Sailing into South Africa

Clipper Round the World Yacht Race crews – including one backed by the UK’s export-focused GREAT campaign - are enjoying some well-earned rest in Cape Town. Our latest Port Profile explores South Africa's potential.
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TABLE Mountain rises imposingly above the V&A Waterfront, where Clipper crews have docked after a 3,560-nautical mile journey from Uruguay.

But doing business in South Africa need not seem formidable, according to international trade bodies.

The Institute of Export describes the Rainbow Nation as “a sophisticated and promising market, offering a combination of well-developed First World economic infrastructure with a vibrant emerging market economy”.

In a foreword to its Doing Business guide to the country, former UK trade commissioner to South Africa Andrew Henderson highlights the “growing potential for UK SMEs to form strategic alliances with South African companies”.

“There are opportunities at every level,” he adds.

How is the government helping?

South Africa’s annual bilateral trade with the UK is valued at just under £10bn by the Department for International Trade.

And International Trade Secretary Liam Fox announced that the amount of support available via UK Export Finance, which helps British exporters by providing finance and insuring against buyer default, would double to £3.5bn when he visited the country last month.

“We are making billions of pounds of additional financial support available to UK exporters and buyers of UK goods and services in South Africa and opening up further export opportunities for British businesses across Africa through overseas investment insurance,” Fox said.

The GREAT Britain yacht is promoting UK trade around the world [Images: Bruce Sutherland]

It’s not all plain sailing, however. Political upheaval – in particular the sacking of finance minister Pravin Gordhan – prompted ratings agency S&P Global to downgrade the country’s credit rating to “junk” earlier this year.

The effect is to make it more expensive for the government to borrow money on international markets, potentially limiting its power to invest.

Despite this, Western Cape’s economic development minister pointed to “phenomenal growth” in the province in the last year, led by development in oil and gas, services, agri-processing and renewable energy, during a trade visit to the UK this year.

Alan Winde visited London, Manchester and Edinburgh with ten SMEs across sectors including fruit and produce, beverages, transport, technology and waste processing and recycling.

Tim Harrison, of the province’s investment agency Wesgro, said: “Our excellent prospects for growth are largely because of the UK market.”  The UK represented the province’s most important partner in technology, the service sector and renewable energy, he added.

Clipper yachts moored in Cape Town

More than 400,000 Britons visit the Cape annually. And many Britons are taking part in the Clipper Race, whose vessels will be berthed in the provincial capital of Cape Town until October 31.

Having been founded in 1652 by a Dutch expedition, Cape Town is known as South Africa’s “Mother City” and, as home to 3.75m of the country’s 56m people, is its second most populous as well as its oldest.

Where do opportunities lie?

Strategically situated near the southern tip of Africa’s West Coast, it boasts both the second-busiest container and airports in South Africa, the continent’s top-ranked university and an established banking system.

The city’s biggest sectors are financial and business services, manufacturing, and wholesale or retail trade, catering and accommodation. However, Western Cape authorities list priority sectors in the wider province as:

  • Agri-business
  • Boatbuilding
  • Business processing and outsourcing
  • Creative industries
  • Information and Communication Technology
  • Oil and gas
  • Renewable energy
  • Tourism
  • Metals, tooling and niche engineering
  • Pharmaceuticals, life sciences and biotechnology

Authorities are quick to describe the area’s “liveability”, created by the clean beaches, accessible hiking routes and diverse history of South Africa’s oldest city.

Cape Town, and South Africa more broadly, style themselves as gateways to trading with the whole of Africa. And the Department for International Trade agrees that the comparative sophistication of the market, ease of doing business, continental expertise and potential as a base for critical services are attractive to investors.

Currently, says the DIT, the top UK exports to South Africa are:

  • Non-metallic mineral manufactures
  • Road vehicles
  • Beverages
  • Medicinal and pharmaceutical products
  • Petroleum and related products

The top sectors across the country include finance, real estate and business services, general government services, wholesale, retail, catering and accommodation, and manufacturing, it adds.

What challenges do exporters face?

DIT warns of “complex” processes, strictly enforcing some 90,000 product tariff codes. “You are encouraged to use a reputable customs clearance agent familiar with South African convention,” it adds.

According to the British Chambers of Commerce, importing a standard container of goods into South Africa requires seven documents, 23 days and £1280.

Other challenges cited by DIT and the Institute of Export include high unemployment, poverty, shortages in energy, skills and capacity, infrastructure “bottlenecks” and a high crime rate. Anyone setting up or acquiring a business in South Africa that’s likely to earn annual revenue of more than Rand 5m (£285,000) must also comply with wide-ranging black empowerment legislation.

Any cultural pitfalls?

Chamber International describes South Africans as “laid back but direct in their communication” but reports that businesses take time to ensure they trust those they are dealing with.

It says: “By and large they love to talk. Sport is usually a good ice-breaker. At business meetings it’s advisable to engage in small talk initially. Getting straight down to business is viewed as ill-mannered. Initial meetings are often just to establish the relationship.”

Arranging meetings during the main holiday periods – mid-December to mid-January and the fortnight around Easter – can be difficult, it says.

“If possible, send an agenda ahead of the meeting. Keep presentations tight and make sure you’re armed with facts and figures since South Africans base business decisions on these rather than intuition.”

With English as the preferred business language, minimal time differences and UK-based financial and legal systems, British companies can find it less complex to negotiate than many markets.

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However, Chamber International adds that translating materials into Afrikaans might be worthwhile if dealing with companies in areas such as Pretoria or Bloemfontein, and that undertaking due diligence is important.

And there are quirks even when dealing in English. As the Institute of Export points out: “If a South African tells you they will do something ‘just now’, they mean they’ll do it in the near future – not immediately. And if they say ‘Now now’ – they mean shortly, as in: ‘I will be there now now.’”

Networking via events such as receptions or golf days is common and while the host will usually pay for entertainment, it is always a good idea to offer to pay, the institute adds. “A gesture such as offering to split a dinner bill goes a long way in building a better relationship with a client or provider.”

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Produced by the 2018 International Business Festival, in partnership with Wordscapes.