Indian companies hunt for opportunities among Africa’s diverse economies and regulatory regimes

Vandana Chatlani reports

The tapestry that tells Africa’s story shares many of the same threads used to weave India’s story. Free from their colonial powers, both Africa and India have witnessed remarkable economic and social development and yet remain plagued by high levels of poverty and a growing divide between rich and poor.

Both India and countries in Africa have experimented with liberalization and suffer from inconsistent law enforcement and political tensions. Yet despite the regulatory labyrinths that confront investors, both India and Africa offer promising prospects, vibrant economies and also a rich experience for entrepreneurs.

Today, Indian investors are providing products, services and infrastructure to fulfil the needs of a growing population across Africa. Even tightly regulated sectors such as telecoms and financial services are attracting investor interest.

Christophe Asselineau, a Paris-based partner at Shearman & Sterling who heads the project development and finance group, estimates that 85 acquisitions and equity investments have been made by Indian companies in Africa over the past five years. This translates into roughly US$16 billion of investments.

Challenges abound

Although India and Africa share many similarities, the continent’s economic, social, political and cultural diversity present tough challenges for investors.

“In countries such as South Africa, Nigeria, Egypt, Morocco, economies are already diversified and industries, banks and financial activities are developed,” says Jean-Jacques Lecat, a partner at CMS Bureau Francis Lefebvre. Lecat says that oil-producing countries such as Algeria, Angola, Equatorial Guinea and Gabon may have high per capita GDP, but their economies are undiversified.

Although Africa has some of the world’s least developed countries, some of them are “nevertheless growing rapidly and have good prospects, such as Burkina Faso, Guinea (Conakry) and Benin,” says Lecat.

Individual countries in Africa offer investment opportunities common to developing economies: infrastructure, agricultural-related industries, fast-moving consumer goods and manufacturing. Resources, too, have been a big magnet for Indian companies that have flocked to oil and mineral-rich countries such as Nigeria and Angola.

Success stories

Bharti Airtel’s acquisition of Kuwait-based Zain Telecom’s assets in 15 African countries in 2010 has been an Indian success story in Africa.

“The market-shaping US$10.7 billion acquisition … pushed the Indian group to number two mobile tele-phone provider on the African continent … and is a good illustration of Indian investor appetite for Africa,” says Asselineau.

Indian businesses of varying size and capital have been investing in Africa for many years. Karuturi Global, a Bangalore-based flower producer, is just one of them (see At the heart of it all page 40). The company set up farms in Ethiopia in 2004 and expanded to Kenya in 2007. The success of these ventures has given the company the confidence to plan investments in Tanzania, Mozambique, Senegal and Sierra Leone.

A host of other investments by Indian entities are peppering the African continent.

Indian Farmers Fertiliser Cooperative has taken over a large fertilizer plant in Senegal (Industries Chimiques du Sénégal). Other members of the Fertiliser Association of India are exploring projects in the Republic of Congo.

Tata Hispano is selling railway equipment in Senegal and will invest in Morocco in a plant to assemble buses intended for export to the sub-Saharan countries. Alok Industries, a Mumbai-based textile manufacturing company, is investing in a cotton-spinning plant in Burkina Faso. The north and west of Africa have attracted Indian companies such as Dabur.

But the political volatility of certain countries in Africa, as witnessed in the north during the “Arab spring”, is a sign that businesses could encounter instability in seemingly safe environments. While many Indian businesses based in Egypt have remained in the country through the recent turmoil, Dabur has been forced to temporarily shut its manufacturing plants to prevent damage to its property and danger to its employees. Dabur is carefully watching developments in Egypt and could reevaluate its business there if tensions escalate.

Paths well trodden

Indian investments in Africa have tended to concentrate largely on countries where personal ties and historical connections to India run deep. Kenya and South Africa, two countries with sizeable Indian populations, are prime examples.

“Trade between South Africa and India has doubled since 2007, reaching about US$5.8 billion in 2011 at today’s exchange rates,” says Pieter Steyn, a director at Werksmans who is currently chairman of Lex Africa, a network of leading law firms in 27 African countries. “India is now South Africa’s sixth-largest export destination and ninth-largest source of imports.”

Pieter Steyn Director Werskmans

Indian companies have already made their mark in several sectors including IT, pharmaceuticals and automotive. Companies such as Ranbaxy, Tata and Mahindra are present or have invested in South Africa, which is used by many foreign companies as a base for operations in other African countries.

However, observers predict that India’s reliance on eastern and southern Africa will slowly fade as entrepreneurs explore new opportunities elsewhere in the region. “In West Africa, Nigeria has been targeted as a priority by the Indian government and enterprises,” says Lecat. “Indian companies might diversify their presence and explore new markets, for instance in francophone Africa.”

Jean-Jacques Lecat Partner CMS Bureau Francis LefebvreIn Nigeria, Fred Onuobia, the managing partner of G Elias & Co, is representing an Indian company on the establishment of an electricity generation company. Bharti Airtel, Tata, Bajaj Auto, Godrej, Birla, Kirloskar, Ashok Leyland, and New India Assurance have also ventured into Nigeria.

Ram Karuturi Managing Director Karuturi Global

Egypt is another popular destination for Indian companies. In addition to Dabur, Egypt has attracted the likes of Emami, Oberoi Hotels, Asian Paints, Galaxy Chemicals, WIPRO, Kirloskar, Ranbaxy, Marico, Ashok Leyland, Tata Motors, Mahindra Satyam and State Bank of India.

Other countries in Africa with Indian interests include Tanzania and Uganda, where as Céleste Oates, the manager of Lex Africa, points out many local businesses are run by people of Indian origin. Mozambique, Zambia, Madagascar and Mauritius also draw in Indian investments, according to Oates.

Power to the people

Indigenization and black economic empowerment

Investors will discover that empowering local communities is a running theme in many African countries and one that can open several doors for investment. In South Africa, this is known as black economic empowerment (BEE) and in Angola, Angolanization.

Robert Appelbaum, a partner and head of the India practice group at Webber Wentzel, compares this policy with legislative proposals by India’s mining ministry to protect tribal communities in various parts of India. Even if an African country has no equivalent, investors will gain favour if they can integrate local talent and management into their business operations.

“The most important matters for the success of any investor … are a deep knowledge of the regulatory framework on the specific industry they are aiming to enter, a profound understanding of cultural traditions … and long-term vision that gives the host country the feeling of an investment partner for the future and not only an investor looking for a ‘gold-rush’,” says Rita Assis Ferreira, a senior associate at PLMJ in Portugal.

“There is quite a complex regulatory framework to measure a firm’s BEE status,” says Pieter Steyn, a Johannesburg-based director at Werskmans, “covering ownership, management, procurement, enterprise development, skills development, employment equity and socioeconomic development initiatives.”

In general, there is no legal obligation to have a minimum BEE status. Nevertheless, investors with a strong BEE status will score high points when bidding for project-related work and contracts in sectors such as gambling.

“Government, para-statals and other public entities will take BEE status into account when awarding tenders and other contracts and certain sectors … require a minimum BEE status to acquire licences,” says Steyn.

Appelbaum says that where necessary, his firm has introduced clients to like-minded black-owned or black-empowered businesses with which they could partner.

Although BEE status may be more important for deals in the public sector, Steyn says that investors often try to enhance their BEE status by procuring from companies with a good BEE rating.

“BEE should accordingly be taken into account by Indian investors,” advises Steyn. “It can often be applied in a manner which makes sound business sense and contributes to the business.”


Indian interest has also increased in Botswana, where in February three Indian companies secured licences for diamond processing. According to Mining & Energy Bulletin, the Botswana government has issued 21 mining licences to global players, of which five went to Indian companies.

Mumbai-based Shrenuj & Co received licences three years ago and has spent US$5 million so far in developing a small processing unit, Mining & Energy Bulletin reports. The company plans to invest between US$5 million and US$10 million to establish a large diamond-cutting and polishing unit in Botswana. Suashish Diamonds and Blue Star have also obtained licences in Botswana.

Similar but different

Veteran businesspeople in Africa are quick to highlight excessive red tape, corruption and poorly functioning courts as major impediments for new investors. This may strike a chord with many Indian companies that face similar frustrations at home. But although parallels can be drawn, navigating a deal in Africa is a completely different ball game.

The challenges encountered by Bharti Airtel, which was venturing out of South Asia for the first time, are a clear indication of this.

“Language, culture, market, the systems are very different … everything is very different,” says Vijaya Sampath, adviser to the chairman and group CEO at Bharti Enterprises. Sampath adds that one of the key challenges was dealing with multiple regulators.

Broadly speaking, the countries in Africa are governed by three separate legal systems, inspired by the French, Portuguese and English legal systems. As a result, France, Portugal and the UK can serve as important gateways for Indian investments.

Joana Andrade Correia Partner Raposo Bernardo & Associados

As Joana Andrade Correia, a Lisbon-based partner at Raposo Bernardo & Associados, explains: “The legal regime of Angola, Mozambique, Cape Verde, São Tome and Principe, and Guinea Bissau are very similar to the old Portuguese legal regime, which means that Portugal can be a good gateway to these countries. Senegal, Mali, Congo, Togo and Côte D’Ivoire are countries which follow the French system … [so] entry through France could be helpful.”

Similarly, the UK could act as a springboard for investments in countries such as South Africa, Ghana and Botswana.

South Africa is a peculiar jurisdiction, which uses a combination of legal systems. Its procedural law, company law and law of evidence are based primarily on the English legal system, but the Roman-Dutch system governs its contract law, law of delict, law of persons, law of things and family law.

South Africa’s legal system is one of the most developed in Africa. Aside from strong competition laws and consumer protection legislation, the country has a robust regime for intellectual property (IP) protection.

Indian rights owners may also opt for multijurisdictional IP protection afforded by the African Regional Intellectual Property Organization, which covers 18 countries, and Organisation Africaine de la Propriété Intellectuelle, which covers 16 mostly French-speaking countries. By submitting a single registration through these organizations, Indian IP holders can obtain protection in member countries.

Regional integration

Many African countries have joined hands to foster regional integration and Indian investors may find it easier to invest within an economic bloc where rules tend to be similar. While regional integration is less evident in the north, “several regional organizations have been formed among sub-Saharan African countries,” says Lecat.

Organisation pour l’Harmonisation en Afrique du Droit des Affaires (OHADA), which works for the harmonization of business law in Africa, is a case in point. Established in Mauritius in 1993, OHADA relies on an updated French legal model to promote both domestic and foreign investments in member countries.

OHADA currently has 16 members. Its legal system comprises nine uniform acts which are “directly applicable in all member states and whose provisions prevail over any national laws governing the same matters,” says Asselineau at Shearman & Sterling.

The uniform acts relate to general commercial law, commercial companies and economic group partnerships, securities, summary debt collection procedures and measures of execution, insolvency and liquidation proceedings, arbitration, organizing and harmonizing accounts, transportation of goods by road, and cooperative credit banks.

The OHADA zone is said to be one of the world’s richest regions in terms of untapped natural resources. “Oil and gas, copper, iron, bauxite, gold, cobalt and other minerals are already extracted in large quantities and there remain large unexplored deposits,” says Asselineau.

Christophe Asselineau Partner Shearman & Sterling

Eight OHADA members (Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo) have formed the Union Économique et Monétaire Ouest Africaine (UEMOA), which is a customs and currency union. The UEMOA members share the CFA franc as their common currency.

Another organization whose members use the CFA franc is the Communauté Économique et Monétaire de l’Afrique Centrale (CEMAC), which promotes regional economic cooperation in Central Africa. The six member states of CEMAC share a common financial, regulatory and legal structure.

“UEMOA and CEMAC customs unions have respectively adopted unified customs rules and a common external tariff applicable to goods originating from third countries,” explains Lecat. He says that while goods qualifying as originating from UEMOA or CEMAC member states may benefit from reductions or exemptions from customs duties, other goods do not move freely within each union and each state continues to collect duties and taxes at its borders.

Another important organization is the Economic Community of West African States (ECOWAS), which comprises the eight member states of UEMOA and seven other countries: Cape Verde, Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone. The ECOWAS countries cover 17% of African territory and a total population of 260 million.

The main practical provision affecting enterprises implemented within ECOWAS is the total exemption … of entry duties levied in respect of goods deemed to originate from a member state,” says Lecat.

The Common Market for Eastern and Southern Africa (COMESA) covers 19 countries that have attempted to harmonize legal and economic policies.

Baby steps

African companies are exploring India with caution

Last September, Litha Healthcare Group, the fourth-largest pharmaceutical company listed on the Johannesburg Stock Exchange, announced plans to join hands with Natco Pharma, a Hyderabad-based generic pharmaceutical manufacturer. Litha signed an agreement with Natco to market and distribute the Indian company’s products in South Africa and neighbouring countries.

But this deal is one of only a small handful of African investments in India, the most notable of which have come from South Africa. FirstRand Bank is the only African bank with a banking licence in India; South African grocery chain Shoprite launched its wholesale operation in India in 2004 and subsequently sold it to an Indian retailer, Future Group, in 2010; IT company Datatec bought a stake in India’s Inflow Technologies; SAB Miller snapped up breweries in India; and Airports Company South Africa was granted a contract to manage and operate Chhatrapati Shivaji International Airport in Mumbai.

Robert Appelbaum, a partner and head of the India practice group at Webber Wentzel, who assisted FirstRand Bank on its foray into India, says India’s “licence permit Raj is always a killer”. He admits that obtaining a work permit for clients in India is easier than in South Africa, but says there are other frustrations, such as vast disparities between tax levels in various states.

It may also be hard to create a tax-efficient structure when pursuing Indian targets. “Indian exchange control is a challenge,” says Raj Karia, a London-based partner at Norton Rose. “Working closely with the client to obtain approval, or structuring an offshore transaction using non-rupee-denominated debt sourced from Indian banks located offshore – particularly Singapore – can help.”

According to Joana Andrade Correia, a partner at Raposo Bernardo & Associados in Portugal, “the general idea that an African investor has of the Indian market is that it is very protective and closed to foreign investment in some sectors of the economy”.

With a hugely diverse market and promising growth prospects in Africa, African companies may see greater benefit in focusing on their own markets before chalking out plans for India.


“The benefits of investing in countries that belong to COMESA are mainly the free movement of factors of production including goods, services, labour and capital,” says Charles Mkokweza, the managing partner of Lusaka-based Corpus Legal Practitioners. The countries within COMESA have a combined GDP of US$360 billion and total population of 400 million.

Such convergence and regional integration is reassuring for investors, particularly those exploring multijurisdictional investments. However, Asselineau warns that the “laws applicable to a specific transaction or investment project often differ from one African country to another”. Approaching experienced legal advisers is therefore crucial.

Steyn at Werskmans advises Indian companies that seek to invest in one or more African countries to “ensure that the investment structure (e.g. a single holding company based in South Africa or routing investments through Mauritius) is tax efficient, takes advantage of available incentives, avoids pitfalls and is based on a thorough understanding of local business, political, legal and cultural environment and customs”.

At the heart of it all

Ram Karuturi, the managing director of Karuturi Global, paints a rosy picture of Africa

In 2004, Ram Karuturi launched operations in Ethiopia to produce and export hybrid tea. Today, Karuturi Global is the world’s largest producer of cut roses and has a flourishing cut-rose production centre in Kenya that is home to over 40 rose species.

In Ethiopia, Karuturi Global cultivates maize, rice and oil palm on 311,000 hectares, and new greenfield ventures are planned for Tanzania, Mozambique, Senegal and Sierra Leone.

Karuturi shares his experiences and offers practical tips to new investors in Africa:

“We saw enormous potential in Africa for our business and we’ve been very happy with our investments. We have not encountered any insurmountable challenges in these geographies. Ethiopia, in particular, has been a breath of fresh air. Government policies have been extremely investor-friendly. It is an evolving regulatory landscape, but one that has evolved in a positive direction. The government has been pro-growth, pro-business and pro-foreign direct investment. We have seen a lot of changes in regulation but mostly in a positive sense.

Kenya is a more evolved and mature mercantile economy. A very transparent regulatory system is in place and the infrastructure is very well organized, be it in terms of legal advice or the ways of the land in terms of laws and regulations. Kenya is very easy to conduct business in.

In Kenya, we used Kaplan & Stratton and PwC as legal advisers for our acquisition. I guess the only surprise was the cost of legal services. I was quite taken aback that I was paying US$500 an hour, versus paying less than half of that in the US and Europe. Apart from that, the quality of advice and service was impeccable.

We believed in local employment on a large scale. There is no regulatory pressure regarding black empowerment as in South Africa, but it is always good to employ local people. The costs are much lower than expat salaries. As a rule, 99% of our employees are local. We have achieved that in Kenya where we have six expats with an employee base of 5,000. We are keen to get more locals into key positions. We have hired expats from South America, India and Holland who possess specialized expertise. But some of our middle management and our senior staff is Kenyan.

One of the first things I would say to investors new to Africa is don’t view corporate social responsibility [CSR] as an afterthought, but as an integral part of your business. We have taken CSR as an important dimension of our business, be it running a hospital or having 2,000 kids in our schools, or running a local football team in the premier league.

These are things we’ve done because we believe CSR pays very rich dividends, be it in the cohesiveness of the workforce, building up team spirit and also to project ourselves to others as a local company, not a foreign company.

I think the instinct of any foreign investor is to largely mirror what they’re doing in their home countries in these external environments. But that doesn’t necessarily work. It’s always good to act local while you think global, to indigenize your business processes to local cultures and local work ethic, and involve the local people in what you’re doing. Then you’re building a more sustainable and scalable organization.

It is not true that in most of Africa there is graft and corruption. It may come as a surprise that Ethiopia is nearly zero corruption. There are a lot of countries like Tanzania, Mozambique, Ethiopia and Uganda which are extremely transparent and have zero tolerance for corruption. They are doing very well for themselves and their investors.

It shows today because Ethiopia is the third-fastest-growing economy in the world after India and China. We’ve never had to encounter any problems of corruption. Kenya, unfortunately I can’t speak in the same breath. There has been corruption in Kenya, but if you follow the rules meticulously, you won’t be exposed to unwanted or illegal demands in business.

View your business as a long-term investment. Hindustan Unilever is a great example because very few Indians believe it is a foreign company. Often when Indians travel for the first time and see the Unilever brand, they are pleasantly surprised because they think it’s an Indian brand. That shows the success of their model in integrating into the Indian ecosystem and the Indian psyche.

I believe when we go to Africa, following best practices will create the right kind of reputation and wavelength with various stakeholders, whether it is the government, the people or other players in the ecosystem.”


Regulatory minefields

First-time investors to Africa will soon realize that some sectors are much harder to penetrate than others. In addition, as elsewhere, certain sectors have their own regulators. In South Africa, sector-specific regulators oversee banking, insurance, gaming, lotteries, telecommunications and broadcasting, and energy and gas.

“In Algeria and Zimbabwe, investments require 51% of share capital to be held by nationals (30% for trading activities in Algeria) and strict exchange control rules apply,” says Lecat.

Robert Appelbaum Partner Webber Wentzel

The scenario is similar in Angola. Robert Appelbaum, a Johannesburg-based partner and head of the India practice group at Webber Wentzel, says exchange controls and the remittance of funds must be “carefully navigated”. Citing Angola as an example, he points out that if “the setup is not properly attended to, the likelihood of ever remitting a dividend is zero”.

Nigeria’s banking, oil and gas, and telecommunications sectors may also be difficult to penetrate. While Nigerian participation is necessary, Onuobia at G Elias & Co believes that “delays occasioned by bureaucratic bottlenecks pose the greatest challenge to foreign investors intent on doing business in Nigeria”.

Clashes between private investors and governmental authorities in Africa have resulted in disputes that may resemble those faced by foreign investors in India. For example, the Zimbabwean government’s cancellation in July 2011 of diamond-cutting licences can be compared with the Indian government’s recent cancellation of 2G spectrum licences.

Looking at the current disputes between Indian parties and African businesses, Appelbaum says: “Probably the biggest issue that will arise is that between Rail India Technical and Economic Services/IRCON on the one hand and the Mozambican government on the other.”

The tussle relates to the Mozambican government terminating the concession held by the two Indian companies on the Sena railway line, which is to connect the coal fields in the western province of Tete to the port of Beira, for alleged non-performance.

The fracturing of Bharti Airtel’s merger with Johannesburg-based MTN illustrates the need for inter-regulatory cooperation for success. “Our exchange control authorities were prepared to agree to the transaction (which involved a share swap between MTN and Bharti shareholders) if MTN was listed in both Johannesburg and Mumbai, but Indian regulators would not permit a dual listing,” Steyn explains.

According to Mkokweza, the withdrawal of tax incentives by the Zambian government has ignited a dispute with an Indian company, Varun Beverages Zambia.

In some cases, Indian parties have obtained a favourable decision. Nico Halle, the founder of Cameroon-based Nico Halle & Co, represented an Indian company in its dispute with Cameroonian shareholders who claimed shares of the Indian company.

“We handled the matter up till the level of the Supreme Court of Cameroon and won the case in favour of the Indian investors,” says Halle.

Brave new world

Key Indian investors in Africa*


A hive of activity

Indian investments across Africa may not match those from China, but there is more bustle and opportunity than meets the eye


“Investment opportunities in Botswana are greatly vested in Botswana’s natural resources, especially minerals,” says Moemedi J Tafa, a candidate attorney at Armstrongs in Gaborone. “There are tax incentives for those venturing into the manufacturing and raw materials processing industries as these have been identified as struggling and underdeveloped sectors.”


“In Cameroon, there are investment opportunities in road infrastructure, mining, forest exploitation, pharmaceuticals and information technology,” says Nico Halle, the founder of Nico Halle & Co. Agriculture-related industries are also lucrative. According to Halle, the Indian government last month pledged a US$42 million line of credit for cassava processing in Cameroon.


In 2011, bilateral trade between Egypt and India reached US$3 billion.

During a trip to Cairo in the first week of March, India’s external affairs minister, SM Krishna, signed a memorandum of understanding (MoU) to increase cooperation in environment protection, an agricultural cooperation work plan for 2012-13 between the Indian Council of Agricultural Research and the Agricultural Research Centre of Egypt, and a MoU between the Egyptian Organization for Standardization and the Bureau of Indian Standards.

Dabur launched its Egypt operations in 1996 in order to manufacture hair oil, vinegar, glucose and rose water, among other branded consumer products. Today, Dabur has a distribution network which covers Ghana, Liberia, the Ivory Coast, Sierra Leone and South Africa. The company plans to set up two new factories, in Johannesburg and Nairobi, before the end of this year.


Indian companies have invested in telecommunications, petrochemicals and chemicals, floriculture, etc., and have executed engineering contracts in the power and other sectors. India is Kenya’s sixth-largest trading partner. Bilateral trade was pegged at US$2.4 billion in 2010-11, of which nearly US$2.3 billion represents India’s exports to Kenya. Pharmaceuticals, steel products, machinery, yarn, vehicles and power transmission equipment are among the key Indian exports to Kenya, according to India’s Ministry of External Affairs (MEA). India imports soda ash, vegetables, tea, leather and metal scrap from Kenya.


Many Indian companies use Mauritius as a stepping stone into Africa to take advantage of its double tax avoidance treaties and other benefits. MEA’s statistics show that India was the largest exporter of goods and services to Mauritius from 2007 until 2010. Mangalore Refinery and Petrochemicals supplies all of the country’s oil requirements under an agreement with the State Trading Corporation of Mauritius, which was renewed for three years in July 2010.


Mozambique’s government has prioritized investments in economic and social infrastructure and in the provision of basic services to enhance private initiatives, in particular investments in small and medium-sized companies, says Joana Andrade Correia, a partner at Raposo Bernardo & Associados in Portugal.

In Mozambique, there is a lot of Indian investment, mainly in the financial, automobile, hotel and real estate sectors.”

Pieter Steyn, a Johannesburg-based director at Werksmans, notes that while foreign ownership of land in Mozambique is prohibited, 99-year leases are possible.


Under the Moroccan foreign investment regime, foreign investors can “freely carry out their investment operations and directly transfer to the banking system any income generated by these investments, as well as any income resulting from their transfer or liquidation, since they invested in foreign currencies,” says Patrick Larrivé, a partner at UGGC & Associés in Morocco.

Morrocco’s foreign exchange convertibility regime requires that an investor must file a report with the Foreign Exchange Office within six months of the date of the foreign investment. The report must include all the details and supporting documents of the transaction.

UGGC has acted as counsel to a Moroccan group in its joint venture with the Oberoi group to develop a hotel and several branded villas in Marrakech.


MEA estimates that over 100 Indian companies have footprints in Nigeria.

Indian investors could take advantage of untapped opportunities in telecommunications, transport, food and the entertainment sectors in Nigeria, where there are few or no exchange control restrictions. Despite the favourable investment environment, Fred Onuobia, the managing partner of G Elias & Co in Lagos, notes that foreign investors “must show evidence of initial importation of foreign capital into Nigeria before they can be allowed to repatriate out of Nigeria dividends, interest or capital derivable from the investment with the foreign capital”.

Investment incentives and relief policies are boosting interest in Nigeria. As Onuobia explains, these include duty drawback on certain goods imported for manufacturing purposes; a three to five-year exemption on income tax granted to companies in industries that have not reached a scale sufficient for Nigeria’s economic development; an investment allowance of 10% granted to companies that incur expenditure on plant and equipment; a 15% investment tax credit for replacing obsolete plant and machinery; and a capital allowance granted to companies that incur expenditure on certain productive assets.

In addition, interest on foreign loans above seven years is tax exempt and certain bank accounts of a foreign non-resident company are exempted from tax, provided the accounts consist mainly of foreign currencies imported into Nigeria through the central bank or any authorized banks.

South Africa

Indian companies that are entering South Africa are showing interest in mining, infrastructure, power, health, pharmaceuticals, IT and agriculture. “There are very few areas where the issue of control of foreign direct investment is an issue,” says Robert Appelbaum, a partner and head of the India practice group at Webber Wentzel. “The only areas where one would need to be cautious would be in relation to radio, newspaper and television ownership and arenas close to the military.”

South Africa has strict exchange control rules, which apply to Indian-owned South African subsidiaries. Companies wishing to lend money to their South African subsidiaries require the prior consent of the South African Reserve Bank.

“Loans by non-residents to residents require prior exchange control approval and there are local borrowing restrictions on companies in which non-residents hold a 75% or more controlling stake,” says Steyn. “There are generally no exchange control restrictions on the repatriation of capital profits and the payment of dividends to non-residents.”


India exports mineral fuels, pharmaceuticals, cotton textiles, engineering goods, iron, steel, motor vehicles, consumer goods and garments to Tanzania. Its imports include raw cashew nuts, gemstones, raw cotton, pulses and timber. In 2007, Reliance Industries acquired a majority stake and management control of major oil company Gulf Africa Petroleum Corporation, which markets fuel to Tanzania, Uganda and Kenya.