What Sells in India, Goes Down Well in Africa

Mahajan crisscrossed the continent as part of his research for his book Africa Rising and found several pleasant surprises. “There are many companies there that would be like Fortune 500 companies if they were listed in the US. That story needs to get out,” says Mahajan. There are misconceptions. For one, not every country is in trouble. Even if there is a problem with one country, it becomes a branding issue for the whole continent. In fact, several of these countries have a GDP per capita higher than India.

The 950 million people in Africa present a tremendous opportunity for Indian companies. The products they needed are exactly the products that a Hero Honda or a Tata Motors makes. There are specific roles that Indian companies can play in Africa, says Mahajan and delineates a few in this interview. Excerpts:

On the African Opportunity
Many companies from India want to globalise. The question is where should they go? Either they can go to the developed world or the developing world. The market they understand is the developing world or what I call the 86 percent of the world [86 percent refers to an estimate of the number of people in the world living in countries with a per capita gross national product of less than $10,000. Vijay Mahajan’s previous book was titled The 86% Solution). Here, the largest market after India and China is really Africa. In terms of the Indian diaspora, we already have some links there. So, it is not entirely unknown to us. Most of these countries got their freedom in the 1960s. In many of these countries, many of the people who helped them in the freedom struggle are Indians — be it Kenya, South Africa, Zimbabwe, Tanzania or Nigeria.

Besides, we don’t have a history of slavery with Africa unlike Latin America, Middle East and the US. Ours is a history of equals — of people who understand each other.

There is also economic similarity between us. What sells in India, the value and price levels go down well in Africa. Our products are designed to be rugged.

On Why an Indian Company Should Look at Africa
The first reason is market expansion. This is true for Mahindra and Mahindra, Tata and Ranbaxy. Similarly, the Kirloskars are also doing very well all over Africa. If you take two companies that are big successes in this regard, it is the Tata group and Ranbaxy. The Tatas’ way of operating in Africa is to indicate to people that they are there to make a difference. They wouldn’t make buses in India and ship them there. Instead, they do the production locally. This way the local community and government should be happy because of employment generation and the other value addition they can do to that country. Ranbaxy took a long time to get drugs approved, especially in South Africa. Their desire is to get and train local talent. You can’t succeed unless you have local talent and train it to run the company.

Two, Africa represents a huge opportunity in terms of resource availability. Tatas, Birlas and IFFCO have all gone to Africa for resources.

Africa is also a great low-cost manufacturing base. One unique advantage that Africa has is its proximity to the European market. That can provide an Indian company easy access to Europe. One company to have done that is Alexandria Carbon Black SAE in Egypt. This is a Birla company. And the whole point of being present in Egypt is to have a manufacturing operation that can sell to Europe and other countries. Alexandria Carbon Black supplies to tyre companies in Europe like Michelin.

Tomorrow, if Bharti were to merge with MTN, just look at the sheer numbers they could address — 2 billion people on this planet! An Indian company can use Africa to achieve global leadership. If the Bharti-MTN deal were to go through, imagine the possibilities — with scale, their costs will go down dramatically!

When I travelled all over Africa I found that some of the products come from Europe. Those are very expensive. What Indian companies are doing is that they are offering inexpensive substitutes to the locals.

In the case of Senegal, which is a big story for Tata, their infrastructure isn’t very different from ours. So, the question is should they buy a European bus (a Volvo could cost them between $70,000-80,000) or an Indian bus (a Tata bus would come for half the price)? The Tatas were willing to assemble the buses in Senegal itself so that would bring down the prices further. This also created a chance for the people there to get employment with the Tatas. The experiment has been so successful that Tata buses are part of their annual parade!

Indian outsourcing companies can use the language advantages of the French and  Portugese speaking nations in Africa to set up centres there. Being close to Europe, the time difference between Europe and Africa is also lower, so, they can service clients in Europe from there.

On What it Takes to Succeed in Africa
For one, you need to be a company that is there for the country. Magadi Soda, the soda ash plant that the Tatas acquired in Kenya, for instance, has done a lot for the local community including putting a train track.

You need to develop the local talent and work with it. Besides, you add more value to your products by being there. If you trade a product, you are not creating local employment, not adding value to the community. I was shocked to see that many European MNCs there have their Africa headquarters in Europe! Coke’s Africa headquarters for many years was based in London — it was hard for me to believe that! They believe that their employees don’t want to go to Africa… That’s not the case with Indians. They make efforts to be part of the community. They become good local citizens.

You need to adapt your products to the local environment. For instance, in some of these countries, it may not be possible for them to have a car as a taxi, so I saw TVS motorcycles being used as taxis in Kigali (Rwanda)! That’s because the business model is very different. Many of the business models we have developed in India are very quickly applicable there. Like prepaid cards for mobiles. Ninety nine percent of the telecom business there is prepaid. Our advantage is that we understand how we can be a low cost provider.