Indian companies have often lost out to Chinese firms in Africa. But they may have found a new ally to counter the Chinese in the continent - Japan.
Indian firms sense that an alliance with Japan would allow them to access capital at a lower cost. Noel Tata, Managing Director at Tata International and Chairman of the Africa committee at the lobby group Confederation of Indian Industry, said on Monday that Indian companies need funds at a cheaper rate to grow big in Africa and that this can come from a third country such as Japan.
Tata, who was speaking at an event hosted by the CII on India-Africa partnership, said Indian companies' strength and experience of operating in similar capital-constrained conditions adds value to their operations in Africa.
An industry leader, who did not want to be named, said that both India and Japan want to train Africans to take up more jobs whereas Chinese companies are often criticised for employing mainly Chinese workers.
India and Japan have been engaged in backroom talks on cooperating in Africa for the past four years. The negotiations have gathered pace since Shinzo Abe became Japan's prime minister more than a year ago. India and Japan are also negotiating to finalise an alliance to jointly bid for natural gas. Japan is the world's biggest importer of gas and India is also rapidly increasing its purchases. China has made massive inroads in Africa's energy and resources sector and is investing almost $75 billion there.
At the CII event, global consultancy firm McKinsey & Company released a report that says India Inc can quadruple its revenue from Africa by 2025. It adds that Indian companies can aspire to capture almost seven per cent of Africa's IT services market, five per cent of fast-moving consumer goods market, 10 per cent of the power sector and two to five per cent of agriculture and allied services.
Rajat Gupta, a director at McKinsey, also pointed out the need to align with Japan. He said that Indian companies can play a vital role in business development in Africa, though he refused to acknowledge this as a counterweight to the growing Chinese influence in the continent.