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Local firms yearn for African safari

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By JAYANTA ROY CHOWDHURY
  • Published 20.03.13
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New Delhi, March 19: Indian investment in Africa is set to touch $50 billion and bilateral trade is poised to reach $70 billion with industry bigwigs gearing up to make the most of the opportunities thrown up by the mineral-rich continent.

India Inc’s very best are in a race with Chinese companies to tap Africa as a growing resource supplier. The Tata group, Mahindra and Mahindra, Bharti, Essar, Godrej, ONGC and Kirloskar are among the big names flocking to the continent.

“Arguably, Cameroon is one of Africa’s best destinations for Indian investments,” Philemon Yang, Prime minister of gas-rich Cameroon, said to Indian business leaders at the India-Africa conclave, hosted by the Export-Import Bank of India and the CII.

The three-day conclave, which ends today, has seen around 30 African countries touting 475 projects worth $65 billion. The proposals range from farming, consumer durables, infrastructure and energy to transport, mining, finance and telecom.

The Tatas have invested around $1.7 billion in chemical and automobile plants, hotels and infotech centres. “The way Africa is growing, there can be no caps on potential future investments,” said Raman Dhawan, managing director of Tata Africa Holdings. The Tatas will continue to set up car plants and bid for telecom network projects but its real focus will be on resources such as coal and iron ore.

If China is the workshop for the world and India its service centre, Africa is emerging as the miner. Much of India’s investments in Africa are in oil acreages, coal and gold.

Oil accounts for around 60 per cent of bilateral trade. Surat gobbles up South Africa’s diamonds, while tonnes of gold from the continent find their way to jewellery parks in Calcutta and South India, accounting for another 10 per cent of the trade. South Africa and Mozambique’s coal fuels power stations. India has entered into a tie-up for uranium from Malawi and Niger to operate nuclear power plants.

However, India differs from China in the way it has been doing business. “China’s investment is mostly locked in resources and is state-driven. Ours is enterprise-driven and diversified. Look at the Tatas, we have invested in telecom and software… set up chemical plants,” Dhawan said.

Bharti Airtel’s buyout of Zain for around $9 billion is India’s biggest investment in Africa. Airtel’s African operations now cover 19 countries.

“We have invested heavily in training African colleagues,” adds P.K. Ghosh, CFO of Tata Chemicals. Indians hire more Africans than Indians. The Chinese tend to do the opposite.

“What one can readily say is that India’s public relations with Africa is far better,” said veteran Ghanian journalist Francis Kokutse. “Both India and China need resources. We know that, but there is a difference in the way the two have gone about it.”

Chinese firms have been known to be less sensitive about local culture. Sinopec has explored oil in a Gabonese national park causing an uproar. Two years back, Chinese mine managers used shotguns to disperse agitating workers in Zambia.

India tends to add value rather than just ship away minerals. Essar picked up 80 per cent in a mineral venture in Zimbabwe and bought a controlling stake in a steel plant for $750 million. Earlier this month, it announced an investment of $275 million in a port.

However, China’s trade with Africa is still three times that of India and its diplomatic presence much larger. But, Indian business practices may still win more business in the long run.

China underwrites large railway, roadway and civil construction projects. No wonder Chinese state-run firms knock out Indian competition while bidding for oil, coal or other mineral resource concessions.

Guy Scott, Zambia’s vice-president, said, “African countries can learn from India’s promotion of family business, long-term investments and innovation, which have proved to be sustainable and we believe that partnership with Indian investors is a prime means to get there.”