
•
Chinese funds are also targeting and supporting Chinese opportunities in Africa.
•
Chinese tourism in Africa is rising
•
There are significant challenges for China in Africa in terms of perceptions and
operations
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20. China’s Drivers
• China is going out…
– Policy drivers for strategic reasons
• Resources, supply chain security, new markets
• Trends & Transitions
–
–
–
–
–
–
–
–
New government
Global role
Slower growth
Higher costs
Economic reform & the private sector
Urbanisation
Domestic consumption vs trade & fixed asset investment
Overseas Direct Investment & Going Global
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21. ODI. Up, Up & Away
•
“Going
Global”
– Since 2000
– ODI vs FDI
•
Targeting
– Resources
– Strategic
Assets
– Tech
•
Brands
– Markets
Source: IMF, End 2011
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22. China’s ODI
• Where?
– Developed &
Developing Markets
China's overseas investment
Region
Total
Largest recipient of
investment
• Differing drivers
SOURCE: IMF STOCK OF OVERSEAS DIRECT INVESTMENT (END 2011)
• How Much?
• Unreliable numbers
• How?
– Official
– Unofficial
• Hard to measure…
Asia
$303.4bn
Hong Kong ($262bn)
Latin America
$55.2bn
Cayman Islands ($21.7bn)
Europe
$24.5bn
Russia ($3.8bn)
Africa
$16.2bn
South Africa ($4.1bn)
North America
$13.5bn
US ($9bn)
Oceania
$12bn
Australia ($11bn)
Source: IMF, End 2011
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23. A Numbers Game
•
ODI+
– US$260bn
committed?
• US$75bn
invested?
– Including official
and unofficial
•
•
•
•
ODI
Grants/Aid
Loans
Private export
credits
• NGOs
• Portfolio
investments etc.
Source: FT; AidData
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24. Trade. New Horizons
• Broken trade-driven
growth model
– US/EU slow-down
– Rising costs
• New resources
– Strategic supplies
• New markets
– Less competition
– Price sensitive
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25. Sino – African Trade
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26. China’s Mixed Offer
• Development Finance
– Cheap money, no strings
• Infrastructure +
– Fund & build
– Resource access + local needs at low costs
• E.g. US$6bn committed to Sierra Leone for development of road,
rail, port, logistics, industrial park…and mining
• China gets markets and supply chain Infrastructure
• Labour
– Cheap but controversial
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27. China’s Challenges
• Lack of transparency
• Political risk
• Expectations vs delivery
– Cost overruns, quality issues
• Business and politics don’t mix well
– Different drivers, stakeholders
– Bribery and corruption risk
• Employment / integration
– Conflict risk
• Management, culture & communications
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28. Problems & Prospects
• Problems in the news
–
–
–
–
Gabon: Oil, iron ore legal disputes
Ghana: Illegal gold mining arrests
Zambia: Coal mining licenses revoked
Zimbabwe: Controversial diamond mining
• Prospects too
–
–
–
–
Resource & infrastructure development
Special economic zone development
Trade as well as investment
Increased private sector role
• Critical issues
– Political sensitivity, project due diligence, delivery support
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29. India – Jeet Jandu
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30. Africa - India
•
India has links with Africa dating back to early 19th century.
•
Late 19th century, the British brought in skilled and unskilled labour from India to
build infrastructure and develop agriculture.
•
Indian traders followed into Africa and over several generations have embedded
themselves into local economies. Introduced the concept of “Duka”.
•
The Indian diaspora in Africa are skilled at building businesses and participating
in local economies.
•
The Indian diaspora and the local Africans have at times had difficult relations.
•
Indian companies see Africa as a continent for tapping into mineral resources
in-order to feed the growing Indian economy.
•
Indian government has not made significant state sponsored investments in
Africa.
•
India and China have only become competitors in Africa in the last 10 years.
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31. India – Trade and Investments
•
Current levels of trade around $50Bn a year.
•
Lead by the Indian Private sector. Africa is a new
investment destination for the increasing global
profile of India’s multinational corporates.
•
Total Indian investment in Africa is upwards of US$
33 bn.
•
Africa recorded 26 new manufacturing projects from
Indian companies in 2011, a rise of 44% from 2010.
•
Between 2003-2009, 70 Indian companies invested
in greenfield projects in Africa, totaling US$ 25
billion; this represents close to 5 percent of total
greenfield FDI projects in Africa (African Development
Bank).
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32. India’s Exports to Africa
LDC* vs. NON-LDC
KEY PLAYERS
Total Exports to
$ 24.7 bn
Africa
2011-2012
% Share
USD bn in Africa
19.2
NIGERIA
2.7
10.9
2.4
9.8
KENYA
2.3
9.2
TANZANIA ^
1.6
6.5
13.7
55.6
$ 17.5 bn
(70.9%)
Source: Commerce Ministry, India
*Least Developed Countries
4.7
TOTAL
To non-LDCs
SOUTH AFRICA
EGYPT
$ 7.2 bn
To LDCs
(29.1%)
^LDC

33. India’s Imports from Africa
LDC vs. NON-LDC
KEY PLAYERS
Total Imports from
$ 43.2 bn
Africa
2011-2012
% Share
USD bn in Africa
NIGERIA
SOUTH
AFRICA
14.7
34.0
9.9
23.1
ANGOLA*
6.6
15.3
EGYPT A RP
3.0
7.0
ALGERIA
2.2
5.0
TOTAL
36.5
84.4
$ 9.4 bn
From LDCs
(21.8%)
$ 33.8 bn
From non-LDCs
(78.2%)
Source: Commerce Ministry, India
*LDC

34. Investment determinants
•
Indian conglomerates like the Tatas, Kirolaskars,
pharmaceutical firms like Cipla and automobile
companies like Mahindra have undertaken profitable
projects in Africa.
•
The Tata Group has invested about US$ 300 million till
2012, and plans to triple that amount over the next 3-4
years.
•
These investments are in the resources, manufacturing,
telecoms and energy sectors.
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35. Other Government initiatives
•
The Indian government is also financing an "e-network" project to enhance
Internet connectivity in Africa, linking 5 regional universities, 5 specialty
hospitals, 53 regular hospitals and 53 educational institutions across Africa
to Indian universities and hospitals, via a satellite and fibre optic network.
•
India recently announced a $5Bn loan package for Africa.
•
An additional US $700 million to establish new institutions and training
programs, in consultation with the African Union and its institutions.
•
India’s capacity-building programme for African countries. Under ITEC
(Indian Technical and Economic Co-operation) India has provided more
than US $ 1 billion worth of technical assistance & training to African
countries.
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36. Summary
• The next major growth area in the world.
• Major opportunities but understand and manage risks.
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37. Thank You
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