South Africa: Gateway to Business in Africa’s “Southern Cone”
Craig Allen, senior commercial officer in Johannesburg, South Africa, talks about how that country, with its English-language business culture, transparent legal system, and access to neighboring markets, offers many advantages for U.S. exporters looking to expand into Africa.
With the end of the apartheid regime in 1994, international sanctions that had been imposed on South Africa were lifted, and the country’s economy opened to foreign business and investment. Since the early 1980s, the U.S. and Foreign Commercial Service (USFCS), a part of the International Trade Administration, has had a presence in South Africa. Craig Allen spoke recently with Doug Barry of the Department of Commerce’s Trade Information Center about opportunities for U.S. exporters in South Africa.
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|Craig Allen, senior commercial officer in Johannesburg, South Africa. (U.S. Department of Commerce photo)
Barry: Africa too often brings to mind headlines about the AIDS pandemic, civil war, tribal difficulties in certain places, and other misfortunes. But, as so often is the case, that image is not the entire picture. Can you give us some perspective behind the headlines on South Africa and its role on the continent?
Allen: One has to be careful about paying too much attention to last night’s news and missing the main story. Africa is growing at an unprecedented rate of about 7 percent a year, and South Africa is growing at about 5 percent. That growth has created tremendous opportunities for U.S. exporters. South Africa is also a stable market for U.S. companies. There is rule of law, with an excellent court system that you can really trust, and very good infrastructure as well—be it ports, highways, or “human infrastructure.”
Barry: If you were a small or medium-sized enterprise in the United States, what would be the reasons for looking to a somewhat far-off country such as South Africa?
Allen: I can think of three reasons. First, South Africa benefits enormously from the global demand for commodities, such as gold, diamonds, chromium, iron, and magnesium. Prices are high, and South Africa is benefiting more than any other economy. Second, there is a growing middle class that is looking for brands and products that the middle class around the world is looking to. Third, there is the 2010 FIFA [International Federation of Association Football] Soccer World Cup, which will be held in nine cities in South Africa next year. South Africa is expected to invest approximately $60 billion in infrastructure.
Barry: Would an additional fourth reason be that South Africa could be an inviting platform from which to spring into the surrounding area?
Allen: Absolutely. South Africa and four of its neighbors—Botswana, Lesotho, Namibia, and Swaziland—have the oldest customs union in the world, which started in 1910. Therefore, if you come into South Africa, you have simultaneously entered five markets. A little bit further afield, you find the very important markets of Angola, Mozambique, and Zambia, all of which are growing very rapidly.
Barry: What about the business culture in South Africa? What does an exporter need to know to avoid blunders and cultural mistakes?
Allen: English is the language of business throughout the region. Contracts are made and enforced in English, so there is virtually no linguistic barrier between Americans and South Africans. By law and culture, there is an emphasis in South Africa on righting historic injustices and providing opportunities for the historically disadvantaged. There is a body of law titled Black Economic Empowerment. And thus, while positioning an American company, it is important, particularly if you are selling to the public sector, to consider the Black Economic Empowerment bona fides of agents and distributors.
Barry: What time commitments need to be made when considering doing business in South Africa? Is there anything unusual that would make the time horizon longer or shorter?
Allen: South Africa is really very similar to dealing with Australia, Western Europe, or other developed economies. The business cycle is perhaps a little bit slower than in the United States. Public tenders particularly can be a bit drawn out and take longer than anticipated. But the public tenders are usually fair and are awarded in a transparent and open manner. We’ve had no occasion to raise concerns about such tenders.
Barry: Are there trade shows and other opportunities to fly in, get a feel for the country, and maybe make a quick sale?
Allen: Trade shows are not as developed here in South Africa as they are in the United States. South Africa does not really have the critical mass or the infrastructure to become a global trade exhibition center. There are some national-level shows, but no continental-level shows. I would recommend that readers contact our office in Johannesburg before committing to a show.
Barry: I’m assuming that you are not alone there in Johannesburg.
Allen: We have 15 employees, located here in Johannesburg and in Cape Town. We provide the full range of business counseling services offered by the USFCS. And we collaborate with the Department of State and other U.S. embassies in the region to provide many, if not all, of those services throughout southern Africa.
Barry: You mentioned getting in touch with your office. Can you tell us how to do so and talk about your office’s new Web site?
Allen: We recently put up a Web portal covering all of Africa. It can be found on Export.gov at www.export.gov/africa. The site contains links to the commercial sections of U.S. embassies in some 45 African countries, a plethora of information on projects that are funded by multilateral donors, and information on trade shows and upcoming events and exhibitions.
Database Points Way to Business Opportunities in Africa
Multilateral development banks (MDBs), such as the World Bank and the African Development Bank, are international financial institutions that promote economic and social progress in developing member countries. Every year, MDBs extend about $10 billion in loans, grants, and investments to the public and private sectors for economic and social development in Africa.
The projects offer qualified and funded supply opportunities for U.S. companies in the African market. However, many U.S. exporters may miss out on these extremely lucrative opportunities because they lack the necessary information about the projects or are unfamiliar with the tendering procedures of the MDBs and the participating foreign governments.
In an effort to make the procurements more accessible to U.S. companies, the USFCS in Johannesburg has put together the Africa Multilateral Donor Project Database (AMDPD). This resource is available on Export.gov’s Africa portal.
“The genesis of this project was discussions with the Department of Commerce’s Advocacy Center on the poor record that U.S. companies have at winning World Bank and African Development Bank tenders,” noted Craig Allen, senior commercial officer in Johannesburg, South Africa. “American taxpayers supply about 17 percent of funding to these lenders, but U.S. companies win less than 1 percent of the tenders.”
Exporters can access listings by industry through the AMDPD. The listings offer detailed information on active procurements, including full descriptions, procurement values, current status, links to project documents, and points of contact at the respective MDBs and the Department of Commerce.
The database has been available for less than a year, but has already proved useful.
“In Johannesburg, a number of American companies have used it to discover projects that they did not previously know of,” noted Allen. “It is a good start, suggesting that the data [are] useful.”