Bright prospects for Indo-South African investment, trade

Indian companies are currently executing projects of the order of $2 billion in South Africa, said a senior trade official from that country.
 
Major investors include Tatas (vehicles, IT, ferrochrome plant), the UB Group (beer manufacture, hotels), Mahindras (utility vehicles) and a number of pharmaceutical companies, including Ranbaxy and Cipla, informed  Iqbal Meer Sharma, deputy director-general of South Africa's department of trade and industry.
 
South Africa is an excellent investment destination and also a "gateway" to Africa and African investment and also to the US and European Union, he said. Besides, Indian companies felt the tax regime did not pose a challenge, as it was in line with global tax systems.
 
"India features among the top 10 countries investing in South Africa, with current investment estimated at $6 billion, with investments from Tata, Cipla, Apollo, Godrej, Genpact, Aegis, M&M, Ashok Leyland and Aurobindo Pharmacuiticals. IT has emerged as a significant area of Indian interest," Sharma said.
 
He was speaking to Business Standard on the occasion of a two-day visit here by South African President Jacob Zuma, who is leading a 230-member delegation of ministers and representatives of business and industry. He said Tata Group companies, mainly Tata Steel, Tata Motors and Tata Consultancy Services, had made considerable investments in South Africa. Further, State Bank of India, ICICI and and Bank of Baroda are increasing their presence by establishing more and more branches.
 
President Zuma is scheduled tomorrow to have meetings with Ratan Tata, Mukesh Ambani, Adi Godrej and Jet Airways chief Naresh Goyal. He would also participate in a business session to launch the India South Africa CEO Forum, to be chaired by Tata.
 
PRODUCTION PLANS

In automobiles, Tata Motors, Mahindra & Mahindra and Ashok Leyland are  actively pursuing plans to set up a manufacturing base in South Africa. Tata Motors was keen to produce the Indica, while M&M wished to manufacture tractors and Ashok Leylands for buses to supply to the US, European Union and African countries. "These companies want to take the advantage of the quota-free and duty-free regime of South Africa to make entry into these markets," said Sharma.
 
Currently, these companies are exporting their vehicles to South Africa and have been in talks with authorities for opening manufacturing units there. Similarly, Maruti is selling cars in South Africa and may consider setting up a factory.
 
Indian companies have also evinced interest in acquiring coal, iron ore and manganese mines. In April, JSW Energy acquired a majority stake in South African Coal Mining Holdings for securing long-term fuel linkages. Indian companies are looking at the procurement of uranium and nuclear technologies from South African companies, too.
 
SA FIRMS ALSO KEEN

On the other hand, South African companies are keen to explore investment opportunities in India in the fields of agro processing and cold chains, tourism, hotel, the retail sector, iron and steel, organic and inorganic chemicals, fertilizers, gold and diamond.  Besides, South African banks, insurance and financial services companies have chalked out  India-specific strategies to increase their presence in India. "South African investors will prefer to pursue investments in collaboration with Indian players," Sharma said.
 
According to Sharma, since 1994, the South African  economy has been undergoing structural transformation just as the Indian one had since 1991. "The signing of a preferential trade agreement between the two countries will help increase trade. The agreement is expected to be signed within a year and it will address issues relating to tariff and non-tariff barriers. South African companies feel various states are imposing non-tariff barriers in the form of labelling and health standards," he noted.
 
Sharma said South African companies must use their capacities to reap benefits from mega investments being planned by India in infrastructure projects. Besides, there is need to promote greater government to government participation. Further, India Inc and South Africa must leverage the India-Brazil-South Africa.

Image: South African President Jacob Zuma