India’s ambitions for Africa trigger mounting FDI wave

Pledges by Indian Companies to Invest $14bn in Nigeria Signal Growing Momentum in India’s African Influence

A group of Indian companies has committed to investing $14bn in Nigeria, highlighting the increasing support from the private sector for Indian Prime Minister Narendra Modi’s ambitions to expand India’s influence in Africa. These commitments were made by four conglomerates on September 6, just three days before the G20 approved Modi’s proposal to include the African Union in the intergovernmental forum.

These new deals reflect the increasing trend of India’s investments in Africa and have sparked discussions about whether India can challenge China’s economic influence on the continent.

India’s Growing Engagement with Africa

“It has been a longstanding ambition of many in New Delhi for India to compete with China in Africa,” says Barnaby Dye, a lecturer in development politics at the University of York. This ambition has been accelerated under the leadership of Prime Minister Modi, who has taken steps to deepen strategic ties with Africa. This includes proclaiming the 10-point Kampala Principles to guide India’s engagement with Africa, signing its first African free trade agreement with Mauritius in 2021, and hosting senior officials from 17 African states last year.

However, the strict separation between India’s private and public sectors has historically limited the government’s influence over companies’ investment agendas abroad. “Unlike in China, a lot of India’s big corporations – both state-owned and private – are very much privately run and act relatively independently of diplomatic and strategic ambitions,” says Dye. As a result, India has struggled to match China’s investment drive, which has leveraged state funding and government-to-government agreements to become the continent’s second-largest source of greenfield capital expenditure (capex) since 2003, according to fDi Markets.

Investment Pledges and Opportunities

Despite these challenges, the recent $14bn investment pledges demonstrate that Indian corporates are increasingly capitalizing on opportunities in Africa, the continent with the fastest-growing population. The pledges include Indorama Petrochemical’s plan to invest $8bn in its existing fertiliser and petrochemical facility in the Rivers state, Jindal Steel and Power’s expression of interest to establish a $3bn steel plant, SkipperSeil’s plan to roll out $1.6bn worth of renewable power projects, and Bharti Enterprises’ $700m expansion of its communication network.

Data from fDi Markets shows that Africa has been the largest regional recipient of Indian greenfield capex over the past five years, surpassing its position in the previous five years. In 2021, Indian firms announced a record-high $22.2bn worth of foreign direct investment into Africa.

The Confederation of Indian Industry has urged Indian firms to increase their investments in Africa from $74bn to $150bn by 2030, indicating that there is more to come. The India-Nigeria Business Council was launched last year to tap into bilateral trade and investment opportunities.

Enabling Role of the Indian Government

Although the Indian government has historically maintained a hands-off approach, it has recently started playing a more enabling role by demonstrating that “the state and private sector can help each other,” according to Harsh Pant, a professor at King’s College London. While the investments made by conglomerates have received significant attention, there is also a focus on small and medium-sized enterprises (SMEs) as part of this shift.

“The government is deliberately pushing some SMEs to do business in Africa,” says Pant. In the past, leaders of large firms would accompany the government on trips to the continent, but now “the business delegations today…are almost evenly poised, if not in favor of SMEs,” Pant adds.

Investment by SMEs is further supported by India’s large diaspora in East Africa, South Africa, and Ghana. “They have often been a key interlocutor for Indian firms to get business on the continent and drive Indian investments,” says Dye. “Entrepreneurial individuals with contacts back in India have been able to bring across and offer their services to Indian companies wanting to expand on the continent.”

SDGs, Targets, and Indicators in the Article

1. SDGs Addressed or Connected to the Issues Highlighted in the Article

• SDG 8: Decent Work and Economic Growth
• SDG 9: Industry, Innovation, and Infrastructure
• SDG 17: Partnerships for the Goals

2. Specific Targets Under Those SDGs Based on the Article’s Content

• SDG 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading, and innovation.
• SDG 9.1: Develop quality, reliable, sustainable, and resilient infrastructure.
• SDG 17.16: Enhance the global partnership for sustainable development, complemented by multi-stakeholder partnerships.

3. Indicators Mentioned or Implied in the Article

• Investment amount pledged by Indian companies ($14bn)
• Number of Indian companies investing in Nigeria (four conglomerates)
• Investment sectors (fertilizer and petrochemical, steel, renewable power, communication network)
• Increase in Indian greenfield capex in Africa over the past five years
• Target for Indian firms to increase investments in Africa from $74bn to $150bn by 2030

Table: SDGs, Targets, and Indicators

Note: The indicators listed in the table are not exhaustive and may require additional data for comprehensive measurement.

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Source: fdiintelligence.com

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