Business Update: Issue 15

Business Update: Issue 15

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Progressive Leader - Issue 19

Progressive leader - Issue 19

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Opening Remrks By Daryl Swanepoel, convenor of the ANC Progressive Business Forum: South Africa / China Business Seminar and B2B On The Eve Of The Forum For China Africa Cooperation (FOCAC): 2 December 2015: Sunnyside Park Hotel, Johannesburg

Good afternoon ladies and gentlemen,

Allow me in the first instance to welcome you all to this afternoon`s event.

It is indeed an honour and a privilege to have the delegation from China with us today. As you are aware tomorrow the Forum for China Africa Cooperation starts here in Johannesburg. We are indeed privileged to be hosting the China Council for the Promotion of International Trade & Investment and their business delegation from across China.

The Progressive Business Forum has entered a cooperation agreement with CCPIT on 9 September 2011. Since then there has been ongoing activity between the two sides. Every year we have received delegations led by various CCPIT provincial structures. We ourselves have led numerous missions to China, where we cooperate with CCPIT in a very productive and effective manner.

I read through the agreement again earlier this week; and I do believe that we have honoured it quite diligently. However, since we have with us today such a senior delegation from CCPIT, I would like to propose that we have early in the New Year we once again workshop our cooperation to assess and strengthen it in line with the adapting economy; and in order to take our joint work to the next level.

It is my honour to welcome and introduce:

* Jing Zengwei, President of CCPIT (joins us tomorrow)
* Lin Shunjie, Director General of CCPIT and his delegation.

The Progressive Business Forum`s first ever international trade delegation in 2008 was to Shanghai, People`s Republic of China, and I am pleased to say that from day one CCPIT assisted us in ensuring success.

Today China is South Africa`s largest trading partner and South Africa is China`s largest trading partner in Africa. It has been great working with you over the years, where we have both been able to witness the radical transformation of our respective economies into the regional success stories that they are.

We also have with us a longstanding friend of the Progressive Business Forum and of China, the honourable Elizabeth Thabethe, Deputy Minister of Small Business Development (and former Deputy Minister of Trade & Industry). Apart from being accessible to us domestically, Deputy Minister Thabethe has also been very supportive of our international work and has led a number of our missions abroad.

This is a relatively new ministry and signifies the importance our government places on SMME development. Just over the weekend Goldman Sachs released a report in which they said that "ploughing investment into the small business sector is the only way to boost growth".

They said that "South Africa`s economy can grow by over 5% over the next five years if government and the private sector invest R12 billion in 300 000 new small businesses. Supporting the establishment of small businesses was also the best way to tackle unemployment, because the sector created the highest number of new jobs to absorb idle youth."

So, it is clearly important that we dedicate effort and resources into this sector; and I can assure all in this room that one will have to look far and wide to find somebody as dedicated to this mission as is Deputy Minister Thabethe. Deputy Minister Thabethe, we are very pleased to have you with again this afternoon.

As we are pleased to have with us such a strong contingent of Chinese and South African enterprises. You are most welcome and we trust that you fill find opportunity during the B2B a little later this afternoon.

We have asked the Deputy Minister to speak to us today on the business and investment climate and on doing business in South Africa - so I do not want to dwell on the same.

In my short input I would want to focus on Africa as an investment choice, and I draw my content from the EY report, Positioning South Africa in the context of the Africa growth story, 2015.

African markets today offer growth and investment opportunity. There is greater political stability on the continent, less barriers to investment, better economic infrastructure, and implementing reforms making easier to do business.

"While sceptics still abound, and there are people that still seek to debate this point, the evidence of the continent`s clear progress over the last decade is irrefutable. The reality is that a diverse range of African countries have now experienced consistent and robust growth over the last decade. In the period since 2002, the size of the overall African economy has more than trebled (and grown at twice the population growth rate). Over this period, the size of the Sub-Saharan economy has grown at 3 times"

According to EY`s attractiveness survey 2015 Making Choices report, traditional investors, including those from North America, refocused their attention on Africa, and confirms that Africa has become an attractive investment destination.

Two trends defining Africa`s future growth path include rising urbanization and a growing consumer class. In line with these trends, FDI data for 2014 reveals strong inflows into, real estate, hospitality and construction. Three consumer-facing sectors - technology, media and telecommunications; financial services; and consumer products and retail again attracted the largest share of investor activity.

That being said, one size does not fit all. One needs to dissect individual countries, some are performing better than others. The EY survey reveals that investor perceptions have lowered of late. When asked about Africa`s attractiveness 53% of respondents said it has improved, down from 60% in 2014. Perceived barriers to investment included an unstable political environment, corruption and weak security. African governments need to work hard on overcoming these roadblocks to doing business in Africa

However, and I believe this is an extremely important point, a wide perception gap remains between established and potential investors.

"Investors who already have operations in Africa believe it is the most attractive investment destination in the world, has become more attractive in the last year, and that its appeal will strengthen further in the next three years.

Investors looking in from afar see Africa as the world`s second-worst investment destination. Only 30% of them reckon it has become more appealing over the past year, though half believe its attractiveness will improve in the coming three years."

So the question to ask yourself is - do you take your lead from your fellow investors who are looking in from the side-lines, without the practical experience, or from those on the field playing the game, who know the realities of doing business in Africa.

Now as a South African I must punt for your investment dollars to come our way. And I do so because I am patriotic, but also because the facts would suggest that it is a sensible and safe thing to do.

They say that a prudent investor will follow the money:

Well South Africa remains the top FDI destination in Africa. In the last 5 years South Africa`s share of FDI in Africa from the US grew from 25% to 29%. The greatest competition is from Kenya, Nigeria, Ghana and Angola. But to contextualise, the comparable growth for Kenya, which draws the second highest share of FDI from the US, rose from 2% to 9%.

The South African economy is by far the most developed economy in Africa. And it is a mature economy. Its world-class infrastructure, quality of corporate governance and reliability of natural resources make it an ideal choice for companies to set-up manufacturing plants for both local consumption and dispatch to Sub-Saharan Africa.

It is attractive for both multi-national and SMME enterprises. 60% of retail in South Africa is through the formal sector. In Kenya it is 30% and the rest of the countries are in the single digits. This is an important point for particularly SMME manufacturers. For their investment to pay off, they need a market which is widely penetrable and that in turn needs the formal retail sector, sophisticated and developed distribution networks and infrastructure; all of which is in South Africa compares with the best in the world.

It is a gateway to Sub-Saharan Africa, which is being developed into a Free Trade Area with a consumer market of over 600 million, a large portion already so, and a stable environment in which to put down your company`s roots, using the economic sophistication of the country as a springboard into the neighbouring regions.

It compares favourably to other emerging markets when it comes to the cost of doing business. In the WEF`s latest Global Competitiveness report South Africa ranked 1st when it came to the regulation of security exchanges. 1st in the legal rights index. 2nd for the availability of financial services. 2nd for financing through the local equity market. 8th for the effectiveness of the anti-monopoly policy. South Africa is also ranked 10th out of 185 countries for good practice in protecting investors in business.

In conclusion:

South Africa and China have developed our relationship to that of a strategic comprehensive partnership.

We believe in a mutually beneficial relationship that will benefit both economies.

We have seen bilateral trade and investment explode between our two our two countries.

That being said: there is much more scope, and I urge you to use the opportunity to get your piece of the slice.

Thank you.

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