Conquering Africa! Destination next for Indian corporates

Africa’s perception has been changing rapidly, from being an unsafe investment destination to being a place hard to neglect. Businesses are no longer asking the question,”whether to invest in Africa?” they are now more worried about the risks of not investing in Africa. That South Africa is now a part of the BRICS group; the group of largest emerging market economies; is a sign of the growing significance of African countries. The continent of more than a billion people has steadily grown at a rate of 5.6% from 2001 to 2008. Africa has large number of Indian nationals and Indian companies are tapping this population to enter into this continent. For aspiring Indian corporates all roads lead to Africa!

Bharti Airtel’s Zain acquisition is the biggest by an Indian company in Africa; however, Bharti is not the only Indian company raring to go out on all cylinders firing in Africa. Many large Indian companies are betting big on Africa. Godrej acquired personal care product manufacturer Tura for $33 million and is eyeing a stake in hair care company ‘Darling Group Holdings’. FMCG companies like Dabur, Marico, Emami are all present in Africa and doing well. The Tata conglomerate has been present in Africa since decades. Essar, another big Indian corporate house has been aggressively investing in Africa since 2008. It started out with its own mobile company in 2008, but has since then acquired mobile companies in Uganda and Congo Republic. Essar Oil, an Essar group has acquired stakes in Kenya Petroleum Refineries and State owned Zimbabwe Iron and Steel.

Karuturi Global, has become one of the largest private land owners in the world thanks to its investments in Africa. It started with a 15 hectare land purchase in 2005; for an investment of $1.9 million, to grow rose. In 2007, it bought one of the largest flower farms in Africa for an amount of $65.5 million. In the last two years, it has acquired 311,700 hectares of land in Ethiopia for an undisclosed sum of money.

Drug companies Cipla and Ranbaxy have been present in Africa for a long time now, helping African nations in their fight against HIV-AIDS by providing cheap generic drugs. Ranbaxy, which is present in Africa since 1996, now has around 10 subsidiaries in Africa. It also has two manufacturing units in the continent. Cipla has recently set up a manufacturing facility in Africa.

One of the main reasons for acceptance of Indian companies is the reason that India has had a long political relation with African countries. However, in terms business it’s the Chinese who are front runners. The Chinese have been investing heavily in the continent. The Indian government though late to act, recently has been sending many delegations to the continent to create business opportunities for Indian companies. One thing in India’s favour is its democratic set-up; unlike China whose Communist nature makes it appear as a threat. All Indian investment in Africa is not about business, some of it is philanthropic in nature. In 2008, during a summit in Africa, India pledged more than $500 million for development projects. It also pledged to increase by $2 billion its lines of credit to African countries.

As Indian companies grow, they have to look beyond the boundaries of the country for new markets and Africa seems to be their number one choice for the time being. For corporate India, conquering Africa is a top priority.

An African Green Revolution?

When we think about Africa what comes to our mind is the harsh climatic conditions, the vast endless desserts, poverty, destabilized countries and a host of other problems. Hardly anyone thinks about Africa in a positive light. Yes, Africa is a challenging place! But it’s got the potential to be a game changer. We know it’s got vast natural resources. And one movement that is transforming the face of Africa is the African Green Revolution. So will Africa become the food basket of the world in times to come? Let’s find out the answer to this.

Agricultural yield in Africa is roughly one metric tonne from one hectare of land, which is lower than other places in the world – approximately seven metric tonnes per hectare, which suggest that there is a huge scope for improvement. The potential is there but how to reap it. Africa has got huge infrastructural problems, access to seeds, access to markets, irrigation facilities – the challenges are plenty. In addition to these, a history of conflicts, poor governance scares investors away from Africa. How to overcome them?

Africa is the focus of the world today in terms of agriculture produce. It is being looked at as a major future source of food for the whole world. As of now Africa is a food deficit continent. Many organizations are working hard to change that. Some of the notable ones are the Bill and Melinda Gates Foundation, the Rockefeller foundation, Alliance for Green Revolution in Africa (AGRA), the Food and Agriculture Organization (FAO). Bill and Melinda Gates foundation is working along with Coca Cola co. on a $11 million project in countries like Kenya. They are supporting farmers to produce fruits which can be used in Cokes Minute Maid drinks. The farmers are benefited by getting a better return for their produce.

The Alliance for Green Revolution in Africa (AGRA) has adopted a four point approach to tackle the problem of African farmers. First the Seed program. AGRA ensures that farmers have access to better quality of seeds, seeds which are more resistant. Low quality of seeds and soils is a major reason why Africa’s crop yields are lower than rest of the world. Second is the Soil program. This program aims to improve farm productivity by providing farmers access to locally adapted soil nutrients and integrated soil and water management. Third, the market access program, provides farmers with access to markets to sell their improved crop yields. And lastly, the Policy and Partnerships program which aims to create policies to provide support to farmers and local, regional and global level.

The Food and Agriculture Organization projects that Africa share in global cereals production will increase to 8.6 percent in 2050 from the current level of 4.5 percent. However, they are even more optimistic and say that with the right management and inputs, African crop yields have the potential to double or even triple. 

Africa’s agricultural transformation is based on a very simple idea. It is to aggregate the small farmers, which make up for 80% of the total farmer population in Africa, in to large groups and provide them with the right materials, training and access to markets. Hopefully, this simple idea will help about in bringing the ‘African Green Revolution’. Given the way world population is exploding, Africa will play a major role in satisfying this huge populations hunger. Program's like these have just started to bring about the necessary revolution, however, there is still a long way to go and numerous challenges to be overcome to realize Africa’s potential as a food basket for the world.