Assessing Indian investments in West Africa

West Africa, comprising 15 members of Economic Community of West African States (ECOWAS) and Mauritania, is the largest region in Africa with highest number of countries, and is a region enriched with vast amount of mineral resources, and is among the fastest growing regions in African continent. The region accounts for 25% of total GDP of Africa. Major mineral resources available in the region includes; gold, clay, cement, limestone, crude petroleum, bauxite, diamond, manganese, natural gas, aluminum, iron ore, steel, uranium etc. The macroeconomic performance of the region has been good, with many West African economies witnessing high growth rates. However, in 2016, regional growth moderated, as countries like Nigeria and Liberia recorded negative growth, outweighing the high growth achieved by countries like Guinea, Senegal, Cote D’Ivoire, and Sierra Leone. As per African Economic Outlook 2018, regional growth is expected to jump 3.6% in 2018, and further to 4.1% in 2019, mainly due to expected oil price recovery, increase in oil production in Nigeria and Ghana, and strong agricultural performance.

Recent reforms and investment incentives in West Africa:

To attract more investments, many West African countries have introduced investment incentives in the form of protection against expropriation, reparation of profits, and nondiscrimination between foreign and domestic investors, and have also set up dedicated investment promotion agencies to promote FDI into these countries.

According to Doing Business 2018, West African countries have started various reforms in recent years by making starting a business easier and less costly. Benin has created a one-stop shop for investment, eliminated need to notarize company bylaws, reduced minimum capital requirement. Burkina Faso has reduced the paid-in minimum capital required to register a company, and has cut cost of soil survey in half and time to process a building permit application by a third. The Gambia has eliminated the requirement to pay stamp duty. Liberia has eliminated the business trade license fees. Nigeria has started allowing electronic stamping of registration documents, and has improved online government portals. Senegal has reduced notary fees for company incorporation, and has reduced minimum capital requirement. Togo has eliminated the requirement to obtain an economic operator card, and has reduced the time and registration costs.

Indian investments in West Africa:

Traditionally, Indian investments in Africa, both public and private, remained limited to Eastern and Southern African countries, mainly due to its geographical proximity and high number of Indian diaspora in these countries. However, in last decade, Indian investments in Africa have expanded considerably, both in geographical spread and in the coverage of various sectors.

West African region has emerged as an important partner for India, both as export market and as import source. This is reflected in the synergy in bilateral trade relations wherein India’s total trade with West African countries US$ 13.5 billion to US$ 21.6 billion during the decade 2008-09 to 2017-18. India’s exports to the region amounts to US$ 6.4 billion, and imports from the region amounts to US$ 15.3 billion during 2017-18. However, despite efforts to boost bilateral relations, West Africa’s participation as an investment partner to India remains relatively limited.

Table 1: India’s Approved Overseas Direct Investment in West African Countries (US$ million)

Note: ‘-‘denotes not available/negligible

Source: RBI and EXIM Bank Analysis

The RBI data only captures only the approved overseas investments rather than the actual flow of funds and the destination of these funds. Therefore, data collated by the Financial Times, through its online database tracking cross-border Greenfield investments, viz. fDi Markets, provides a clearer picture of the trends in Indian investments in West Africa (see Table 2).

Table 2: Trends in Indian Investments in West Africa

Source: fDi Markets online database (accessed on 27.02.2019) and EXIM Bank Analysis

An analysis of Table 2 indicates that Indian investments in West Africa peaked in 2010 at US$ 3 billion, with Nagarjunga Fertilizers and Chemicals investing US$ 1.1 billion in Nigeria and Rashtriya Chemicals & Fertilizers investing US$ 1.5 billion in Ghana in pesticides, fertilisers, and other agricultural chemicals sector. In terms of sectors of investment, chemicals sectors receives the highest investment, followed by communications, coal, oil and natural gas, and automotive original equipment manufacturers (OEM).

EXIM Bank’s role in promoting investments in West Africa:

In West Africa, EXIM Bank has representative offices in Abidjan, Cote D’Ivoire, apart from offices in Addis Ababa and Johannesburg. The bank has extended Lines of Credit (LOC) in the region at competitive rates and has also signed Memorandum of Understandings (MoUs) and Memorandum of Cooperation (MoCs), through the Government of India with governments in West Africa to promote trade and investment. It has also financed various Indian joint ventures in the region.

In West Africa, as on August 31, 2018, EXIM Bank has 62 GOI-supported operative LOCs valued at US$ 2,862.5 million, covering 15 countries and ECOWAS Bank for Investment and Development (EBID). For details, see Table 3 below.

Table 3: EXIM Bank LOCs in West Africa and focus sectors of investment

Note: ‘-‘denotes various    

Source: “Indian Investments in West Africa: Recent Trends and Prospects” EXIM Bank Working Paper 82, October 2018, p.130, New Delhi. Accessed on February 27, 2019.

Looking Forward:

Undoubtedly, with its experience, expertise, and technologies, India can play an important role in assisting economies of West African countries to diversify their resource-focused economies, and promote industrialisation and manufacturing through value-addition and technology transfer. To achieve India-West Africa’s investment potential, the prevailing infrastructure gap needs to be bridged urgently through concrete initiatives and policy changes. West African counties must look to avail the opportunities presented by India’s Duty Free Tariff Preference (DFTP) scheme, in order to increase their exports to India.

Priority must be given on forging closer tie-ups in Small and Medium Enterprises (SMEs). Renewable energy is the next big frontier of India-West Africa partnership to promote green growth. The ECOWAS region should look to access more funds from GOI’s US$ 10 billion credit promised to African countries, out of which US$ 2 billion have been earmarked for solar projects under International Solar Alliance (ISA). Going forward, India-West Africa partnership can be a perfect tie-up between resources and talented people of West Africa with Indian skills and expertise.

• International Affairs
• Economic Diplomacy
• Africa
• ECOWAS
• West Africa

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