If ever there was an award for the most unusual product to be developed by a fast-moving consumer goods (FMCG) company, Kolkata-based Emami will be in contention. A year and a half ago, when it firmed up its entry into the African market, it set out to develop products exclusively for the continent. It knew that merely selling Indian products wouldn’t do. After extensive research and expensive trials, Emami finally has a wonder product — a hair straightener for thick and curly African hair.



Soon after it is launched, Emami will roll out another product — Silk ’n Glow, a whitening cream for dark African skin. This will add to the eight products including pomade, hair foods, styling gels, lotions, etc., that Emami has already launched in Africa. Says Prashant Goenka, director, Emami: “While the entire African market in the segment we operate in is about $12 billion-13 billion, our market share is small as we are relatively new.” Hence, it is expanding its product portfolio. Currently, about 20 per cent of Emami’s total exports are to Africa.



Africa is not a new market for Indian companies. Groups like Tata and Mahindra have been present here for decades, but their interest has heightened in the last few years. Others like pharma majors Ranbaxy, Cipla and Dr. Reddy’s, consumer firms like Marico and Emami, construction firms like Punj Lloyd and Shapoorji Pallonji, and liquor maker UB Group are in various stages of building their Africa businesses.



Even multinationals now see India as a base to launch their African operations. When Suzuki recently realigned its global businesses, it made India (Maruti Udyog) the production hub for Africa.



Interesting market it is, but Africa is still only a small part of India Inc.’s global ambitions. Its investments in Africa are only a minuscule portion of what it is investing elsewhere in the world. Africa may never be the mainstay of India Inc.’s global business, but it will certainly add diversity to it. Moreover, Indian companies see Africa as a key source for resources like oil and minerals.



Neither is India among Africa’s leading trade partners — it accounts for only 2.1 per cent of the region’s imports. Its bilateral trade with Africa ($11.84 billion in 2005-06) is less than a third of China’s (which will cross $36 billion this year).



But from here on, Indian interest in Africa will only increase. The momentum is building. Bilateral trade has doubled since 2001-02 ($5.51 billion). Last year, India’s exports to 49 African nations grew over 60 per cent to reach $7.15 billion. Africa is one of India’s fastest growing destinations, accounting for 6.8 per cent of the total export basket.



Indian companies are investing more and more in Africa. The Tata Group has stepped up its exposure in the continent. Several projects including a $1-billion investment in South Africa’s Second Network Operator Telecommunications (SNO), a $100-million Ferro Chrome smelter in Richards Bay, also in South Africa, a $180-million investment in hotels, a $12-million coffee plant in Uganda and a 509-hectare farm in Zambia are now underway.



In 2004, the group’s Africa revenue was $37 million, but it has since grown to $210 million (2005-06) and is expected to touch $250 million this year.



Still, Africa brings in less than 4 per cent of the Tata Group’s estimated global revenues of $6.6 billion. But it is likely to increase. For example, SNO alone is targeting $1 billion in revenue in its first five years of operations. Says Ajay Pandey, CEO, SNO: “All our investments are made with a long-term objective in mind. We are certainly here to stay.”



Like the Tatas, Mahindra & Mahindra (M&M) has been present there since the late 1970s, but it started developing an Africa strategy only in 2001. “Before that, we had sold good numbers in countries like Kenya, Nigeria, Ghana and Angola. But those were all sporadic cases and not part of an organised business strategy,” says P.N. Shah, vice-president (overseas operations), M&M. “What we have done so far is only a small fragment of what lies ahead. We have great plans for Africa.”



Last month, infrastructure construction company Punj Lloyd secured a $290-million order from Sirte Oil Company, Libya for pipeline projects on EPC (engineering, procurement and construction) basis. This is the largest ever contract won by the company. Says Atul Punj, chairman, Punj Lloyd: “This will help us set a strong foothold in Maghreb and Africa.” Punj Lloyd believes Africa has a high potential for large engineering construction projects in the energy and infrastructure sectors.



Healthcare major Apollo group is partnering with African governments to provide public health services. Thus, in Nigeria it has taken over the management of a public hospital, introduced speciality services, and better clinical and management systems. “Governments are looking at healthcare and are willing to spend,” says Ravi Anbil, CEO, Apollo Projects Consultants.



FMCG major Marico’s exports to Africa last year was about 7 per cent of its sales. It has just acquired a company in Egypt. “Africa is attractive because it is less developed. So, India’s technology is considered appropriate and cheaper for them. For example, Tata trucks may not be the most advanced in the world, but are suited to the rugged roads in most of Africa. Moreover, they are seen as value for money,” says Nagesh Kumar, director-general, Research and Information System for Developing Countries, a research firm.



Indian companies aren’t just selling in African markets. They are also building factories there. Mumbai’s Ashapura Minechem is setting up a 300,000-tonne barites (a mineral used in manufacturing paints, paper, etc.) processing facility near Port Hardcourt, Nigeria. Emami is planning to invest some Rs15 crore in a new manufacturing plant in Africa. The Tatas already have many plants here. M&M is setting up a manufacturing and assembly plant in Egypt. “Egypt is a great base with local market potential. It is also a mature auto ancillary base,” says Shah.



But why the increased interest now?



Approximately 890 million people live in 54 countries in Africa. While no African nation can be compared to the developed countries, it is a myth that the entire continent is impoverished. There are great variations in Africa’s wealth. The per capita GDP of South Africa ($12,000 with 50 per cent population below poverty line), Egypt ($3,900 and 20 per cent below poverty line) and Namibia ($7,000 and nearly 56 per cent below poverty line) prove this.



Also, growth is picking up. The African economy grew by almost 5 per cent last year. Angola’s economy grew the fastest, by around 15.5 per cent, Ethiopia’s by almost 7 per cent and Uganda nearly 6 per cent. Inflation, now averaging 8 per cent, is at its lowest in many countries since their independence.



Emboldened by this, foreign investors have turned their gaze to the continent. Good returns from Africa’s small stock exchanges have lured fund managers. Foreign direct investment (FDI) has also gone up: $18 billion flowed into the region in 2004, three times the annual average in the 1990s. Though this is much lower than the $61 billion that flowed into China, it is gaining momentum. Investment flows have risen in 40 of the 54 countries in the region. Portfolio investments are at about $3 billion and rising. Much of the inward investment is directed to South Africa or to the extractive industry sectors, but not all.



According to some estimates, Africa needs $25 billion in investments in the next five years. Michael Gondwe, president of Africa’s PTA Bank, hopes that $5 billion will come from India.

Sensing an opportunity, the Indian government has adopted the ‘Focus Africa Programme’ (in its Exim Policy 2002-07). This is designed to tap the export potential and reduce the uncertainty in the business environment. “It will take special effort to develop these markets and sustain long-term export growth,” says S.R. Rao, chief general manager, Exim Bank. The bank has extended 60 lines of credit, amounting to over $1.8 billion, to support export of eligible goods on deferred payment terms.



Besides being an emerging market, Africa is also rich in oil and minerals. Its oil markets are open to foreign participation, unlike some Gulf countries, and are attractive to Indian oil companies. ONGC Videsh Limited (OVL), ONGC’s overseas investment arm, has already acquired stakes in oil exploration in Libya and Nigeria. It also has big investments in Sudan.

India’s mining companies are also digging in. Recently, the government of Nigeria privatised mining of solid minerals. Ashapura Minechem made a substantial representation, and won a couple of bids for mining barites, bentonite and even gold. It has set up a 50:50 joint venture with an office in Abuja and invested $10 million. It expects to start getting revenues of $2.5 million in two years. “All of Nigeria’s neighbours are well endowed with minerals. Guinea is bauxite rich and so is Ghana. We are among the world’s leading bauxite trading companies. This opening will provide us the foothold in the region,” says Tanuj Roy, CEO, Ashapura Minechem.



Among others, Indian iron and steel companies are eyeing the rich coal deposits of South Africa, Nigeria and Mozambique for securing hard coking coal to run their plants. While Ispat is said to have shown interest in the mines of Nigeria, JSW Steel is said to be in talks with mining authorities in Mozambique. Tata Steel is investigating opportunities to mine chrome, manganese, coal and iron ore in South Africa.



Indian companies are using similar strategies to enter Africa. South Africa is emerging as a base station; companies are developing products exclusively for African markets; they realise the need for local partners, but want to be in the driver’s seat; and they are exploring acquisitions for faster penetration.



Both the Tatas and M&M have used South Africa as their hub. “South Africa is an English-speaking country. It is the biggest home market, is easily accessible from India and is the entry face for Africa,” says Shah. Also, the continent looks to South Africa for framing laws and policies, and needs its support too.



In northern Africa, Egypt is favoured. It is considered neutral in political and economic behaviour. It is also entering into bilateral trade pacts and various trade blocs are expected to come up in the region. M&M (assembly line) and Marico (acquisition) have identified Egypt as a country with potential.



A local partner brings value but it is important to retain operational control. M&M explored various options — a relationship office, region-wise importers, sole selling agents, etc. But it decided to go on its own. M&M projected itself as a South African company, and tied up with a local partner Ichikowitz, to deal with the local nuances. However, it retained brand ownership and operational control. “We had to be in the driver’s seat and our partners had to share our vision and goals,” says Shah. In other countries, M&M opted for an importer-exporter model. Hence, the investments are transaction-based. But it is keen to restructure the Africa business over time.



Products are being redesigned for Africa. M&M had Africa in mind even when it started developing the Bolero and Scorpio range. By the time these hit African roads, M&M had already incorporated local requirements. “We took stock of the average height and size of the people. Wouldn’t the steering position depend on that? The product capability had to be built using those inputs,” says Shah. Similarly, road speeds in South Africa are higher. “Here you won’t find a 10-km stretch where you can go at 140 km per hour. In South Africa, you can travel for over 500 km at that speed,” he says. So, the SA version of the Scorpio is fitted with an NEF 2.6-litre engine that is more suited to the conditions there and not the CRDe engine of the Indian version. Emami too, is developing products exclusively for Africa.

Marico recently acquired hair-care brand Fiancée in Egypt. This brings local knowledge and quicker access to distribution. Says Milind Sarwate, chief financial officer, Marico Group: “While in the short term, we aim to integrate this acquisition into our business and cater to the Middle-East and north Africa, we hope to eventually address the other markets in Africa too.”



There are other nuances, too. Indian firms are not used to reservations in the private sector. But that is the norm in Africa. In South Africa, after Nelson Mandela took charge in 1994, a programme to empower black people was launched. Under this, companies supplying to the government must have a certain number of black employees, a certain number of black people in the top management, in the board, and across its operations.

Africa is a difficult, even hostile terrain. Political instability and violence have scared many multinationals away (though some like Unilever and Shell still have substantial operations). But things are improving. “Africa has a new generation of leaders who are more serious about its development,” says Aparajita Biswas, professor, Centre for African Studies, University of Mumbai. Adds Shipra Tripathi, director, CII: “This is translating into new investments, the sorts of which are new to the continent.”


Like most other spheres, China is a major competitor in Africa. The second largest consumer of energy imports nearly 30 per cent of its oil and gas from sub-Saharan Africa, and is Africa’s third largest trading partner. According to an Organisation for Economic Cooperation and Development study, Chinese companies are investing about $1 billion a year in Africa, mainly in the energy and commodities sectors. It will take a while for India to match that.

Interesting article, ... hopefully we can make a profit out of this business in Africa, but not rape the continent like some western companies. I think another major field of indian interest would be generic drugs.

I found Indian-made generic antibiotics in Tijuana, Mexico recently ... that surprised me.

India should only focus on some parts of Africa. Pretty much the entire North Africa is trash. Too many Islamic freaks up there, and if you go way South, then you have Christian freaks.

Ex: South Africa\'s Christian President doesn\'t believe in AIDS/HIV. He thinks it can be naturally cured by god. That idiot. Jebus will not do a single thing for you. He\'s dead. lol.

Tanzania, Kenya, and Uganda are good places. The Congo, Zimbabwe, and Zambia (Congo) are good places for Indian to go. As is the Seychelles, Madagascar, and Indian-filled Madagascar.

As Apocno said, I hope that Indians (Hindu/Sikh/Jain/Parsi/Jew/Buddhist) can go there and do well, but not ripoff the locals.

I think former colonials should work together for peace prosperity and then destory our enemies.

Seriously, I agree.

China wants to do business with Africa more than anyone these days it seems.

Although it remains to be seen whether the money invested into Africa pays back.