India intensifies trade with Africa

Africa has become one of India’s top priority markets, especially to meet the country’s growing demand for energy and other natural resources and to serve as an export hub to bolster Africa’s automobile and pharmaceutical industry

March 28, 2020

India’s exports to Africa are dominated by crude oil and pharmaceutical products, accounting for nearly 40 per cent of the total exports into African markets

Bilateral trade between Africa and India has amplified from US$7.2 billion in 2001 to US$63 billion in FY 2018, making India Africa’s fourth-largest trading partner

India’s gold imports amounting to US$100.6 million in 2018-19 drove bilateral trade between Republic of Cote d’Ivoire to cross the US$1 billion for the first time

Ghanaian health tech start-up mPharma, for instance, recently received a round of funding led by Unbound Ventures, the VC arm of Bharti Global Ltd

India intensifies trade with Africa

“We will keep our markets open and make it easier and more attractive to trade with India. We will support our industry to invest in Africa.” –

One of the ‘10 guiding principles’ for India-Africa engagement espoused by Indian Prime Minister Shri Narendra Modi during his address to the Ugandan parliament in July 2018

Aiming to further expand its footprint in the strategically important South African market, the Indian automobile giant, the US$42 billion Tata Motors, launched two new variants of its commercial vehicles category at Johannesburg in September last year. Since 1992, the auto major has enjoyed a significantly large presence in Africa, and their vehicles are a familiar sight on South African roads. It has six plants across Africa, which includes a manufacturing base producing trucks in Rosslyn in South Africa and an assembly plant in Tunisia. Tata Motors’ fleet of buses has helped Ghana revamp its public transport system, and their vehicles have been utilized for the UN peacekeeping forces in Uganda.

Meanwhile, Mahinda & Mahindra, one more of India’s leading auto manufacturers too is stepping up its presence in the African markets. Present in Africa for the past 15 years, the premier utility vehicle company launched its new series of tractors and farming equipment for the first time at Johannesburg last year. Mahinda & Mahindra opened its assembly plant with an annual capacity for 2,500 pick-ups in Durban in 2018 and has plans to enhance its presence in the African continent by opening more units in Kenya and Sudan.

India is Africa’s fourth-largest trading partner as bilateral trade between the two has risen from US$7.2 billion in 2001 to US$63 billion in 2018

Punjab based tractor company, International Tractors Ltd, has set up assembling plants for their Sonalika tractors in Nigeria and Cameroon, while a few months ago, Renault India too shipped its popular Triber from the Ennore port in Kerala to South Africa for the first time. 

Here are more examples of the Indian auto industry’s penetration into the highly competitive African markets. India-based TVS’ motorcycles are popular in Nigeria and Burundi, while Bajaj Auto 15 per cent growth year-on-year in Q3 of FY20 in Africa has been driven by demand in Nigeria, Congo, Uganda, and Ethiopia.

Traditionally, Africa has been a major export market for India’s automobile industry, which exports 3.5 million vehicles of the 25 million vehicles manufactured by the country. Though India’s exports to Africa have been dominated by petroleum and pharmaceutical products, accounting for nearly 40 per cent of the total exports into African markets, Indian automobiles, which includes cars, buses, two-wheelers, and utility vehicles, today predictably form one of the key export items in India-Africa’s trade basket. 

A 2018 report, Deepening South-South Trade: An Analysis of Africa and India’s Trade and Investment, jointly prepared by the African Export-Import Bank (Afreximbank) and the Export-Import Bank of India (Exim India), had determined the value of India’s exports of motor vehicles and auto components to Africa at around US$2.9 billion in 2017, accounting for a sizable 18.5 per cent of India’s global export of motor vehicles and parts. Although South Africa is a big consumer of India’s automobiles, the report zeroes in on the potential in East and Central Africa and suggests that India should leverage its inherent competitive strengths to boost its share in the African market. 

Trading with a Continent on the Move 

Today, Africa’s 54 countries offer significant opportunities with a growing young population, huge mineral resources, oil wealth, decreasing poverty levels and expanding consumption patterns. Africa is a ‘continent on the move’ with a number of emerging economies with growing purchasing power, say policymakers. In the past decade, India has been actively driving efforts to reengage with Africa, with which it shares deep social and economic relations dating back thousands of years. From the time, Indian traders first sailed to the east coast of Africa in search of agricultural and animal products, gems and minerals. 

Bilateral trade between Africa and India has amplified from US$7.2 billion in FY 2001 to US$63 billion in FY 2018, making India Africa’s fourth-largest trading partner. Primarily, Africa exports raw materials such as crude oil and minerals, gold, copper, cashew nuts to India and imports refined petroleum, pharmaceutical products, vehicles, and telecom equipment. 

India has become Africa’s third-largest export destination, after China and Europe, facilitated by a slew of factors such as platforms like the India Africa Forum Summit, last attended by more than 40 heads of African states; Focus Africa initiative to scale up trade and investments; and trade incentives such as the Duty-Free Tariff Preference Scheme for Least Developing Countries (LDC). Thirty-four African countries, who are eligible for duty-free access for their exports to India have hugely benefited by this scheme.

Additionally, India’s dependence on some African nations for its energy security has led to a rise in its crude oil imports, making it a dominant feature in the India-Africa trade partnership.

The dominance of oil in trade relations

India, the world’s third-largest energy consumer, has been increasingly turning to Africa, which has large deposits of crude oil, natural gas, and uranium, besides coal and bauxite, to meet its growing needs. More than half of the recent oil discoveries have been in Africa, which accounts today for about 7.5 per cent of the global oil reserves and 7.5 per cent of natural gas in the world, according to a Deloitte report. And, more than half of the oil production is exported, with western African nations Nigeria and Angola being the country’s two largest crude oil exporters.

In recent years, Nigeria has been one of the main sources of crude for India, replacing even the USA. According to a brief by the Indian commission in Abuja, Nigeria, India is the largest importer of Nigeria crude oil, which provides nearly 10-12 per cent of India’s annual crude oil requirement, making it India’s fifth-largest supplier of crude oil and second-largest supplier of LNG in 2018.

India’s Public Sector Units too are active in Nigeria, for example, Oil India and the Indian Oil Corporation each hold a 25 per cent stake in an onshore block OML 142.

Energy forms the heart of the India-Angola partnership, with the Lusophone country emerging as the second-largest African oil supplier to India, after Nigeria. Indian oil companies have been upbeat about investing in the energy sector in Angola, with delegations from ONGC Videsh Ltd., Reliance Industry Ltd, HPCL Mumbai, Engineers India Ltd. and Mittal Investments UK Ltd visiting Luanda to explore cooperation in the oil and gas sector.

India is Angola’s 3rd largest trading partner. Bilateral trade, valued at US$4.3 billion in 2018-19, is in Angola’s favour due to the oil imports. For this reason, India’s direct bilateral trade with Chad too surged in 2018-19 because of increased crude oil from this central African nation.

Recently, India has also been engaging with other oil-rich countries in Africa such as Mozambique, where vast gas fields were discovered in 2011. Three Indian state-owned oil and gas firms, ONGC, Oil India, Bharat Petroleum, which own 16 per cent, 4 per cent and 10 per cent respectively, are investing US$6 billion into Area 1 of the offshore liquefied natural gas block, the Rovuma gas field in Mozambique. In the Western African nation, Gabon meanwhile, Oil India and Indian Oil, are jointly conducting oil exploration in Shakti Block, Lamberele, with each holding a 50 per cent interest.

Gold is India’s second-largest import

Gold is India’s second-biggest import from Africa. While India depended solely on South Africa for its gold imports in 2001, the share of South Africa fell to 22.8 per cent, with Ghana (48.4 per cent) and Tanzania (12.3 per cent) emerging as new major exporters of gold to India.

Today, gold accounts for nearly 80 per cent of India’s total imports from Ghana. Bilateral trade has grown from US$1.2 billion in 2011-12 to over US$4.5 billion in 2018-19, with the West African nation enjoying a positive trade balance. Similarly, India’s gold imports amounting to US$100.6 million in 2018-19 drove bilateral trade between the Republic of Cote d’Ivoire or Ivory Coast to cross the US$1 billion for the first time.

Raw cashew nuts for the Indian market

It is not just oil or gold that dominates the India Africa trade. According to the 2018 Exim Bank and Afreximbank report, India is a highly receptive market for one of Africa’s chief commodity products – raw cashew nuts.

Across much of West Africa, cashew trees represent a major cash crop, with raw cashew nut production hitting 1.5 million tonnes, or over 43 per cent of the global supply (2018), according to the International Nut and Dried Fruit Council. Côte d’Ivoire, Guinea-Bissau, Nigeria, Benin, Burkina Faso, Ghana, Senegal, and the Gambia are the prominent producers in the region. 

West Africa’s total production outstrips East Africa’s 470,000 tonnes, which mostly come from Tanzania, Mozambique, and Kenya. But the bulk of what is produced locally around 90 per cent, is exported as unprocessed raw nuts to processors in India and Vietnam, before being dispatched to supermarkets in Europe and the United States. Vietnam imported around 53 per cent of the world’s raw cashew nuts and India accounted for 45 per cent last year.

Though African countries are waking up to the huge potential of processing, India, which is unable to produce raw cashew to meet its demand for continuous processing and export, mostly imports it from West African countries. According to a Business Line report, imports from Ivory Coast, Ghana and Nigeria account for nearly 37 per cent of India’s total cashew imports.

India, a key source of pharmaceuticals

While India’s imports from Africa remain essentially concentrated in crude oil and primary commodities, the exports lean towards completely manufactured products like automobiles and pharmaceuticals. India, which is often referred to as a “global pharmacy” exports nearly 19 per cent of its entire pharma exports (US$19.2 billion in 2018-19) to Africa.

South Africa and Nigeria are top importers of India’s pharma products due to demographic factors and the size of their health care sector. Nearly 33 Indian companies such as Ranbaxy, Cadila, Emcure, etc, are active in importing or involved in domestic manufacturing products in Nigeria.

African nations turn to Indian medicines because of the lack of essential life-saving drugs and to access cost-efficient medicines. This is a major challenge in the continent, especially in East Africa, which has limited manufacturing capacity. Much of the East African market is dominated by generics and medicines imported from India. More so, Indian companies have established a competitive advantage and play a vital role in reducing the price of HIV/AIDS and meningitis drugs.

But Indian pharma companies are not just flooding the local market; they’re investing in local potential as well. Ghanaian health tech start-up mPharma, for example, recently received a round of funding led by Unbound Ventures, the VC arm of Bharti Global Ltd, best known in Africa as a mobile operator, Airtel. An Indian pharmaceutical company, Shreya has invested about US$ 1 million in CAPS Ltd, Zimbabwe’s largest pharmaceutical company. India has a strong presence in the pharmaceutical sector in Zimbabwe and Indian medicines are readily available in the local market.

Many of India’s pharma companies have established units in various parts of Africa, including Ethiopia, Uganda, Democratic Republic of Congo, Zambia, and Ghana. There are seven Indian pharma manufacturing units in Nigeria.

Medical equipment such as Bhabhatron (an indigenous machine developed by Indian scientists for cancer treatment) and phototherapy machines are saving lives in Africa. Mylan Laboratories Ltd of India constructed a state-of-the-art oral solid dosage pharmaceutical facility at a cost of US$4 million in the Lusaka South Multi-Facility Economic Zone.

Many African countries are also trying to enhance local manufacturing with foreign enterprises. For example, Kenya firms have now started joint ventures or buyouts with leading Indian (Strides, Cipla) and South African (Aspen Pharma) companies, and are using their funds to expand operations and improve manufacturing standards. But for now, Indian pharma continues to augment and boost Africa’s healthcare sector.

Future of India Africa trade

Foreign policy experts argue that Africa-India trade and investment has more potential than what is currently being realized. The African Continental Free Trade Area Agreement (AfCFTA), which is expected to boost intra-African trade by the elimination of import duties and non-tariff barriers, is expected to facilitate trade and open opportunities for India. 

Both sides are trying to diversify the goods in the trade basket — India is now exploring the exports of technological and intellectual based products to Africa. For example, Namibia has a strong interest in Indian technological prowess in IT, engineering, pharmaceuticals, railways and SMEs.

According to projections by experts, Africa-India trade could double by 2021, especially if the state and corporate entities step up the momentum to reap the full benefits of the potential offered by the two trading partners.