The chief executive of ITC’s paper division Pradeep Dobhale tried an experiment recently. He led paper companies to consider importing wood from Africa, a radical departure from the set norm of importing from countries such as Malaysia and Indonesia.
“For most paper companies, it was common to import bamboo wood from either Indonesia or Malaysia,” says Mr Dobhale, who is also the head of the Indian Paper Manufacturers Association. “But decreasing availability led us to explore options of importing from Africa. As an experiment, we will initially import about 1,00,000 tonnes of wood and if it becomes viable, we’ll go for more.”
India consumes about 10 million tonnes of wood annually for making paper. Although the government is currently working on a plan that will allow public-private partnership in growing dedicated forests for the paper industry, a final picture will take some time. “Till then we will import from either Tanzania or Ethiopia,” adds Dobhale.
ITC thus joins a growing list of Indian industries that are excited about Africa due to its vast raw material resource and a growing consumer market. While developed countries once scrambled for dominance of Africa, a surging demand for consumer goods such as cars and commodities is now leading large Indian business houses to script strategies around the continent.
The paper sector’s plan closely resembles that of the metals industry. However in this case, metal companies are setting up shop in Africa to tap its vast raw material base. The Anil Agarwal-promoted Vedanta Resources and Tata Steel, India’s largest private steel company, are building large projects in the continent. While Vedanta has a copper mining project in Zambia through subsidiary Konkola Copper Mines, Tata Steel is building a ferro-chrome project at Richard’s Bay in South Africa.
“The large raw material resource base, basically copper concentrate, is what brought us to Zambia,” says Vedanta CEO Kuldip Kaura. “Our total investment in Konkola will go up to $700 million which is the largest so far in Zambia,” he said, adding that Vedanta is ramping up Konkola’s capacity to about 5,00,000 tonnes. It currently makes about 2,50,000 tonnes of copper.
The story is the same for other Indian metal companies. Public sector SAIL is one among several local companies that had recently sent geologists to scout the continent for iron, coal and other mineral deposits. And not without reason. Africa has 35% of our planet’s mineral reserves, including iron reserves (15%), copper (17%) and bauxite (43%).
Among the various Indian business houses, the Tatas are known to be most active in Africa. Apart from Tata Steel, the group’s other companies such as Tata Tea, Tata Motors are also very keen on the continent. The group has floated Tata Africa Holdings, a Johannesburg-based company that acts for all Tata operations in Africa.
Coffee, cars and metals are the priorities for the group. “We’ll make Uganda our hub for coffee exports across the world,” says Tata Coffee managing director MH Ashraf.
The company currently exports to Russia and the CIS countries and is now planning to tap the lucrative markets of Europe and China. Uganda is Africa’s second largest coffee producer, after Ethiopia.
India’s largest commercial vehicle maker, Tata Motors has for long been in South Africa selling cars, trucks and light commercial vehicles. Now encouraged by its success in South Africa, the company is opening dealerships in neighbouring countries such as Botswana, Lesotho and Namibia.
But as more companies foray into Africa, there is a growing concern. Security threats, especially kidnapping and extortion in countries like Nigeria, where China and India are increasing their investments, has thrown a dark shadow.
In May, three Indian petrochemical workers were kidnapped in Nigeria’s oil capital port, while two employees of Global Steel, a company with Indian origin, were kidnapped and later freed, again in Nigeria.