Raman Dhawan, managing director, Tata Africa Holdings, talks about the coming of age of the Group's relationship with the continent

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.