From the first
tentative steps in 1977, the Tata Group’s African initiative
has gathered momentum. Its footprint now extends to nine countries
(with two more slated to join the list this year) and ‘Tata’
has become a well-known and respected brand in Africa. The
success of this venture has also become a model for Tata ventures
in other new geographies.
A large part of the credit for making this possible goes to
Raman Dhawan, managing director of Tata Africa Holdings,
who spearheads the Group in the African continent. Quiet and
unassuming, Dhawan has been cementing the Group’s relationship
with Africa for more than two decades. In an interview with
Christabelle Noronha, Dhawan reveals Tata Africa’s
strategic plans for further expansion and growth.
What are the challenges of doing
business in a continent as large and diverse as Africa?
The sheer size of the African continent is a challenge as
each of the African countries is different — in their
economy, culture and environment for investment.
When we first came here in 1977, we had to struggle to
get a foothold. That has changed over the past couple of
years. Today, we are a known brand and we have built confidence
in our customers. We have succeeded in establishing our
businesses in the area of automobiles, engineering service
and telecom, and are continuously exploring new business
opportunities. We continue to face challenges of a different
kind today, as we need to look for new and relevant areas
of investment, which reflect the Tata Group’s core
strengths. Mining is one of the main businesses in Africa,
but it is a difficult sector to enter for the Tatas as it
is dominated by large global corporations which have been
here long before Tata Africa came into being.
While Tata operations in Africa
started from Zambia in 1977, most major developments in
the last few years have been in South Africa. What is Tata
Africa’s strategy for growth?
There are four regional business hubs in Africa. We have
offices in Tanzania, Uganda, and are setting up operations
in Kenya. These three countries will form our eastern Africa
region. Central Africa comprises Zambia, Malawi and Zimbabwe.
We are also exploring the possibility of setting up operations
in the Congo. As far as West Africa is concerned, we currently
have operations only in Ghana. We are hoping to form a company
in Nigeria this year and will then look at countries like
Senegal and Angola.
We had been looking for opportunities in South Africa since
1994. It is only in the last five years, with the changes
in the political environment, that we have been able to
make effective inroads in the country. Going ahead, we plan
to extend our operations all over the continent, depending
on where the opportunities lie.
The Taj Pamodzi was the Group’s
first five-star hotel in Zambia and you are now looking
at some more properties. Can you tell us something more
about these new properties?
The potential for the hospitality industry in Africa, particularly
in South Africa, is vast. It is a beautiful land, rich in
flora and fauna, and the game parks are a big tourist draw.
We have entered into a joint venture with Indian Hotels
to look at various opportunities in South Africa and have
identified Johannesburg, Durban and Cape Town as favourable
cities to set up hotels. We have signed a memorandum of
understanding with the developers and are hoping that development
will begin within the next few months.
With the growth rate expected to be over six per cent in
South Africa and over five per cent in some other African
countries, the opportunities for business are on the rise.
In fact, commodity prices have already started rising. Therefore,
we are very upbeat about the prospects for our joint venture
with Indian Hotels.
Tata Africa has plans to invest
in the bus-body building, telecom, ferro-chrome and power
sectors. Can you give us an insight into each of these projects?
Tata Africa is setting up these projects jointly with Group
companies — with VSNL in telecom; in ferrochrome with
Tata Steel; and in bus-body building with Tata Motors.
Another project on the anvil is the setting up of a plant
for soluble coffee in Uganda, jointly with Tata Coffee.
The project, which is expected to start production in the
third quarter of 2007, will process instant coffee and have
an annual output capacity of 3,600 tonnes.
Tata Africa has currently invested $100 million in Africa.
In the next two to three years, this will increase to $150
million. In addition, Tata Group companies are going to
invest about $150 million as equity in various projects.
This will add up to a total investment in excess of $1 billion.
As these figures show, we are committed to a long-term
relationship with Africa, and see our investments growing
steadily in the future.
What is the status of the SNO
(second network operator) project?
VSNL owns a 26-per cent stake in SNO, a South African telecom
service provider, which was granted the licence for fixed
line telecom services in December 2005. The project has
progressed well and we hope to launch our fixed line telecom
services by July 2006.
The prospects of growth in the telecom sector are very positive.
Along with local companies, we plan to invest $1 billion
in SNO Telecommunications over the next four years.
Group Chairman Ratan Tata has
talked about assembling vehicles in South Africa if conditions
favour it. Is the Group planning to make this a major internal
manufacturing base?
Tata Motors, with Tata Africa, has been able to capture
a significant share of the commercial vehicle market here.
In its segment, the vehicle sales are the second highest
in volume and have a market share upward of 20 per cent.
The Indica has been very well accepted in South Africa
and is one of the fastest growing internationally established
brands. In view of the growing market in South Africa and
our success here, we will definitely explore the possibility
of assembling vehicles locally.
How does South Africa’s
Black Economic Empowerment (BEE) agenda affect your operations
in South Africa?
In keeping with the Group’s philosophy of conducting
business in an ethical manner, we have very consciously
been taking partners and hiring people from previously disadvantaged
segments of society into our businesses.
However, let me state clearly that this is being done not
because of any regulation, but in the spirit of social responsibility
that underlies all business activities of Tata Group companies.
Can you tell us something about
your CSR initiatives in South Africa?
In South Africa, we have consciously focused on developing
skills among the local population as we feel it will enhance
the quality of people’s lives. We have therefore evolved
initiatives for skill development and have awarded Tata
scholarships to deserving students studying in various disciplines.
We are now looking at expanding our programme to support
entrepreneurs who can use their skills to earn a livelihood.
As our business grows, our CSR initiatives will also be
stepped up.
What is the future of the Tatas
in Africa?
Africa has been very good to the Tata Group and we have
built a strong bond with people and companies in the different
countries. We have an excellent track record in the continent
and are welcomed wherever we go.
Group Chairman, Mr Ratan Tata, and the chairman of Tata
Africa, Mr Syamal Gupta, have actively encouraged Tata Africa
and urged Group companies to increase investments here.
I am personally very happy to be promoting the Group in
Africa. I believe this continent is truly alive with possibilities
and our relationship will get stronger in the future.
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