SOUTH Africa is among 15 African economies identified by the Export-Import Bank of India (Exim Bank) as an alluring investment and export destination, says the bank’s executive director David Rasquinha.
The economies have been singled out by Exim Bank for being the "most amenable" to building trade and investment between India and Africa, he says.
The bank has representative offices in Addis Ababa, Ethiopia, Dakar, Senegal and Johannesburg to facilitate bilateral trade between Africa and India.
Set up in 1981 with the Indian government as its sole shareholder, the bank’s role includes promoting infrastructure development in African countries while facilitating private sector development. It is also involved in helping to build institutional capacity across Africa. South Africa’s Industrial Development Corporation has been a beneficiary with Exim Bank helping it to design and implement its export finance programmes.
The bank has also helped the Nigerian Export-Import Bank to develop a programme on financing of films, especially those with the potential to earn foreign exchange. Exim Bank finances Indian companies that export goods, and offers support such as loans, guarantees and equity finance.
Speaking on the sidelines of the third Africa-India Trade Ministers’ Meeting in Johannesburg on Tuesday, Mr Rasquinha said the bank’s research team has conducted a study on the top African economies and made this information available to exporters across India.
Indian exporters and investors are showing "huge" interest but are held back by a lack of information about Africa and its opportunities, he says.
Besides South Africa, the most promising African economies for imports, in Exim Bank’s view, are Algeria, Angola, Egypt, Morocco, Nigeria, Kenya, Ghana, Tanzania, Zambia, Cote d’Ivoire, Uganda, Kenya, Ethiopia and Mozambique.
The bank has had a presence in South Africa since 1998 when it opened its Johannesburg office.
At the moment, it is involved in around 10 projects in South Africa including financing vehicle operations for the Tata Group and working with the Suzlon Group — the world’s fifth-largest wind turbine supplier — on the Cookhouse Wind Energy Facility project in the Eastern Cape.
Exim Bank has extended $6bn in credit to 45 African countries to facilitate the import of equipment and services from India on deferred credit terms. Much of this credit is earmarked for infrastructure and development projects. This includes a hydroelectric project in the Democratic Republic of Congo, a housing project in Gabon, developing the sugar industry in Ethiopia, and the Gaza electrification project in Mozambique.
As a development finance institution, Exim Bank has a "development orientation", says Mr Rasquinha. But its funding choices also have a practical side: creating a more amenable environment for Indian investors.
"The development of core infrastructure must precede commercial ventures. It is only when there is a functioning electricity network, a functioning transport network, then the private sector can use that as stepping stones to build on," he says.
The Exim Bank report on African economies expresses concern that India’s share of imports into Africa is "marginal". It says, for example, in 2011 India accounted for only a 4.3% share of South Africa’s total imports and a 3.4% share of Nigeria’s total imports.
India’s exports to Africa accounted for only 4.4% of Africa’s global imports in 2011, though this had risen from 2.7% in 2001.
South Africa is India’s leading export market in Africa, accounting for almost 20% of India’s total exports to Africa in 2011. But the report says India lags China, Germany, the US and Japan.
It suggests India could potentially export a number of products to South Africa to grow its share of imports. These include optical and medical apparatus, chemical products, footwear, meat, confectionery and ceramic products.
With a $15bn balance sheet and capital adequacy ratio of 14.28%, the bank is healthy. But Mr Rasquinha says the best measure of the bank’s success is that its bond issues are oversubscribed five to six times. "That is actual market feedback on our balance sheets."
Exim Bank raises around $4bn a year through issuing bonds. Although its business involves a high level of risk, Mr Rasquinha says gross nonperforming loans are only 2.3% of total loans.
Mr Rasquinha has been attending the Indian Africa Business Forum where private sector CEOs have been trying to identify bottlenecks that reduce opportunities for trade and find solutions. These will be presented to government in the hope they will be implemented.
Trade and Industry Minister Rob Davies told the forum that South Africa and India are "on track" to reach a target of $90bn trade between the two countries in 2015.
