by Mehul Srivastava and Subramaniam Sharma
Indian billionaire Ravi Ruia has flown to Africa at least once a month for the past year and a half. He’s invested in coal mines in Mozambique, an oil refinery in Kenya, and a call center in South Africa. Soon, he may also have a power plant in Nigeria.
“Africa looks remarkably similar to what India was 15 years ago,” says Firdhose Coovadia, director of African operations at Essar Group, the $15 billion conglomerate headed by Ruia and his brother, Shashi. “We can’t lose this opportunity.”
Faced with increasing competition and a welter of bureaucratic obstacles at home, Indian companies are looking to Africa for growth. Since 2005 they have spent some $16 billion on the continent, vs. at least $31 billion for the Chinese, according to data compiled by Bloomberg and the Heritage Foundation, respectively.
Bharti Airtel, India’s largest mobile-phone provider, in June paid $9 billion for the African cellular operations of Kuwait’s Zain. In 2008, India’s Videocon Industries paid $330 million for two coal mines in Mozambique, and India’s state-run fertilizer maker bought an idled Senegalase phosphorus producer for $721 million.
Beyond those big deals are dozens of smaller acquisitions and investments by Indian companies. “Compared to India, valuations [in Africa] are quite attractive,” says Anuj Chande, who heads the South Asia Group at accounting firm Grant Thornton in London. “We’re expecting to see a lot of midsize deals across a variety of sectors.”
The Indians view Africa as a place where they can replicate the low-cost, high-efficiency business model they have honed at home. Like India, Africa has hundreds of millions of underserved consumers eager to buy products tailored to their needs. Consumer spending in Africa may double, to as much as $1.8 trillion, by 2020, McKinsey & Co. predicts, an increase that would be the equivalent of adding a consumer market the size of Brazil.
As a pioneer in sales of single-use sachets of soap and shampoo (along with Unilever (UL) and Procter & Gamble) for lower-income Indians, Mumbai-based Godrej Consumer Products understands “low-cost, value-for-money products,” Chairman Adi Godrej said in a May interview. In June his company acquired Nigerian cosmetics maker Tura, and in 2008 it bought South African hair-care company Kinky. “We want growth. Whether it’s from inside or outside India, we are agnostic,” Godrej said.
Indian companies also see Africa as a hedge against a possible slowdown at home. “If tomorrow the Indian economy was to take a U-turn, then at least you have other markets which are growing,” says Neeraj Kanwar, managing director of Apollo Tyres, India’s No. 2 tiremaker. His company bought South Africa’s Dunlop Tyres for $62 million in 2006, giving Apollo two manufacturing plants on the continent and brand rights in 32 African countries. Apollo aims to triple sales, to $6 billion, by 2015, with 60 percent of revenue from abroad, vs. 38 percent today. “Africa is going to give me growth,” says Kanwar.
Essar has endured endless squabbles with Indian landowners who refuse to make way for steel mills. Like other Indian companies tired of regulatory headaches at home, it moved into Africa and now has 2,000 employees there. Bangalore-based Karuturi Global, the world’s largest rose producer, couldn’t get enough land in India to compete with European and African rivals. Many times flowers wilted on the tarmac as cargo flights were delayed or canceled, including a big Valentine’s Day shipment.
So in 2004, Karuturi bought a small plot in Ethiopia, and sales have since grown elevenfold, to $113 million in the year ended Mar. 31. Karuturi now leases 1,200 square miles of land—larger than the state of Rhode Island—in Ethiopia and sells more than half a billion roses a year. “Africa offered us a scale we could never reach in India,” says Managing Director Sai Ramakrishna Karuturi. “I’d love to do more in India, but getting even 1,000 acres near Bangalore took years.”
wake up says:
IMF destroyed Mali’s agricalture sector by dictating a commercial crop rather than food crops to take priority. The result has been a lot of money for the tobaco industry, hunger for the people, and the government manages to remain in power with the help of the West. When you have a government that needs the West to stay in place, the end game is the same. I fear for Ethiopia’s fertile land.
November 12th, 2010 at 8:12 AM
wake up says:
Indians have destroyed their land thanks to intensive farming. This is a classic example of short termism. It is not sustainable. They will move to another virgin land after this land is exhausted. In the mean time, Woyane gets the dollars it desperately needs to stay in power. The next generation will certainly pay the price.
November 12th, 2010 at 8:16 AM
The names of the people who wrote this look like from India. They have full knowledge of the billionare investor and the consequence of this huge land grab. Does Ethiopia lack educated minds who can do this research and analysis before signing such long term deal to foreign investors ? no the problem is – the government in Ethiopia did not give educated Ethiopians a chance to give their opinion. The decision being made now as a long term consequence for generations to come.
November 12th, 2010 at 9:32 AM
Asmelash Tammirat says:
Folks: this is genocide by other means.
It is typical colonial economy whereby in previous periods at the start of the older form of direct colonialism, colonialist money men went to Africa forcefully grabbing fertile land areas from African farmers who were farming highly nutritive traditional staple agricultural products for human needs and human consumption and replaced them with cash crops production for the purpose of profit making for the few alone.
As it robbed fertile land areas from the indigenous farmers producing food for human needs, most researchers agree that it was the start of unjust system of African famine in the entire history of African existence. This is great injustice, leading the society deep down to the bottom of misery and endless impoverishment. The system is robbing our futurity and the futurity of our children down the line.
WE MUST RESIST IN UNITY WITHIN DIVERSITY!
November 12th, 2010 at 11:12 AM
It is indeed troubling to watch these enemies of the people selling the country away acre by acre to foreigners. What can we do to stop it. If it is allowed to continue unopposed, I think, in the near future we may not have a country left to call home. This is a clear manifestation that their mission is to loot and distroy the country. Never seen or heard in history, a country being distroyed by it’s own sons. I can’t imagine how much hate they harbour against their own country . What is driving them to this kind evil act?
November 12th, 2010 at 12:51 PM
1,200 square miles?? O_0
To give you a perspective of how large that is, consider that all of Addis Ababa is 205mi2. Therefore this plot is nearly 6 times the size of Addis Ababa.
Hmmm I wonder how much they paid the Ethiopian mobs.
November 12th, 2010 at 7:51 PM
November 28, 2010
by Mehul Srivastava and Subramaniam Sharma