Watch that rogue bullet...

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With India and China pulling up their socks in Africa, is the west already threatened? By Karan Mehrishi

The presence of the American seventh fleet in the Bay of Bengal during the 1971 India-Pakistan war was greatly discomforting to India. The same was with China in the late 1990s, when US Nimitz class carriers continued to patrol the East China Sea, during the escalated dispute between China and Taiwan. More than the military buildup in their backyards, what was more bothersome for these two Asian giants was the fact that they were being strangulated by sheer pressure tactics, ridiculed due to their inability to return the favour. They have been waiting all along for their turn for a quid pro quo, now its pay back time with a war waging somewhere else than Asia…

Here the casualties are not soldiers, they are brands and apparently the Asians are performing these operations with their own indigenous brands. During the last decade, China and India have tactically increased their presence in the world’s most strategic yet unexploited region, Africa. Long considered as a dark continent, some African nations today record double digit growth records in GDP. The world can no longer afford to ignore Africa anymore as the stakes have risen multifold. Africa not only has the capacity to offer scarce minerals and other natural resources to the world but also a potentially large and diverse consumer market. Traditionally, European brands (Europe was an erstwhile colonialist of the region) were the primary sources of consumer goods accounting for almost half of all African trade while America, whose military eminence was far greater than its economic eminence, had brands which influenced African socio- economic structures for more than five decades as American goods have a cultural affinity to the African people. Even though both Europe and America had a firm footing in Africa until recently, they have somehow lost to the strategic expansion of the new ‘colonialists’. Replacing Pfizer, Chevrolet, IBM among many others; Indian and Chinese brands like Tata, Haier, Ranbaxy, Mahindra, NIIT, Lilliput and Cherry have offered the African consumer what no one else could, quality with affordability. Dying and unsustainable western brands are no longer viable for Africa as competition is intense. With their fast expanding economies and voracious demand for oil, natural resources and ready markets for their manufactured goods, India and China have been at the forefront of African businesses. Feeling the heat of the slow down and their reduced ability to expand in less developed markets, the once powerful American and European MNCs are now slowly loosing the contact with Africa. “For the short to medium term, I expect a period of contraction on the part of American corporations, who despite their global dominance have failed to build truly distributed and multi-nodal organisations. As American economic concerns begin to dominate their thinking, their ability to develop and expand global businesses will suffer,” says Aditya Dev Sood of Center for Knowledge Societies.

Trade is booming between Asia and Africa more than it ever did, sidelining the west in the process. As per several agencies bilateral trade between Africa and China has already crossed $100 billion. The trade is majorly dependent on China’s oil trade with West African countries of Angola and Nigeria. Thanks to oil and affordable Chinese brands, according to some reports, the Sino-Africa trade has grown by more than 560% in the last decade alone, far more than with any developed market! India is not behind either, with investment in Africa exceeding the $5 billion mark so far; Indians are firing all cylinders. According to Fantu Cheru, Research Director at Sweden’s Nordic Africa Institute, “Trade between Africa and India is expected to grow from $25 billion today to $50 billion by 2011.”

Apart from the Black Gold, both Asian giants are in a race to consolidate their positions in Africa. With heavy investments in infrastructure, power generation and technical assistance the Asian powers are strategically spreading their tentacles in African daily life. If plain economics is allowed to do the talking, then China is perhaps the only country which pips the trade balance in Africa’s favour. China’s more than $8 billion trade deficit with Africa is reason enough to give chills to America & Europe, whose deficits with Africa are now declining. China already imports almost 50-60% of African timber and minerals along with 15% of its oil and intends to increase the figure substantially. The export of raw materials to Asia gives the imported Asian brands an upper hand in Africa as they attract fewer taxes and compete better vis-à-vis western brands. The brands are also enjoying a higher penetration level in Africa and are even replacing some western brands in certain sectors.

However, there are differences of opinion to these arguments. Washington DC based Sebastian Mallaby of The Council on Foreign Relations is not impressed with this ongoing renaissance. He believes that all the US and European investments and brands in Africa are in line with the rule of law, while the record of China in human rights, for instance, is not that great. When asked whether India and China would dominate African markets sooner than later, he replied, “I feel that rather than China and India dominating Africa, there will be a mixture of investments in Africa and that will be healthy.”

Analysts believe that if Asian brands eventually become more dominant than the established western brands, Asia could meet its aspirations of dominating the African market. It will not only bring the unexplored African consumers to its kitty but also win the love and respect of people in that country. Who ever wins in the domain of Africa, one thing is for sure, there will be a ‘brand’ new war waging in the region. European and American brands had better acknowledge the reality, and soon. May the best brand win!

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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