ABHINEET KUMARMumbai, 9 April

It is no coincidence that the fifth BRICSsummit was held in Durban, SouthAfrica, last month. The country is thegateway to a continent that is catchingup fast.

Holding the summit in Durban,therefore, was a recognition of thechanging dynamics of what was once ahopeless, strife-torn continent. Africais now seen as the place where the nextbig opportunities are. A genuine middleclass is emerging in the continent; itspopulation of 1.1 billion has a medianage of 18; and consumer spending, cur-rently over $920 billion, is expected togrow to $1.4 trillion by 2020. Obviously,the growth potential is huge. For newand old Indian companies alike in thecontinent, the untapped demand forconsumer durables, automobiles, med-icines and mobiles phones offers alucrative opportunity.

India and Africa resemble each other,says Chandru Chawla, head of corporatestrategy (international business),Cipla,referring to the huge opportunity at thebottom of the pyramid in the two geog-raphies. Cipla, the Mumbai-based phar-maceuticals company, went to Africaover a decade back and it is now trying tostep up its presence in the continent. InFebruary, it announced plans to acquireits South African distribution partner,Medpro, for $512 million.

Cipla could gaze into the potential ofAfrica’s bottom-of- the-pyramid marketearly on. In 2000, Yusuf Hamied, thepromoter of the company, decided to sellits three-drug combination for treatmentof HIV/AIDS for around $800 for a year’sdosage. At that time, patent-holdingmultinational corporations were sellingthe combination for $12,000 per patient.

Cipla could reap the benefits ofeconomy of scale. Africa’s huge HIV-infected population allowed it to cutcosts further to $140 for a year’s stock.

“We found these markets attractivedespite the challenges. We find that theopportunity is increasing exponential-ly,” says Chawla.

Cipla, which has a turnover of about$1.3 billion, is expecting its Africa busi-

ness to contribute $1 billion by 2020.For the purpose, it is changing its dis-tribution model. From getting into tie-ups with companies to market its prod-ucts, it is setting up its own distributioncompanies.

India’s Tata Group, which has aturnover of $100 billion, set up TataAfrica Holdings about two decades agoto identify development opportunities.Its Africa operations, which includeautomotive, chemicals, smelting,among others, had a turnover of about$2.3 billion in 2011-12. The group has sofar invested $1.7 billion in various proj-ects in the continent including a plantin Pretoria to produce commercial vehi-cles for the local market.

“The kind of growth that the Tatashave experienced in Africa in the lastdecade is a reflection of the potentialand promise that this continent has tooffer,” says Mukund Rajan, the group’sspokesperson. The group is looking atannual revenue growth of 30 per centfrom its Africa business, RamanDhawan, managing director of TataAfrica Holdings, had told Business

Standard recently. The Tatas are alsoplanning to get into business hotels inAfrica, expanding from the luxuryhotels that it operates in Lusaka andCape Town.

Telecom is another sunrise sector inAfrica, with Bharti Airtel leading theIndian charge. It acquired Africa’s mobiletelecommunication company, Zain, in2010 for $10.7 billion (enterprise value).Since then its subscriber base has risen to62 million from 36 million. Bharti alsooffers high-speed data service in 11 coun-tries and mobile remittance service in15 countries. Bharti has adopted a low-cost business model in Africa with thehelp of its global partners: IBM, Ericsson,Nokia Siemens, Tech Mahindra andSpanco. The low-cost model has helpedthe company expand its presence in therural areas there.

“It may have taken us a little longerthan we expected but if you look at theoverall trajectory and direction, we areon the right track in a continent that isthe market of the future,” says a BhartiAirtel spokesperson. Africa is the fastestgrowing mobile market in the world.

Over the past five years, it has seen a 20per cent rise in the consumer base,according to a study by telecom indus-try body GSMA .

India-Africa partnership is not lim-ited to companies setting up bases inthat continent. In 2011-12, India-Africabilateral trade was worth $63.1 billion,accounting for seven per cent of India’sglobal trade. Bulk of this, about $43 bil-lion, was still made up of Africa’s staple:oil, gold and metals. However, in recentyears, export of manufactured goodssuch as machinery, transportationequipment, food and pharmaceuticalsto Africa has also been on the rise. In2011-12, it was $20.1 billion.

“We see the growth trajectory inAfrica is going to be higher in the yearsto come vis-a-vis other markets,” saysMahendren Moodley, chief executiveand India head of Africa’s leading finan-cial group, FirstRand Bank

Pune-based Bajaj Auto exports itstwo- and three-wheelers to 20 Africancountries. In African markets the pri-mary usage of motorcycles is in the taxisegment. Its Boxer brand with its robustexterior and fuel-efficient engines is ahit in the continent, accounting for 28per cent of the market. The companyhas assembly lines in eight Africancountries.

“For the last few years, Africa hasbeen growing as governments are gettingmore stable. Also, demographics of thecontinent is such that it ignites con-sumption,” says Rakesh Sharma, presi-dent (international business), Bajaj Auto.

For fast-moving consumer goodscompanies the story is no different.Africa presents a bright spot with itshuge base of middle-income people.Godrej Consumer Products (GCPL) andMarico have been the flag-bearers ofthe Indian FMCG industry in the conti-nent. “We believe that Africa can be agame changer for GCPL,” says VivekGambhir, managing director designate,Godrej Consumer Products. But it is notjust India that’s looking at Africa to fuelgrowth. “Indian companies will have tocompete with other global companiesin this market and it is up to them tomake the most of the opportunity,” saysthe Bharti Airtel spokesperson.

India Inc ups its stake in Africa

WELL CONNECTED Bharti Airtel’s subscriber base in Africa has risen to 62

million from 36 million in three years PHOTO: REUTERS

CALL OF THE CONTINENTCompanies Turnover* (~ Cr)

Tata Group (2011-12) 12,555Cipla (Projected by 2020) 5,458Godrej Consumer Products (2011-12) 700*Africa business