India Inc. to use third country funds for Africa growth
India Inc. Monday said it can help build infrastructure and expand growth in Africa by using cheap funds from third countries like Japan and Singapore.
"Patient capital funds from Japan can be ustilised in Africa. Singapore can be another place from where funds can be accessed," said Noel Tata, chairman of Confederation of Indian Industry (CII) Africa Committee and managing director, Tata International.
"These funds can be used in developing long-term infrastructure development (projects) in Africa and help Indian companies which find it difficult to fund projects with such long gestation periods."
To grow their businesses, Indian companies require major capital infusion at cheaper rates to counter the growing influence of Chiness products and companies in Africa. Currently, China has made significant inroads in mining and infrastructure sectors in Africa. However, Chinese companies have been criticised for only employing Chinese workers in major projects and not developing local skill base in Africa.
According to Tata, who was speaking at the tenth CII-Exim Bank conclave on India-Africa Project Partnership, India Inc.'s experience in growing business in a capital-constrained domestic conditions will come in handy in Africa.
"We believe India's strengths and experience of operating in similar capital constrained conditions will be of great value to Africa," Tata said. "Africa needs constructive foreign investment and holds the promise of long-term business for India."
"The Indian model is primarily driven by the private sector and supported by the government sector. We look for support in funding infrastructure and construction projects in Africa."
Global consultancy firm McKinsey in its report titled "Joining Hands to Unlock Africa's Potential A New Indian Industry-led Approach to Africa" also pointed out that cheap third country funds can grow Indian businesses in Africa.
"Joint Japan-India fund (can be instituted) to grow business in mid-level infrastructure development projects in Africa. These projects require huge capital investments and long-term gestation time," said Rajat Gupta, director, McKinsey & Company.
"Africa is the next front for Indian businesses. Africa has some of the highest returns on investments from anywhere in the world. Indian firms would find this opportunity of great help in funding their projects in Africa."
Currently, Indian investments account for 6.5 percent of total foreign direct investment (FDI) inflows into Africa and India-Africa bilateral trade accounts for six percent of Africa's total trade.
The McKinsey report said that India Inc can quadruple its revenues from Africa to $160 billion by 2025 by developing its presence in sectors like information technology (IT), agriculture, infrastructure, pharmaceuticals and consumer goods.
According to Gupta, India can aspire to capture almost seven percent of the African IT services market, five percent of the fast moving consumer goods (FMCG) space, ten percent of power sector, and two-five percent of the agri-allied services.
The report added that as African nations continue to grow, they need constructive foreign investment and Indian industry could greatly contribute to their development by creating employment, spearheading talent and developing infrastructure.
"To do so, India can leverage its strengths, such as the experience of setting up successful distribution for fragmented consumer markets, and the entrepreneurial mindset required to navigate ambiguity," the report said.
Gupta added that Indian companies can play a vital role in skill development, business generation and execution.
(Posted on 10-03-2014)