Context:
The approach of African leaders during the FOCAC meeting in Beijing could offer valuable insights for India to strengthen its partnership with Africa.
Africa’s Key Priorities at FOCAC 2024:
- Trade Expansion with China: Africa seeks to enhance exports to China by focusing on value-added products instead of raw materials.
- Sustainable Agriculture: To bolster agricultural resilience, Africa is looking for support from China and India in areas such as crop development, fertilizers, and local processing capacities.
- Green Energy and Industrialization: The continent aims to establish more refining and processing centers, as seen with Zimbabwe’s efforts for local lithium refining. However, ongoing challenges like power shortages and environmental concerns persist.
- Debt Management: Managing debt sustainability is critical, as China holds about 12% of Africa’s total debt. Improved negotiation tactics and greater transparency are crucial for addressing this issue.
- Strategic Coordination: To effectively influence FOCAC’s agenda, African nations must work on developing a unified strategy and align their priorities.
Challenges:
- Limitations of Traditional Financing: Dependence on traditional loans is no longer sufficient. Exploring innovative financing options, such as public-private partnerships and blended financing, is essential.
- Chinese Debt Concerns: China lent around $170 billion to African governments and institutions between 2000 and 2022, making it a key creditor holding 12% of Africa’s debt. While “debt trap diplomacy” is debated, closer scrutiny of China’s lending practices is necessary.
- Financial Integration Barriers: Expanding the presence of Indian banks in Africa and managing foreign exchange risks are key challenges that need addressing to enhance economic relations.
- Debt Transparency Issues: A 2022 AidData report revealed that half of Chinese loans to sub-Saharan Africa are not reflected in sovereign debt records, complicating debt assessments.
How India Can Contribute:
- Independent and Strategic Engagement: India should leverage its strengths in sectors like ICT, human resource development, agriculture, and pharmaceuticals to deepen ties with Africa. It is also essential to hold the fourth India-Africa Forum Summit (IAFS-IV) to sustain recent progress.
- Investment in Key Sectors: Indian businesses should focus on high-value sectors, such as agriculture, pharmaceuticals, and manufacturing, by setting up local operations in Africa, which would generate jobs and support economic growth.
- Boost Private Sector Participation: India’s private sector should be encouraged to engage in African development projects, with support from innovative financing solutions like public-private partnerships and blended finance models.
- Improve Digital and Financial Connectivity: Expanding Indian digital technologies such as UPI and RuPay in Africa would enhance financial inclusion and help mitigate forex risks through the use of rupee-based transactions.
- Establish Strategic Dialogues: An India-African Union Track 1.5 Dialogue could facilitate ongoing discussions and enhance coordination on mutual interests and challenges.