Saturday, June 12, 2010

Corporate India’s belated grand entry into Africa

June 9, 2010 by James Lamont - 'Financial Times'

Outrun by large Chinese state corporations, now India is making ground in its fastest growing sector - telecommunications. The $10.7bn acquisition by Bharti Airtel, India’s largest mobile network, of the African assets of Kuwait’s Zain is a long awaited foray across the Indian Ocean.

Indian entrepreneurs have long been a mainstay in African business, but this multibillion dollar merger is the first of its kind. Others are likely to follow in Bharti’s slipstream in anything and everything from towelling to mining. The Indian state is behind its private sector’s African expansion, for the first time ever.

China’s interest in Africa has been a great motivator for India. Last week, top Indian officials were falling over themselves in gratitude to Jacob Zuma, the president of South Africa. The reason was that he had chosen India over China as his first port of call in Asia in his new office.

Sunil Bharti Mittal, the chairman of Bharti Mittal, and Manoj Kohli, head of international operations, have India’s edge over China firmly in mind. Behind their business strategy is a strong sense that the African operating environment is more similar to India than anywhere else. The continent, like India, has 1bn people, tremendous linguistic and ethnic diversity and quirky democracies.

It also has inconsistent regulators and weak infrastructure. A growing middle class is expected to double over the next 15 years.

Bharti executives are banking on success in India translating to Africa. About 50 of them are now headed to Africa to try to replicate Indian mobile telecommunications lightning growth. The lessons of India, however, should also temper brimming confidence. Africa, like India, often promises more than it delivers, and new entrants can come a cropper. No country does this apply more to than Nigeria, the continent’s most populous state and potentially the jewel among Bharti’s new assets.

So Mr Mittal’s comment on Tuesday that he has “cracked the code” for operating in oil rich Nigeria may prove premature. That code is very difficult to decipher. Ask any of the oil majors or pharmaceutical companies.

Mr Mittal would know that a foreign business leader saying the same about Uttar Pradesh, an Indian state with 180m people riven with complicated caste politics, would only tempt fate.