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Indian Companies Push into Africa

  • Anjana Pasricha

CEO Manoj Kohli, from Indian telecommunication company Bharti Airtel speaks during a press conference in Lagos, Nigeria, 25 Oct. 2010

CEO Manoj Kohli, from Indian telecommunication company Bharti Airtel speaks during a press conference in Lagos, Nigeria, 25 Oct. 2010

Indian companies are investing billions of dollars in Africa to tap the potential of its growing market and increasing its footprint across the continent.

From Kenya in the east, to Zimbabwe in the south and Nigeria in the west, India's $ 15 billion Essar group is investing in Africa in businesses ranging from power, steel and mining to telecommunications and construction.

A director at the Essar group, Firdhose Coovadia says when the company wanted to diversify, the growing opportunities in Africa provided the obvious answer. He says though the continent's 53 countries vary enormously, the macro trends are similar.

"You look at what the continent has to offer today in 2010, I think what you will find there is a resurgence of entrepreneurial spirit across the continent clearly," Coovadia said. "Secondly there is an increased willingness and openness to trade, openness to investment, and a commitment by the politicians and regulators that they is no turning back from a cycle of investing and development. This obviously for an investor is that inflection point, between where the continent was as a whole, and where it is likely to be."

In the last five years scores of Indian companies have bought or invested about $16 billion in a range of businesses in Africa. Among them is Bharti Telecommunications whose $9 billion deal to acquire mobile phone operations in 15 African countries this year is the biggest investment by an Indian company.

Others tapping Africa are involved in pharmaceuticals, automobiles, information technology, power, mining and consumer goods.

State-owned companies are also making large investments in oil and gas fields to meet the needs of energy-hungry India.

Many investors view the resource-rich continent as the new frontier for global business. Home to a billion people, Africa's economy is growing by about four and a half per cent.

Debashish Mukherjee, with consultancy A.T. Kearney in New Delhi says the continent has great potential.

"Africa is where India was a few decades back," Mukherjee said. "The per capita income in many of the African countries is growing, there has been investment in education in many of the Sub Saharan countries, so many of the forward-looking indices are right and I think many of the companies would like to capitalize on that with an early start."

Attracted by cheap labor and land cost, Indian companies are also moving into Africa for commercial farming. Only about 15 cent of the arable land in Africa is cultivated. And many countries, which are food-deficient despite having surplus land, are inviting foreign investors into the agricultural sector.

In India, where farming is dominated by small, family-run holdings, companies are attracted by the possibility of starting large-scale operations in Africa. Arun Agarwal heads the African committee at the Associated Chambers of Commerce and Industry in New Delhi.

"In India there is a problem of land. You cannot get big lands (land)," Agarwal said. "So Sudan, Ethiopia Tanzania Mozambique, Senegal, and many countries, they are offering big land on easy terms."

Indian businesses find it relatively easier to operate in Africa because ties with the region date back generations. Many Indians who migrated to Africa to build roads and railways in Britain's former colonies are settled in that continent.

Still many Indians find Africa a tough place to do business. Coovadia of the Essar group says the challenges in Africa are similar to those faced by investors in many developing countries.

"Bureaucracy is one issue, the complex politics, you need to understand and be sensitive to the politics and history of each country," Coovadia added. "Infrastructure is a critical one. You would expect e-mail and bandwidth to be good, simple infrastructure like that does not often work effectively, and then getting shipping and logistics done, port services done…a similar parallel to were India was a decade or two ago."

The thrust into Africa is backed by the government, which has pledged to increase investment and trade with the continent. But business analysts say that unlike China's push into Africa which is driven by its government, India's push into the continent is largely led by its private sector.