Has India really trumped China in Africa?

Position:Foreign direct investment

Investors love stories, and when it comes to bedtime tales Africa is the emerging market investment darling of the day (or evening). But who is really putting money into what The Economist famously called "the hopeless continent"? The statistics seem to tell a story of striking change - but as you may not be surprised to hear, statistics can lie.

A few months ago the respected fDi Markets data service, a subsidiary of the Financial Times, published a striking story about investment in Africa. 'India top Asian investor in Africa' was the headline.

It seemed that India, the junior giant of the emerging market world, had suddenly overtaken the biggest, richest and fastest-moving BRICS economy when it comes to grabbing a share of Africa's high-growth, high-risk investment markets. India had trounced its Asian rival China. If true, that would be remarkable. Competition for assets and resources in Africa is intense. Economies in sub-Saharan Africa are recording exceptional growth, outstripping the growth of China, India and Brazil, and everyone wants part of that action. Add to that the fact that Africa is rich in resources - in particular it is rich in the energy resources that India and China lack, oil and coal and uranium - and the significance of an Indian triumph over China becomes clear. Trouble is, the statistics behind this story - while accurate - are very misleading.

The background is that investment into emerging markets that comes from other emerging markets has become increasingly important in recent years. India and China are big players here: they are neighbours and rivals, and in some ways their rivalry in places like Africa is a low-intensity replay of the Cold War.

For businesses and investors in Africa, the relative performance of these two powers is critical. But India does not have China's financial muscle or its geopolitical confidence. If India had indeed overtaken China as the biggest investor in Africa, you would want to know.

So, back to the fDi Markets statistics. India remains the top Asia-Pacific source country for FDI into Africa, according to first-quarter 2013 figures, says the story. And it goes on, since records began in 2003, India has been top of the table every year bar 2005 and 2008, when it was beaten marginally by China. That would come as a surprise to many - until you realise that the fDi data refers only to Asian FDI sources, and only to greenfield...

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