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India-Africa Trade Boom

Written By Brian Hicks

Posted April 7, 2008

Gandhi got it wrong.

Mahatma Gandhi, India’s most famous leader, cut his teeth as a social agitator in South Africa circa 1900, and said, "The commerce between India and Africa will be of ideas and services, not of manufactured goods against raw materials after the fashion of western exploiters."

By the time Gandhi was killed in 1948, Britain was only just beginning to free its colonies around the world, and the oil age had barely begun.

Today, African nations are still heavily dependent on their former European rulers, but with Africa holding $30 billion in untapped oil and gas resources and needing major investment to get it out of the ground, India-Africa trade is racing forward at a summit this week.

India-Africa Trade Just Tripled in Five Years

India’s economic growth is expected to break 8% in 2008, and African countries should average over 6%. No wonder Indian ministers are rolling out the welcome mat in the capital of Delhi this week, hosting the leaders of 14 African countries at the India-Africa Summit… These are the most vibrant economies on the planet!

Not only sub-Saharan nations but also the Arab states of North Africa will be represented, signaling the importance of this historic meeting that touches on energy and other major industries to boot.

It’s a historic moment for many reasons. You see, these days, rather than having terms dictated by European powers, Indian and African leaders are sitting at the negotiating table as independent countries and enterprises with economic might.

India’s Tata Group, for example, is a multinational conglomerate whose Tata Motors (NYSE:TTM) makes low-cost vehicles perfect for developing countries, while other Tata companies are building power plants, hotels and delivering international consulting services.

An Indian man, Lakshmi Mittal, is now the head of the largest steel maker in the world, ArcelorMittal (NYSE:MT), and the richest man in Europe (he lives in London).

All told, exports from India to Africa multiplied threefold in the five years after the turn of the millennium, from $2 billion in 2000 to $6 billion in 2005, and African shipments to India also jumped from $3 billion a year to $4 billion during that time.

It’s a back-and-forth that involves markets for everything from mobile phone services to precious metals–exactly the kind of opportunities we’re tracking with the Global Growth Stocks international investment service.

Yet these advances in international trade still leave hundreds of millions behind, and India shares the African goal of trying to deliver the benefits of greater national wealth to rural and urban poor while building roads, power lines, and other key features of sustainable economic well-being. African infrastructure and Indian infrastructure both leave plenty to be desired.

From anti-colonialism to pro-development, India and Africa are in the same boat.

Yet that word, "colonialism," is being batted around again in 21st century Africa, with some applying it sharply to India’s biggest Asian economic rival, China, and even to India itself.

Will India-Africa Trade Nudge China Over?

American billionaire and big-mouth George Soros grabbed headlines in February when he told Reuters interviewers in the west African nation of Senegal that India and China’s booming economies have turned them into "new colonialists."

Soros also predicted that African nations with the kind of resource wealth that is attracting fortune and favors from Beijing and Delhi will be able to avoid a U.S.-led global slowdown and continue to enjoy high economic growth rates.

Whether that growth comes with China’s "no questions asked" Mao money is a sticking point for leaders like the southern African nation of Zambia’s commerce minister, Felix Mutati.

Mutati’s country, which is rich in copper, has enjoyed Chinese-led road construction projects and experienced an influx of Chinese merchants over the past decade. But with a shared colonial history and longstanding trade ties, Mutati told the Indo-Asian news agency ahead of the Delhi meeting that he prefers Indian investment to the new kid on the block, China.

Criticism of China on the African continent will only sharpen ahead of this year’s Olympics, as the Beijing games draw sharper protest against China’s support for Sudan and its policy in Darfur.

For India’s part, Tata Group has already started construction on a 120 megawatt power plant to deliver energy to the Zambian mining industry, and meeting with African leaders who represent the 54-nation African Union this week will surely generate plenty more interest in Indian know-how.

Not only Indian industrial giants like Tata but also smaller companies such as water pump manufacturer Kirloskars are filling gaping potholes on Africa’s road to progress… The BBC reports that Kirloskars has sold $75 million in water pumps to various African nations in just the past few years, with projections of $300 million in African business in 2008 alone.

From energy to infotech, water to copper, India and Africa have the ability to rise together away from western economic woes with essential growth that crushes developed world averages. This week’s summit will go a long way to ensuring a continued path to prosperity.



Sam Hopkins

P.S. The Global Growth Stocks portfolio has included a variety of plays on Africa since 2006, while most fund managers and newsletters slept on this undeniable growth story. Right now, subscribers are sitting on 123% gains in just one African energy stock, double-digits in African mobile phone growth, and there’s more in the works. To learn more, click here: Global Growth Stocks