Business

Riding The Horn

Africa’s unique challenges for Indian firms, and ways to crack them

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Riding The Horn
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It’s time Indian B-schools make African examples part of their curriculum in recognition of the continent’s ‘untapped potential’. Not only are there arrays of case studies that involve Indian companies on the continent, investments by Indian firms have ballooned to $35 billion by now. Going by what experts say, the investments from India will continue to rise, though many ventures are bound to fail. Getting Africa right will involve several adjustments. Here are five relevant management mantras:

1. Look at a map: Indian companies will have to stop thinking of ‘Africa’, instead of its constituent countries, says Debashish Das, head, HR, at the Gurgaon-based mid-size bpo, Spanco. “Culturally, each African nation is very different—but we talk of ‘Africa’ in general terms. That’s a big mistake Indian companies are prone to,” says Das. Last year Spanco acquired 51 per cent of mobile-service company Airtel’s call centre business in Africa. The acquisition made the way for Spanco to hire new people in Kenya, the major country it operates in so far. Spanco is expanding its independent presence there as well, Das says, with eyes on the existing and new markets of Nigeria, Niger, Chad, Tanzania and Burkina Faso. Managing the teams has taught him one thing—Indians want to be managers, particularly those who join bpos. “But in Kenya or Nigeria, where jobs are fewer and far between comparatively, the ambition is to be hired.”

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2. Small is beautiful. Really. A large number of smaller Indian companies have focused their businesses on Africa, but it has required rethinking. Though the media attention is cornered by larger companies and their big investments on a ‘new’ continent, says business lobby group FICCI’s Africa desk head Sheela Sudhakaran, it’s really the smaller ventures that have made room for Indian products. “And there is still room for small Indian companies, such as in the agriculture sector, in oil processing and equipment manufacturing—in Ethiopia for instance.”

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On the road A bus made by Tata Motors in Dakar, Senegal. (Photograph by Reuters, From Outlook, September 26, 2011)

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At present, SMES contribute 55 per cent to Indian exports. They want to be in African nations because of their growing manufacturing expertise and the relative comfort of finding a large Indian diaspora. There’s also a “pull factor”, says Aparajita Biswas, director of the Africa studies programme at Bombay University. African countries want to diversify the direction of their trade. While South Africa is India’s largest trading partner, other African countries benefit from Indian investments too. “The concessional loans that India is providing in infrastructure projects, agriculture, small business, have benefited African countries,” says Biswas.

3. Pricing products can be tricky. Focus: With Europe on the brink of recession and the US economy in stagnation, it isn’t just India, but China, Turkey and Brazil too whose small businesses are eyeing the cost-saving potential of Africa. In this competitive climate (an Indian entrepreneur running a mid-size firm that supplies equipment to Africa says the competition for business is so intense that getting an appointment with bureaucrats who approve projects is becoming increasingly difficult), it’s critical to recognise what market segment a firm wants to focus on in a new country.

“There is a market for every price band of products, that is why cheap Chinese stuff sells on the streets of Karikoo in Tanzania or other local markets,” says Renu Modi, an Africa studies research fellow at Gateway House, a foreign policy think-tank based in Bombay. She says African consumers are very price-sensitive, just like Indians, but Indian manufacturers tend to have the USP of “Triple A technology”—that is, appropriate, adaptable and affordable. “The markets in Africa are surely competitive, but India can have niche areas—pharmaceuticals, food processing, SMES etc,” says Modi.

4. An early starts pays: Tech trainer NIIT, which has been in Africa for over a decade (starting with Botswana), has trained nearly 1.5 lakh students in Nigeria, Ghana, Senegal, Botswana, South Africa and Zimbabwe. Ajai Manohar Lal, chief business officer, individual learning solutions—IT (International) at NIIT, says the company is now focusing on East Africa—Nigeria, Ghana and Botswana besides South Africa: “Governments of many African countries are beginning to realise how important ICT is. As they push for overall economic development, we find they are also allocating more to technical training,” he says. For NIIT, like other companies from India, breaking into Africa was a matter of timing it right.

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5. Watch out for quality concerns: One issue that keeps cropping up with Indian firms in Africa is that of quality—drug recalls, for instance, have hounded Indian manufacturers exporting to Africa, although Indian generics are considered high-quality and inexpensive. “Most African countries, including South Africa and Uganda, are very conscious about quality control,” says Biswas. Rabindra Gandhi, whose family-run company has supplied oil-extraction equipment to African firms (and other Indian firms in Africa) for the past five decades, says Indian firms often come up against quality issues as they work under the mistaken assumption that African consumers are easy to please. “They’re not. In fact, many African nations have historical ties with European countries—which means they’ve been using refurbished Land Rovers, which give Indian car-makers a run for their money,” Gandhi says.

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Finally, Indian companies’ entry to African nations has been largely a private enterprise. There’s been little official support. “Of the billions of dollars promised and supplied, no one is keeping track of what is actually spent in African nations, and how,” says Biswas. A bit like the Wild West, isn’t it?

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