India-Africa Economic Partnership: Is There a Role for Mauritius?

India-Africa Economic Partnership: Is There a Role for Mauritius?

The idea that an unwieldily group of 54 diverse countries on the African continent could somehow produce an economic miracle sounds inconceivable. That could be said of India's 28 self-ruled states with often conflicting economic policies, incredibly yet collectively generate a $3T output.

But in the 1980s, the possibility that communist China could one day rival Western Europe and the United States would have seemed equally ridiculous - claimed the Foreign Affairs Magazine recently.

China was desperately poor and even less developed than Africa today. Its 1980 GDP of $423 billion was barely larger than that of the Netherlands, and its GDP per capita was $431 per year, just half of Ethiopia’s presently.

The miracle came about, almost unexpectedly, as its prime-age working population grew to 200 million. The state equipped them with the tools to be more productive, and China drew in global investment and expanded its economy 30-fold.

We see a similar process underway in India. Its working-age population is estimated at 900m. This is likely to expand to 1B in the next decade.

Economic policies matter. Government action matters. But they are often overemphasised. Several forces are at play, such as population growth. Or decline.

A UN report projects that African countries will increase their prime-age working population by 400 million in the next 20 years.

If, over the following 40 years, even half of them achieve the same productivity gains as China (or all of them achieve, on average, half of China’s productivity gains), Africa would increase its GDP 15-fold, a gain of $52 trillion, which would produce a 60 per cent increase over the world’s total GDP in 2021.

Look at Bangladesh. Characterised as a 'hopelessly overcrowded and impoverished' “basket case”, and despite lacking any of the natural and energy resources that Africa has in abundance, it has grown its GDP fivefold in the last 30 years; its GDP per capita is now greater than India’s.

If Africa can achieve even Bangladesh-level growth over the next 30 years, it would add $15 trillion to the global economy—about the same contribution as China made from 1980 to 2020 - suggests Foreign Affairs.

In case you thought such growth was fantastical, remember that between 1980 and 2020, sub-Saharan Africa tripled its GDP from $600 billion to $1.9 trillion. From 2000 to 2020, Nigeria alone nearly tripled its GDP; Ethiopia’s has grown fivefold in that period.

To outsiders, Nigeria is a messy, unpredictable and unruly country, but its economic performance tells a very different story. "No other region of the world can produce anything like the potential growth of Africa", underlined the same magazine. The Continental Free Trade Area (CFTA) is slowly but surely moving head. One day it will transform the continent, allowing good and services to move quickly, smoothly and cheaply, freeing up capital and other resources for more productive alternate uses.

As Africa emerges in leaps and bounds and China faces slowing growth due to an ageing population and internal dissent, the world’s eyes are fixated on India for the moment, at least. Its economy accelerated to 6.1% in the first quarter of 2023!

Analysts predict that India and Africa will jointly produce an economic output in the vicinity of $50T over the next thirty years. This is independent of how the governments perform, merely taking into consideration the latent demand and the exceptional entrepreneurial spirit, creativity and frugal innovation of the youth.

So where can a close partnership between India and Africa create the most impact?

There are broadly four core areas - energy (including renewable/green energy), agriculture ( innovative biotech-led large-scale farming and disintermediated supply chains), healthcare (inexpensive medical devices to remote diagnostics), education (anytime, anywhere learning) and two ancillary ones - smart cities ( citizen-centric public infrastructure including digitalisation of government services) and cross border banking and finance ( including payments)

It is not difficult to imagine that going forward, an entrepreneurial collaboration between India and Africa will dwarf the existing US$60B bilateral trade or the US$150B estimated Indian investment into Africa.

Mauritius enjoys a privileged relationship with India. It sees itself as an important enabler of Indian investment into Africa, leveraging on its membership of various regional economic blocks and its reputation as a well-regulated financial services centre.

That dream has remained only partly fulfilled. And yet, much can be gained from developing this niche. Think of the India-Africa corridor as a US$50T river flowing along the Mauritian coast. Drawing a few buckets could dramatically transform its $11B economy. Its long-held dream of becoming the Singapore ($380B) of Africa could finally materialise.

But that requires some long-term thinking and capacity development. To begin with, Mauritius must;

a) Develop a community of entrepreneurial experts and advisors who are deeply knowledgeable and trustworthy - not just transactional brokers and independent intermediaries.

b) Encourage experimentation, innovation and creativity with flexible regulation and institutional support to its own entrepreneurs.

c) Anchor cross-border investors with seed funding and project development support.

It is a rare moment in the history of India Africa relationship. It is also a rare opportunity for Mauritius to reincarnate and find itself a new place in the world.

China’s debt trap diplomacy has failed. It’s Belt and Road initiative struggling. America and the Western world face declining populations and contracting economies.

India is expected to keep the global economy growing - saving jobs in Germany, the US and Japan and consuming their goods and services, even as the country develops its international markets for its own products and aggressively expands abroad.

Africa is next.