African Agriculture: an abiding investment venue for India
Dr Suresh Kumar, FnBNews.com -
The Africa India summit 2008 endeavors capacity building in the agriculture sector in terms of best practices. India adopted collective engagement in Africa to promote infrastructure and agro industry, African regional approach will give the member states greater opportunities to attract foreign investment. The process of creating a free trade area that incorporates the east African community, the common market for eastern and southern Africa, and the southern African development community is underway, bringing together nearly 600 million people into a single market. Such a development will have a major bearing on India-Africa economic exchanges.
Is India a threat in Africa?
Today, Africa is the hub of natural resources with leading world powers eyeing the continent for them. Only an average 3% of cultivatable land in Africa is being used now, which is not sufficient to feed the entire population of Africa. It is imperative to incorporate the development of the agriculture sector as a prerequisite to an African country’s progress and overall prosperity.
The trade and investment in agriculture and agro-infrastructure are inter linked and need mutual support, which persuaded Africa to share Indian experience in this sector. Indian scientific and agricultural research institutions have assisted around 5,000 entrepreneurs for developing their business ideas in the African countries. Today, India’s foreign policy is being questioned while dealing with agriculture sector in Africa. The issues being raised are:
1. Is India accused of ‘neo-colonialism’ in Africa using is agriculture land to cater to the Indian population of home?
2. How best can India work with African countries in facing the challenges of food sufficiency?
3. Are there any S&T measures that can ensure a long term benefit that is adaptable for the local requirements?
4. Are there any institutional link and processes by which this knowledge can be shared with African states?
1. India and new Colonialism in Africa
The academic circles in Africa worry about India’s role as a neo colonial power. Dean Nelson observed that Karuturi Global (KGL), an Indian company, one of the world’s largest producers of cut roses, has been accused of neo-colonialism in Ethiopia and Kenya. Refuting these allegations, KGL has outlined its agriculture investment policy clearly, listing a number of welfare measures the company has initiated in both the countries to improve the living conditions of the rural people. The investment in agriculture sector in Kenya And Ethiopia has created employment opportunities for skilled and unskilled workers. A good number of sugarcane factories have been started by Indians in Ethiopia according to the region’s demand. They are sowing sugarcane locally and producing sugar to cater domestic as well as regional market.
The Indian Ministry of Finance’s data on foreign direct investment (FDI) in African countries refutes the negative propaganda and shows the real picture. Figure in Tablel-1 shows that Mauritius and Russia are at the top of the figure of cumulative share of FDI towards the developing countries for the period 1996-2008, followed by Sudan, China, Egypt and Brazil. The government approved sector wise FDI in manufacturing, financial and non financial service and trading. The data does not indicate the intention of Indian FDI as being used for land grabbing. Indian corporate houses are making overseas investments through countries like Mauritius that either have low tax rates or allow tax free remittance of income. Despite the fact that outward FDI is moderately concentrated for the developing world, the African countries may follow different trends. Similarly, John Heine expressed, “Yet, contrary to what some might surmise from this new version of Scramble of Africa, if African countries play their cards right, they have much to gain. Indian companies are more willing to invest in infrastructure and in the downstream facilities needed to bring products to part than western ones.”
Its is observed that India focuses on bilateral, multilateral and regional economic cooperation acting as bridging power with all the major powers as a part of its foreign economic policy. But being seen as the bridging power, it should not be misused by multinational corporations using India in Africa for their self interests and assigning a proxy label of new colonialism on India.
Following suggestions may help curb misnomer of new colonialism on India.
1 .Public private partnership (PPP) in Africa is concerned about the relative decline of agriculture production of domestic food and industrial requirements. It’s estimated that the use of 15% of the total land in Africa is sufficient for the emergency. Indian investors are buying land in Africa for agricultural purposes. The sharing of the total produces should be in the ratio of 70:30 where 70% should be reserved for the export & industry and only 30 % should be used for domestic consumption.
2.African government should adopt a method of assessing the quantity of food production required for local market versus production for exports, Along with it, similar method should be used for local agro industrial activities. These measures will help to develop mutual understanding among PPP.
Indian Investors & Africa’s Food Sufficiency
The question raised that are there any S&T measures that can ensure a long term benefit that is adaptable for the local requirements, shows genuine concern of local users and investors, Th answer lies in the India’s transfer of knowledge/ technology that could help Africa deal with the problem of food crisis. The importance of small farm mechanisation and India’ expertise in small tractor production by good number of companies is highly relevant to Africa. Indian investors provide agricultural mechanisation such as seed cum fertilizer drill that facilitates seed and fertilizer saving, enhancement in cropping intensity and increase in gross income and return to farmer in Africa. India manufactures agricultural tractors, mould board plough, disc plough, sub soiler as primary tillage spring loaded tillers, harrow, leveler, bund former, scraper, rotary tiller as secondary tillage, back hoe with tractor, laser grader, graders, scrapers with tractors as earth moving equipment and sowinig machinery.
Indian investors promote agro processing firms, joint ventures in horticulture, storage facility and technology transfer with African government to address world market. Besides the other areas, India should focus on the Africa’s need for quality infrastructure and micro financing to enhance the farm productivity in the African countries. Along with it, Sanjay Kirloskar stated that African women are the real workers on small farms. The experience of Indian women working with micro finance in developing self help groups, co operative societies producing number of food, medicine, beverages and cosmetic items for the urban market will be the real input for the African women. Africa having small holding can use this micro finance for better seed, agriculture implements, irrigation systems and natural pesticides, Along with farm relatec partnerships, African countries hope to replicate India’s success in microfinance. India microfinance institutes could assist Africa build this sector. And a system of sharing of expertise in microfinance could be developed with the participation of India’s leading microfinance companies. Africa could become the world’s food basket with Indian expertise and farm technologies.
Indian Institutional links & knowledge sharing with Africa
The focus Africa programme of India initially emphasised on seven major trading partners of the region namely Ethiopia, Nigeria, South Africa, Mauritius, Kenya, Tanzania and Ghana that accounts for around 69 % of India’s total bilateral trade with the sub Saharan African, NEPAD ( New Partnership for Africa’s Development) shares the developmental approach with India and Indian institutional partners. The institutional entrepreneurship in Africa represents through Cll, FICCI, EXIM Bank IOR ARC and focus Africa. India’s economic engagement in Africa is working as per their local needs. Different turnkey contracts have been undertaken in Tanzania, Uganda and others. It enables imports of Indian equipment and technology on deferred credit terms extended through EXIM Bank, PTA bank BOAD, EADB and EBID. Joint ventures of Indian companies are engaged in African through Line of Credit LOC. A visible change in perception with access to greater knowledge of the region has helped in promoting economic relation between the Indian industry members and African countries. Cll’s effort is to develop a long term sustainable relationship with the private sector in the African countries. The participants in March 2009 conclave was remarked by 483 African delegates and 318 Indian delegates who discussed more than 193 projects worth $17,2 billion in technology, agriculture, human resource and energy in the COMESA regions.
Cll Africa committee has institutional agreements with Africa Small and Medium Enterprises SMEs and signed Memorandum of Understanding (MOU) in the fields of soap plan, water management and infrastructure related projects during this conclave of 2009. A strong structure that supports a continuing dialogue, transparent access to opportunities, interaction with the government and African Heads of missions has now been institutionalised.
Indian institutions such as NRDC, CFTRl, CSIR and ICAR and NEPAD should approach the forum for Agriculture Research in Africa FARA, the Southern African Centre for Cooperation in Agricultural and Natural resource training SACCAR the Association for strengthening Agricultural Research in eastern and central Africa ASARECA and the African centre for agricultural research and development CORAF in North Africa to address agricultural strategy for development. Indian investors are training human resource of Africa and importing knowledge in agricultural sector strengthening the overall food security. There is an active participation of Indian investors in Africa in agriculture sector and in related activities.
African priority in agriculture sector & Indian investors
The agriculture sector faces the changing environment that demands higher food quality, productivity improvements and environment friendly agricultural methods. This sector needs sophisticated equipment for agronomy concerns optimized yield, precision farming, fuel saving less soil compaction and safety, Africa needs Green Revolution for achieving food security as the population will reach 1.8 billion by 2050. Table 2 highlights the Afro Asian particulars about the irrigated land area and the potential through irrigation in this sector. More than 90% of agriculture in Africa is rain dependent. Africa has abundance of water across the continent. The major water bodies across the African continent includes major rivers such as Blue Nile, White Nile, Limipopo, Niger, Volta, Senegal and Chari and lakes such as lake Chad Victoria and Malawi. There are 73 other major rivers and lakes, 1300 small lakes, 13 major river basins and 104 small river basins across Africa. Only 20% of it’s required to enhance irrigation facilities equipped with extensive infrastructure to fulfill the basic needs (Kirloskar: 3 6) Africa needs water pumping system and water management techniques from India. The requirement of little training to African HRD will help installation of pumps for handling it that will change even the deserts into green areas. More than ’1,00,000 Kirloskar pump sets are greening 200,000 ha of desert land along the Nile for the last 40 years and are in operation at more than 50 large pumping stations in Egypt. These pumping systems are also used in South Africa, Lesotho, Angola, Ghana, Ethiopia, Sudan, Kenya, Tanzania, Uganda Zambia and Zimbabwe making a difference in key sectors of economy (kirloskar, 2008: 14-15). Indian investors in Agriculture sector in Africa offer better seed technology, irrigation, scientific instruments, etc.to get more output supporting poverty alleviation programmes. Mr. Felix Matati, Minister for Commerce, Trade and Industry, Zambia, pointed out African countries would prefer Indian investment as we understand each other. You have cost effective technology, which we want. We are able to understand each other better as we are both from the south. India Africa trade has been lacking clear visibility. We want to change that, (IT Christie : 2005).
Africa offers different key areas of investment that may start in different provinces/ districts /zobas/ villages. These include fruit and vegetable, agriculture engineering, fish and fish farming industry, live stock industry, food & beverages and dairy sector. The experiences of African visits and five conclaves on India Africa partnership en enriched detailed knowledge on agriculture sector of some African countries that are discussed here as case studies.
Investment in Burkina Faso
Burkina Faso is second largest producer of cotton in West Africa and rank third in Africa. Agriculture plays a key role in this country’s GDP 80% of export revenue and 85% of employment. The agriculture investment exists in the following sectors such as industrial units of manufacturing tractors, manufacturing pump sets for irrigation, manufacturing agro food products, agro chemicals (fertilizers and pesticides), manufacturing textile (cotton fabrics, garment production and yarn) and setting up commercial farming units ( fruit, vegetables, Arabic gum and cotton).
Investment in Ethiopia
Ethiopia adopted agriculture and rural centered development strategy known as agricultural development led industrialisation (ADLI). ADLI focuses on the development of small holder farm productivity and the expansion of commercial farms. One suggests the structure of cooperative farming should be like of west & south India and Kenya may be replicated in Ethiopia. If successfully implemented, it has the potential to reduce food insecurity, absolute poverty and environmental degradation. Ethiopia agriculture, second largest sector of investment focuses on FDI since 2004 and received number of projects as mentioned in Table 3
Investment in Ghana
The government gives incentives by way of tax rebates for manufacturing in certain locations, tax holders, ranging from 5 to 10 years depending on sectors, custom import duty exemption for plant machinery, equipment and parts thereof and double taxation agreements, Ghana is searching for an investment location and offers opportunities such as agriculture (Cassava, Cotton, Sugarcane, Soya Beans, Oil Palm, Pineapples etc). Agro processing (Cocoa, Fruits, Vegetables, etc) general infrastructure (Agricultural and industrial estates, roads, railways and ports) and fisheries.
Investment in Senegal
Senegal has become a leading exporter of cherry tomatoes, fine green beans, basil, green asparagus, onions, potatoes and aubergines. 70% of Senegalese population is involved in agriculture sector that is central to the country’s development. Senegal is highly dependent on import of rice. As an alternative, the Senegal government offers investment opportunities in this sector particularly in Senegal River valley region. An upper limit of CFA F 15 million is the condition of investment in this country. There are export opportunities facilitated by AGOA visa in the agri-business sector in “floriculture, fruit cultivation, market, gardening, thousand of hectares of cashew nut plantation,diversification of the industrial processing of groundnut, fish cultivation support to the development of horticultural exports, improvement of the condition of market operation, support to agro business producers and operators for a better adaptation of products to the market, development of private irrigation and land related activity.
Investment in Uganda
Uganda is east African’s food basket with over 80% of the population relying on agriculture for its livelihood. The 32million hectares of arable land in Uganda are lying untapped. The agro processing can improve the livelihood of low income groups as it produces cereals, root crops, coffee, tea, livestock, fish and forestry, there is a lot of scope for business in processed agro products. India and ucts Africa are starting quota free trade and thus Ugandan products will be sold duty free in India the linkage potential in the plantation and agro industry includes:
Outsourcing the field operations including seed bed preparation.
Supply of produce to processors.
Maintenance of machinery.
This agro industry needs strong infrastructure such as roads, railway, etc. in Uganda. It requires a more efficient railways network to connect Kenya, Tanzania, Rwanda, Burkina Faso and southern Sudan, This is a very important area of investment for Indian investors.
Investment in other African countries
Angola it has ntroduced development programmes for rural economy and is expecting more cooperation in private sector in terms of investment in mostly cereals, coco, cane sugar and tobacco from India.
Botswana it is looking forward to setting up units of production of commercial farming such as fruits,vegetables, Arabic gum and cotton. The opportunities in this sector include the setting up of small industrial units of milk processing (dairy plants) breweries,production of animal feeds, veterinary pharmaceutical products, meat processing, leather and tanning and products, cattle rearing ranching and poultry.
Cameroon The government is stressing upon PPP to promote farm productivity and India private investors could supply equipment to small farm holders.
Eritrea The government of Eritrea announced new economic investment policy that is known as proclamation no 159 / 2007 regarding foreign financed special investment FFSSI Proclamation. It applies to all FFSI of more than Twenty Million US Dollars (20, 000, OOOUSD) or its equivalent in other convertible currency. The Eritrean government policies give priority to agriculture sector.
Mozambique it uses 15% of total cultivatable land. It plans to begins a Green Revolution through farm mechanization and formulated a food production plan for 2008 2011. India could be a partner in providing the infrastructural support and transfer of skill to facilitate the revolution as it has rich experience in capacity building, research and technical training in this field.
Southern Sudan the government offers policy of concession for private companies to initiative affirmative business atmosphere that is conducive for Indian companies to take a lead1.
Mali Angelique international has been engaged in for the manufacturing and assembling of tractors. The plant was handed over to the client organisations in 2007. the company later entered into a separate joint venture with the government of Mali with 51% shareholding’(CII: 2009: emphasis mine.)
Tanzania Zanzibar, part of Tanzania is known as the spice islands, It offers investment opportunities in horticulture and floriculture, agro processing, fruit processing & canning, cloves, cinnamon, cardamom, nutmeg, black pepper, chillies, etc.
Following suggestions will help to strengthen Africa’s development and their collaboration with the Indian partner reflects the following advantages of scientific agriculture such as:
1. African agricultural trade is controlled by the developed world, Africans’ should persuade for intra African trade serving common man’s needs, the resource mobilisation should be from the domestic, regional and international markets.
2. As a result of population growth, there is a need to introduce more agricultural land introduce applications of S&T in Africa. The S&T methods like better seeds, dwarf plantations, demand of less water crop, rotation patterns, minimum period of crop production and preference for the use of natural insecticides will help African agricultural system.
3. There is widespread inequitable land distribution based against small farmers, The need of community farming under collective land system should be promoted, which will help in using scientific agricultural implements in Africa. It will strengthen market based land reform and give more bargaining power to the community farmers as it is successfully working in some state of India.
4. The scientific agriculture system will persuade and promote the farmers to join agriculture education, literacy programmes and other awareness programmes. Moreover, agriculture extension is an important component of agriculture universities .throughout the world, which will help Africa Agriculture Education system to strengthen in rural areas.
5. Different programmes like diary farms, poultry, e, piggery, fisheries, sericulture, horticulture, floriculture and shrimp & prawn cultivation should be introduced in Africa as an alternate food resource. It needs commercial feed to save grazing areas and build veterinary hospitals accordingly. It will help in fulfilling the mutual needs and establish mutual cooperation among rural and urban areas.
6. Africa needs more agriculture scientist and practitioners, who will help African youth to get training in agriculture science and develop technology as per local needs. It will enhance field of research and teaching in Agriculture College and university and generate self employment among educated youth.
African government should initiate the process of Rural Cooperative Banks. These banks may provide different loan schemes for modern mechanical support like tractors and other implements, credit to farmers(to buy good seeds, fertilizer, pesticides, etc) insurance schemes on crop and subsidised technical guidance and other financial assistance(building concrete houses, potable water pipes, electricity, cooking gas stoves and kerosene oil stove, etc.) to rural society.
7. Importance of growing trees / plants needs to be farmers to receive agricultural training courses, awareness of information technology in agriculture sector, use of communicated through PPP and government should persuade farmers to receive agricultural training courses, awareness of information technology in agriculture sector, use of animal husbandry and building scientific civic society.
8. Finally the government should adopt programmes such as food for work and cash for work programmers in agriculture and related sectors. The related sectors involve road building network, dam construction, boring wells, small channels from river for irrigation purpose, installation of power projects, etc, this relationship between governments farmers market consumers will provide a right direction to agriculture sector that will fulfill the needs of African society & promote today’s investment, tomorrow’s prosperity in true sense.
The author is the Head, Department of African Studies.
Source: Indo African Business