Roses may be red, but when Ramakrishna Karuturi sized up those thorny flowering plants back in the 1990s, he saw only green.
It wasn’t until Karuturi’s farming acquisitions in Ethiopia and Kenya toward the end of last decade, however, that the Bangalore businessman turned his rose-growing enterprise, founded in India in 1994, into a cash cow — by outsourcing away from India.
It’s just one example of the Indian business boom that has fueled double-digit growth of the country’s trade and investment in Africa over the past several years. Karuturi turned his 25-acre farm on the outskirts of his Southern Indian town to a 600-acre operation yielding roughly 555 million stems a year. That makes Karuturi Global Ltd. one of the largest producers of cut roses in the world — with 97 percent of those coveted buds growing in East Africa. Karuturi’s African ambitions didn’t stop with bouquets, however. In 2008, his company inked an agreement with the Ethiopian government to lease 750,000 acres of farmland — an unprecedented amount of turf — in the fertile Gambella region, with the aim of branching out into cereal crops and oil palms.
India and Africa: a Fact Sheet
- Africa has more than 10 times the land mass of India
- India has 200 million more people
- Nearly 900 million people in India and Africa live in extreme poverty
- India’s bilateral trade with Africa is now higher than its trade with the U.S.
Source: WTO & Confederation of American Industy
Karuturi isn’t the only Indian tycoon to see opportunity in Africa’s cheap and abundant supply of arable land in recent years. Indian enterprise has been on the continent for nearly a century, heating up most in the 1970s under Ugandan leader Idi Amin, famous for declaring “economic war” on Asian (namely Indian) investment in his country. But now, egged on by their own government to expand production during the global food crisis of 2007-08, Indian agriculture firms have bought up or leased land to grow everything from cotton to tea, with Indian-owned plantations now dotting the landscapes of Uganda and Mozambique and even as far afield as West Africa’s Sierra Leone and Ghana.
With those activities, India looks to have nosed past China as the biggest investor in African land, period, in recent years, says Professor Padraig Carmody, a professor of development geography at Trinity College Dublin — citing data from Land Matrix, a global land monitoring initiative. Though the numbers are fuzzy and may not be comprehensive, given the lack of transparency of some deals, Land Matrix’s count shows India having invested in more than 30 major land deals, compared with China’s 22.
Certainly, across the full spectrum of trade and investment activities (not just land but infrastructure, finance and so on), China is still clearly the big dog in Africa — with more than $150 billion in bilateral trade in 2012 and billions more invested. The United States was second in terms of two-way trade with Africa at just over $100 billion. But Indian companies’ land grabs are just one more piece of evidence that after spotting Beijing a big lead at the start of the 21st century, the rest of Asia is now keen to catch up on a continent dripping with natural resources and, if population and economic growth projections are to be believed, home to an increasingly rapacious consumer class.
With some of the world’s best performing economies in recent years, the growing linkages between the two regions are poised to shape the global economy of the future, particularly when it comes to energy — which Asia is hungry for.
Business partnerships across Africa are shifting the way in which developed economies engage with the continent, proving it’s not just for humanitarians.
Chinese and Indian business partnerships across Africa are also shifting the way in which the world’s developed economies engage with the continent, proving it’s not just for humanitarians.
The United States, Carmody notes, is now mulling teaming up with China to finance a dam project in the Democratic Republic of Congo, which would be the world’s biggest.
The most dynamic player in Africa this side of Beijing is India.
Meanwhile, Japan — one of the world’s biggest and most developed economies — trails well behind geopolitical rival China in terms of its African presence. Prime Minister Shinzo Abe is now trying to change that, with one eye clearly on Beijing. Last May, Abe announced $32 billion in economic development and infrastructure aid at a conference on African development in Tokyo, with billions more for development and security promised in a recent swing through Cote D’Ivoire, Mozambique and Ethiopia.
Malaysia, meanwhile, caught everyone by surprise when it topped the list of developing countries investing in Africa in 2011, according to a United Nations report that came out in the spring. (The caveat: Experts at the Center for Strategic and International Studies say Chinese investment on the continent is underreported and likely larger than Malaysia’s.) But the report and the size of Kuala Lumpur’s spending on African energy and agriculture projects was still eye-opening, to say the least.
The most dynamic player in Africa this side of Beijing, however, is India. Though it started from a much lower level, bilateral trade between India and Africa has grown at nearly the same rate as bilateral trade between China and Africa since 2002. And the World Trade Organization now forecasts that bilateral trade could surpass $175 billion by 2015, up from less than $10 billion in 2001.
With the rise in investment has come growing scrutiny of the ethics and business practices of Asian power players.
Africa’s oil spigots are the main attraction, dominating exports to India. But agriculture — like Karaturi’s farming ventures — as well as banking and telecommunications are also drawing the interest of India’s business class, who recognize the tremendous growth potential as more and more Africans climb into the middle class.
Global Indian brands like manufacturer Tata, cell phone provider Bharti Airtel and IT company Wipro have all been buying up companies, infrastructure and market share across the continent, making Africa-based enterprise a substantial part of India’s foreign investment portfolio as of this decade.
With the rise in investment, however, has come growing scrutiny of the ethics and business practices of these Asian power players. Though they haven’t drawn the headlines or international suspicions directed at China and its opaque, state-owned enterprises, that’s not necessarily an indication that private companies from India, Kenya or Malaysia are behaving any better, says Michael Kugelman, an expert on Asia at the Wilson Center.
Karuturi Global’s recent spate of bad press is Exhibit A. In the last year the company has faced strikes and been forced to pay back taxes at its rose farm in Kenya. And its foray into other farming operations in Ethiopa has been slowed by floods and labor disputes. Its whole land purchase in Gambella, moreover, has been part of a bigger political dispute about Ethiopia’s land policy, which global human rights campaigners say has forced locals off their land and sapped domestic food supply. The outcry — and Karuturi Global’s travails in particular — prompted the Ethiopian government to overhaul its policy this past summer.
Asia’s love affair with Africa may be destined to grow fiercer, but not everything, it seems, is coming up roses.
Why you should care
Because we know you know about China in Africa — but, surprisingly, there’s a bigger player in the ring: India.