Africa Diary
Africa Diary

Africa's Mineral Wealth and Indian Investments

The scientific theories suggest that life first sprung from Africa as it offered the most life surging environment on earth. Humans were first evolved here and spread across other continents through what is now known as the Great Migrations and Expansions of archaic and modern humans which is believed to have begun approximately 2 million years ago.

African Mineral Wealth and Business

The scientific theories suggest that life first sprung from Africa as it offered the most life surging environment on earth. Humans were first evolved here and spread across other continents through what is now known as the Great Migrations and Expansions of archaic and modern humans which is believed to have begun approximately 2 million years ago. Different climatic conditions changed their genomes constantly and forced them to adopt a lifestyle most suited to that environment and thus evolved them into different races which flourished at different corners of the world. However, this huge exodus which carried humans to all corners of the world, left behind nature's wealth in the form of oil, minerals and stones back in Africa. The womb of mother earth in this vast continent is full of precious minerals, oil and metals which promises an almost infinite supply if extracted properly.

For centuries, the world has witnessed Africa to be the richest continent on earth in terms of minerals, metals and precious stones. The soil of most of the African countries has bellied oil and natural resources in abundance. The history of 5000 years has given enough indications to prove this fact from the rise of Egyptian civilization to modern Africa, the region is full of promises and untapped riches - from oil and minerals to vast amounts of people capital.

Although the pace of development has been slow in Africa in comparison to first world countries, strong economic growth in the past few decades has forced the other countries to shift their focus to this region. With a population of over a billion, Africa offers one of the biggest consumer markets to the MNCs world over which has an ever-increasing buying capacity as well as enough resources to establish their franchisees, fulfilling a constant demand for better goods and services. Africa has been picking the pace and becoming the world's fastest-growing region for foreign direct investment for it has approximately 30 percent of the earth's remaining mineral resources.

As we all know, Africa is home to more than 54 different nations and around 2,000 languages. It houses five of the world's top oil-producing countries, with an estimated 57 percent of Africa's export earnings from hydrocarbons. Sub-Saharan Africa has six of the world's 10 fastest-growing economies. North Africa has vast oil and natural gas deposits, the African Big Sahara separating north and sub Saharan Africa countries holds the most strategic nuclear ore, and resources such as coltan, gold, and copper,

among many others, are abundant on the continent. Algeria, Angola, Cameroon, Chad, Republic of Congo, Egypt, Eritrea, Gabon, Ghana, Kenya, Libya, Nigeria, South Sudan, Sudan, Tunisia, and Mozambique are all rich in oil and gas. The region is home to five of the top 30 oil-producing countries in the world, and nearly $2tn of investments are expected by 2036.

Besides oil and gas, Africa is rich in precious minerals, which are spread across countries. If we look at the deposits in spread over countries, following names find themselves in the list:

Discoveries of oil, gas and other minerals in African countries are expected to generate considerable wealth in the future, which poses a need to devise a system to smoothen the percolation of wealth to the bottom of the ladder. "Resource-rich African countries have to make the conscious choice to invest in sustainable health, better education, smooth infrastructure and proper jobs for their people, because it will not happen automatically when countries strike it rich," said Shantayanan Devarajan, the World Bank's chief economist for Africa, and lead author of Africa's Pulse.

The region's established oil producers represent less than 10 percent of the share of both global reserves and annual production. Nigeria, Africa's biggest oil producer, can keep supplying at 2011 levels for another 41 years, while Angola, the second largest producer in the region, has about 21 years remaining at current production levels before its known reserves are depleted. Others have considerable mineral resources. In 2010, Guinea represented more than 8 percent of total world bauxite production; Zambia and the Democratic Republic of the Congo have a combined share of 6.7 percent of the total world copper production; and Ghana and Mali together account for 5.8 percent of total world gold production.

Its observed that after 10 years of high growth, an increasing number of countries are moving into "middle-income" status, defined as those countries reaching more than $1,000 per-capita income. Of 48 countries, 22 with a combined population of 400 million have officially achieved middle-income status.

Indian Investment

Although, it’s believed that ancient India and Africa were in the trade since they had learnt to row boats and to cross the ocean between them, very little is known about contacts made between them earlier than 1st century AD. Helped by the monsoon winds, merchants traded cotton, glass beads and other goods in exchange for gold and soft-carved ivory. Under the Greek Ruler Ptolemaic, ancient Egypt and India had developed bilateral trade using the Red Sea and Indian ports. Controlling the western and northern end of other trade routes to Southern Arabia and India, the Ptolemies had begun to exploit trading opportunities with India. From medieval times, many Indian merchants have chosen to settle down in Africa for the ease of business or have at least established business centres there.

Although in modern times, there have been active traces of trade and business happening between India and African countries, especially those near eastern coast and central Africa since 1600 AD, they were never recorded in history. However, the recorded business started happening when the Birla Group first invested in Ethiopia in 1956. There were large Indian companies that invested in East African countries in the 60s even when domestic policies were highly restrictive in releasing the foreign exchange abroad. In 1969, the Birla Group also entered into a joint venture, Pan-Paper, with the Kenyan government and the World Bank.

Trade between India and Africa stood at US$ 62.66 billion in 2017-2018, making India the fourth largest trading partner of Africa. According to the World Investment Report 2017, India was the seventh largest investor in Africa in 2015. Both public and private sector companies of India have made significant inroads in Africa. For instance, OVL is one of the most active Indian companies in Africa. Meanwhile, private corporations like Reliance, Varun Beverages, Bharti Airtel, Essar Group, and the TATA Group have also made huge investments in many African countries. In addition, there are a multitude of small and medium Indian enterprises operating in Africa. The remarkable growth of Indian investments in Africa has caught widespread global attention lately.

The Indian private sector has also invested in a range of energy and non-energy sectors, including manufacturing. The correlation between India’s development cooperative initiatives and its investments in Africa is currently weak. It recommends the establishment of an institutional vehicle to promote development of friendly Indian investments in Africa. Post-2000 era, Indian companies started conducting takeovers in Africa. In 2008, Bharti Airtel purchased Zain Africa for US$9 billion. Trade between India and Africa has grown exponentially during the past 15 years. Indo-African trade volume reached US$ 53.3 billion in 2010-11 and US$ 62 billion in 2011-12. It was US$ 90 billion by 2015. It is to be noted that this volume was at a meagre US$ 3 billion in 2001. Indian companies have already invested more than US$ 34 billion in the resource-rich continent as of 2011 and further investments worth US$ 59.7 billion are in the pipeline. Among the proposals that CII (Confederation of Indian Industry) received from the African nations are 126 agricultural projects worth an investment of $4.74 billion, 177 infrastructure projects worth $34.19 billion, and 34 energy sector plans costing $20.74 billion (337 projects totalling US$ 59.7 billion). Former Prime Minister of India, Dr. Manmohan Singh while expressing his country's support to Africa, said in an Indo-African trade summit that "Africa possesses all the prerequisites to become a major growth pole of the world in the 21st century. We will work with Africa to enable it to realise this potential.” The Indian government has promised to extend loans worth US$ 5.4 billion (during 2011-14) to several African nations in order to nurture growth in those nations.

The easiest way to invest in Africa is through exchange-traded funds (ETFs) and mutual funds. Not only are these funds traded on U.S. stock exchanges, but they also contain built-in diversification and cost far less than manually building a portfolio with American Depositary Receipts (ADRs) or foreign stocks that trade on foreign stock exchanges. Since the rest of Africa isn't quite as popular, there are only a few broad options to invest in the region. The first option is to purchase Middle Eastern and Frontier Market ETFs that include exposure to African countries. Since many African countries have enormous natural resources, the second option is to invest in commodity ETFs, like those focused on copper and gold. Africa offers the highest return on foreign direct investment in the world, according to the Overseas Private Investment Corporation (OPIC) and UNCTAD. But, there are also many unique risks faced by those that invest in Africa. From civil wars to political risk, companies face a number of hurdles competing in the region's promising economies.

Investment Opportunities in Africa

Natural Resources: Africa has an enormous amount of natural resources, ranging from oil and diamonds to gold and uranium. And many of these natural resources remain untapped due to a low human density along with a lack of infrastructure and financing.

Healthcare: Treatment and medicines are of utmost requirement in most of the African countries. Good hospitals with state-of-the-art facilities and specialist doctors of international standards are in much demand. Many pharmaceutical companies are finding their own niche there. Going a step ahead, quality medical colleges are also in good demand in African countries.

Education: Education is the first stepping stone for the success of any society. Medical and engineering colleges of international repute have a good standing along with other areas like business administration, economics, accounting and literature.

Infrastructure & Real Estate: Construction business both in real estate as well as in infrastructure is in great demand in whole of Africa as the expansion is huge and promises are at stack.

Large Population: Africa's population represents approximately 14.72 percent of the world's total population with about a billion inhabitants in more than 60 territories. It creates a huge opportunity for consumer goods, such as telecommunications and banking.

In short, the whole of Africa offers the world both an excellent ground to establish modern facilities and a fantastic consumer base as well as an abundance of natural resources which could change the face of life and replenish those resources which are depleting fast from the other regions of the world. Investing in Africa could be a wise choice for those who look at the continent not as a dump yard but as an opportunity for better research and development which can even feed the first world countries in times to come.

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Diplomatist Magazine was launched in October of 1996 as the signature magazine of L.B. Associates (Pvt) Ltd, a contract publishing house based in Noida, a satellite town of New Delhi, India, the National Capital.