“The Tata-fication of Africa: Indian corporations will drive innovation and investment in Africa” EmApril 9th, 2008 - 10:54 pm ICT by admin
New Delhi, Apr 9 (ANI/Business Wire India): On the occasion of the India-Africa summit, key findings from the Emerging Economy Report were released today, which foreground the role of Indian corporations in driving new technology usage in Africa.
According to the Emerging Economy Report, Indian companies will have a far more prominent role in Africa’s economic development than China, even though China has been a far more aggressive investor into Africa over the past decade.
The report came to these findings after studying seven economies in all corners of the world, including India, China, Indonesia, South Africa, Kenya, Egypt and Brazil.
It also examined the inter-relations between these economies and projected these trends outwards three, five and ten years into the future. The report was executed and funded by the Center for Knowledge Societies (CKS).
Chinese corporations have made significant investments in Africa over the past decade, and this has caused the Indian industry as well as Indian strategic thinking to be concerned about having to ‘catch-up’ in terms of an organized engagement with diverse African nations.
In the city of Rwanda, for example up to 80 per cent of all new roads have been built by Chinese companies. And China’s Civil Engineering Construction Corporation is building the 8.3 billion dollars railroad linking Lagos and Kano.
However, the report also points out that Indian entrepreneurs have long enjoyed trading relations in Africa, particularly along the continent’s east coast, running from Kenya down to the tip of South Africa.
In the early part of the 20th century Indian engineering and consumer brands were considered as reliable as those coming from Europe. Bilateral trade between India and Africa increased from less than 1 billion dollars in 1991 to over 9 billion dollars in 2005.
Today, the Government of India is aiming to achieve a trade turnover of 500 billion dollars by 2010.
Indeed, one of the key trends identified in the Strategic Forecasts section of the report is called “The Tata-fication of Africa.”
Tata Motors was a well-known truck brand in Africa well into the 1960s, when it was finally supplanted by European competitors.
Now, the resurgent Tata Group has been making strategic investments around the world, including Africa. Other regional Indian multinationals, Videocon and Suzlon, are similarly driving innovation for consumers as well as businesses. The Indian Hotels Company is making multimillion-dollar investments in three locations across the continent.
By contrast, the Chinese presence in Africa relies either on state-partnership or else operates in the informal sector. This makes them vulnerable to market forces as the middle-classes of Africa become more and more powerful.
Dr. Aditya Dev Sood, one of the authors of the report, explains: “In every part of the world that CKS researchers visited, they discovered Chinese products replacing traditional local handicrafts. But these products were often viewed by local populations as ‘fake goods.’ They were neither intrinsically local, nor did they have the values of a brand attached to them.”
Dr. Sood argues that there is an extraordinary opportunity for Indian corporations to capitalize on the new infrastructure generated in certain parts of Africa by Chinese companies: “Anyone who has lived in both India and China will agree that the Chinese have been far more successful at creating mass urban and cross-country infrastructure. On the other hand, just having quality infrastructure is not enough for Africa - the continent needs jobs, and that’s something Indian service sector companies can provide.” For Africa, then, working with India as well as with China would appear to be a win-win proposition.
Nevertheless, the report concludes that it is India and not China that will create Asia’s first global innovation economy. “I think the edge is definitely with the Indian managerial classes, who have already demonstrated their ability to build global brands, nurture existing brands, and command global consumer markets. Their next step is to invest adequately in innovation processes that can ensure their products truly meet the needs of untapped markets in other Emerging Economies,” said Dr. Sood.
Other findings of the Emerging Economy Report include:
– Information replaces Industrialism: Strong and sustained employment growth is seen in the service sector, while the manufacturing sector sees variable change.
– Soft Infrastructure precedes hard Infrastructure: Soft infrastructure includes terrestrial, cable and satellite television, mobile coverage, broadband cable and wireless broadband and other informational backbone while the term hard infrastructure includes highways, roads, bridges, water supply, sewage systems and electricity. In many Emerging Economy environments, especially in rural areas, soft infrastructure is encountered even in the absence of hard infrastructure. More importantly, the installation and use of soft infrastructure can generate and attract the capital resources necessary to build more expensive hard infrastructure.
– Informal Economies become Networked Economies: Large informal markets for intellectual property continue to coexist with newly organized corporate retail outlets, as each caters to different consumer segments. Where once only large corporations enjoyed sophisticated long distance access, even micro-enterprises can now be connected to one another.
– Formal and Informal Economies interact in new ways: The vast majority of retail outlets in some regions are in the informal sector. In some rare cases informal enterprises working in the information economy are able to aggregate into formal, publicly listed corporate entities.
– Energy Consumption rises with GDP growth: As economies grow, they demand more energy. Emerging Economies require energy to power new transportation, housing infrastructure, public infrastructure, retail environments and service companies. There is also more capital available in Emerging Economies to invest into energy infrastructure. The ways in which new capital investments into energy are made will substantially determine the environmental impacts of this increased consumption of energy.
– Energy Innovation enables smaller footprints: Emerging Economies will be able to make more informed choices about their energy portfolio based on the experiences of Industrialized nations. (ANI)
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