Indian economic involvement in South=20 Africa has mushroomed. Reg Rumney reports
The purchase by Indian brewery United Breweries=20 Investments (UB) of a 30 percent stake in National=20 Sorghum Breweries — reportedly for R70-million — is=20 the most visible sign of the growing economic co- operation between South Africa and India.
UB had previously bought Mabula Game Lodge in the=20 Northern Transvaal.
Trade and business delegations from India have been=20 streaming in since 1993, according to India’s Deputy=20 Consul General in South Africa, TP Seetharam.
Despite the presence of the Indian community in South=20 Africa, the country is something of an unknown quantity=20 to Indian investors. “There is a lot of interest, much=20 of it exploratory. There is an information gap because=20 of a lack of contact for four decades,” says Seetharam.
Several major business chambers have visited South=20 Africa, and have met counterparts in national and=20 regional chambers such as the South African Chamber of=20 Business, the National African Federated Chambers of=20 Commerce as well as localised forums of Indian=20 businessmen in Durban and Cape Town. Interest ranges=20 from pure trade to investment from, and in, Indian=20 business. In South Africa, the Indexpo ’94 exhibition=20 at Nasrec, in which 300 Indian companies took part,=20 attracted 50 000 visitors.
As India continues with the liberalisation policy=20 started in 1990, it is encouraging investment overseas.=20 Barriers to capital outflows have been scrapped, along=20 with other restrictions on business. This has paid off,=20 says Seetharam. Foreign exchange reserves have=20 increased by $20-billion in the past year.
One major Indian conglomerate, Tuta, already has motor=20 assembly operations in Southern Africa, making small=20 trucks, and Seetharam says it has registered a company=20 in South Africa.
For potential Indian investors, Seetharam indicates=20 decisions will be shaped by the special role the five=20 or six major conglomerates play in the South African=20 economy. Certainly, the UB investment will be watched=20 to see how NBS fares in competition with natural=20 monopoly South African Breweries. But some Indian firms=20 may want to take advantage of the dominance of the=20 conglomerates by entering into partnerships.
Opportunities for investment from South Africa abound=20 as India opens up its once protected economy to the=20 outside world. With around 900-million people, India is=20 a vast market, with a legal system which won’t be=20 unfamiliar to South Africa, and with English as the=20 language of business. On top of this there are various=20 investment incentives, such as Export Processing Zones=20 where wholly owned firms are tax exempt.
Individual South African firms and individuals, rather=20 than trade delegations, have visited India, says=20
There are opportunites, for example, for private sector=20 investment in the building of toll roads, and=20 guarantees are being given of a return on investment in=20 the power sector.
South African investment in the mining sector is a=20 natural development, and India has resources which=20 Seetharam says could be more efficiently mined. De=20 Beers is looking at a diamond mine, he says, and the=20 Chamber of Mines has sent a delegation to India to look=20 at coal mining.
The extent of general economic involvement is best=20 reflected in the trade figures. Trade has grown=20 dramatically since 1990, off a low base.
In 1994, imports from India totalled R406-million;=20 exports to India from South Africa totalled around=20
Exports from South Africa tend to be raw materials:=20 imports from India tend to be manufactured goods.
Despite the myriad delegations, the trade balance is=20 favourable to South Africa. Seetharam adds that it is=20 even more favourable if exports of gold through London=20 and diamonds through the Central Selling Organisation=20 are added in. India is a big buyer of small diamonds.=20 This is not surprising since gems and jewellery are the=20 biggest export category, with an 18 percent share of=20 all exports at $3 991-million in 1992-93. Pearls,=20 precious and semi-precious stones rank third, with an=20 11 percent share of imports at $2 641-million in that=20
Economic involvement doesn’t stop at trade and=20 investment. India’s Housing and Development Corporation=20 is to help in encouraging and training communities to=20 get involved in low-cost housing, Seetharam says, the=20 idea being that housing is not a product which=20 governments deliver but a process which government=20
Another area in which he says South Africa can learn=20 some policy lessons from India is in small- and medium- scale enterprises (SMEs) — and he emphasises that this=20 is not restricted to low-tech or informal sector=20 operations. Many goods now produced by big companies=20 can be outsourced to small companies. Moreover, such=20 goods are not restricted to the local market. Seetharam=20 says around 45 percent of Indian export earnings come=20 from goods made by SMEs. Indian companies and agencies=20 can help South Africa stimulate the small business=20