Book / Chinese and Indian Entrepreneurs in the East African Economies
India in Africa:
Chinese and Indian entrepreneurs in the East African economies
The rapid economic growth and subsequent global rise of China and India in recent years has raised myriad questions about the implications for the world economy and developing countries in particular. The bulk of such questions are posed with particular reference to Africa, which has become a central geopolitical element in the globalisation strategy of especially China and, increasingly, India. Replete in natural resources and boasting the potential for new market opportunities, Africa is witnessing an inpouring of trade and investment from both ‘Asian Drivers’, as well as others.
In 2008, bilateral trade between China and the continent reached an unprecedented $106.8 billion. Indian-African trade stood at $36 billion in the same year, marking a 12-fold increase from $3 billion seven years ago. Equally, by 2008 China’s Exim Bank was funding upwards of 300 projects in 36 countries across the continent and Chinese companies were running mining operations in 13 African countries and were prospecting in more. Between 2002 and 2005, too, Indian firms topped the list of greenfield foreign direct investment (FDI) projects in Africa at 48, compared to 32 from China (UNCTAD 2007)
In view of the strategic importance Africa has come to wield in both Chinese and Indian foreign policies, it is unsurprising that the debate about China and India’s respective African engagements concentrates overwhelmingly on the implications of this newfound role for Africa, with especial attention on macro-economic variables pertaining to trade, aid and investment. To date, few studies have examined the implications of China–Africa and India–Africa linkages as they impact upon African small and medium enterprises (SMEs), for instance, or individual entrepreneurs laboring in the continent’s informal economies (Gadzala 2009; Mohan 2009). Equally, studies focused on China and India in a comparative perspective have thus far failed to appreciate the ramifications of economic and political competition between both ‘Drivers’ on their respective foreign policies and global economic strategies, arguing instead over the broader geopolitical ramifications of their African exploits.
Accordingly, this chapter seeks to fill a dual void by addressing not only Indian and Chinese economic engagement at the micro-economic level, but also further examining the implications of the entrepreneurial activities of the latter upon the former. Indeed, inasmuch as Chinese and Indian prospecting for resources and the surrounding investments stand to influence Africa’s economic growth and development, it is in fact the entrepreneurial activities of the Chinese especially that bear the greatest ramifications for African economies. With a growing number of Chinese-owned and operated firms, particularly in the manufacturing and service sectors – among the continent’s key sources of employment – local, African-owned enterprises are increasing forced to foreclose, in turn heralding heightened unemployment levels and the associated complications. Equally, the influx of Chinese SMEs in similar ways impacts the pre-existing population of Indian-origin entrepreneurs, as well as those seeking entry to the new market.
The objective of this chapter is thus to elucidate the unfolding dynamics between African and Chinese, and Indian and Chinese entrepreneurs in East Africa, and in so doing shift the focus of this seemingly triangular relationship to the micro-economic levels of engagement. As systematic data on the subject is generally dispersed, and in many cases altogether unavailable, much of the analysis contained in this chapter is derived from fieldwork conducted in Kampala, Nairobi and Lusaka in 2007, and supplemented by anecdotal evidence.
The chapter begins by highlighting parallels between business strategies pursued by Chinese entrepreneurs today and Indian-origin entrepreneurs during both the colonial and contemporary periods. It subsequently outlines how, despite such apparent similarities, Indian entrepreneurs are in many cases being driven out by their Chinese counterparts – in the medicine and textile industries in particular – and new market entrants face an uphill battle. The chapter concludes by positing potential explanations for this reality, speaking especially to the strength of the Chinese entrepreneurial and diasporic networks, which the Indians are only now apparently rediscovering and Africans have in many cases seemingly not yet properly enjoyed.
Aleksandra Gadzala Magpie Advisory CEO