AFRICA –INDIATRADE MINISTERS MEETING3

RD

Tuesday, October 1 2013

BUSINESS relations between India and Africahave a rich historical context to them that goesback hundreds of years. Bilateral trade and in-vestments have, however, seen catalytic growthover the past decade or so in particular; in linewith the rising economic prosperity that hasbeen witnessed by their respective economies

as well as the efforts being initiated from both sides at all lev-els.

Africa has been growing at an impressive pace since theturn of the century, despite persistent volatility across theglobal economic landscape.

In fact, the economy of Africa has grown by over threetimes its size since 2002, with at least twenty seven countriesin the continent having attained the status of middle incomecountries.

With the current rates of growth, it is expected that at least40 African nations could potentially achieve that status by 2025.According to the IMF projections, eleven of the 20 fastest grow-ing economies in the world till 2017 will be based in the dynamiccontinent of Africa.

India is expected to be the world’s fastest growing economybetween 2011 and 2060 as per the OECD; growing at an averageannual rate of 4.9 per cent during the period.

As the two economies progress on their respective paths todevelopment, their bilateral relationship is expected to play anextremely critical role.

INDO-AFRICA TRADERELATIONS

INDIA shares a wide ranging relationship of cooperationand partnership with African nations across political,economic, science and technology, human resource devel-

opment, social, cultural and numerous other areas of mutualimportance.

Trade remains at the very core of the bilateral relation-ship. Africa accounted for around 8.92 per cent of India’s to-tal imports in 2012, as compared to just 3.5 per cent in 2005.

On the other hand, India garnered a share of 5.2 per centof Africa’s total trade in 2011, and is the fourth largest trad-ing partner for the African continent after EU, China and US.

In value terms, bilateral trade has improved from US$ 5 bil-lion in 2001 to US$ 12 billion in 2005 and US$ 70 billion in 2012.India’s exports to Africa for 2012 stood at US$ 27.25 billion,while imports from Africa had reached US$ 43 billion duringthe year.

Private companies from India are also ramping up on theirinvestments in Africa, with the key focus sectors being tele-com, IT, energy and automobiles.

In value terms as per figures for 2012, India’s top five trad-ing partners in Africa were Nigeria (US$ 16.56 billion), SouthAfrica (US$ 12.34 billion), Angola (US$ 8.55 billion), Egypt (US$5.46 billion) and Kenya (US$ 3.88 billion).

Together, they account for around 67 per cent of total bi-lateral trade between the two regions. During the same year,bilateral trade with India also crossed the figure of US$ 1 bil-lion for eleven African countries – Nigeria, South Africa, An-gola, Egypt, Tanzania, Algeria, Morocco, Libya, Mauritius,Mozambique and Ghana.

The top five African export markets for India for the yearwere South Africa (US$ 4.95 billion), Kenya (US$ 3.78 billion),Egypt (US$ 2.85 billion), Nigeria (US$ 2.82 billion) and Tanza-nia (US$ 1.59 billion).

Together, they accounted for 58.72 per cent of India’s totalexports to Africa.

India’s exports were led by petroleum (crude & products),vehicles (other than railway & tramway), pharmaceuticalproducts, machinery & instruments, and rice (other than Bas-mati); apart from textiles, plastic and linoleum products, pa-per and wood products, iron and steel, rubber manufacturedproducts, agro products and chemicals.

At US$ 27.25 billion, India’s exports in 2012 grew at a rateof 17.05 per cent year-on-year.

Conversely, the top five exporting countries from Africa toIndia in 2012 were Nigeria (US $ 13.29 billion), South Africa(US $ 8.77 billion), Angola (US $ 7.26 billion), Egypt (US $ 2.61billion) and Morocco (US $ 1.43 billion); and they accountedfor 77.7 per cent of India’s imports from Africa.

Imports by India were led by petroleum (crude & products),gold, coal, inorganic chemicals and iron & steel.

Africa now has a significant trade surplus with India. Ex-cept Kenya, all the top five trade partners have a trade surpluswith India. Key import items from the Indian perspective arepetroleum, metallurgical goods, gold, raw cotton, fruit, vegeta-bles and preparations, chemicals, non-metallic mineral man-ufactures, precious stones, textile yarn, nickel, and ferro-al-loys from Africa.

Crude oil is a crucial component of the trade relation, andAfrica now supplies around one-fifth of India’s crude oil im-ports. India also imports a significant quantity of rough dia-monds for its diamond cutting industry, and uranium fromNiger, Uganda and Tanzania for its nuclear power sector.

Value addition within Africa has been deemed as impor-tant for African countries to be able to benefit further from thetrade relationship.

Already, FDI into Africa in the natural resources space hasmade a significant shift towards processing activities in min-ing and quarrying, as opposed to basic extraction.

Business travel and tourism are the largest services exportsectors in Africa, and have been deemed as high potential ar-eas going forward in the context of trade with India.

INDIA announced the Duty Free Tariff Preference (DFTP)Scheme for the Least Developed Countries (LDCs) in April2008. This scheme provides duty free access to 85 per cent of

India’s tariff lines and preferential duty on 9 per cent of tarifflines.

These incentives provide several LDCs in Africa with an en-hanced market potential in India, and 21 LDCs in the continenthave subscribed to the scheme so far. In particular, the productsthat are relevant to Africa under the scheme include cotton, co-coa, aluminium ores, copper ores, cane-sugar, ready-made gar-ments, fish fillets and non-industrial diamonds.

Exports from African LDCs to India have been growing at aCAGR of over 45 per cent between 2005 and 2011; and India nowaccounts for around 5.8% of their total exports to the world.

Crude oil is the key driver of exports from these countries.African LDCs, however, also contribute immensely to exports ofedible vegetables, edible fruits and nuts (unshelled cashew inparticular), where their share of total African exports is morethan 61 per cent.

In addition, they have a share of 69 per cent in the exports of

copper and copper products and also contribute significantly toexports of inorganic chemicals and iron and steel.

EXIM Bank of India has been providing lines of credit (LOCs)to African governments to support Indian exports of eligiblegoods to the region on deferred payment terms, as directed bythe Government of India.

It introduced Buyer's Credit under Government of India(GOI)’s National Export Insurance Account (NEIA), in collabo-ration with Export Credit Guarantee Corporation (ECGC) inApril 2011. With this product, the bank provides credit for over-seas sovereign governments and government-owned entities forimporting goods and services from India on deferred creditterms.

Buyer’s credit made under NEIA complements the LOCs sup-ported by the Government Of India that are provided on conces-sional terms with tenures going up to 20 years. This providesvaluable risk cover to medium and long term overseas projectsof high value.

In addition, a 2 per cent Interest Subvention Scheme for Pro-ject Exports through EXIM Bank for countries in the SAARC re-gion, Africa and Myanmar, has also been launched by India.

The scheme aims to improve India’s exports to these coun-tries through long term concessional credit via EXIM Bank, asco-financing in key infrastructure sectors like drinking water,housing, irrigation, road projects and renewable energy.

GROWING INVESTMENTS INAFRICA’S FUTURE

AFRICA offers immense potential for FDI due to its robustfundamentals, which include favourable demographics;improving macroeconomic and business climate; greater

private sector involvement; growing middle class; rich naturalreserves base; quickening pace of urbanisation and progressiverelations with other emerging countries.

As per an analysis by the World Bank, 45 out of the 46 sub-Saharan African economies have improved their regulatoryregime for business since 2005.

More than a third of the top 50 global economies that havemade the most significant improvements in this area are fromAfrica.

FDI into the continent grew by 5 per cent on a year-on-yearbasis to reach US$ 50 billion by 2012, which is a growth of 5 percent year-on-year as opposed to a decline by 18 per cent year-on-year in global FDI during the year (UNCTAD World InvestmentReport 2013).

Key sectors that have attracted investment include manufac-turing, services, infrastructure, ICT, financial services and edu-cation. Interestingly, South Africa was the largest investor in FDIprojects in African countries other than itself in 2012.

There has been an unprecedented surge in FDI inflows fromIndia as well, led by private and public sector enterprises likeTata Group, Vedanta, Bharti Airtel, Jindals, Cipla, Ranbaxy,Videocon, Shapoorji Pallonji, Mahindra & Mahindra, Kir-loskars, Coal India Limited, Emami, Marico, Dabur, ONGCVidesh, Essar, Tata Group, Godrej group, Escorts and Apollo. FDIfrom India to Africa stands at around US$ 50 billion currently,and spans sectors like telecom, IT, energy, engineering, chemi-cals, pharmaceuticals and automobiles (as per figures from CIIand WTO).

Some of the major areas where investments have taken placeare as follows:

1Consumer-oriented industries: Driven by the immense

potential in the African market place, a number of com-

panies have invested in scaling up their presence in con-

sumer-oriented sectors:

● Bharti Airtel entered the African telecom market with the ac-quisition of Zain Telecom’s operations in 15 African countries(Zain Africa International BV) for an enterprise value of US$10.7 billion in 2010. With the agreement to acquire Warid Tele-com Uganda made in April this year, Bharti Airtel has strength-ened its position as the second largest telecom player in Uganda.● Tata Motors, which has invested around US$ 700 million since1994 in its base in South Africa, has emerged prominently amongAfrica's fastest-growing passenger vehicle manufacturers. Fromits base in South Africa, where it has invested around $700 mil-lion since 1994, it exports a range of vehicles to markets in theSouthern African Development Community (SADC) and has laidout plans for an assembly plant in Kenya. Mahindra & Mahin-dra has also set up base in South Africa and exports within theregion to Zimbabwe, Zambia, Botswana, Swaziland andNamibia. The company has also announced plans for vehicle as-sembly operations in South Africa. Hero MotoCorp has an as-sembly plant in Kenya for the manufacturing of its 100cc Dawnmotorcycle. TVS Motor Company has also commissioned an as-sembly line in Kenya and plans a large assembling plant inUganda.● There is a rising interest from Indian public sector banks, whoare setting up a number of branches and subsidiaries acrossAfrica. ● Godrej Consumer Products Ltd. has made four strategic acqui-sitions in Africa over the past five years, and now owns fourbrands – Inecto, Renew, Tura and Darling – in the haircolourants, soaps and hair extensions product categories. Re-cently, the company has entered Nigeria’s home insecticide mar-ket with its Good Knight brand.● India is a key supplier of pharmaceutical products to Africancountries, a partnership that has been most visible in the areaof low cost AIDS medications. Indian pharma company Ciplamade headlines in 2001 when it came up with Triomune, an af-fordable version of the anti-AIDS treatment that is a combina-tion of three generic medicines; bringing down the treatmentcost from around US$ 12000 a year to just around US$ 300 a year.In July this year, it acquired 100 per cent of the issued shares inCipla Medpro (the company that was supplying its drugs inAfrica) for 4,507 million South African rand (Rs 2,707 crore).

2Infrastructure: Africa needs an influx of at least

around US$ 90 billion every year for the next ten

years for infrastructure maintenance and upgrada-

tion. Some of the prominent cases of Indian FDI in this

area are:

● Reliance Industries has purchased 10 plots of prime land inNairobi for a price of around US$ 34 million for commercial andresidential projects● The Government of India has approved 123 lines of credit(LOCs) since 2002-03 amounting to US$ 5.9 billion, which havecontributed significantly towards building of sustainable infra-structure in Africa. During the second Africa-India Forum Sum-mit (IAFS-II) in May, 2011, the Hon’ble Prime Minister of Indiaannounced LOCs worth US$ 5 billion to Africa for the next threeyears.

● A sum of US$ 300 million has been promised by Export Import(EXIM) Bank of India for the construction of a 210 km rail linkbetween Asaita in Northeast Ethiopia and Tadjourah in Dji-bouti. Lines of credit will be opened once the technical studiesare completed.

3Natural resources/mining/agriculture: Africa is a

rich storehouse of natural resources that attract FDI.

Oil & gas and mining are key areas of interest. Some

key investments are:

● Vedanta Resources, India’s largest mining and non-ferrousmetals company has made investments of around US$ 4 billionin Africa’s natural resources space in the past 10 years. ● Commercial agriculture has been a major focus area for In-dian companies, accounting for 40 per cent of the investments.Instances include M/s Karaturi – 1,00,000 hectares, Bho-Bio–27,000 hectares, Ruchi Soya – 25,000 hectares, Sannata Group -10,000 hectares, White Field Cotton – 10,000 hectares.● Kirloskar Brothers, which manufactures pumping systems forall types of fluid movement, has invested in two factories inAfrica and also set up a large service centre in Egypt for its sub-sidiary. It has been operating successfully in the African marketfor over five decades, and entered into an MoU with the Mechan-ical and Electrical Department (MED) at the Egyptian govern-ment's Ministry of Water Resource and Irrigation, wherein thecompany will assist in building and upgrading skill sets of theengineers and technicians at MED.

Continued on Page 2

INDIA & AFRICA:STRATEGIC PARTNERS IN PROGRESS

Ranbaxy South Africa offices in Centurion.

KGKSouthAfricaUnit.

BUSINESS REPORT Tuesday, October 1 2013

Continued from Page 1

● Jindal Steel & Power Ltd. (JSPL) has been consistently ramp-ing up on overseas investments to boost its steel, power and min-ing businesses; and Africa is one of the key focus markets. Jin-dal Africa is now engaged in a number of exploration andmining projects in South Africa (coal and iron ore); Mozam-bique (coal); Madagascar (limestone); Tanzania (copper) andZambia (copper). In 2012, it acquired Canadian coal companyCIC Energy Corp. (CIC) for around US$116 million through amerger of its subsidiary Jindal BVI Ltd. (JBVI) and CIC. Thisdeal provides JSPL with access to CIC’s high quality thermalcoal resources in SE Botswana.

4Capacity building: The Indian Technical and Eco-

nomic Cooperation Programme (ITEC) has been both

lauded and replicated across the board due to its flex-

ibility and adaptability. Under the Action Plan of the

agreed Framework of Cooperation, there has been signif-

icant increase in the scholarships and training positions

as well as in the number of specialised courses that are

relevant for Africans:

● India is in the process of building over 100 institutions inAfrica for human resource development and enhanced eco-nomic growth. Some of the prominent ones are India-Africa In-stitute of Foreign Trade, India-Africa Institute of EducationalPlanning and Administration, India-Africa Diamond Institute,

India-Africa Institute of Information Technology, and India-Africa Institute of Agriculture and Rural Development. ● Over 22,000 new scholarships are on offer for African Studentsin diverse academic courses and training programmes, whichalso include special agriculture scholarships and C.V. Ramanfellowships. Till 2014, India has offered over 700 CV Raman Sci-entific Fellowships. India has also committed US$ 700 millionto develop training institutions in Africa. ● Private sector players from India like NIIT and Aptech see im-mense potential for skills development and training in Africain areas like IT and animation; and have been investing in build-ing a strong infrastructure to impart this training over theyears.

With the numerous strategic initiatives being taken to im-prove bilateral relations, India and Africa are truly emergingas partners in progress. To improve trade and investment fur-ther, a Preferential Trade Agreement (PTA) is currently beingnegotiated with the South African Customs Union.

Besides this, a Free Trade Agreement (FTA) is also being dis-cussed between India and Common Market for Eastern and

Southern Africa (COMESA) by a Joint Study Group institutedfor the purpose.

Similar agreements are also being mooted with other

African Regional Economic Communities (RECs).At the core of the annual ‘India-Africa Trade Ministers Di-

alogue’, which was first held at Addis Ababa on May 21, 2011,before the 2nd Africa-India Forum Summit, is a realisation ofthe importance of the India-Africa trade relationship, and itspositive implications for both economies.

The 2nd meeting was held on March 17, 2012, in New Delhi.During this Summit, Ministers from India and Africa set a bi-lateral trade target of US$ 90 billion by 2015 as opposed to US$70 billion earlier, in view of the remarkable progress made inthe past few years.

In addition, the Ministers from both sides also announcedthe launch of the India-Africa Business Council (IABC) and Cot-ton Technical Assistance Programme in C-4 countries (BurkinaFaso, Benin, Chad and Mali), Malawi, Nigeria and Uganda; be-sides coordinating their positions on the ongoing Doha Round.

The 3rd ‘Africa-India Trade Ministers Meeting’ meeting isscheduled to be held in Johannesburg, South Africa, on Octo-ber 1, 2013.

It can be seen that India-Africa trade and investment rela-tions have been greatly enhanced over the past few years,thanks to initiatives that have being taken by stakeholders atall levels in both regions.

The upcoming 3rd Africa-India Trade Ministers Meeting isexpected to take this strategic engagement further to the nextlevel.

i. India-Africa Trade Ministers MeetingsAn annual ‘India-Africa Trade Ministers Dialogue’ to review economicrelations between the two regions, enhance India-Africa trade & in-vestment linkages and coordinate position in the ongoing negotia-tions in the Doha Round, is being held since 2011. The 1st Africa-India Trade Ministers Meet was organised at Addis Ababa on May21, 2011, prior to the 2nd Africa-India Forum Summit there, and thesecond meeting was held on March 17, 2012, in New Delhi. The 3rdAfrica-India Trade Ministers meeting is scheduled to be held be-tween September 30 and October 1, 2013 in Johannesburg, SouthAfrica. ‘Joint Statements’ have been issued during the two meet-ings that have been held so far.

ii. Duty Free Tariff Preference (DFTP) Scheme India has allowed Duty Free Quota Free (DFQF) access via the DFTPScheme to Least Developed Countries (LDCs), of which 33 are inAfrica. The scheme was launched in August, 2008, with tariff reduc-tions that are spread over a period of five years.

iii. ‘India-Africa Business Council’ (IABC) India-Africa Business Council (IABC) has been set up to enhancebilateral economic relations and also address outstanding issues to-wards that end. The 1st meeting of the IABC was held on March17, 2012, in New Delhi in conjunction with CII-Africa Conclave andthe 2nd India-Africa Trade Ministers’ Meet. During this meeting, fiveWorking Groups were set up to determine sector-specific opportu-nities and enhance collaboration for improving trade and investmentrelations:i. Core infrastructure (including energy, oil and gas and construction) ii. Agri-based and food processing industries & textilesiii. Value-added manufacturing (including mines and minerals)iv. Services including connectivity (air and sea), health, IT, telecom,banking and pharmaceuticalsv. Skills development

The 2nd meeting of IABC is scheduled between September 30and October 1, 2013, in Johannesburg, South Africa, in conjunctionwith the Africa-India Trade Ministers Meet.

iv. India-Africa Investment E-Portal India-Africa Investment E-Portal has been launched to provide de-tailed information on investment opportunities and the overall invest-ment environment in India and Africa. The India-Africa InvestmentE-Portal was launched by Mr Anand Sharma, Hon’ble Minister ofCommerce and Industry, Government of India, in Addis Ababa dur-ing the 1st Africa-India Trade Ministers Meeting in May, 2011. In-dia-Africa Business Guides and E-Newsletters that are released by‘Invest India’ are also available at the portal.

v. India-Africa Business Guides & E-Newsletter It has been proposed to bring out India-Africa Business Guides forthe five regions of Africa. These guides will provide a detailed in-sight into investment policies in the major countries of each region,important sectors, processes to be undertaken while setting up busi-nesses, taxation issues, important projects, etc. The Guide for Eco-nomic Community of West African States (ECOWAS) was releasedby the Mr Anand Sharma, Hon’ble Minister of Commerce and In-dustry, Government of India, during The India Show at Accra,Ghana, in July, 2012. The business guides for SADC & EAC regionsare scheduled for launch during the 3rd Africa-India Trade MinistersMeeting scheduled for September 30-October 1, 2013. Invest In-dia has also been bringing out monthly e-newsletters, and ten edi-tions of these newsletters have been released till date.

vi. Trade-related capacity building a. Indian Institute of Foreign trade (IIFT) has conducted thirteen Ex-ecutive Development Programmes on International Business inAfrican countries since April 2009; namely Ethiopia, Egypt,Botswana, Namibia, Angola, South Africa, Uganda, Senegal,

Rwanda, Burkina Faso, Sudan, Mauritius and Seychelles. b. Centre for WTO Studies (CWS), India, has conducted six train-ing programmes in the last two years, with active participation fromNigeria, Sierra Leone, South Sudan, Zimbabwe, Benin, Ghana, Su-dan, Tanzania, Yemen, Kenya, Madagascar, Guinea, Mauritius,Lesotho, Egypt, Ethiopia, Uganda, and Mali. These programmescovered the following areas on WTO and Doha Round Negotiations- Agriculture, Services, TRIPs and RTAs (including Rules of Originand WTO Plus Provisions), Anti-Dumping, Subsidies, Safeguards,Dispute Settlement. c. A capacity building workshop was conducted by Invest India inJanuary, 2013, for the benefit of investment promotion agencies(IPAs) in Africa at New Delhi, India. The workshop was attended by23 participants from investment promotion agencies across 15African countries. d. Confederation of Indian Industry (CII) has organised ‘Training Pro-grammes to strengthen Chambers/Industry Associations in Africa’.The first programme was held for 30 participants in March, 2012,at New Delhi. Under IAFS-II, the second programme was held forthe benefit of senior representatives of Apex Chambers of Com-merce/Industrial Associations from African countries, in March 2013.This was attended by 27 participants from 17 African countries (Al-geria, Botswana, Burkina Faso, Burundi, Cote d'Ivoire, Ethiopia,Gambia, Mali, Malawi, Namibia, Nigeria, Senegal, Tanzania, Togo,Tunisia, Zambia and Zimbabwe). The third programme is scheduledfor 2014.

vii. Technical Assistance Programme in cotton sectorA Technical Assistance Programme for cotton support in a selectedgroup of African countries - Burkina Faso, Benin, Chad, Malawi (theCotton-4), Nigeria and Uganda – is under implementation over athree-year period (2011-14). It was officially launched during the 2ndIndia-Africa Trade Ministers Meet on March 17, 2012, in New Delhi.The programme is being implemented by premier institutions from

the cotton industry in India.The Technical Assistance Programme (TAP) addresses the fol-

lowing broad areasl Increasing cotton production (area expansion and productivity en-hancement).l Improving extension & support service efficiency, enhancingR&D/quality control.l Marketing/distribution infrastructure.l Strengthening/developing cotton residue-based value addition in-dustry.l Creating/strengthening the downstream industry in textiles andclothing.

viii. Training Programme on Design Intervention for the BasketryCraft for improvement of women artisans of rural AfricaAs a part of the 2nd India-Africa Forum Summit, the National Insti-tute of Design (NID) has undertaken a design intervention project inMarch, 2012, under the aegis of the Ministry of External Affairs, andwith the active support of the Department of Industrial Policy & Pro-motion.

The project aims at empowering the rural, women basketryweavers of five African countries – Zimbabwe, Ethiopia, Ghana,Malawi and Zambia. Under this project, 125 training positions havebeen offered for craftswomen and artisans from these countries overa period of three years.

In the first phase, Zimbabwe was appointed the lead country. Under the programme, 40 new products, 20 each in the bam-

boo and sisal fibre categories, were developed and 50 basketweavers were enrolled; wherein three training workshops were or-ganised.

An exhibition cum buyer-seller meet was also organised inMarch, 2013, to showcase these products and provide market ac-cess in India. In 2013-14, similar programmes are scheduled to beheld for Ghana and Ethiopia.

A. Exports from India to Africa (US$ million)

S. No. Region 2011 2012 Percentagegrowth in

2012

1. SOUTHERN AFRICA 5,975 6,915 162. WEST AFRICA 5,968 6,526 93. CENTRAL AFRICA 671 833 244. EAST AFRICA 6,362 7,496 185. NORTH AFRICA 4,308 5,484 27

TOTAL 23,284 27,254 17

B. Imports from Africa to India (US$ million)

S. No. Region 2011 2012 Percentagegrowth in

2012

1. SOUTHERN AFRICA 15,694 16,770 72. WEST AFRICA 16,354 18,505 133. CENTRAL AFRICA 46 99 1144. EAST AFRICA 553 793 435. NORTH AFRICA 7,250 6,759 -7

TOTAL 39,897 42,926 8

C. Total bilateral trade between India and Africa (US$ million)

S. No. Region 2011 2012 Percentagegrowth in2012

1. SOUTHERN AFRICA 21,669 23,685 92. WEST AFRICA 22,322 25,031 123. CENTRAL AFRICA 717 931 304. EAST AFRICA 6,915 8,289 205. NORTH AFRICA 11,558 12,243 6TOTAL 63,181 70,180 11

INDIA & AFRICA:STRATEGIC PARTNERS IN PROGRESS

Recent Initiatives in India-Africa Economic Relations

A medium sized TATA truck rolling out of the assembly line in South Africa. (ABOVE)

A view of the assembly line for trucks at the TATA Motors plant in Rosslyn. (BELOW)

Minister Anand Sharma addressing the 1st Africa-IndiaTrade Ministers Meeting, Addis Ababa.

Ranbaxy Be-Tabs Manufacturing Plant.

(ABOVE &RIGHT)

KGK South Africa

Polishing Unit.

(LEFT)KGK South Africa QualityControl Unit

BUSINESS REPORT Tuesday, October 1 2013

INDIAEpicentre of growth and opportunityThe economy of India has left a lasting

impression on investors in both developed

and developing economies with its

achievements in the past two decades.

Successes like the emergence of a world

class IT industry, the rapid growth in exports

across sectors and the development of a

sophisticated financial sector have made

India one of the top choices for investment.

The domestic economy has evolved rapidly

over the past two decades and the last seven

to eight years have seen the economy shift to

a higher growth path.

The country has also seen rapid

financial integration with the world due to

trade globalisation over the years. Rapid

liberalisation and globalisation in trade

have ensured that the fruits of development

are shared by urban and rural India;

bringing tremendous opportunities for

Indian enterprise and boosting employment

growth. On one hand, a strong domestic

market backed by a large pool of talented

workforce has been an attractive proposition

for foreign investors. And on the other hand,

diversifying its reach beyond the developed

world and developing the domestic

manufacturing industry has provided a

fillip to India as a destination for sourcing

quality products and services.

A STRONG DOMESTIC MARKETBeing a young nation of 1.2 billion people

with a median age of 24 years, India is being

viewed from a long term perspective by

foreign investors. It is expected to emerge as

the world’s largest consumer market, with

aggregate spending of US$ 13 trillion by 2030

(Deloitte report). Factors like rising average

income levels among the Indian middle

class are expected to drive aspirational

behaviour, as Indian consumers seek out

higher quality products, better healthcare

and more sophisticated services. At the

same time, it is important to note that total

rural income in India is expected to go up

from the current US$ 572 billion to US$ 1.8

trillion by 2020-21. The availability of a

large pool of skilled workforce to tap the

growth potential available in the country

makes India an investor-friendly business

destination. For instance, India has the

second largest pool of scientists and

engineers and the second largest English

speaking population across the world.

The country is expected to be home to

25 per cent of the world’s skilled workforce

by 2025.

The future looks equally promising.

India today has the world’s second largest

telecom network based on the total number

of telephone users with over 900 million

mobile phone subscribers. India is already

the world’s largest market for tea; largest

two-wheeler market; fastest growing

market for chocolates; fastest growing

market for luxury goods and among the

fastest growing internet markets in the

world. Going forward, there are many

sectors that offer a huge growth potential.

For instance, India’s infrastructure sector

alone is expected to attract investments

worth US$ 1 trillion during 2012-17.

Foreign direct investment (FDI) stood

at US$ 198 billion during April 2000 to June

2013 growing at a compounded annual

growth rate (CAGR) of 20.2 per cent during

this period. Almost every well-known

multinational company (MNC) has a base

in India. R&D programmes of over 100

Fortune 500 companies are run from India,

with over 750 MNC-owned R&D facilities.

For the current financial year alone, FDI

stood at US$ 5.3 billion from April 2013 to

June 2013.

EXPORTS AND MANUFACTURING GROWTHMNCs are leveraging India as a production

hub for global markets. India has achieved

many milestones in the area of exports

and manufacturing over the past years. It

is already the world’s largest rice exporter;

largest tractor manufacturer; largest

bicycle manufacturer; largest producer of

spices and second largest manufacturer

of biscuits. In fact, India is expected to be

the Asia’s fastest growing importer and

exporter over the next five years. India stood

on the fourth position in the 2013 Deloitte

Global Manufacturing Competitiveness

Index and is expected to become the world’s

second most competitive manufacturing

nation in the next five years.

Indian exports stood at US$ 300 billion

at the end of 2012-13. Over the past few

years, India has not only expanded

its geographical reach but has also

strengthened its global export base. The

emergence of new entrepreneurs and

a flourishing micro, small and medium

enterprises (MSME) sector are playing a

catalytic role in the development process

of emerging economies such as India.

The MSME sector is the second largest

employer of manpower (after agriculture)

in India; the sector’s output also constitutes

almost 40 per cent share of the value added

by the manufacturing sector and makes

up approximately one third of India’s

exports. India has the potential to build

about 2,500 highly scalable businesses in

the next 10 years. These businesses could

together generate revenues of about Rs. 10

lakh crore and contribute to the GDP and

employment creation at the same scale as

for the IT and ITeS industry.

The rise of Indian manufacturing is

expected to play an equally important

role in the economic development in

India. India’s manufacturing sector has

the potential to create up to 90 million

new jobs by 2025. From telecom to auto

to pharma to consumer durables and

electronics, India’s vast supply of cost

effective yet skilled engineering manpower

and conducive investment climate are

prompting a slew of global companies to

look towards India as their manufacturing

base; and the nation’s consummate design

skills are already attracting a slew of

technological orders. The government

plans to raise the share of manufacturing

in India’s GDP from the present 16 per

cent to 25 per cent by 2025, and is in the

process of ramping up infrastructure and

ensuring an enabling policy environment

for manufacturing industries. With the

impetus being provided, India is expected

to become the second largest economy in

manufacturing in the next five years, and

promises immense potential as a sourcing

destination; besides its well established

credentials as one of the most lucrative

consumer markets globally.

3rd AFRICA-INDIA TRADE MINISTERS MEETING | 3 BUSINESS REPORT | Tuesday, October 1, 2013

Source: Department of Industrial Policy & Promotion; Ministry of Commerce & Industry, Government of India

INDIA: Inventing the FutureA US$ 20 cellphone, a portable refrigerator, a car that sells for US$ 2200

A US$ 2000 artificial heart, a US$ 1500 portable ECG machine

India is renowned for frugal engineering

Breakthrough space technology

25% of world’s workforce by 2025

World’s IT nucleus The research hub

2nd on the solar index 3rd on the wind index4th on renewable attractiveness index World’s spice bowl

Pharmacy of the World Credible Affordable Sustainable

Tuesday, October 1 2013 BUSINESS REPORT

4 | 3rd AFRICA-INDIA TRADE MINISTERS MEETING Tuesday, October 1, 2013 | BUSINESS REPORT

SUNIL BHARTI MITTALChairman and Group CEO, Bharti Enterprises

and Co-Chair, India-Africa Business Council

Africa is the continent of the future and has the potential to become a major growth

engine for the global economy. India and Africa have had historic trade and cultural

ties and worked closely during the Non-Aligned Movement. To me, India and Africa

are natural allies and their partnership adds immense value to South-South economic

cooperation. I am confident that the economic engagement between the two partners

will deepen further in the years to come and contribute to the well-being of their respective

populations.

R S AGARWALJoint Chairman, Emami Group of Companies

Africa is a gold mine, but it doesn’t come easy! With explosive population growth & a

youthful market with 50 per cent of inhabitants below 20 years of age coupled with

over a 100 million households with discretionary income, it offers great potential

for progressive Indian companies like Emami. The value orientation of the African

consumer is very similar to the Indian consumer, where both quality & price are equally

critical, which is something Emami understands well. Finally, it’s about timing, and the

time is ripe to grow one’s presence in Africa.

H M NERURKARMD, Tata Steel

Availability of raw materials for steel can make the African continent a favourable long-

term destination for steel manufacturing. The mineral-rich African continent could

provide new coking coal sources, which can de-risk the steel industry’s current dependence

on existing coal sources. Africa will also present opportunities to global producers as a

steel market in the medium to long term.

QIMAT RAI GUPTACMD, Havells India

The India-Africa relationship is distinctive and owes its origins to a common past that

they share – a past that witnessed a struggle against colonialism, poverty and illiteracy.

India and the African nations have been building strong and mutually beneficial

associations. Africa offers diverse opportunities for trade and investments. Africa is one

of the fastest growing regions in the world and we are happy to be participating and

contributing in the growth story.

AMIT BURMANVice Chairman, Dabur India Limited

At Dabur, we had realised the potential that Africa offers much earlier than others

and have put in place substantial investments in markets like Egypt and Nigeria.

We have manufacturing facilities in both these markets and are in the process of

expanding our presence in Africa and exploring the feasibility of establishing new

manufacturing facilities to cater to the growing demand for our range of oral care and

personal care products. African countries have been witnessing similar growth rates

in the consumer category, as we have seen in India in the past years and there are not

enough organised players in that market. It is home to 12-13 per cent of the world’s

population and creating products tailored to suit their needs would be a key to success

for any company.

SANJAY KIRLOSKARChairman and MD, Kirloskar Brothers Limited

Kirloskar Brothers Limited is in the business of manufacturing pumping systems for all

kinds of fluid movement. The fluids range from water to slurry. The African continent

is one of the biggest growth markets in all fields, be it infrastructure, agriculture or

development of industry including the extraction industry. All such growth requires a

variety of fluids to be moved, and so I believe that Africa as a continent gives our industry

one of the biggest growth markets. We have recognised this potential and as such have

set up two manufacturing facilities in South Africa and a large service centre of our

subsidiary in Egypt. I personally believe that the continent provides opportunity for all

kinds of businesses to grow.

P R VENKETRAMA RAJAVice Chairman & MD, Ramco Systems Limited

Ramco has been closely associated in several African countries over the past 10 years. Our

customers have deployed the mission critical Ramco’s ERP on Cloud solution in areas

like government, public services, aviation, medical supplies, manufacturing and cement.

Our customers in the African region have been profiting significantly by the adoption

of Ramco VirtualWorks, our advanced framework-based business application, and have

realised benefits in terms of improved efficiency, lower TCO, compliance to regulations

and improved service delivery. With the economies of several African countries growing

at a relatively significant pace, organisations are adopting the best-of-breed ICT solutions,

to rapidly grow and manage their operations in the most efficient manner. We, at Ramco,

see Africa as one of the key focus regions for increasing our business.

PAWAN MUNJALMD and CEO, Hero MotoCorp Limited

Africa is the new land of opportunity. Even in the current global downturn, a number of

African nations are growing in excess of five per cent. Almost all African countries are

also resource-rich, and as these resources get effectively tapped, economic opportunities

are being created across sectors.

We are in the business of providing mobility – both necessity-based and aspirational.

Our products are tailor-made to serve the transportation needs of people in this region.

In fact, we have launched our first modified two-wheeler – Dawn – in Kenya, specifically

designed for this market. We have already launched Hero two-wheelers in Ivory Coast

and Burkina Faso, with plans to start operations in several more countries in the African

continent in the near future. Our first Africa assembly facility has also come up in Nairobi.

KARL SLYMMD, Tata Motors

As a number of countries in Africa have embarked on a journey of development, the

numerous infrastructure-related projects on the anvil and large investments in several

mining projects indicate a growing demand for heavy commercial vehicles such as trucks,

tippers and pickups. Simultaneously, recognising that the rapid urbanisation in most of

Africa’s developing countries will lead to the need for large scale Mass Transit Systems

using buses, we are among the few companies that have a range of different-sized bus

offerings on an actual bus (rather than truck) chassis. Further, with Africa having among

the lowest levels of car penetration relative to the rest of the world, we also believe that

there will be an increasing demand for passenger vehicles in the years to come. Tata

Motors is well-positioned to cater to emerging requirements for transportation solutions

across a wide variety of customer segments.

NINAD KARPEMD and CEO, Aptech Limited

Aptech has been present in the African market for the last 13 years. Our first centre was

in Lagos. We now have 15 centres in Nigeria and 23 in Africa. Our current presence is in

Nigeria, Ghana, Sudan, Gambia, Tanzania and Uganda. We intend to expand now to many

more parts of Africa. There is good potential for IT and animation education. Apart from

career oriented courses in IT and animation, which are delivered in our centres, we also

have our presence in the school segment. We are supplying k-12 IT content to 100+ schools

in the Rivers State in Nigeria. Aptech also has tie ups with many universities, which allow

our students to also acquire an International Degree in IT/Animation.

RAJENDRA S PAWARChairman and Co-Founder, NIIT Limited

We see a growing potential for the training and skills development industry in Africa.

In order to leverage human resources, appropriate skills are necessary; it is therefore

important to understand skills development requirements of local industries, investors

and trade development bodies for expanding work opportunities for the youth. But this

is not a trivial task. Governments need to step in and provide an enabling environment

for private players to participate.

VIVEK GAMBHIRMD, Godrej Consumer Products Limited

We have made 4 acquisitions in Africa in the last 5 years and sell hair colourants, soaps and

hair extensions through our brands Inecto, Renew, Tura and Darling respectively. These

businesses are performing well and we have learnt a lot about what it takes to be successful

in the region. We also believe that these can, over time, provide a strong distribution and

marketing platform for taking other home and personal care products from the Godrej

portfolio to the African consumer. In fact, we have recently entered the home insecticide

category in Nigeria with our Indian brand, Good Knight. Africa has one of the fastest

growing consumer markets in the world with a young population. As incomes increase,

consumers with rising aspirations will seek new and exciting products and new categories

will emerge. A large section of the population will also be able to afford branded consumer

goods and will be looking for quality products at accessible price points.

ANAND G MAHINDRAChairman and MD, Mahindra & Mahindra Group

Like the plains of the Serengeti, the possibilities that Africa provides, seem limitless.

With its wealth of mineral resources and a burgeoning middle class yearning

for better products and services, Africa has the potential to be the next growth

engine for the world. With their rich histories and cultures, Africa and India have

been the cradles of two of the world’s greatest civilisations. But despite our slow start

as the economies open up, I am confident that in the next few decades, the world will

see the potential of the 2 billion people who live here – the world will see that the people

who built the pyramids and the Taj Mahal can also build economic powerhouses of the

21st century.

ARUN SAWHNEYCEO and MD, Ranbaxy Laboratories

As growth opportunities continue to move away from the traditional pharmaceutical

markets, it is Africa, which holds tremendous promise. As per IMS estimates, by 2016,

pharmaceutical spending in Africa is expected to reach US$ 30 billion. This value is driven

by a 10.6 per cent compound annual growth rate (CAGR) through 2016, second only to Asia

Pacific (12.5 per cent). Spurred by a convergence of demographic changes, increased wealth

and healthcare investment, and rising demand for drugs to treat chronic diseases, this

market potentially represents a US$ 45 billion opportunity by 2020. In Africa, Ranbaxy has

over US$ 100 million in investments. We believe in expanding local manufacturing, nearer

to markets in Africa, which gives us greater flexibility and speed to service the market and

therefore, we continuously work towards localising the manufacturing of our products.

By arrangement with the High Commission of India, South Africa and the India Brand Equity Foundation (IBEF), www.ibef.org

India Inc. Committed to Africa