South Africa promises a whole new world for Indian business
"We’re still scratching the surface," says Jerri M. Matsila, South African High Commissioner for India. The growth rate is still on a small base, as economic links between the two countries were set up only in 1992-93. But it holds promise, keeping in view that trade was Rs 994.89 crore in 1994-95. According to the Federation of Indian Chambers of Commerce and Industry’s (FICCI) estimates, the figure should touch $4 billion or Rs 14,000 crore by the turn of the centur y.
India was among the first countries to take advantage of the lifting of sanctions on South Africa. The Government issued the Export Trade Control order on May 5, 1992, to allow specified items to be exported to what had till then been the world’s favou-rite pariah. Gradually trade, investment and shipping were permitted and Air India started a direct service to that country. Even before sanctions were completely lifted, FICCI sent India’s first trade delegation to South Africa on April 26, 1993.
And what prompted it to do so was South Africa’s rich mineral reserves. It produces 47 per cent of the world’s alumino-silicates and 28 per cent of its gold. Besides, 82 per cent of the world’s manganese ore reserves, and 66 per cent of platinum group metal reserves are found there. After years of economic sanctions, which saw a decline in real growth rate, Pretoria was raring to go. The story so far: Most of India’s exports to South Africa comprise traditionally popular commodities like cotton yarn and fabrics, leather and readymade garments, while imports from there consist primarily of iron and steel and inorganic chemicals. "But we are moving towards expanding the scope of bilateral trade and are looking for joint ventures in mining, steel and power," says Matsila.
The chambers of commerce on both sides are humming with activity. "The Indian Trade Promotion Organisation organised Indexpo ’94, a major Indian trade fair, in Johannesburg last year and South Africa has been participating in trade fairs here,’’ says S.C. Pradhan, deputy secretary, FICCI, and a member of the association’s first delegation to South Africa. The India-South Africa joint business council has drawn up a 10-point strategy for strengthening economic ties.
From the Indian private sector, United Breweries has bought a 30 per cent stake in National Sorghum Breweries for $20 million, with an option to increase its stake to a maximum of 50 per cent. Corporates like Ranbaxy Laboratories, the DCM group, PCL, SRF, and Tata Consultancy Services have also opened offices in South Africa. Others like the Hinduja Group and Bajaj Auto may soon be doing so.
In turn, South African conglomerates are coming to India. Diamond giant De Beers has opened an office in Bombay. Foskor, the world’s leading rock phosphate producer, has appointed representatives for India, as has steel giant Iscor. An Indian delegation is now in South Africa, negotiating a treaty for the avoidance of double taxation, while a South African delegation is here to finalise an investor protection treaty.
India, the world’s largest gold importer, has not yet begun importing from South Africa, the world’s largest gold producer. As a first step towards direct imports, the State Bank of India has applied for clearance to open branches in Durban and Johannesburg.
The two countries’ needs and strengths mesh well. South Africa’s economy is very high on natural resources, strong on infrastructure and low on availability of skilled labour, giving rise to unusual opportunities for Indian businessmen. For instance, India can be a valuable source of expertise for setting up a small industries base that will help in grassroots economic development in post-apartheid South Africa.
The National Small Industries Corporation is to set up a Demonstration-cum-Technology-Dissemination Centre in South Africa where it proposes to train 150 technicians at a time, entailing an initial cost of Rs 3.43 crore. By nourishing South Africa’s nascent small industries base, India expects to generate substantial export orders for its capital goods. For Indian business, the southern tip of Africa couldn’t have been named more appropriately: the Cape of Good Hope.