Investments in Africa have been at the receiving end of media attention lately, especially those linked to land acquisition.
There are accounts of Indian investors pulling of out of agri-business and mining projects, leading one to believe that investments in Africa are barely sustainable.
Reports of declining rates of return may paint the picture that Africa may not be the attractive investment destination it is touted to be.
Further, rights activists brand Indian investments as instances of land grab that threaten the livelihood of communities in Africa.
Indian investors claim that issues arise from lack of Government policy, while governments in Africa allude to a lack of commitment on the part of Indian investors. The host government and the Indian investor may both be responsible for this situation.
Most countries in Africa do not have detailed topographical, cadastral (details of extent, value and ownership of land) and land-use/land-cover maps.
They seldom conduct GIS and land-mapping studies, an important starting point when they invite investors either for agriculture or resource extraction.
Studying the land
Conducting such studies helps host countries access existing and future potential of their lands, provide concrete concessions for implementing sustainable projects, and avoid future litigations.
Topographical maps are a fundamental requirement for informed decision-making.
Superimposed with resource maps such as land-use/land-cover maps, soil maps, they open up a plethora of views of spatial data for various engineering, legal and environmental inputs needed for the successful implementation of projects.
It is, therefore, imperative that host countries develop basic map frameworks, at the very least.
Often, Indian investors enter hastily into agreements, especially related to land acquisition. Most often they do so without conducting adequate due diligence and scientific analyses to ascertain their suitability for crop production or mineral availability.
Discussions with numerous prospective investors revealed that this is especially true with respect to SMEs; the entrepreneurs concerned have the appetite to invest in Africa and the intention to make it a viable business proposition, but not the necessary resources to understand the ground realities.
When investors enter a host country with little or no understanding of the country from an economic, social or political perspective, they tend to blame governments when challenges arise, and projects often come to a standstill.
Long-term outlook
There are also instances of Indian investors who enter Africa to make a quick buck, with no long-term vision for their investments. This outlook often causes heartburn among thousands of people in the host country who stand to benefit from job creation.
There have been cases of companies, under the pretext of overseas expansion, acquiring thousands of acres of land in Africa,raising capital based on that land in European and North American financial markets, and never implementing the project.
This investment mismatch can be resolved by host governments taking concrete steps such as conducting topographical, cadastral, land-use/land-cover maps and others as required.
It is important to have such large-scale maps to gauge irrigation canal routes, soil types, mineral deposit availability and suitability of land for agriculture and horticulture.
Some African nations, such as the Republic of Rwanda, have been dilligent about undertaking such studies and successful in attracting investors in the agriculture sector.
The Rwanda Natural Resources Authority has mapped the entire country using high-end technologies where 80 per cent of the entire country is mapped with full information about topography, natural resources, soil and land title. If investors wants to purchase or lease land, besides accessing basic information about the land, they can also check on the title.
When they finally make the investment they will have it registered with proper land titles, thus enabling a confident business investment case.
Need clear policies
It is also imperative that governments in Africa formulate clear policies on land management and land rights to ensure adequate compensation.
While mining laws in most countries in Africa mandate that landowners are adequately compensated, land is informally divided among the community and title deeds are absent, creating issues regarding ownership and compensation.
Land disputes and related problems hamper investment prospects; therefore, it is essential that governments of African countries revisit their policies on property rights alongside conducting mapping exercises.
Recognising that geographically referenced information is vital to attract private sector investment, the World Bank and other donor bodies have embarked on programmes to promote land-mapping information systems in Sub-Saharan Africa.
The Bank aims to improve support towards design and implementation of information systems.
Indian investors require strategic planning for their forays into countries in Africa. A project successful in one country may not meet with the same outcomes in another due to different resource patterns, economic climate and political leadership.
In today’s social-media empowered world, information is easily accessible and people are increasingly aware of their rights. There is a need to look at Africa differently – participation rather than exploitation – to be successful in business endeavours.
Indian conglomerates such as the Tatas, Reliance and Essar, automobile companies such as Mahindra, Bajaj and TVS, and telecommunication companies such as Bharti Airtel have been successful in Africa because they have a long-term vision for Africa, thereby creating new markets for their products.
A myopic vision may provide short-term results but could be detrimental to the companies’ branding and the future of other investors looking at Africa.
Success can be replicated if opportunities are approached strategically coupled with the right support in terms of feasibility studies, resource mapping, local partner identification and building strong relations in the host country.
(The author is Managing Director of Avignam Group, based in New Delhi, London and Kigali.)