Role of Services in Accelerating India-Africa Trade
Satinder Bhatia
The growing India-Africa trade is a matter of mutual pride as this growth has come despite the well known hurdles in the form of poor infrastructure which increases logistics costs and, thereby, the cost of doing business. India’s principled stand on capacity-building in Africa including training to African nationals in different areas together with building higher education institutions in Africa has definitely had its ripple effects on trade as Africa’s capacity to engage with international markets and India’s familiarity with African markets increases rapidly over time. This model of trade through capacity-building and investments in Africa is one of the unique models pursued by India doggedly, much to the advantage of the continent and a source of pride for India. Today, African exports to India are rising at an annual growth rate of over 40 percent resulting in India-Africa trade at over $75 billion overcoming India-US trade at approximately $63 billion. So far, of course, commodity trade has dominated trade deals from Africa including crude oil & gas, gold, diamonds, coffee, cashew-nuts and sugar. All regions of Africa are rich in commodities; some in natural resources and others in agricultural commodities.
Yet, Africa is very heterogeneous too. First, in terms of per capita incomes, we have countries like Equatorial Guinea and Seychelles at the top end with per capita incomes of $20,572 and $14,220 respectively and Malawi, on the other hand, with a per capita income of only $226 (World Bank figures, 2013). Besides Equatorial Guinea and Seychelles at the top end, the other notable countries competing with them in terms of high per capita income are Gabon ($11,571), Libya ($12,157) and Mauritius ($9,210). Even amongst the high-enders, there is a lot of diversity with countries like Libya, Gabon and Equatorial Guinea capitalizing on their oil-rich resources while others like Seychelles and Mauritius making the most from their tourist-attractive destinations. Tunisia and Morocco, too, are good tourist destinations and the tourism industry has contributed significantly to their growth and development. India, though, does not have much trade with either Seychelles or Tunisia. Commodity trade may have been the low-hanging fruit but trade will said to have matured only if the potential of non-commodity trade is also exploited. India is now keen to get investment from Seychelles in its hotel industry. And that can be the initiator of services export from Africa. Seychelles is also investing heavily to become an exporter of financial services. Already, Seychelles has over 140,000 international business companies registered in its financial sector. These companies do business outside of Seychelles and are exempt from all taxes. India, on the other hand, is already strong as a provider of IT, medical and even education services. For India to emerge as a strong trading partner of Africa, the trade basket has surely to be diversified with the inclusion of more manufactured items and services. Africa’s land mass is so huge and infrastructure so weak that it is nobody’s guess that there is huge scope for transport and logistical services. But today, logistics has gone beyond physical activities such as transport, storage and handling to include supply chain design, selection of contractors, demand forecasting and ICT-enabled tracking and tracing. With India having proven its expertise in ICT, export of logistics services from the country to countries even with good physical infrastructure should be the next big revolution. Kenya and Ethiopia have emerged as big floricultural exporters from Africa. Besides, the availability of land and good climate for the growth of flowers, logistics is playing an important role in boosting floricultural exports from these countries. In the export of such fragile and perishable items, logistics obviously plays a vital role. Foreign airlines have seized the opportunity and are providing palletized services whereby the flowers are directly loaded on to the pallets at the farm and then transported to the auction market in Netherlands. High production costs are, thus, offset by efficient logistics. Similar to floriculture, logistics enabling timely production and delivery of products and services is essential for medical emergencies. In India, a lot of start-ups have come up in the health care sector that are using ICT to connect doctors with patients. Such services can be extended to Africa with the inclusion of wellness services. To begin with, doctors, physicians and nurses in India may form the bulk of the database of these service providers but later the database can include such professionals of other countries as well. And there may be special advisory services to guide people in making their choices. The rural hinterland of India should similarly be able to able to avail of these services including education services that have the ability to uplift many millions out of poverty. The scope for services trade is, indeed, vast and India-Africa trade is on the cusp of such a breakthrough. India’s major trading partners will then no longer be only the commodity producers such as Nigeria, Angola, South Africa, Egypt, Algeria and Morocco. Africa is a continent of 54 countries and India-Africa trade should reflect our reach to all these countries. For that, the key will be the ability to provide low-cost diverse services through efficient logistics. Another issue that will need attention is appreciating Africa’s language diversity. India’s trade has so far been concentrated in English-speaking countries. But a large part of North and West Africa speaks French. Even countries such as Nigeria, Gambia, Ghana, Sierra Leone, Egypt and Sudan that were under the British rule have integrated the teaching of French in their secondary schools in order to integrate better with the North and the West. In Ghana, French is widely spoken and Nigeria has plans to make French co-official with English. Kenya, Tanzania, Uganda and Zambia may soon be introducing French in their schools. A few countries like Angola, Mozambique, Cape Verde, Guniea-Bissau and Sao Tome and Principe speak Portuguese and yet again, there are countries like Morocco and Equatorial Guinea which have been Spanish speaking countries. For India-Africa trade to reach new heights, it is important that we appreciate this language diversity and master different languages.
Bhatia is a professor at the Indian Institute of Foreign Trade in New Delhi. Bhatia’s key interest is policy-based research on international trade and her subject specialisation is international financial management.
