Indian Investments in Mining and Agriculture in Africa

The bulk of research that has been undertaken on the Indo-African engagement has focused on the business perspective of the relation; however, there is a need to better understand the different ways in which investments are affecting local communities in Africa.

Against this background, with support from Heinrich Boll Foundation (HBF), Consumer Unity & Trust Society (CUTS) International implemented a project, Critical Dimensions of Indian Investments in Africa covering two sectors i.e. mining and agriculture.

Kenya was selected amongst four other countries namely; Uganda, Zambia and Ethiopia, for the study conducted in primary sectors such as mining and agriculture. Given the extractive nature of both these sectors, there are significant impacts that they have been known to have on local communities who are directly affected by operations in these two sectors.

While mining was looked at in Kenya and Zambia, agriculture was looked at in Ethiopia and Uganda. These countries were selected based on the significant amount of FDI flows into these countries particularly in mining and agriculture. India is the largest investor in Ethiopia, and one of the top five foreign investors in Ghana, and Kenya. Zambia was selected as an example of a Least Developing Country (LDC) with which India has a burgeoning investment relationship that is likely to lead to further bilateral engagements. In Kenya and Zambia two Indian companies we selected whereas in Uganda and Ethiopia, focus was on the impact of two agricultural-based companies.

Kenyan Study

Kenya is a market-based economy with only a few state-owned infrastructure enterprises. Its economic advancement agenda hinges on the need to pursue an open economic policy and the demand for foreign capital and investment flows, inter-alia FDI and Overseas Direct Assistance (ODA).

In terms of FDI inflows, Kenya is one of the most favoured destinations in East Africa. Since 2007 the Kenyan government began to actively focus on attracting FDI, by establishing free trade zones and improving infrastructure business incentives and various other reforms, including adoption of relevant legislations, as reflected in this publication

As a result, Kenya was placed within the top ten reformers in the World Bank’s Doing Business 2008 report. This happened after the government took major steps to implement licensing reforms by reviewing the regulatory regimes that resulted in the elimination, simplification, consolidation and harmonization of business licenses.

As a result, the country was ranked among the top destinations for FDI in both the Middle East and Africa, particularly due to the increased investments in infrastructure.

 

 National Legislations

Generally, all investments are anchored under the Kenya Investment Promotion Act (IPA) of 2004 which came into effect on 3rd October 2005 and was later amended in 2009. The objective of the act is to promote and facilitate investment by assisting investors in obtaining the licenses necessary to invest and by providing other assistance and incentives and for related purposes. The IPA established the Kenya Investment Authority (Ken Invest) and provided it with the responsibility of promoting and facilitating investments in Kenya. It provides a one stop window for investors including provision of information on investing in Kenya.

 

The IPA provides the issuance of Investment Certificates to both local and foreign investors upon application within the prescribed form and satisfaction of the provisions of the Act. The IPA establishes the National Investment Council as an unincorporated body with functions of advising the government and government agencies on ways to increase investment and economic growth in the country and to promote co-operation between the public and private sectors in the formulation and implementation of government policies relating to the economy and investment.

The country’s Foreign Investment Protection Act of 1964 amended in 2009 provides special protection to certain approved foreign investments and for matters incidental thereto. Under the Act, any foreign national who proposes to invest foreign assets in Kenya may apply to the Minister for Finance for a certificate that the enterprise in which the assets are proposed to be invested is an approved enterprise for the purposes of the Act.

Overall

The areas where the local community would want the Indian company to invest are mainly in education, health and employment opportunities. The community also noted that the company could also assist the community get water through the use of trains. The community also expressed a want to be involved in the decision-making in certain areas that directly affected their livelihoods.

Key Findings and Recommendations

Apart from community perspectives, there are also varying perceptions of the Indian company by different players such as the Kenya National Chamber of Commerce and Industry (KNCCI), various CSOs as well as the local leadership based in Kajiado. According to some local CSOs, not much has been done by the company to improve the lives of the community members. According to them, there have been little tangible development projects for the community by the company apart from the opportunity for local women to undertake some sale of souvenirs and handcrafts within the company premises.

Contrary to the CSOs however, the Business Chamber paints a different picture of the Indian company as the only mining company in Kenya that has invested in the community. According to KNCCI, the Indian company is one of the companies in Kenya improving the lives of the community around them. For instance, company is associated with the building of schools in Kajiado County. The company also provides employment opportunities to local community members, sponsorship, transport facilities, water through digging of wells and provides health facilities

Based on the research findings, the study makes the following recommendations:

There is a need to further localize the company’s CSR agendas through community dialogue. Indeed this case study indicated that there is a need for dialogue between the community and the company regarding their role in development in order to help build trust and mutual understanding as well as communicate the limits of their contribution to development. It can also help to highlight locally relevant issues and approaches, which might not be prioritized in other contexts.

 

Download the publication for further reading.

 

Product details
Date of Publication
December 2014
Publisher
CUTS International, 2014
Number of Pages
74
Licence
All rights reserved
Language of publication
English