Decathlon in the Savanna: India can beat China in Africa

Winning in Africa isn’t a simple race where the Indian elephant and the Chinese dragon must run flat out. It’s about corporate governance and getting the African zebra – or giraffe, if you will – to pair along

rohit

Rohit Bansal | March 26, 2013


PM Manmohan Singh arrived at King Shaka International airport to attend the Fifth BRICS Summit, at Durban, South Africa on Monday. Minister of justice, South Africa, Jeffrey Thamsanqa Radebe is also seen.
PM Manmohan Singh arrived at King Shaka International airport to attend the Fifth BRICS Summit, at Durban, South Africa on Monday. Minister of justice, South Africa, Jeffrey Thamsanqa Radebe is also seen.

Addis Ababa/Juba: As this is being written, Chinese president Xi Jinping and his glam wife are in the African theatre. Beijing expects the duo, on their very first overseas trip after Xi took over, to charm their Tanzanian hosts and those in South Africa and the Democratic Republic of Congo thereafter.

Early March, the two Asian rivals were caught courting Africa on exactly the same dates.
New Delhi hosted the CII-Export Import Bank Africa Conclave, where some $70 billion were discussed by 900 delegates from 45 countries.

Beijing, on its part, set the stage for president Xi Jinping’s visit to Africa, hosting the Forum on Chinese Businesses in Africa.

The charge of the elephant remains a modest mix of development assistance (the union budget this year assigns a modest Rs 300 crore for Africa) and lines of credit via Exim; our hope pegged to the famed Indian entrepreneur to deliver like her predecessors have over the decades, more often than not without backing from New Delhi.

In comparison, China’s ‘two-way trade’ with Africa has ballooned from about $10 billion in 2000 to almost $200 billion in 2012. Africa is already Beijing's second largest project contracting market, and as statistics from Beijing claim, the continent is China’s fourth largest investment destination. Data cited until April 2012, claims that accumulative investment in Africa had reached $15.3 billion, compared to none just over a decade ago.

Amidst such contrasting prowess, who would put their money on the elephant?

I would.

For one, there are clear signs of despair in Beijing’s blunt warning that their investing businessmen have been behaving badly!

“Build a better corporate image.” Chinese vice foreign minister Zhai Jun chided his audience at the Forum on Chinese Businesses in Beijing. “Every Chinese company and individual is a spokesperson for China. Chinese businesses in Africa are generally doing well promoting the development of local communities; but they are certainly not without shortcomings. I hope Chinese businesses will further strengthen self-discipline, improve internal management and win the market with integrity and quality, rather than only seeking one-off deals. I want to see a Chinese business community that complies with local laws, respects local customs and traditions, understands the importance of improved labor practices and environmental protection, enables more local participation in operation, and readily gives back to the local communities. The practice of abandoning the country immediately after taking some quick returns is nothing but short-sightedness. It is even more unethical to ‘drain the pond in order to catch all the fish.’”

This is as direct an admission of corporate mis-governance you would hear from a top Chinese leader.

But old habits aren’t easy to give up. Dragon Inc is used to hiss and bully, unmindful of the zebra’s comfort. Their SOP is to piggyback on China’s politico-corporate cabal and their large contingents of stationed diplomats, with wads of easy cash from state-owned banks, loaded with benign – and often fuzzy – interest regimes to sweeten the deal. Who has time to keep an antenna out for what the local sentiment is!

Bad attitude is creating push back. But Beijing can barely control it. The only way its mandarins know is to dump more cash into the pockets of African leaders; a dubious strategy given increasing literacy, political rectitude and social media spotlight.

So, here’s the bad news. “Africa must shake off its romantic view of China and accept Beijing is a competitor as much as a partner and capable of the same exploitative practices as the old colonial powers,” Nigeria's central bank governor has warned in a blunt public message.

Reflecting the shifting views of senior African officials who fear the continent's anaemic industrial sector is being battered by cheap Chinese imports, Lamido Sanusi wrote a scathing essay in The Financial Times complaining that Africa is "opening itself up to a new form of imperialism". "China takes from us primary goods and sells us manufactured ones. This was also the essence of colonialism," Sanusi wrote, the most trenchant yet by a serving African leader.

Sanusi, credited with cleaning up Nigeria's banking system, argued that African countries must respond to "predatory" trade practices – such as subsidies and currency manipulation – that give Chinese exports an advantage and the continent must build infrastructure and invest in education so that African businesses can compete for continental trade as Chinese labour costs rise. “I cannot recommend a divorce. However, a review of the exploitative elements in this marital contract is long overdue."

Parched of infrastructure and capital, and deeply wary of the West, the China option seemed attractive until not so long ago. But behaviour of Chinese companies on the ground has left African leaders between a rock and a hard place. Many now see Beijing interested only in ‘one-way trade’, where it soaks in the resources leaving very little value on the ground. Even construction workers in African projects – nearly a million of them – are Chinese!

Despite the elephant’s cuteness, Africa isn’t eating off New Delhi’s hand either. The scourge of near sightedness and one-off deals isn’t alien to Indian business. Enough number of them are messing around throwing dubious promises among unsuspecting communities.

It’s just that the dragon has deeper pockets, so its actions have left a more putrid taste in the mouth.

So, before we become complacent in this decathlon, let’s remember that not everyone agrees with the Nigerian central banker. South African president Jacob Zuma even warned western companies to shed an old "colonial" mindset when investing in Africa and to stop warning against the embrace of China.

For a continent parched of capital and infrastructure – and with the elephant receding in stamina – it’s indeed a difficult choice for Africa to stave off the dragon. But many like SJ Dima, education minister of Central Equatoria state of South Sudan can’t forget Beijing’s role in arming Khartoum in the gory war. “We trust India more,” Dima confesses, hurt over how China rebuffed the request to build a hydro-electric dam Juba needs over the Nile. Norway seems to be stepping in.

India could be that manna, here and at several other places. Our empathy and commitment to solve unsolved problems with deep consumer insights can make a quiet difference.



 

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