11 April 2006
The Tata Group, one of India’s top two corporations, has identified South Africa as a major growth area in its plans to increase the contribution of its non-Indian businesses worldwide from 25 to 35% within five years.
The group is poised to pump billions of rands into a range of South African industries, spurred by chairman Ratan Tata’s admission to having “lost my heart to South Africa”.
Tata Africa Holdings, the group’s dedicated enterprise in Johannesburg, acts as the headquarters for all Tata operations in Africa. “Success in South Africa is a benchmark for the African continent,” says Tata Africa Holdings MD Raman Dhawan. “If a product sells here, it will sell in the rest of Africa.”
Tata’s computer arm, TCS, has already been performing well in South Africa for the past decade, and chief executive S Ramadorai has said the company has plans to upscale the brand’s presence in the country.
Tata Motors takes off
Tata Motors has been in South Africa almost as long as TCS, initially selling its trucks independently and, from late 2004, selling its cars and light commercial vehicles (“bakkies”) through a joint venture with the local Imperial Group.
The car maker sold around 11 000 units in 2005 – double the number it expected – and hopes to double that number again in 2006, helped by the planned introduction of about five new models in the country.
Based partly on its success in South Africa, Tata Motors has opened dealerships in neighbouring Botswana, Lesotho and Namibia, and aims to increase its southern African dealerships from about 45 to 65 by the end of 2006.
R1.2-billion telecoms investment
Meanwhile, VSNL, the former Indian state-owned telecoms business in which Tata has a 26% stake and management control, is expected to make a US$200-million (R1.2-billion) seed investment in South Africa’s second fixed-line operator, which is due to start offering the first real competition to state-owned provider Telkom by the end of 2006.
Also poised to enter South Africa is Indian Hotels, Tata’s hospitality wing, which is reportedly keen to bring its luxury Taj chain of hotels to the country in order to capitalise on growing numbers of tourists from India.
India’s Business Standard reports that Indian Hotels has recently held talks with both the KwaZulu-Natal and Western Cape provincial governments, and is weighing the options of entering South Africa either through an acquisition or by setting up a new hotel.
R600-million ferrochrome plant
And most recently – last month – the South African government gave Tata Steel the green light to start construction on its US$103-million (R600-million) ferrochrome steel plant at Richards Bay in KwaZulu-Natal.
Tata Steel has also expressed an interest in buying a controlling stake in South African steelmaker Highveld Steel and Vanadium, after Anglo American said in October 2005 that it planned to sell its 79% stake in Highveld.
Last month, Highveld announced that “several interested parties” had started due diligence investigations in respect of Highveld, but would not confirm reports that Tata Steel, Mittal Steel, and a consortium led by the South African arm of UK-based Kermas Group, were among the bidders.
In November, Ratan Tata confirmed that his group was trying to convince Anglo American to separate its steel and vanadium operations, with Tata Steel chief executive B Muthuraman saying: “We are very interested, as South Africa is one of only six places in the world where it makes sense to produce steel … But as it now stands, Highveld is a vanadium producer that has steel as a by-product.”
Following Tata’s lead
Tata is not the only major Indian player waking up to the potential of the South African market.
Lakshmi Mittal’s LNM Group took over former state-owned steel maker Iscor in 2004, renaming the company Mittal Steel SA.
And a number of other Indian companies, including pharmaceutical group Lupin, automotive and farm equipment manufacturer Mahindra & Mahindra, and ICICI Bank, are reportedly eyeing South Africa as a base for their African operations.
“There is a big pharma company. Mahindra is also coming in. There are a number of other companies that are beginning to find their feet,” Minister in the Presidency Essop Pahad told Indian journalists recently. “One of your biggest banks is now having a discussion to open a branch in South Africa.”