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BW Businessworld

Africa Rising, Africa Surprising

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I heard this fascinating story about Sanjay Kirloskar, Chairman of Kirloskar Brothers Ltd (KBL). This is the flagship company of the $2.5-billion Kirloskar Group.

When Sanjay was checking-in to a hotel in an African city, the clerk at the counter giggled after reading his name. When Sanjay asked him why, the clerk had simple answer. "Sir, in our language your name Kirloskar means a pump."

Sanjay smiled. It was a symbol of his group's success.

For the last few years, water pumps made by KBL have become so popular in some African countries that Kirloskar is a generic description of the appliance. Much like Xerox is for a photocopier.

Sanjay's group discovered the potential of the continent much before many others in India and the world. The economic growth in African countries is now rewarding companies that invest in the region. The traditional strategy of petty trading for quick gains is not paying much dividend now.

Here are some facts about Africa countries that can surprise. Mobile devices are likely to be used for internet browsing in African countries than in any other region of the world.  The region's middle class will treble over the next two decades. Half of the continent's billion plus population is under 20 years.

Unfortunately, more bad news is reported from the continent than good news. But here is the fact that the world is realizing with delight. Over the last decade, the continent was home to six of the world's 10 fastest growing economies, and the outlook for the region remains bright at a time when the rest of the world is facing major political and economic challenges. 

"In 2012, Africa's projected growth rate of 6 per cent will be driven by improved macroeconomic and political stability, an ongoing resource boom and a growing consumer base. In addition, deepening links to fast-growing emerging economies and an increasing appetite of global and regional champions for long-term investments in Africa's frontier markets are fuelling a renewed optimism about the continent's future," says a World Economic Forum paper, ahead of its summit in Addis Ababa next week.

The capital of Ethiopia, Addis Ababa is among the most exciting cities of the continent. The city boasts the headquarters of African Union, the multilateral body that is playing an increasingly important role in bringing peace and deepening democracy of the continent. With stable politics and welcoming attitude, Ethiopia is emerging as travel and investment destination. Prime Minister Meles Zenawi is working hard to drive foreign investment into sectors like power, agriculture and railways.

Another country that has emerged as an economic dynamo is Rwanda. It is among the smallest countries of the continent, but is recognized as the Singapore of Africa. President Paul Kagame wants to make Rwanda a middle income country by 2020, putting behind the Hutu-Tutsi conflict. Rwanda was named the world's top reformer in the World Bank's Doing Business Report 2010.

African countries are reducing their dependence for trade and investment on developed countries. Exports to BRIC countries have risen to be equal to its exports to Europe. And this is an opportunity that India is building on. Last year a $5 billion line of credit was announced by Prime Minister Manmohan Singh. This is being executed through the Exim Bank of India. Tata International's Syamal Gupta who is also Chairman of Confederation of Indian Industry's Africa Committee is confident that India and Africa's bilateral trade will rise to $90 billion by 2015.

There are 54 countries in Africa, more than in any other continent. There are over 30 regional trade agreements across the continent. Some of the more successful ones like the East African Community are working toward a customs union. 

Many problems and challenges remain. Especially with regard to transparency, governance, ethnic conflict and human rights. But these problems are on the decline.  As the political leadership matures, so does the prospect of a prosperous Africa.
(Pranjal Sharma is a senior business writer. He can be contacted at [email protected])