The Export Import (EXIM) Bank of India has had a robust presence in countries in the African continent, which it sees a critical component of its strategy to promote and support two-way trade and investment. It described itself as a partner institution to promote economic development in Africa. Here we trace its backing for Indian companies in the region.
EXIM India actively promotes and finances Indian companies to execute their projects in Africa. As on March 2015, EXIM India supported 194 project contracts secured by Indian project exporters in Africa valued at Rs 564 billion. Of these, 137 project contracts valued at Rs 184.9 billion are under government of India supported Line of Credit (LOCs).
To enhance bilateral trade and investment relations, EXIM India has several LOCs in place with institutions/agencies in Africa. These LOCs supplement the “Focus Africa” programme of the Indian government.
According to a recent 'Enhancing India's Trade Relations With Africa' analysis, to provide further impetus to project exports from India on medium- or long-term basis, especially in the infrastructure sector, a product called Buyer's Credit under National Export Insurance Account (BC-NEIA) was introduced in April 2011. Under this programme, EXIM India facilitates project exports from India by way of extending the credit facility to overseas sovereign governments and government-owned entities for the import of goods and services from India on deferred credit terms.
Indian exporters can obtain the payment of eligible value from EXIM India, without recourse to them, against negotiation of shipping documents. NEIA is a Trust set up by the Indian ministry of commerce and industry.
EXIM offers significant support to Indian companies in their endeavour to globalise operations, through overseas joint ventures (JVs) and wholly owned subsidiaries (WOS). Such support includes loans and guarantees, equity finance and in select cases direct participation in equity along with Indian promoters to set up such ventures overseas.
In the African region, EXIM India has supported several such ventures in countries such as South Africa, Kenya, Mauritius, Ghana, Nigeria, Sudan, Egypt, Zambia, Morocco, Uganda and Tanzania, across a range of sectors like agro and food processing, agro-based products, auto and auto components, chemicals, construction, electronics, engineering goods, EPC services, mining and minerals, plastics and rubber products, packaging, pharmaceuticals, software and IT enabled services, and textiles. As on March 2015, EXIM India had 49 ventures worth nearly Rs 36.4 billion in Africa under this JV umbrella.
EXIM also works as a partner institution in promoting economic development in Africa, sharing its experience in the setting up of institutional infrastructure for enhancing international trade. In this regard, the bank has taken active participation in the institutional building process in a number of countries in Africa.
Under the Narendra Modi led government, an increased focus in the region has led to a deepening of economic and cultural exchanges and cooperation between India and Africa. India's business and investment interest in Africa was largely driven by small and medium enterprises (SMEs) in the past, a trend recently replaced by foreign direct investment (FDI) from larger Indian companies.
Indian firms have ventured into both greenfield and brownfield investments, spanning telecommunications, energy, computer services, power and the automobiles sector among others. A large proportion of Indian FDI has also gone into the infrastructure sector in Africa. Indian construction and telecommunication companies have made investments in Africa to build roads, ports and telecommunication backbone in several African countries.
Several auto industry majors like Tata Motors and Mahindra and Mahindra have investments in Africa. Broadly it can be said that Indian investments in Africa are predominantly resource seeking, though market seeking and efficiency seeking investments are also present. Some flagship Indian investors in Africa include Bharati Airtel, ONGC Videsh, Reliance Industries, Tata Group, Vedanta Resources, Shree Renuka Sugars Ltd, Appolo Tyres, Mahindra Group, Cipla, Kanoria Chemicals, Glenmark Pharmaceuticals, Onmobile Global, RITES, Larsen & Toubro Ltd, and Ashok Leyland, among others.
Indian banks are growing their partnerships with Africa largely based on their clients, who have increased demand for banking options in the African continent. According to Indian Ministry of Finance and Reserve Bank of India data, approved cumulative Indian investments in Africa in April 1996 to March 2015 period amounted to $50.1 billion. Mauritius, Mozambique, Sudan and Egypt were the top destinations of India's investments in the African region.
EXIM, meanwhile, continues to play an active role in this largely positive landscape and, in association with IL&FS, SBI and AfDB, established a Project Development Company (PDC) in Africa to identify and develop infrastructure projects with the objective of providing the Indian private sector an opportunity to invest in and implement such projects in Africa. There are a number of success stories to its credit in the region, something it hopes to continue enhancing alongside the government's “Focus Africa” initiative.
