Myths About China and India's Africa Race.

More countries in Africa are joining the global economy. Over the last decade, the continent's GDP expanded at an average annual rate of 5.1%, which is low compared with emerging giants like China and India, but still well above the global growth rate of 2.9%. During this period, Africa also became far more globally integrated. Africa's economic ties with China and India have grown at a particularly rapid pace. This development has led many to believe that China and India have taken over from the West as the new economic powers in Africa. That conclusion, however, hinges on some common misconceptions about China and India's engagement with Africa.

Myth No. 1:

China and India dominate the race for Africa. During 2000-10 , Africa's merchandise trade with China grew at an annual rate of 29% (from $9 billion to $119 billion) and with India at an annual rate of 18% (from $7 billion to $35 billion). While these growth rates are very robust, they are building on a very low base. So far, Africa's economic partnership with Europe dominates that with China or India . In 2010, Europe received 36% of Africa's exports, compared with 13% for China and 4% for India.

Over 37% of Africa's imports came from Europe, versus 12% from China and 3% from India. In 2010, even the US was ahead of China in terms of total merchandise trade with Africa. To date, China and India also have played only a small, albeit growing, role in terms of capital investment in Africa. Each accounts for less than 5% of the total inbound FDI stock in Africa, which is a tiny fraction of that from Europe and the US. In short, as newly-active players, China and India are making rapid headway in Africa. However, appearances notwithstanding, they are still far behind the developed economies - especially Europe - in terms of economic engagement with Africa.

Myth No. 2:

China and India's engagement with Africa is all about natural resources. Many Indian companies are looking at opportunities to sell in African markets. In 2010, Indian mobile operator Bharti Airtel paid $9 billion for the African telecom operations of Kuwait-headquartered Zain. India's Tata Motors has opened an assembly operation in South Africa. Mumbai-based Essar Group is investing in the African steel sector and Godrej, another Indian conglomerate from Mumbai, is active in Africa's consumer goods market. Indian companies are also very active in Africa's emerging IT services market. Chinese companies are also not just focused on Africa's natural resources. China has taken a growing interest in helping build Africa's infrastructure such as roads, railways , bridges, ports, and power stations. Both China and India are beginning to see Africa not just as a resource supplier but also as a market and as a target for capital investment in many sectors of the economy.

Myth No. 3:

China and India are the new neocolonialists in Africa: in recent months, British Prime Minister David Cameron and US Secretary of State Hillary Clinton have warned Africa to be cautious of 'new colonialism' , especially from China. On this dimension , however, the West doesn't have much of a moral leg to stand on. China's relationship - based on 'resources for infrastructure' - has been radically different. While such deals are unlikely to be corruptionfree , the scope for corruption is clearly lower.

More important , in a continent like Africa , better infrastructure is massively critical for spurring growth in productivity. India's relationship, driven largely by the private sector and focused heavily on investing and creating jobs in Africa , has the potential to be even more beneficial for Africa. In short, China and India's involvement in Africa is structurally different from that of the US and Europe, and is likely to have a bigger long-term impact on the creation of human and institutional capacities in African countries.

Myth No. 4:

China's investment in Africa's natural resources threatens other resource-dependent economies such as Europe, the US, Japan and India. Even though Africa is resource-rich , it is not the only resource-rich region on earth . It is impossible for Chinese investments in Africa to give China any type of monopoly position in any commodity. In fact, what Chinese investment does is to boost the world's supply of various commodities and, thus, prevent commodity prices from rising even faster than they otherwise would.

Myth No. 5:

India cannot compete with China in Africa : the only Africa-focused issue where India cannot compete with China is in bidding for concessionary rights to natural resources. However, the last thing India should fret about is Chinese investments in Africa's natural resources. In sectors other than natural resources, Indian companies have overwhelming advantages over their Chinese peers.

Source : economictimes.indiatimes.com