TRADE

Pushing projects intra-Africa

People working on Construction Site at Bangkok Thailand

Trade and investment is vitally linked to economic growth. With Pan-Africanism becoming more prominent among business discourse on the continent, South Africa is expected to come to the party and embrace both inter and intra-continental co-operation for a brighter future.

Indeed, when looking at Pan-African initiatives such as the Tony Elumelu Entrepreneurship fund, we see a new consciousness geared toward the promotion of entrepreneurial growth in Africa. But how much co-operation is there really among African countries and who is taking the initiative?

South African Chambers of Commerce (SACCI) member Janine Myburgh, President of the Cape Town Chamber of Commerce, says the unfortunate situation in South Africa is that Intra-SADC (Southern African Development Community) trade stills stands at a woeful 15%. “While the developed nations are turning to Africa to grow their exports and balance sheets, South Africa is missing out on reaping the potential benefits of trade to the North. Co-operation between South African chambers could be better. We tend to work in isolation and this has not benefited us or our members. There has been a shift of late which is heartening, but a more collaborative approach is certainly what is needed,” she says.

Promoting investment ties

Expanding on what their chamber has done to promote investment ties with other African countries, Myburgh says while looking to expand its service offering and diversify its revenue stream, the Cape Chamber opened a dispute settlement centre in 2012. This mediation and arbitration offering, housed within a chamber, allows companies to settle disputes quickly and cost effectively.

“We also built and delivered an online procurement portal, which has more than 30 000 business on it. It allows companies to access tender opportunities and issue e-request for quotation’s (RFQs). Around the same time, we began working with Chamber Trade Sweden, which gave us access to all the chambers and women’s organisations in the vast Swedish aid network. While the project had specific deliverables, we realised that one of the key opportunities was to take one of the existing, albeit fledgling, new products we had developed and share it among the African network Chamber Trade Sweden was already working with.

“We had already begun speaking to a number of other African chambers about our dispute settlement centre. The idea is to develop sister dispute centres in other chambers. While around 38 % of our members are already exporting, a further 20% said they would if the risk was lower. Having a connection with another chamber in your export market, and knowing there was a dispute centre available should anything go wrong, significantly lowers the legal risk of expansion,” she says.

More than that, the direct connection between chambers opens doors to better trading between members. Currently, she says they have board agreement to pursue this with chambers in Ethiopia, Kenya, Tanzania, Botswana, Zimbabwe, Zambia and Namibia. According to her this will not just entail the dispute settlement centre, but also a shared business support portal, which will significantly boost their ability to trade across borders and between members.

Myburgh does however admit that in terms of South Africa’s image among other African countries, “South Africa can be viewed as rather arrogant in our approach. We have been likened to the US of Africa. We need a much more open and collaborative approach if we want to enter new territories.”

Tony Robinson from the Cape Town Chamber of Commerce further points out that South Africa has missed several opportunities to promote regional trade and the development of the whole Southern African region. “At the start of our electricity problems Botswana offered to build a large coal-fired power station in partnership with a Canadian company. This would have provided Botswana with its own electricity (it buys power from SA) and to sell to Eskom. Eskom rejected the idea and said it could do better. It has failed dismally with its new build way over budget and years behind schedule.

“The Botswana deal would have offered South Africa very good value. Much of the money used to buy electricity from Botswana would have come back to us to pay for our goods and services. Mozambique with its vast off-sure gas resources is another huge opportunity. Gas power stations are clean and efficient and can be built in a third of the time it takes to build a coal-fired power station. Buying gas from Mozambique would keep the money circulating in the region and promote economic growth as a good deal of it will come back to buy our goods and services. When South Africa buys nuclear power stations from France, South Korea or Russia, capital leaves this country and does not come back. It is much better to trade with neighbours,” he says.

Intercontinental projects

Anna-Marth Ott from the Middleburgh Chamber of Commerce, told Opportunity magazine that, when looking at the importance of intercontinental investment projects for South African trade and industry, free market principals are the foundation of a growing economy, through access to business opportunities from different countries, as available raw materials and products ensure vibrant economic activity.

She further highlights the importance of exposing businesses to current best practises used in the global economy to ensure business competitiveness. She says foreign investment capital grows and stimulates economies by developing, among others, manufacturing industries and exploiting commodities that otherwise would not have been. According to her this benefits both parties economically and she says an added bonus is sustainable development and job creation through bilateral trade.

“Many chambers of commerce have a dual approach on investment promotion. Chambers have a focused local investment strategy, such as access to local economic indicators, potential business opportunities and through our local network we offer ways to introduce potential investors into the local economy. Within the chamber environment many members trade outside South African boarders. This is not only in the export of raw materials, but also manufactured goods and agricultural produce.

“Through the SACCI network there are several key activities to encourage intercontinental trade.  SACCI chambers regularly facilitate trade delegations where SACCI members and the potential investors are introduced and relevant information exchanged. We also have regular communications with various organisations, embassies and representatives from the different consulate generals in the country. This type of communication often facilitate intercontinental trade enquiries. The most important role the chambers play in intercontinental trade facilitation is to have up to date and relevant information that is required by investors,” she says.

Ott points out that the chambers typically do not get involved in specific investment activities, however they do have relationships with chambers in other African countries and use these ties to encourage trade. She says the chamber can facilitate and arrange meetings with local businesses and foreign investors; “We have the means to get the right people talking to each other.”

Export

Regarding outside involvement in South African projects, Ott says the majority of the investments locally are from Asian, European and United States of America, which includes large global corporations such as Anglo American and BHP Billiton. “African countries tend to attract investors rather than invest in other African countries; the African Union has this as part of its KPI’s. There are some export and trade agreements in place, but the focus is not in investing in each other’s countries on a significant scale. There are South African companies that have invested hugely in countries such as Ghana, Tanzania and Zambia in the mining and manufacturing sectors. Small scale investment in for instance the retail and cellular communication sectors by Shopright, Nando’s, Steers and MTN also comes to mind,” she says.

Ott says when considering South Africa’s role in assisting other countries in boosting investment projects, we mainly host or facilitate trade delegation visits throughout the world. She however says there are business sector specific programs and projects, run by the businesses themselves, and points out that these strategies are structured on a return on investment basis and that information will not be freely available.

Regarding which sectors we find the most intercontinental investment projects, Ott says the mining sector has by far the most monetary commitment towards intercontinental investment, however cellular communication and retail trade between the different countries have also increased exponentially. This also includes manufacturing (South African Breweries) and the commercial agriculture as in the sugar industry.

Looking at possible barriers to investment projects with other African countries, Ott highlights that understanding the culture and languages used in the different countries can make it difficult if one does not have a contact in that country.

“A good contact for potential investors is to communicate with the chamber of commerce in the area of interest.  Official red tape and corruption or perceived corruptions act as a barrier to investment. Another important factor in deciding to invest is the safety of the investment, issues such as nationalisation or changing regulatory environment in the country where you are planning to invest.

“Government can do more to promote intercontinental investment by creating free trade zones, waiving tariffs and by creating easier and trade friendly customs regulations. Government should also amend the new immigration laws as the recent amendments are not business friendly. The private sector is very active in investment projects between the regions. There is a constant flow between African countries,” she says.

The utility of these projects can be seen in the civil engineering profession today. As Frans Pienaar, Chairman of Inyatsi Contruction, explains: “Not only does trade into the rest of the continent create jobs in South Africa, it also creates opportunities for South African companies to gain valuable international exposure. The experience gained from working in other cultures and different business and tax regimes, makes us wiser and better equipped to re-invent ourselves in our home markets. We become more efficient as we adapt to different environments and modify our way of doing things. Cross-pollination makes us better.”

He says, in addition to this, working in other markets help us to deal with peaks and troughs in the different markets. “If the one market is tight and there is not an abundance of work, we can move resources to other countries where the opportunities exist. When the market then turns in the home market, we have not lost the skills, and can just bring it back home. This works across countries and is the same for all the countries we work in.

“If Inyatsi runs a bit low on work in one market we can redistribute employees to other markets until their home market has work again. This grows employee loyalty and commitment as well. An employee should not leave us to fullfill his or her dreams. We must create the opportunity from within. This has been a great strength of our past and will stand us in good stead going forward,” he says.

Assisting other countries

Looking at how South Africa is assisting other countries in booting investment projects, Pienaar says as the most developed economy on the continent, South Africa is a growth centre for skills and a key supply hub of materials and other technologies. With South African businesses growing into Africa and the rest of the world, these skills get transferred, but it also unlocks the ability for those markets to easily have access to materials, skills and new technologies that were rare in the past.

When asked about the challenges that these projects face, Pienaar says border posts and customs controls are the main obstacles. According to him, temporary imports, permanent imports and the administration involved with it sometimes create barriers that not only hamper progress, but actually obstruct progress. This is one area where co-operation at government level can make investment, growth and expansion a lot easier he says. Similarly, immigration issues around work permits, resident permits and the ability to try and work seamless across borders hamper business rather than protect certain parts of it, according to him.

Looking at government’s role in the matter, Pienaar says government “can never do enough to enable private business to fulfil their role in growing the economy. I also think that one will always get criticism against governments’ best efforts. It is a process and dialogue is key to a better future. Less regulation and more freedom to pursue opportunities should be a focus area of this dialogue.”

Pienaar says investing in other countries stimulates the South African economy by creating a market for the South African products, businesses, and jobmarket. It just grows the size of the pie from which one can fund and support growth in the economy. China and the USA are masters at creating markets for their products by investing (or lending) in developing economies,” he says.

This way, according to Pienaar, they create job opportunities for their citizens in other countries as well in their own country by creating a demand for their products. “When the USA donates food to stricken economies, it donates products they buy in their own country and therefore stimulate its own economy at the same time. Africa can learn from this.

“The developed world is not scared of the rest of the world. They see it as an expanded market and a place to learn from. Countries should not be afraid that an influx of skills will be a drain on the economy and steal jobs. Rather harness this as an opportunity to utilise the additional skills to create demand inside their own economy. Standardising on the tax regime will also allow the economy and growth to flow freely across the continent,” Pienaar concludes.

Michael Meiring

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