India’s influence in Africa is growing. Elaine Porteous, SmartProcurement Associate Editor and Procurement advisor discusses how to make the most of this partnership.
Indian companies are increasingly investing in Africa. “India will invest US$1,5-trillion in the next five years,” declared Anand Sharma, India’s Minister of Commerce and Industry, at a recent conference in Nigeria on bilateral business in Africa.
Diversified groups like Tata and Mahindra have been present for decades, but the extent of their investment has heightened in the past few years. Africa is one of India’s fastest growing markets, accounting for more than 7% of the total export basket. Nigeria is its largest trading partner, with a committed US$10-billion investment, predominantly in the oil and gas sector.
Like the Tata Group, Mahindra & Mahindra (M&M) has been present since the late 1970s. “We have sold good numbers in Kenya, Nigeria, Ghana and Angola,” says PN Shah, vice-president (overseas operations), at M&M. “We have done only a small fragment of our great plans for Africa. South Africa is our hub because it is easily accessible from India.”
Also growing at a rapid rate is Neotel, the second network telecommunications operator in southern Africa, which is part Indian-owned. The company is targeting $1-billion in revenue in its first five years of operations. Ajay Pandey, CEO of Neotel, says: “All our investments are made with a long-term objective in mind. We are certainly here to stay.”
India’s mining companies are also digging in, eyeing the rich coal deposits of South Africa, Nigeria and Mozambique to secure hard coking coal to run their plants. Mittal Steel is entrenched in Africa already.
Many established and emerging Indian firms are moving into the African marketplace both directly and through joint ventures. These include pharmaceutical suppliers Ranbaxy and Cipla, and cosmetics company Emami. Reliance Oil is picking up many retail and wholesale businesses across Africa that have been divested by the global oil majors.
Ideally, local sourcing would always be first choice, but realistically cost plays a major part in any buying decision. The labour costs of Indian companies are low, productivity is higher, delivery is on-time and products and services of the required quality. But there are cultural pitfalls to be aware of when establishing relationships with Indian vendors.
Sourcing from an emerging nation can be a real challenge. Indian businesspeople will have prepared well for their negotiations and will probably understand more about doing business in Africa than you may think. Most speak English well, although more than 80% of the population has Hindi as its first language.
Understanding cultural differences can help with avoiding potential misunderstandings which can result in contractual disasters. A side-to-side toss of the head normally indicates agreement in India, while in Western cultures, a “yes” signal would be an up-and-down nod of the head.
It is important to be sensitive to, and appreciate, the diversity of Indian business culture, which varies depending on an organisation’s history, geographic region, its industry sector and ownership patterns. A large number of Indian businesses are family-owned or owned by members of regional communities.
Finding the right date and time to engage in business negotiations can be somewhat of a test of patience. India is religiously diverse so observes many additional religious holidays. This means despite traditionally following a Christian calendar, businesses may be closed on other days. And if you visit India, be aware that most Indians take vacations during April-June and mid-December to mid-January. To avoid the monsoon season, a visit between October and March would be a good idea (although bear in mind that March is the financial year-end). When it comes to appointments, Indians appreciate punctuality but don’t always practise it themselves. It is recommended you keep your schedule flexible for last-minute changes.
Business is conducted at a fairly leisurely pace and is usually preceded by lengthy introductions, refreshments and small talk. Expect delays; they are inevitable. The concept of “time is money” is almost unknown. Do not feel surprised if you are asked some personal questions about your family, children or home.
Negotiations and protocol
Indians usually do not express their disagreements openly and directly; doing so would be considered discourteous. Instead, when differences arise, they may circumvent them with statements such as “we can discuss this later”. It is not recommended that you say “no” because it has harsh implications in India, better to be evasive and say “I’ll try” or “I’ll think about it”. Bargaining for the price or asking for additional concessions is normal with Indian negotiators, who expect and value flexibility in such discussions. It is advisable to build buffers into an initial offer to allow for bargaining later.
Insisting on a firm commitment to do business in the first meeting is not likely to be successful. Making a decision in Indian organisations is often a long, drawn-out process. It is pretty much a given that there will be a need to refer to higher authority.
Titles are highly valued by Indians, who tend to be status conscious. Erring on the side of formality is preferable, especially with professional people, and try to keep physical contact to a minimum. The safest bet is to stick to the old Western-style handshake.
The giving and receiving of gifts can be a minefield. Guidance on this and other possible pitfalls in entertaining are outlined in Kiss, Bow or Shake Hands by Terri Morrison and Wayne Conway, which details the cultural challenges you may face in 60 countries. The authors’ advice on India suggests that gifts should not be opened in the presence of the giver, should not be wrapped in paper that is black or white, should not be made of leather, nor should you give money. To be safe, stick to sweets, chocolates or flowers – but not frangipani blossoms, which are associated with funerals in India.
In the next decade, Indian businesses will provide growing competition to incumbent local suppliers in many long-established industries because their products will be cheaper. Understanding the thinking processes of Indian business people and the nuances in their way of doing business could provide you with the competitive edge.
For more information contact Elaine Porteous at firstname.lastname@example.org
This article first appeared in the 15 April edition of Supply Management