December 15th, 2011
10:53 AM GMT
Cape Town (CNN) – Asian trade and investment in Africa is growing, but where investment in Africa has traditionally concentrated on natural resources, India is looking to diversify its interests in the African continent.
In recent years, India has made new inroads into African markets. Tata, which is owned by one of India's richest men, recently built a new truck-manufacturing plant outside Pretoria, South Africa, producing heavy vehicles that are sold in Africa.
“You cannot constantly keep importing finished vehicles,” Raman Dhawan, who runs Tata's African operations, told CNN's Robyn Curnow.
“We've started actually with just assembling the commercial vehicles, which is the trucks and bus chassis, and so as we move forward, yes, we will explore others,” he added. “So the basic thing is that you must put investment, add value locally and that's what we've really followed.”
Tata says the value of its South African projects – from cars to telecoms to metals and hotels – totals around $1.6 billion.
India's rapidly modernizing industries and growing middle class are fuelling some of this growth in African markets.
Safiya Patel is a mergers and acquisitions lawyer who specialises in helping Indian clients. “We've witnessed an acceleration of Indian investors in South Africa over the last five years,” she said. “It's been phenomenal, absolutely phenomenal.”
“Right now we are assisting investors in a whole array of sectors. Pharmaceuticals is big, but I would say mining is top of the list right now, and that's because India itself has a huge power challenge and coal is a commodity that's highly sought after in India,” she added.
Abdullah Verachia advises businesses on the emergence of the BRICS economies – Brazil, Russia, India, China and South Africa.
“As we stand today, 57% of the world's population is either Chinese, Indian or African and that has strategic implications,” he said. “Implications politically, implications in terms of south-south co-operation, and implications for the business sector in Africa, in India and in China.”
China's investment far exceeds India's. China is expected to invest more than $100 billion in Africa this year, more than double the $46 billion invested by India, according to the India Africa Business Network.
But one difference between China and India is that Indian business is driven by the private sector – mostly successful family businesses like the Tata conglomerate – which are tempted into Africa by high growth and new markets.
But this influx of investment is relatively one sided so far. The rate of African countries setting up shop in Asia is low and some worry that Chinese and Indian businesses are harming local manufacturing sectors, such as textiles, with their cheaper products driving African companies out of business.
Analysts say tariffs on African exports must be lowered in India and red tape must be cut if Africa is to really participate and benefit from these new flows of investment from the East.
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