The Continent of Good Hope

Africa is the next frontier for Indian business

Published: Jun 5, 2009

Think Africa, and the ghost of Idi Amin appears. Of the 40,000 Indians expelled, the businesses wiped out by a single command, the killings. That ghost has spread out from Uganda to come to settle over all of Africa. The fear hangs over that an Indian can only earn small money in Africa before getting killed or expelled. And it’s largely been as much a CEO perception as that of the chap on the street. That first hurdle to doing business in Africa is in the mind.

But banish that ghost before the new Africa of today, and the multi-billion promise it holds for Indian enterprise. Some of this is being realised already — but it’s little before all that in store.
All the buzz over Bharti Airtel’s proposed deal with South African telecom major MTN gives the biggest indication yet of how serious Indian companies are about South Africa. For many, too many, Africa still means just South Africa or ‘Africa Lite’ as a Western diplomat describes it, but there is enough business to be done in other nations. Our CEOs have seen this and are beginning to step in where they feared to tread before.

“Our corporate houses have largely been inward-looking and risk-averse, and the markets in Africa have been seen as very risk-prone to capital investment as well as human investment,” says Shipra Tripathi, CII’s (Confederation of Indian Industry) Africa head. It is only of late that the credit rating of several African countries has been raised. And about time, says Tripathi. “CEOs would want to look at a market which is growing, and where the return on investment is fantastic.”

Inevitably, the focus of investors is on South Africa, and not least because it has nearly half of the gross national income (GNI) of all of sub-Saharan Africa. “And while there are opportunities in agriculture and minerals, services is an area of growth,” says Navdeep Suri, Indian consul general in Johannesburg. And none more than telecom; Bharti’s MTN overtures apart, Tatas have the biggest share in Neotel, South Africa’s second national telecom operator.

There’s nothing a CEO likes more than success stories in cousinly fields — not strictly one’s own, naturally — and Indian companies have created plenty already in South Africa: Tatas have set up a ferrochrome plant and a bus-body-building unit and are planning a motor assembly plant; Ranbaxy has bought BE Tabs, a generics manufacturing unit. Africa needs a lot of generic drugs to fight AIDS. A host of small and medium inroads from India that are doing very well in South Africa: Apollo Tyres has acquired Dunlop SA, Vijay Mallya’s United Breweries has bought local breweries while the Godrejs have picked up a hair colouring business. India was exporting just $350 million worth of goods in 2001-2002. It has grown seven times in seven years.

And there are huge opportunities a CEO can consider beyond South Africa, where African markets are untouched, or thought to be so because they are away from media eyes. “CEOs look at Africa in two pockets: South Africa and Nigeria, or traditional partners,” says Tripathi. “In Kenya and Tanzania, business has remained at the level of trading.” But there are markets beyond the ones already explored. Kirloskar Brothers, Tripathi says, are running a water management system to double grain production in Senegal next year. In Ghana, Mohan Energy Corporation are working on an extensive rural electrification project.

A lot of Africa is waiting, if our CEOs are willing. “In Ghana, they have an affinity with India from the Nehru days. When you go there, you can feel the affection,” says Dr. Mohan Kaul, CEO, Commonwealth Business Council. And that is translatable into business. Don’t forget that Ghana has now found gas and oil.

But CEOs will still run into rules that need reworking. “A number of rules that guide particular sectors are very Western oriented, and a lot of projects therefore get left out by default for Indian companies,” says Tripathi. “A lot of countries in Africa have just about broken their umbilical cord to the West. There are still a large number of consultants to Western countries working in African countries; we need to see how to make consultancy there stronger."

One way CEOs can get past that is the Chinese way: To get governments in, a lot more than at present. “Where governments are involved, trust comes faster and easier,” says Kaul. “If we can have a structure like that, the Indian private sector will feel a lot more confident in investing in Africa.” And both the older and the younger India can go in.

“Agriculture is a big opportunity,” says Kaul. “Africa has a lot of unused land where they want commercial farming in a big way. Africa has the capacity to become the food basket of the world.” And when you speak of India, can IT (information technology) be far behind. “Kampala has the highest number of graduates per capita in Africa,” says Kaul. “Kampala can become the Bangalore of Africa.”
And like India, most African countries have a very young population, and between the two there is a future to build on. And in a new south-south way, Africa is getting past the traditional impasse to investment.

A continent, ladies and gentlemen, is waiting.

(This story appears in the 19 June, 2009 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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