India Agri firms see hurdles in investing in Africa

 

Indian investors have had bitter experiences in the past. Number of large companies including Ruchi Soya Industries, Vedanta Harvests Plc, Solvent Extractors' Association, MMTC Ltd, McLeod Russel, Adani Group among a host of others invested in African agriculture four - six years ago. Many of these investors purchased land for growing various agri commodities. Companies like MMTC Ltd and Adani Group proposed to grow pulses, Ruchi Soya Industries invested Rs 50 crore to grab 152,649 ha of land parcel to grow soybean and set up a processing plant in Ethiopia.

The primary objective of these corporate investors was to grow pulses and oilseeds to meet growing demand - supply deficit in India. But, the objective was met with expected success because of various issues pertaining to agriculture. The major fear, certain political classes raised, was that the local land owners would lose their control over land in case Indian investors succeed in their business efforts.

"Our land parcel is situated at Sudan boarder which faces security unrest. We have spent Rs 50 crore in land acquisition, but no progress was made thereafter," said a Ruchi Soya spokesperson.

Meanwhile, the availability of large land parcel with suitable agronomic condition still induces Indian investors to take the risk with investment in African region.

Similarly, Solvent Extractors' Association (SEA) formed a consortium of 18 vegetable oil companies and took 15,000 ha of land on lease in Paraguay. But companies lost interest gradually due to a dramatic upsurge in cost of production. "We released the land which we had taken on lease," said B V Mehta, Executive Director, SEA.

Endowed with rich natural heritage like fertile land, favourable climatic condition similar to India and direct connectivity with mass consumer markets like Europe, countries in African region remained on back foot in terms of agriculture production. Irrigation facility remained almost absent resulting into the entire region's sole dependence on seasonal rainwater.

In good monsoon year, therefore, the agriculture productivity mounts while in drought year, the agriculture output hits. Consequently, a large portion of African continent needs aids from the rest of the world.

"It is therefore, essential for the African government to give a commitment on returns as investors cannot spend on people, infrastructure, land, politics and everything. So, trade between two governments would yield better results than investment in agriculture," said a senior industry official.

While pulses import from Mozambique would be a new initiative, Tanzania continues to supply pulses to India albeit in a small quantity. India opportunistically imports wheat and onion from Kenya too.