Low cost, high returns make Africa attractive to India Inc


Economic Times | 5 Apr, 2011


NEW DELHI: Several Indian companies have planned huge investments in the African mining and agriculture sectors, buoyed by the prospects of high returns, on the back of rich resources and low labour and input costs, stakeholders maintain.

"Africa offers the most attractive returns when it comes to mining and agriculture. A lot of Indian companies are already there, and a massive investment is in the pipeline," K.S. Aswathanarayana, chief executive of Jaguar Overseas, told IANS.

Jaguar Overseas, a unit of the diversified DP Jindal Group, has interests in areas such as mining, engineering, construction, and power projects in six African countries, including the Democratic Republic of Congo, Mozambique and the Central African Republic.

Aswathanarayana said Jindal Group had already invested nearly $500 million in different African countries and planned to boost the investment in the coming years.

"Africa and Latin America are the two main areas left for mining. Big Indian companies like Tata and Jindal Group are investing heavily in Africa. These two companies have invested almost $500 million each in the African continent," he said.

He said cost of production of mines in most African countries was almost half that of India because of the easy availability of resources, cheap labour and relatively high selling price.

"Investment decisions are made on hard facts. Those who want to invest rely on numbers and the numbers are very good in Africa. Say you want to set up a cement unit plant, in India the pay back period is about seven to eight years; in Africa you can get your money back in two-three years," Aswathanarayana said.

He pointed out that a bag of cement (50 kg) is sold for $5-6 in India, while its price in some African countries is as high as $25.

Jaguar Overseas is building a cement plant in central African country Democratic Republic of Congo.

Aswathanarayana said most African countries were wooing Indian investments as they consider it critically important to give an initial push to their economies.

Expressing a similar view, Vice-Chairman of Tata Steel B. Muthuraman said Indian government and private firms were playing an increasingly important role in growth and development of the African continent.

"Bilateral cooperation has deepened both at the government and business levels. The challenge here is to ensure that the dividends of this partnership reaches to the significant numbers of the 1.2 billion people of India and the near 1 billion people of Africa," said Muthuraman.

"In the new world which is economically re-balancing itself, India and Africa will play an increasingly important role," he added.

On investment in the agriculture sector, officials said Indian companies were attracted to Africa because cost of farming in that region was almost half that in India.

"Cost of agricultural production in Africa is almost half that in India. There is less requirement of fertiliser and pesticides, labour is cheap and overall output is higher," S.N. Pandey, director of Agro Technology Division at Lucky Group, told IANS.

Pandey said his firm had already bought 3,000 hectares of land in Ethiopia and 1,500 hectares of land in Sudan. "We are already operating in eight African countries and plan to increase investment and operation in the region."

Ethiopia has offered 1.8 million hectares of farmland to Indian investors.

Pandey pointed out that the cost of production of cotton in India was around $900 per hectare while it was about $400-500 per hectare in most African countries.

"Development of modern agriculture in Africa is crucially important for global food security. Majority of fertile land in Africa is still left untouched. There is a lot India can do in it," he added.

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