Indian Earth-moving Equipment in Africa

Priyan R Naik
A columnist and an independent journalist based in Bengaluru. He regularly writes for The Hindu, Hindustan Times, Deccan Herald, Shillong Times, Ceylon Today of Colombo, Sri Lanka and The Daily Star of Dhaka, Bangladesh.

New York, USA based Volza, a global export import trade data aggregator, has stated that excavator and related shipments including spares, to Nigeria alone stood at 1,170 as of May 2023. These spanned 45 Indian exporters shipping to Nigerian buyers. If over a 1000 shipments are being made to Nigeria alone one can speculate the potential for Indian excavators and earth moving equipment to the African continent.  BEML for example recently executed an order to supply 71 units of earth-moving equipment for the Cassava Project in Cameroon.

It is disturbing therefore to read news of excavators being smuggled into Africa for road construction and mining projects after being shipped from Chennai and Mumbai ports. Alarmingly, the police has launched a probe because fraudsters are buying excavators with loans from banks and financial institutions, shipping them to Africa and selling them at almost two times the price at which they are available in India. A carefully operated network ensures potential operators are chosen and their Credit Information Bureau (India) Limited, (CIBIL) score studied. CIBIL, a 3-digit numeric summary of an individuals credit history works as a first impression to a lender, the higher the score the greater the chances of getting a loan.

News reports have detailed how a fraudster scouts around and tracks the CIBIL scores of an operator in the hinterland. If the CIBIL score is good, he approaches the operator, claiming he wants to buy an excavator as he has a big contract but cannot get a loan because his own CIBIL score is low. The financing therefore has to be done in the name of the operator with the high score. The first 4-5 EMIs are paid up and the vehicle registered in the operator’s name. The operator gets the loan and the fraudster gets the excavator which he quietly ships out to Africa where it fetches double the price. Excavator dealers did install GPS devices on every earth moving equipment but the fraudsters were too smart, they simply remove the GPS device after moving out of the dealer’s premises.

There are several reasons why Indian made earth moving equipment should be popular in Africa. The earth-moving equipment, the excavators, bulldozers, loaders, and graders, manufactured in India are designed to meet international standards and are built to withstand rugged conditions and can work in diverse terrains, making them suitable for African environments, quite similar to the terrain and conditions found in India. Indian manufacturers adjust equipment specifications and attachments to ensure the equipment is suited to specific conditions and requirements of the African region so considerable India made earth moving equipment already exists in Africa giving confidence to African customers.

Legitimate customers benefit from a reliable supply chain for spare parts and maintenance services where the parts are continuously replenished and African customers have access to skilled technicians who constantly ensure timely repairs and maintenance. Most important adequate training is provided to local operators and maintenance personnel to ensure familiarity with equipment and its operation and also a support system that addresses any technical issues that may arise.

Now that Indian earth moving equipment is proven and the facility for spare parts, maintenance and training facilities duly established it is only natural that Africa, where conditions similar to the Indian sub continent exist, will need more equipment and machine population will continue to increase. This is the time for manufacturers to introspect on their pricing strategies for the African geographies using arbitrage as a financial strategy to take advantage of price differences for the same asset in different markets. They should not allow a middleman (or a fraudster) to profit from the price discrepancy for the difference in supply and demand.

Undeniably there is a huge market demand for construction and mining machinery in Africa due to the aggressive infrastructure and mining activity being undertaken in the continent. The offshoot of this increased demand is the steep price difference between the two regions. The higher prices more than makes up for the significant cost of transporting the heavy machinery from India to Africa, the additional funds required for import tariffs and taxes, shipping fees, customs duties, and other logistics expenses. These costs do add up and contribute to the higher selling price in the destination market as otherwise the profit margin would be still higher.

Exchange rate fluctuations between the Indian Rupee and African currencies impacts the cost of the equipment and is a major factor, specially if the Indian Rupee depreciates further against African currencies. The local competition for excavators in Africa is almost non existent, so it is easy to maintain higher prices without any pressure to lower them. This lack of competition is a major reason for price disparities compared to other continents where competitive markets exist.

The fraudsters, middlemen and intermediaries deserve to be eliminated as soon as possible. Their presence along the supply chain is a major reason for increased costs, which gets passed on to the buyers in the form of higher prices. They exist because their is primarily an asymmetry of information between the Indian manufacturer and the African buyer. Obviously the buyers are not well-informed about the actual costs and the market prices in India due to which they end up accepting higher prices without realizing it.

The need of the hour is for Indian manufacturers to wake up and grab the market. Instead of letting middlemen capitalize on this arbitrage opportunity, manufacturers should themselves make the most of their hard work, their manufacturing prowess, their R&D, their ability to provide spares and service and the efficiency in machine operation they have obtained through service and maintenance contracts.  The legitimate way is the only way to make India proud!

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