South Africa urged to explore China opportunities

Better coordination, improved policies will attract more investments and partnerships, experts say

The business community in South Africa is pushing for better investment policies to spur new partnerships with Chinese investors, while mulling over how to scale up its presence in China to boost the country's export market.

Kobus Van der Wath, the managing director of Beijing Axis, a management consulting company, says China offers unexplored opportunities for South African entrepreneurs.

"Despite 20 years of relations, the huge consumer market presented by China is yet to be fully appreciated here (in South Africa). I think we need to be better coordinated to successfully bridge the trading gap," he says.

According to official data from South Africa, China is the country's top trading partner, while the African country is leading the continent as the top trading partner with China. Volume of trade between the two countries has increased from $24.43 billion in 2015 to $24.93 billion in 2016. The total trade last year was $26.51 billion, with a trade deficit for South Africa of $7.23 billion.

However, recent trade tensions between the United States and China have buoyed expectations that South Africa can increase its fruit and wine exports to China to meet demand, although this can only happen with a well-coordinated strategy, says Van der Wath.

There is a need to develop a China-literate business community that understands Chinese culture and bureaucracy, he says. "We need to be savvier to increase our chances."

This means learning Chinese history and culture and becoming familiar with the country's policies and regulations and how to collaborate with clients across their value chains, he says. "We need to work as a pack and leverage on our advantages. China is open for business, but we have to be more competitive."

Beijing Axis, which is based in Beijing, offers consultancy services linking African businesses to their Chinese counterparts. It has plans to take in at least 50 South African youths for internships in China to increase their understanding of the Chinese business culture.

"We have to inculcate a business mindset in (South Africa) to understand that the Chinese market is huge and open. With the reorientation of their economy from export to domestic consumption, massive opportunities are available that we haven't explored. We cannot continue with a business-as-usual mentality," says Van der Wath.

In addition, better policies will attract Chinese investment to South Africa, says Erwin Pon, the business development director at Rand Merchant Bank. He says processes such as company registration, land leasing and work permits need to be speeded up.

"Foreign investors are picky and prefer destinations that are appealing and easy to settle in. Complex and voluminous regulations discourage them," Pon says.

Africa should not think it is the only preferred destination, Pon adds. Noting that many other developing countries, particularly in Asia and South America, are also angling for the millions of jobs outsourced by China as it realigns its economy, he says: "What we need to offer is a better proposition compared with what China's hinterlands and other countries are offering. This means that we have to be better."

According to Pon, the mining sector in South Africa is becoming less attractive compared with South American mines. South African mines "are deeper, calling for more investments. We also have stronger labor unions, and this means more protraction when it comes to labor disputes. These are issues that weigh into decision-making. It is also time we considered them when formulating policies."

Another challenge facing South Africa is low productivity, Pon says. "This is affecting decisions on whether factories can settle here. There is a great opportunity here in terms of availability of modern infrastructure (and) strong financial and legal institutions, but this is not enough."

He says that in spite of Chinese companies such as Hisense, FAW and Beijing Automotive Industry Holding Co finding a footing in Africa's largest economy, these investments have not expanded to other countries due to poor efficiency.

"This is, however, transferable and we have seen Chinese companies such as Hisense and Huawei investing heavily in capacity-development programs. However, as a country, more focus should be given to technical and vocational institutions to build a talent pool that will be ideal for expansion of the light industries."

According to a report released in December 2016 by the South Africa-China Economic and Trade Association, China's investment in South Africa had reached $13 billion by the end of 2015, and at least 300 Chinese companies were operating there, with a total of 26,000 employees.

Pon also says access to credit facilities should be easier for local investors. "We have to build our local businesses' capacity to enable them to latch onto the global supply chains. Chinese investors would like to partner with existing entities and invest in expansion strategies," he says, adding that there have been few mergers and acquisitions between Chinese and South African companies.

He says Chinese investors seek partnership opportunities with the locals to enhance cohesion.

"To tap into these opportunities, therefore, we need strategies of reaching out to Chinese investors to help them overcome barriers such as language, culture and policy requirements. More information about our market should be made available by the government and approved consultancy firms empowered to market (South Africa) in China's market.

"Otherwise," he says, "we are missing out."

lucymorangi@chinadaily.com.cn

(China Daily Africa Weekly 04/13/2018 page27)