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India eyes African markets, faces tough competition from China

India eyes African markets, faces tough competition from China
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First Published: Thu, May 08 2008. 11 35 PM IST
Updated: Thu, May 08 2008. 11 35 PM IST
Hong Kong / Mumbai: As China pushes into Africa to tap its natural resources and consumers, India wants deals of its own there to feed a booming economy and a corporate sector hungry to grow overseas.
But India is having to play catch-up as China has a tight foothold across the African continent, stretching into nearly every country in areas such as mining and oil.
Indian companies realize that if they don’t move quickly to expand across the globe to secure energy and customers in markets such as Africa, China is likely to get there first.
“There’s been a definite shift in the way Indian companies look at Africa,” said Shipra Tripathy, head of the Africa desk at the Confederation of Indian Industry. “We are now big enough to foray into what was earlier perceived as a risky market. It’s not just natural resources. Companies are now looking for opportunities in many sectors,” she added.
China and India, the world’s two most populous nations, are battling for resources to drive their roaring economies, and are going head-to-head when it comes to cross-border acquisition strategies for fast growing companies.
That is the backdrop for an expected bid by India’s mobile leader Bharti Airtel Ltd for a controlling stake in South African telecom operator MTN Group Ltd, a company worth about $40 billion (Rs1.6 trillion).
Bharti says it is in talks with MTN, but has not yet made an offer.
But investment banks are lined up to advise and finance the deal, people close to the development say, with other global telecom players — China Mobile Ltd included — said to be on the fringes.
China Mobile said on Thursday it has not bid for MTN, but is interested in the South Africa market.
A deal for MTN would be India’s largest ever cross-border acquisition and would boost the country’s presence in Africa.
In March, Satyam Computer Services Ltd, India’s No. 4 software services exporter, announced the launch of a software development and support facility in Egypt to tap a growing outsourcing business in West Asia and north Africa.
Top Indian outsourcer Tata Consultancy Services Ltd has a business unit in South Africa. Oil and Natural Gas Corp. (ONGC), Tata Steel Ltd and Tata Motors Ltd also do business there.
China’s outbound acquisitions so far this year have ballooned to $28.3 billion on 72 deals from $2.3 billion and 66 deals in the year-ago period, according to Thomson Reuters data.
Industrial and Commercial Bank of China Ltd (ICBC), China’s largest bank, agreed to buy South Africa’s Standard Bank Group last year for $5.6 billion. A CLSA Ltd report from 2006 said more than 900 Chinese companies had invested in 49 African countries.
India’s cross-border acquisition activity dropped 39.1% to $6.8 billion so far this year, Thomson Reuters data show. Last year, India-Africa trade grew to $30 billion, but China’s trade with Africa jumped to double that figure.
That China has been able to forge more relationships in Africa is due in part to Beijing’s role in partnerships abroad.
Most of China’s top companies are run by the government, providing capital to finance deals.
Indian companies, by comparison, have neither government backing nor its balance sheet, so they have had to be more selective in where they invest.
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Tom Miles in Hong Kong, Serena Chaudhry in Johannesburg and Rina Chandran in Mumbai contributed to this story.
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First Published: Thu, May 08 2008. 11 35 PM IST
More Topics: India | China | Africa | Bharti Airtel | MTN Group |