While there has been a huge focus on China’s
involvement in Africa, India’s increasing presence on the continent has not
received the same attention. Yet I believe that over the long term, it will be
the Indian factor that will play the most significant part in Africa’s growth.
Some analysts attribute India’s increasing footprint
in Africa as that nation’s attempt to play catch-up to its giant Asian
neighbour. But this ignores the sharp difference in approach between the two
emerging market champions. China’s investment is led by the state which funds
its companies working in Africa; the Indian charge is led largely by the
private sector and to some extent, the Indian Exim Bank which has made some
$3.5bn worth of lines of credit available to exporters and importers.
While China’s growth has been masterminded by the
state but largely executed by private & semi-private enterprises, India’s own
spectacular growth came about when the state exited business.
From independence in 1947 to the era of liberation
that began in 1991, the Indian economy was dominated by state-run enterprises.
A policy of protectionism, a bewildering raft of regulations and the infamous
‘licence Raj’ which bred corruption on a staggering scale, hamstrung and
suffocated Indian enterprise.
India wallowed in poverty and inefficiency; its
infrastructure was outdated even by developing world standards. The big change
came in 1991 during the administration of Narasimha Rao (with the current
Indian PM, Manmohan Singh as the Finance Minister). Against strong political
opposition, the government liberalised the economy, allowing entry to competing
imports and it ripped away some of the worst bureaucratic tangles.
In the roughly two decades since, India has seen its
per capita GDP increase 200 times from independence and emerge as the
third-largest economy in purchasing power parity in the world.
More significantly, this period saw the astonishing
rise of Indian companies from virtually the bottom of the barrel into global
giants like Tata and ArcelorMittal. Before this period, India produced some of
the shoddiest goods in the world.
India has come a long way since those days. Faced
with competition, Indian entrepreneurs discovered hitherto unsuspected levels
of skills within themselves. They also realised that they had a vast pool of
qualified engineers which had been turned out by the Indian education system
but which was virtually idle.
Free at last to apply their innate entrepreneurial
talents and unshackled from the stifling regulations, they discovered that they
could not only compete against the best in the world, they could prevail.
India’s new generation entrepreneurial thrust first
announced itself in 2000 when the Tata Group purchased Tetley Tea – as much a
British icon then as Buckingham Palace. Other companies followed suit in the
same manner, acquiring some of the world’s largest companies.
Mittal Steel bought Iscor in South Africa before
acquiring Europe’s Arcelor to become the world’s largest steel manufacturer. It
has large iron ore mining projects in Algeria. Mauritania, Senegal, Liberia and
South Africa. Tata bought Jaguar and Land Rover in the UK and went into
ferrochrome production, tea, hotels, vehicle assembly in South Africa and
purchased the Magadi soda works in Kenya. Essar is into steel in Zimbabwe and
petroleum refining in Kenya.
Kirloskar Brothers has become the most significant
providers of industrial pumps and power generators in Africa; Apollo Tyres
bought out Dunlop South Africa and pumped $80m to upgrade their plants in
Africa; GBOT set up the continent’s first multi-asset digital exchange
platform; and, of course, Bharti paid a record $10.7bn to Zain for its African
operations.
Ranbaxy Laboratories and Cipla are on their way to becoming
pharmaceutical giants on the continent, while Karuturi is now the world’s
largest exporter of roses from its farms in Kenya and Ethiopia.
What attracts Indian companies to Africa?“Africa
offers us a scale we cannot find in India,” says Sai Karuturi. “Africa is a
larger, less crowded, less complicated version of India,” says Luis Cenevis,
who runs Apollo Tyres. “We are perfectly comfortable in Africa,” says Shipra
Tripathi of Kirloskar Brothers, “We had to overcome worse challenges at home.
Africa is not the coming big thing, it is already there now.” Rinsey Ansalam of
GBOT says “the question is no longer should one invest in Africa; the question
is can you afford not to invest in Africa?”
The Indians plan to stay. We say welcome.
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