Financial Daily from THE HINDU group of publications
Friday, Dec 03, 2004
Alliances & Joint Ventures
Industry & Economy - Foreign Trade
India Inc makes inroads into Africa Auto majors, pharma cos join the fray
New Delhi , Dec. 2
INDIA Inc is clearly upbeat on prospects in Africa. Domestic companies, including Tata Motors, Mahindra & Mahindra, Kirloskar, Candico, Dr Reddy's and Dabur, are among those headed in droves to capitalise on the business opportunities in the nascent African market and also tap it as a cheap manufacturing base.
The auto sector is clearly leading the charge, with Mahindra & Mahindra and Tata Motors inking joint ventures with African companies to enter the market. Utility vehicles major Mahindra & Mahindra has entered into a 51:49 joint venture with South African company, African Automotive Investments Corporation, and has already unveiled its Scorpio and Bolero vehicles. The Tata group has also forged a partnership with Senegalese investors to roll out a 30-seat bus called `Senbus' and is setting up a bus assembly factory in Johannesburg.
Incidentally, both Mahindra & Mahindra and Tata Motors plan to use South Africa as a springboard for accessing the rest of the continent. Tata Motors has already launched its Indica hatchback and Indigo sedan in South Africa and is eyeing a 7 per cent market share in the South African passenger car market by 2007-08. Two-wheeler major Bajaj Auto is also looking at Africa as a potential supply base to India. According to officials, Africa could clearly emerge as a supply base for India, since costs are much lower.
The Rs 125-crore Candico has also recently announced the acquisition of a plant in Tanzania and has unveiled its plans to set up a major plant in Johannesburg at an investment of $5 million.
According to Mr Karan Gupta, Executive Director, Candico (I) Ltd, "The Johannesburg plant, to be set up within a year, will cater to seven countries in the South African region. We are also scouting for joint venture partners in North and West Africa. Our strategy in the first phase of expansion is Third-World specific and since the MNC penetration in these regions is very low, we can steadily gain a firm foothold in these markets before moving further.''
While South Africa seems to be emerging as the first port of call for Indian companies, other markets of interest include Egypt, Tanzania, Sudan, Madagascar, Uganda and Zambia. For instance, a handful of Indian chemical companies have entered into joint ventures in Morocco and Tanzania, while the areas of interest include copper mining in Zambia, and oil in Madagascar and Sudan.
State-owned Oil and Natural Gas Corporation has made huge investments in Sudanese oil exploration and production and has bagged contracts to build a 720-km oil pipeline and to upgrade an oil refinery.
Also, Indian companies are treading beyond the traditional brick and mortar space to enter into the new business avenues. For instance, Tata Africa Holdings, a subsidiary of the Tata Group, is vying for a controlling stake in South Africa's second largest telephone network operator.
Indian pharmaceutical companies are also trying to get a foothold in Africa, with Dr Reddy's, Ranbaxy and Dabur among the home-grown pharmaceutical companies eyeing the African market.
"In case of pharma, there is a clear synergy between low cost Indian manufacturers of essential and bulk drugs and the economic standards of the people. It is also easier clinching deals with partners in South Africa to supply cheap drugs to the country and beyond," a domestic pharma sector player said.
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