Africa beckons
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Is Africa emerging as the new frontier for Sri Lankan businesses? Suddenly…..well…..suddenly there is a surfeit of local businesses setting up shop in Africa and the business pages of local newspapers are documenting this phenomenal rise in Sri Lankan investments in that continent.It even stretches to a packaging facility with the advent of Sri Lanka’s Printcare, a global leader in premium packaging solutions, setting up a cutting-edge manufacturing facility in Nairobi.
So what is the reason for this sudden increase in investments in Africa? According to Knowledge@Wharton, CEO Manu Chandaria, out of the top 10 most important investment destinations today, six are in Africa. There is huge potential right now. Everybody is rushing towards it because Africa now has a more stable political climate than ever before.
Furthermore while nearly all developed countries are finding it extremely difficult to grow, Africa is expected to grow probably at 6 per cent in the coming years, he says.
Hankering for a conversation with one of my friends on this topic, I reached out to Ruwanputha, the young economist who has his finger on the pulse of recent global economic trends, to find out about this new-found interest in Africa.
“Well, there seems to be a lot of economic opportunities in Africa,” he said. “How about the political climate?” I asked. “It seems to be stable, labour is cheap and access to other markets from Africa is strong,” he said, adding that there is also huge potential for renewable energy projects.
China is the largest investor in Africa over the last 10 years (pumping in more than $72 billion to the continent from 2014 to 2018, according to a Brookings Institute report). The US is the second-largest investor in Africa, followed by France in third place. The report also ranked the UK as the fifth largest investor in Africa, adding that it is quickly losing ground to Japan and the UAE, which have both given Africa more investment in the last decade.
But I pointed out to Ruwanputha that Sri Lankan companies should respectfully ensure fair wages and non-financial benefits to local workers and create a situation where Sri Lanka can be proud of its principles. “I am not an expert on African rules and regulations, but if we can establish that Sri Lankan companies look after the workers fairly, then that is something to be proud of,” I said.
Here is a glimpse of Sri Lankan investors in Africa:
- The biggest Sri Lanka investor: Browns Plantations PLC, a subsidiary of Sri Lanka’s diversified conglomerate LOLC Holdings Group, officially became the world’s largest tea producer after its acquisition of James Finlay, Kenya’s tea estates business which is a significant portion of the Lipton tea supply chain.
- LOLC is already present in Nigeria, Zambia, Zimbabwe, Malawi, Tanzania, Kenya and Egypt with its robust MSMEs business model, has sugarcane plantations in Sierra Leone. The group recently acquired a luxury leisure property, the Radisson Blu in Mauritius.
- Mini-hydro power companies such as VS Hydro and Hemas Power, a subsidiary of Hemas Holdings Plc, were among the early entrants of Sri Lankan companies into Africa.
- Resus Energy PLC is looking at expanding to Uganda in East Africa.
- Star Garments has opened a manufacturing facility in Togo.
- hSenid is in Tanzania.
- LTL is constructing a transformer manufacturing plant in Tanzania.
- JAT Holdings has established JAT Paints Africa Ltd., in Kenya through a joint venture.
- Isebella Socks Manufacturing Plc and Hirdaramani Garments Plc, have operations in Ethiopia.
- Venora Lanka Power Panels (Pvt) Ltd launched its manufacturing products in Ethiopia in 2018.
- Hela Kenya, established in 2016, has over 4,000 workers and produces around 20 per cent of the country’s total apparel exports.
- Venora Lanka Power Panels (Pvt) Ltd., launched its manufacturing products in Ethiopia in 2018.
- According to Sanjeewa Wickramanayake, Chairman of EWIS Colombo Ltd, there are parties in Zambia and Kenya interested in joint ventures there.
- Valibel One has subsidiaries in Kenya and is confident in long-term growth in East Africa.
Sri Lanka’s entry into the African continent, the second largest continent in the world with 54 countries, is guided by a stable political climate, enormous new investment opportunities, a gigantic workforce, an easy-to-do business environment, consistent tax policies and a welcoming attitude towards foreign investors.
According to Landry Signé, Executive Director and Professor at the Thunderbird School of Global Management, the rapid expansion of Africa’s middle class and consumer base is driving demand for locally produced creative goods. By 2060, the middle class is expected to comprise more than 40 per cent of the continent’s population. At the same time, Africa’s youth population is projected to double by 2050, making it the only region in the world with a growing working-age population.
Well after this discourse, I needed a breather. After picking up a mug of tea from the kitchen, I overheard the conversation, from the kitchen window, by the trio. “Ah, den bus rathawala riyaduranta seat-belt andinna wela (Now bus drivers also have to wear seat belts),” said Kussi Amma Sera. “Eka hondai, mokada riyaduru anathuru adu karanna puluwan wewi (That’s a good idea as it helps reduce traffic accidents),” added Serapina. “Bus wala adika wegaya ganath aanduwa mokak hari karanna oney, mokada eken thama godak riyaduru anathuru wenney (The government should also do something about speeding by these buses which cause many accidents),” noted Mabel Rasthiyadu.
Well with Africa being the new frontier of investment for Sri Lankan businesses, Sri Lanka’s business community, particularly the likes of the LOLC group, is making a strong name as an established foreign investor in the global arena.
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