Selling to South Africa

Selling to South Africa article image

In an interview with the BBC, South Africa's 2010 Local Organising Committee chairman, Danny Jordaan described the FIFA World Cup as nothing less than an opportunity to "construct a new economic and businessenvironment for the African continent", using South Africa as a catalyst. Jordaan’s remark truly positions South Africa as the economic gateway to Africa. The presence of Australian multinationals such as BHP Billiton, Rio Tinto and Woolworth attest to the nation’s leading economic status in Africa. As the South Africa 2010 FIFA World Cup football competition nears kick-off, Austrade has concluded plans to implement their Business Club Australia (BCA) program. BCA South Africa 2010 will showcase Australian business capabilities and strengthen new and existing relationships with South African customers and stakeholders. Austrade has secured a permanent venue for the first 17 days of the World Cup Tournament ensuring the Australian business community travelling to South Africa during this time will not be short of networking opportunities.

Solid as a rock

South Africa remains Australia’s largest and most vibrant market in Africa. The South African mining environment presents the biggest single concentration of hard rock in the world, and also the deepest level mines in the world, up to 4,000 metres. The challenges of hard-rock ore and deep-level mining in South Africa amplify the demands for capital-intensive technologies. Presently, some mining technologies developed in South Africa have foreign components or patents that offer commercial benefit to foreign suppliers either as an export good or an IP royalty. Australian service providers are positioned to benefit from this opportunity by presenting more appropriate systems and services that may include proving the concept, commercialising the product or establishing systems for technology transfer. The available opportunities include advanced mining technology in areas such as seismic interpretation software, 3D ore modelling, integrated mine planning, communications, IT software and water-powered drills. New Australian investors can piggyback off established channels of sales, distribution, after-sales service and project management. South Africa remains the stepping stone to much of African mining operations. Australian mining giant Rio Tinto plans to build a US$2.7 billion aluminium smelter at the Coega industrial development zone near Port Elizabeth in the Eastern Cape. It would produce around 720,000 tons of aluminium a year, and will be the largest greenfield investment in South Africa to date. Over the years, Australian companies have been actively engaged in South Africa’s mining sector, however South Africa still has a natural advantage in mineral feedstock such as gold, the platinum group of metals, manganese, chromium, vanadium, copper, antimony, phosphate rock, uranium, fluorspar and titanium containing heavy minerals. Most of the minerals are exported in unprocessed form due to limited technology and resources needed to add value to the export-destined chemical products. South Africa’s shortcomings in technology and resources provide significant opportunities for Australians to fill the gaps in the beneficiation process of the chemical sector. The domestic chemicals sector has developed into an important part of the country's manufacturing sector, second only to the food sector in turnover, though Australia is currently among the key exporters of chemicals into South Africa.

Tourism in training

As an estimated 2.7 million spectators gather to watch the FIFA World Cup, accommodation remains a challenge to the Local Organising Committee. South Africa’s limited hotel accommodation offers a new vista of investment opportunities for Australian tourism operators with foresight beyond the FIFA World Cup tournament. Currently, tourism in South Africa is characterised by a high number of small, medium and micro players.  Entry prerequisites into the market are considerably low according to the Department of Trade and Industry of South Africa. The challenges in South African tourism sustainability include limited access to skills and training needed to deliver quality experience to clients. These capacity building challenges are definitely business opportunities for Australian tourism training providers to exploit. With an even greater rate of tourism growth anticipated, other exciting and diverse investment opportunities in areas such as adventure tourism, eco-tourism, cruise liners and transportation await Australian investors.

Finding the energy

Earlier this year, the South African Minister of Public Enterprises Barbara Hogan conceded that ESKOM, South Africa’s government-owned energy provider could no longer supply the total electricity needed to power the burgeoning economy. The recent disclosure was in response to current power cuts in South Africa that have affected mining activities. The South African government has now initiated an independent power producers' framework, which will enable ESKOM to purchase power from businesses building generators and power stations, as well as from suppliers outside South Africa. Prior to the announcement, the Government of South Africa initiated a largescale US$56.8 billion infrastructure development plan through to 2010, targeted at the upcoming 2010 FIFA World Cup and the electricity shortages. Now that the government has opened a new platform for independent power producers, Australian energy-generating firms with aspirations of exporting to Africa could start with more stable opportunities in its energy sector, from coal, renewables or alternative sources.

Security and staffing

It is widely acknowledged that South Africa has one of the highest crime rates in the world although the government has taken concrete steps to stem the tide of criminal and violent activities in the country. Its initiatives comprise of a number of crime prevention programs including mass recruitment of law enforcement personnel in preparation for the FIFA World Cup, targeting a 7-10 percent annual reduction in serious crimes. This year will surely be the ultimate barometer to measure the success or failure of this security target. The South African government is also firmly committed to promoting Black Economic Empowerment (BEE). New Australian investors need to have plans to include training black workers at all levels of their company and working with other BEE companies. These conditions are pre-requisites for companies that aspire to do business in South Africa. A lesser-known barrier is that labour unrest is a persistent problem in South Africa’s workplaces. Around 30 percent of the formal workforce is unionised. Through the Congress of South African Trade Unions, trade unions have a strong political voice in South Africa.

Time to invest

The business process outsourcing and offshoring (BPO&O) industry is one of South Africa's fastest growing economic sectors. The call centre sub-sector alone has been growing at about eight percent per annum over the past four years and currently employs about 54,000 call centre agents. Most activity occurs within the call centre and back office processing spheres, with more than 70 service providers serving both local and offshore customers. South Africa is fast on the tail of East Asia for BPO&O international market share. BPO&O investment opportunities include call centres, back office processing, shared corporate services, and enterprise solutions in service lines such as fleet management, knowledge management and asset management. Generally, South Africa’s investment climate is considered friendly. The banking system, infrastructure-barring the energy sector-and legal system are at or close to advanced economy standards.  This creates an enabling environment for Australians to further invest in a G20 member African country with an OECD-like investment protection. As always, Australians are most welcomed to the Rainbow Nation. Enjoy the celebration of Africa’s humanity. -Frank Aneke is the principal of OctoberFirst Consulting ( an investment communication firm and Africa specialist, particularly forging business and investment relationships between Asia-Pacific nations and emerging African economies. OctoberFirst is a member of the NSW Business Chamber.


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