With south/south trade strategically growing in importance, India is shaping into one of South Africa’s most important trading partners.
Already we have witnessed the successful entry into South Africa of Indian conglomerates such as the Tata group and Ranbaxy, while South African companies seem set to make their mark in India, with FirstRand, SABMiller, Old Mutual and Sanlam setting up operations in the Asian giant and Sasol also investigating potential coal-to-liquid opportunities.
India is currently South Africa’s 13th-largest trading partner, with trade between the two countries reaching $4-billion (R27,6-billion) in the 2005/06 financial year. The trade relationship is also currently stacked in South Africa’s favour, with a trade surplus of $1-billion.
According to the Consul General of India in South Africa, Navdeep Suri, 2006/07 is looking like an even more impressive year with the half-year figures indicating that the $5-billion (R34,5-billion) mark will be reached.
However, if the declaration signed in Tshwane by Indian Prime Minister Manmohan Singh and President Thabo Mbeki in October last year is anything to go by, trade between the two nations is expected to treble by 2010.
Earlier this year South Africa’s Indian Business Forum (IBF) was established, one of only three in the world.
Suri, who works closely with the IBF, says the Confederation of Indian Industries looks for a critical mass of Indian companies when setting up a forum and the expectation is that the number of Indian companies will grow exponentially over the next few years.
He says there are more than 35 Indian businesses operating in South Africa and the forum will allow them to share their experiences and give them a platform to deal with common problems and issues they face. The IBF’s work will not only benefit Indian companies but also assist South African companies looking to explore the Indian markets.
Only last week Sanlam talked about its intentions to focus on the Indian market, where it feels profit margins are high and opportunities extremely promising.
“There are areas where we are strong and there are areas where South Africa is strong and so we complement each other,” says Suri. “I personally believe we are on the cusp of a transformation and we have only just begun this process of discovering each other; the best is yet to come.”
Suri, who says the entrance of Indian companies into South Africa is having very positive effects, cites the case of Indian pharmaceutical giant Ranbaxy Laboratories, which is now the fifth-largest generics company in the country.
“When you look at South African society, obviously one of the priorities is affordable healthcare and when I come here as an Indian I find the price of medicine horrendous,” he Suri. “When you compare to India you are not talking 10% or 50% more expensive, you are talking like five to 10 times more expensive.
“We certainly see a lot of room for Indian companies to come in and provide generics that will make healthcare a lot more affordable.”
Ranbaxy CEO Ranjan Chakravarti agrees. “We are quite convinced that, for us, South Africa is a very important market that offers us huge opportunities,” he says. “We want to be recognised as local players and big players.”
Tata Africa CEO Raman Dhawan also sees South Africa as the “main engine” to drive its expansion into Africa.
Dhawan, who is also chairperson of the IBF, says more and more Indian companies will look to South Africa as a gateway into Africa, because there are great opportunities in this growing economy. But he warns they must put their money where their mouths are, because a long-term view is required.
INDIA IN SOUTH AFRICA
Tata Africa Holdings (SA)
Tata is India’s best-known industrial group, with an estimated revenue of more than $20-billion. After sanctions against South Africa were lifted by the Indian government, and after three decades in Africa, Tata decided to move its head office from Zambia to South Africa.
Tata Africa CEO Raman Dhawan says Tata currently has operations in 11 African countries, with further operations in Nigeria and a return to Zimbabwe in the pipeline. In South Africa, Tata has already successfully entered the motor-vehicle and ICT industries. In the past six years, Tata has secured a 20% to 25% market share in the commercial-vehicle market. Tata entered the ICT sector through its subsidiary VSNL’s 26% shareholding in second network operator Neotel.
Tata is also involved in the R650-million Ferrochrome smelter in Richards Bay, expected to come on line later this year. Two R40-million five-star hotels in central Cape Town and Melrose Arch, Johannesburg, are expected to be operational by 2010. Tata has also committed to a $250-million power-generation project in Zambia. “We are trying to build a truly African company with a large footprint in Africa and a base in South Africa,” says Dhawan.
VSNL (Videsh Sanchar Nigam)
VSNL was India’s incumbent telecoms operator until 2002, when the Indian government privatised the parastatal and the Tata group acquired a 45% controlling stake. VSNL has made a number of acquisitions in the past five years and is currently the world’s third- largest carrier of voice traffic.
VSNL entered South Africa when it secured a 26% shareholding in South Africa’s second network operator, Neotel. The MD of Neotel, Ajay Pandey, says the telecoms operator has already signed up large customers such as Vodacom, MTN, Cell C, Internet Solutions, Standard Bank and Ernst & Young and was recently awarded a R700-million contract by Sita, the government IT agency.
Pandey says Neotel has now secured access to 23Â 800km of nationwide fibre infrastructure and is about to launch a wireless fixed-line pilot that could see services launched for South African consumers in four months.
Ranbaxy Laboratories
Ranbaxy Laboratories is India’s largest pharmaceutical company and is ranked among the top 10 generics companies in the world.
It currently exports to 125 countries and has manufacturing facilities in seven countries. In May this year Ranbaxy SA announced it had finalised the R500-million acquisition of Be-Tabs, which makes it the fifth-largest generics company in South Africa. Ranbaxy is also involved in a joint venture, Sonke Pharmaceuticals, which manufactures ARVs in South Africa.
Ranbaxy CEO Ranjan Chakravarti says its share of the ARV market in SA is negligible because it is waiting to get approval for nine other products later this year. Chakravarti says a R100-million upgrade of Ranbaxy’s Be-Tabs manufacturing facility in Roodepoort will be crucial for its expansion into Africa and plans to grow its South African revenue, currently at about R60-million.
Rosy Blue Diamonds
Rosy Blue, an Indian company involved in the gemstones and jewellery industries, had a turnover of $1,7-billion in 2005. It entered South Africa in 2003 and soon acquired a diamond-polishing plant in Cullinan, outside of Tshwane.
Rosy Blue MD Vishal Mehta says it currently has about 245 polishers in Cullinan, making it the second-largest polishing factory in South Africa. Rosy Blue brought out a group of Indian professionals to help the polishers through an intensive skills-development programme, which it plans to run again later this year. “We now have an operation that is internationally competitive and we plan to grow it organically until we are number one in South Africa,” says Mehta.