African nations offer India barter deal: Copper, gold for infra projects

Struck by liquidity crunch, low foreign exchange, African nations want to swap copper, gold for infra projects

Bartering, or the exchange of goods and services for other goods and services, has been used as a trading tool since the earliest times. In 6000 BC Mesopotamian tribes bartered for trade and so did the Phoenicians. Today, that millennia-old practice is about to be revived by some African nations. Hit by the liquidity crisis and foreign exchange woes, they are reaching for the barter system to fund infrastructure projects such as roads, rails and other basic amenities. 

At least three countries — Zambia, Ghana and Rwanda — have approached India with a proposal to export minerals in return for project import. Among the commodities that could be part of the barter deal are copper and gold. Two Indian companies, Ircon International and the State Trading Corporation of India (STC), are already in talks with these countries for a commodity-project swap deal. 

A person in the know said STC was doing a detailed study to identify countries in Africa with which India could work out such arrangements. “It appears business in future will happen through barter. Every country is facing issues with foreign currency. India will build projects and we will be getting goods in return,” said an official. 

The plan is that Ircon, which is owned the Indian Railway, will build the projects while STC, under the ministry of commerce, will work out the mechanism for importing the minerals from the African nations.

When asked, S K Chaudhary, chairman and managing director, Ircon, confirmed the development. “We are in talks with these countries for such a deal. However, it is yet to be finalised,” Chaudhary said.

Zambia is the world’s second-largest producer of cobalt and the seventh-largest producer of copper. It is reportedly rich in platinum and gold as well. Similarly, Ghana is Africa’s largest producer of gold and is also known for bauxite, manganese and diamonds. And Rwanda is rich in tin, tantalum and tungsten.

According to industry experts, a barter deal will make financial sense for India, too, as profits and returns may be more immediate than a long-term line of credit (LOC) to these countries.

Ircon and STC had joined hands earlier for similar trade arrangements for building projects. In early 2000s, India imported palm oil from Malaysia in exchange for building a railway line in that country. African nations have emerged as key focus areas of India's foreign policy, with the government increasing its development assistance to the continent through grant assistance, LOCs and concessional financing schemes.

In July, the ministry of external affairs informed Parliament that 279 LOCs, aggregating to nearly $27.91 billion, have been extended to 63 countries since 2005-06. Of these, 191 LOCs to the tune of nearly $11.58 billion have been extended to Africa.

An LoC constitutes loans to promote bilateral economic relations. Under it, a minimum 75 per cent of the contract value must be sourced from India in the form of goods and services, including consultancy services. A relaxation of 10 per cent is made on a case-to-case basis.

India has been providing LOCs on concessional terms to African nations to counter China's growing influence in the region. Indian policymakers have been cautious of Beijing's move to economically connect Africa with Asia and Europe through its ambitious Belt and Road initiative (BRI). 

While China has committed to invest $126 billion across the region under the BRI, India has tried to counter this through increased LoC disbursals.