South Africa, the most important of the continent's countries, is the base from where the Tata Group is building its business muscle

The Group set up a dedicated enterprise — Tata Africa Holdings — in Johannesburg, and this acts as the headquarters for all Tata operations in Africa. "Success in South Africa is a benchmark for the African continent," says Raman Dhawan, managing director of Tata Africa Holdings. "If a product sells here, it will sell in the rest of Africa."

That's where the challenge lay for the Tata Africa team. The team had to first convince customers that the Tata Group had competitive products of international standard. It also had to drive home the message that it was strong in industries such as automobiles, steel, telecom, and that it could deliver in all these areas.

Ten years later, Tata Africa Holdings has covered a lot of ground on the road to full-fledged success. Tata Motors' medium commercial vehicle (MCV) range is No 2 in the South African market and the Indica, introduced in December 2004, has already set a record for being the most successful car launched in South Africa, beating the likes of Renault and Kia. There are some 1,000 Indicas on South African roads today and the company is hoping to push this number to 7,000 in the next year. In the telecom sector, the Tata Group has acquired a controlling stake in the Second National Operator (SNO) in South Africa. The SNO will soon be granted a licence to provide fixed line national and international voice, data and other value added services.

In a recent interview with a leading Indian business daily, Ratan Tata, the Chairman of the Tata Group, expressed his satisfaction at these accomplishments. He emphasised Africa's importance to the Group's globalisation thrust and named telecom, power, mining and tourism as the areas the Tatas would be focusing on.

Tata Africa Holdings began its operations by importing commercial vehicles from Tata Motors. Over the years, it has set up three main businesses. Tata Automobile Corporation SA (Pty) Limited (TACSA) handles the marketing and distribution of Tata vehicles; The Engineering Division manages businesses in steel, chemicals and engineering products; and Consilience Technologies (Pty) Limited, through a company called Fairitec, offers IT services and solutions.

Says Sudhir Babshet, TACSA's general manager: "We wanted to enter the market with a product that suited customer needs." Research revealed that the biggest market was for Telco's (now Tata Motors) 2- and 4-tonne vehicles, particularly the LPT 713 (bus version). These were subjected to 100,000 km of endurance and performance testing by an outside agency called Gerotek in Pretoria and, after mandatory approval from the South African Bureau of Standards, the first batch of Tata vehicles was introduced in December 1998.

In the first four months, nine vehicles were sold. From such modest beginnings, the business has grown to sales of 1,400 vehicles in 2004-05, a market share of 18 per cent in the MCV segment, behind Toyota. This is no mean achievement in a market dominated by entrenched heavyweights such as Toyota and Mitsubishi, both of whom have been operating in the continent for nearly 60 years and have their own manufacturing bases here.

"There were two problems that we faced initially," says Mr Babshet. "The first was marketing the Tata brand, as products from India were not considered world class. The standard of living in South Africa can be compared to any European country and customer expectations are high. Our team spent many months convincing customers about the Tatas' commitment to quality." The second was setting up a dealer network. "The big dealers were aligned with well-known names; we had to work hard to persuade them to sell our truck," says Douglas Viljoen, marketing head at TACSA, "It's a different scenario today; Toyota dealers now ask for our dealership."

The company currently has 32 dealers and this network has helped them sell their vehicles in every part of the country. TACSA spends a lot of time training these dealers in sales and service practices. Recently they have also started giving dealers a uniform Tata image in terms of signage and brand visibility. "Our dealers are committed to and enthusiastic about our products," says Mr Viljoen. "For instance, we are now bringing in our 8-tonne vehicles and we are getting orders even before the launch."

Navnitlal Bhagoobhai (aka Dagwood) is one of the five dealers in the Gauteng province, which has the highest sales of vehicles. "We are totally dedicated to the Tata products and management. It is no more a challenge to sell Tata vehicles, as the brand is now well known. Today, people ask me for the products by name," he says.

"I think what is nice about the Tatas is that when you have a problem they are ready to do something about it. The vehicles have certainly improved in quality and I see that from the repeat orders I get," adds Willy de Beer, director of de Beer Motors, another Tata dealer who is now expanding his premises to accommodate more Tata vehicles.

All sales are through the dealers, and customers are usually fleet owners and individual businessmen in mining, farming, dairy and warehousing. An important customer is AA Distributors who was the first to buy a fleet (10 trucks) in 1988. It now owns 45 trucks and has recently finalised an order for another 25. TACSA sells directly only to the government. It is the sole supplier to Durban Metro, who is also their biggest customer.

"Customer satisfaction is very important in this industry and it spreads by word of mouth. If you cannot give good service to the customer you will not last," says Dagwood. "Forty per cent of my customers are repeat buyers."

Adds Mr Viljoen, "We have not driven the market. We allow the market to tell us the specifications required — through our dealer network, their market experience and direct contact with the end-user. Customers here don't want to know how a truck performs in other countries, but how well it will perform here."

The Group has succeeded in building the Tata brand thanks to four key elements: commitment to quality, products with the correct specifications, competitive prices and, most important, good and efficient after-sales services. "We work with our dealers to ensure that not a single vehicle is off the road for more than 24 hours," says Mr Babshet. And to aid that initiative, a central distribution centre in Johannesburg ensures that dealers do not run out of spares.

Apart from trucks and buses, the company has also now brought in the Indica and the Telcoline Pickups. The cars are being distributed by Accordian Investments (Pty) Ltd — a tie up between Tata Africa and Associated Motor Holdings (a subsidiary of Imperial Group which has varied business interest). Another area of business for TACSA is the bus-body building unit. South African bus operators prefer locally built bodies and TACSA is bringing in the chassis and cowl and assembling the body and interiors. The 18-seater bus is called Tata Ubuntu (which means ‘we are for each other’). TACSA has also started marketing the Tata Novus (from the Tata Daewoo heavy commercial vehicles) range.

The Group is also promoting another of its engineering skills in South Africa, in the mining industry. This makes eminent sense, given that South Africa is such a big producer of gold, platinum and chromium, and that mining is the most important component of its economy. Says Bish Chakraborty, general manager, Engineering Division, "We started by reengineering products but soon realised that the requirements here were very different. We then shifted our focus to consumables. The main challenge in the South African market is equalling the level of service and product quality."

The Engineering Division's product range includes conveyor belts, rails, steel ropes, bearings, safety shoes, steel plates, rollers, pipes, refractories, speciality chemicals, castings, chains, valves, forging and strapping. These are sourced from India (from Tata as well as non-Tata companies) and countries such as the UK, the US and Germany. The products are exported to Zambia, Tanzania and Ghana as well.

The division also caters to the steel, chemicals and power industries. A significant part of revenue comes from steel, sales of which topped 45,000 tonnes in 2004-05. "Our galvanised coils are perceived as a high-quality product," says marketing manager Anand Swaminathan. "It's a very competitive market and China is a threat," adds Mr Chakraborty, who says plans are afoot to expand into niche areas and new product lines such as appliances and white goods.

In the area of power, the division is working on a project with Alstom, the Swedish company, to rehabilitate the auxiliary systems at the hydropower station in Kafue Gorge in Zambia. Charles Marais, business development manager, details the scope of the project: "We have designed the heating, ventilation and air-conditioning system, refurbished the electrical system, set up dam-level monitoring and upgraded the intake gate-control system." The project is expected to be complete by April 2005. Mr Marais has identified additional projects that are being assessed for economic viability with the help of TCE Consulting Engineers. The Engineering Division's turnover for 2004-05 is expected to be $35 million, and future plans include tapping the chemicals business, ferro alloys and minerals.

Yet another business area that Tata Africa Holdings is engaged in, is IT services and solutions, through Consilience Technologies. In 2000, Consilience Technologies was set up as a joint venture between Tata Africa Holdings and J&J, a local group. "It was envisaged that the company would grow organically, but an acquisition strategy was adopted for faster growth," says Nikhil Chengappa, an associate consultant with the SI division of Tata Infotech, which is the preferred IT service provider to Consilience. J&J then bought a 30-per cent stake in Fairitec, another local company, and the operations of Consilience were merged with Fairitec in April 2003. Fairitec was dealing mainly in boxes and shrink-wrap software and did not have systems-integration skills, which is where Tata Infotech excels.

"There is a dearth of skilled individuals in the country and the South African IT market, though mature in terms of creating solutions doesn't have strong methodologies and processes built into its systems," says Mr Chengappa. "Our clients appreciate the systems we follow, and we are doing well in banking, finance and telecom. We are also working on getting more business from the government." Its clients include ABSA Bank, MTN, Vodafone and Cell C and it has also executed a national identification project for the South African Department of Home Affairs.

All said, the rainbow nation is providing the colours and the base for the Tata Group to light up the African sky with a dash of India.

South Africa facts

• Area: 1.2 million sq km
  
• Population: 46 million
  
• Adult literacy: 85.3 per cent
  
• Major industries: Mining, automobile assembly, metalworking, machinery, textiles, iron and steel, chemicals, fertilisers, foodstuffs
  
• Major exports: Gold, diamonds, platinum, other metals and minerals, machinery
  
• Major imports: Machinery and equipment, chemicals, foodstuffs, petroleum products