International business – India to Africa: We Feel You
As the African investment climate gets more interesting Indian companies are growing their interest in the region and increasing their presence in the Africa marketplace. India’s $ 15 billion Essar group is investing in Africa in power, steel and mining, telecommunications and construction. When the world wants to diversify, the growing opportunities in Africa provide an obvious answer. Essar’s Coovdia says there is a resurgence of entrepreneurial spirit across the continent and an increased willingness and openness to trade and investment.
African politicians and regulators agree that there is no alternative to the investment/development cycle.
Bharti Telecommunications entered a $9 billion deal to acquire mobile phone operations in 15 African countries this year is the biggest investment by an Indian company. In Sierra Leone, the Malawian Managing Director, Edward Sauti-Phiri, who resigned his position last week, is being replaced by a new Indian Managing Director. The Sierra Leone subsidiary of the telecoms company which has been Mobitel, Celtel and Zain in the past, has not declared a profit for the past 6 years. Market observers believe the team at Zain had not sufficient local knowledge to be able to manage the market successfully in the face of cut throat competition and rife anti-business practices.
Africa has 1 billion people and vast wealth in resources and minerals. Its consumer base is huge and its potentials are vastly untapped. Telecoms penetration in much of the continent remains below 12%, while formal banking is available for as little as 20% of the population.
However per capita income is growing, as well as education enrollment. Africa’s labour and land cost makes it attractive for commercial farming as only about 15 cent of the arable land in Africa is cultivated. In many African countries the availability of land and labor is not complemented with the right technology throughout the value chain and these countries need foreign investment to bridge the gaps.
However, Africa is still a hard place to do business. The challenges in Africa include bureaucracy, politics and history. Infrastructure is a huge factor.
By Thompson Jallow
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