The Tata family, including Tata Motors chairman Ratan Tata, 'run more than 100 companies in 80 countries'. (Photo: Denis Balibouse: Reuters)
India’s Tata Group is interested to invest in east African farming in order to export agricultural products back to India, where it anticipates a local food supply shortage over the next decades.
“One of the opportunities … is agriculture, and east Africa is extremely important. In the next 10 to 20 years, India will be a large importer of agricultural products … And we have started looking at that,” said Raman Dhawan, managing director of Tata Africa, during a recent KPMG Africa Conversation session.
“We have been looking at growing products in Africa, and then exporting them,” said Dhawan. He suggested that Tata could also process some of the commodities in Africa before shipping them to India.
Dhawan didn’t elaborate on why the company is specifically interested in east Africa, but the region’s relative proximity to India could be the reason. He added that Africa has abundant land and water as well as inexpensive labour.
Dhawan explained that Tata took a conscious decision to expand into Africa since the leadership of the Indian conglomerate acknowledged the need to export. “We came to South Africa and Africa to build a footprint on the continent, and we are looking at sectors which are untapped, such as the telecoms. We have successfully managed to establish ourselves in about a dozen countries including South Africa, which we consider as a benchmark for our operations in other African countries.”
During the session, Dapo Okubadejo, a partner at KPMG’s Nigeria office, said that he also sees major potential in Africa’s agriculture sector. “There are two major opportunities that I see in agriculture. When you look at a place like Nigeria, 45% of our GDP is contributed by agriculture, but the problem is it is done in such a small-scale subsistence nature. So the first opportunity is large mechanised farming.”
“Number two, there are significant issues with the value-addition element of [agriculture] … Processing is a huge opportunity, where you add value before you export. For instance, we produce cocoa … but we export the raw beans and we import chocolates,” he added.
Nick Matthews, part of the KPMG Africa M&A advisory team, said that up to now the continent’s agriculture sector hasn’t experienced much merger and acquisition (M&A) activity, although there is some interest in agri-processing. “I think people are starting to identify it as an area of opportunity. As with M&A strategy in Africa in general, part of the challenge is finding meaningful opportunities.”
Tim Bashall, head of strategy at KPMG Africa, noted that because of global food security concerns, Africa’s agriculture industry could be the next big investment trend. “I think the new uncharted territory … is actually in agriculture, which is a surprising development. It is around the fact that 60% of global uncultivated land is in Africa … I think that is the next wave that companies across the world are showing a lot of interest in.”