Indian firms reap bitter loss in Africa

[fast]

Indian companies which invested in controversial deals involving hundreds of thousands of acres of land in Ethiopia have found themselves out of their depth in a fast-growing African economy that is still in the process of building critical transport and irrigation networks.

Documents related to one such transaction reveal how Emami Biotech, a subsidiary of the Rs.2,200-crore Emami Group, pulled out of a Rs. 400-crore, 40,000-hectare, bio-fuel plantation only a year after the project was announced.

Indian companies are the second largest investors in the Ethiopian economy with approved investments worth nearly $5 billion.

While a majority of the businesses are small manufacturing and trading enterprises run by business families long settled in East Africa, the big money has come with the recent entry of large Indian investors.

A number of Indian companies have signed agreements to lease more than 4,40,000 hectares of land across Ethiopia, 1,00,000 hectares of which has been granted to a single Bangalore-based company, Karuturi Global Ltd. International. Rights organisations and NGOs have characterised the deals as instances of land grab and have accused the government of forcibly resettling pastoral communities.

The Ethiopian government has denied these allegations, insisting that large-scale commercial agriculture is a vital part of an ambitious project to transform the national economy. Yet, the failure of Emami Biotech’s plantation and the glacial progress of Karuturi’s 1,00,000-hectare project in Gambella have led some to question the ability of these companies to manage such large plots of land.

A senior Ethiopian bureaucrat said the government had taken considerable political risk by embarking on such sensitive projects …involving the displacement of thousands and felt that the Indian investors had not done their homework. Emami Biotech’s project in Oromia, he said, was a case in point.

In August 2009, the company announced it was investing Rs. 400 crore to acquire 100,000 acres to plant Jatropha and other oil seeds and to set up an oil extraction plant. Mott McDonald, a reputed engineering and development consultancy, conducted a feasibility study. The Ethiopian government welcomed the investment and even appointed Emami Director Aditya V. Aggarwal as Honorary Ethiopian Consul at its newly opened Consular Office in Kolkata.

Pulling out

The following year however, Emami was ready to pull out. On December 22, 2010, the company wrote to the Oromia Investment Commission, claiming that only half the land initially allotted to Emami was suitable for agriculture, and even that land didn’t have enough water.

As per the letter, the company invested $1.5 million in the project, dug several bore wells, and constructed a check dam. It also tried to grow maize, pulses, soya bean and sunflower, “but all our hard works becomes in vain [sic],” the letter said. The other parts of the land, the company claimed, lay along a disputed border between Oromia and the neighbouring province of Somaliland.

The letter lists seven additional problems, including crop damage by local villagers and their cattle and a lack of cooperation from the local administration. While Oromia officials said there were no clashes between the company and the local villagers, a researcher acquainted with the project said the company and the villagers had clashed over scarce water supplies.

The Hindu : News / National : Indian firms reap bitter harvest in Africa

 

[somebozo]

a case of excessive greed of profits. The Indian company was encouraged by low cost and in the process ignored many tell tale signs!

 

[I spikes therefore I am]

China, India beating U.S. in race for Africa

WASHINGTON – China and India have their own border disputes and are competing in the East and South China Seas, but now the two largest populated countries of the world are vying for influence in a new economic battleground – East Africa, according to a report from Joseph Farah’s G2 Bulletin.

The countries of East Africa are readily accessible from the Indian Ocean and account for an estimated 70 percent of India’s expanding export market in Africa.

Analysts say East Africa is regarded by India as a natural extension of its domestic business activities not only in corporate business but also for acquiring raw materials and production at very cheap labor costs.

In terms of development projects, India’s African investment is exceeding that of China.

India is primarily interested in energy extraction, manufacturing, financial services, agriculture and infrastructure development on which China also is focusing in spreading its own influence in Africa.

According to the open intelligence company Stratfor, India is expected to expand its business activities, including relocating corporations in Africa due to the slowing of growth in India itself.

Given East Africa’s close connection to southern Africa, India’s trade is expected to increase significantly in years to come, challenging China’s growing influence on the continent.

The effort by both countries has been increasing for a few years, with the effect that Chinese and Indian investments and trade are beginning to crowd out American and European firms in Africa’s emerging markets.

One American company involved in infrastructure work in Africa, General Electric, complained that Chinese and Indian construction companies have been undercutting job proposals by up to 60 percent.

A spokesman for the company said that its costs and profit structures “are simply too high” compared to Chinese and Indian companies. India’s Tata Motors and China’s Great Wall cars, for example, are more prevalent than U.S. cars. Indian companies are providing Internet service in East Africa with with new fiber-optic connections.

In mobile telecommunications, it is the Chinese firm Huawei that just came under scrutiny by the House Intelligence Committee for alleged electronic spying and potential espionage of telecommunications systems. Huawei and another Chinese company, ZTE, have denied the allegations but still may be discouraged from investing in the U.S.

“Unlike the standard Western doom-and-gloom analysis of the African condition, China and India hold the view that Africa is a dynamic continent on the threshold of a development take off, with unlimited business opportunities that would serve Chinese, Indian and African interests,” according to Fantu Cheru, research director of the Nordic Africa Institute.

As China’s economic opportunities grow, so does its military investment to protect its economic interests, which also could set the stage for Chinese and Indian confrontations on the African continent. China has entered into numerous bilateral defense and military exchange arrangements with African countries where it has the greatest investments and access to vital resources. Beijing also has become increasingly involved in collective security operations under United Nations auspices on the African continent.

“The deeper China ventures into the resource-abundant African continent, the more it stumbles upon various security challenges,” said the European Commission’s Jonathan Holslag, who outlined Beijing’s potential interests and concerns for Africa in an article titled “China’s New Security Strategy for Africa.”

The security challenges includes an increase of U.S. power on the continent, by almost double, while its arms sales also increase.

India similarly is increasing its military presence in Africa, especially along the East African coast, and has signed defense agreements with Kenya, Madagascar and Mozambique. It also has various training programs in these countries, including Tanzania and South Africa.

“Its naval dominance in the strategic maritime shipping lanes around Africa in particular makes Chinese security analysts worry about the safety of Chinese supply routes,” Holslag said. “Delhi has convinced island states such as Madagascar, Mauritius and the Seychelles to cooperate on maritime surveillance and intelligence gathering.”

In addition, India has increased its fleet presence in the Indian Ocean and has become one of the most powerful naval forces, with submarines, aircraft carriers and surface combatant ships.

China’s chief concern will be any attempt either by Western powers and India to block the straits through which vital resources transit.

“China’s growing military might and diplomatic assertiveness may lead to a more strident and unilateral security policy” in Africa, Holslag said. The one thing that could disturb that prospect would be the vulnerability of its long supply lines that will prevent China from resorting to unilateral diplomacy.

But just as China has become more assertive in its own region of the East and South China Seas, it could – but probably won’t for now – set aside any security cooperation in Africa because of what it sees to be challenges to its strategic standing on the continent.

Instead, it could decide to continue cooperation and collaboration with other countries in the region for now to help safeguard its vital economic interests in Africa.

“Unlike any other external power,” Holslag said, “it is in China’s interest to turn regional actors into flexible and globally supported organizations and by demonstrating strategic leadership and conflict management while doing so.”