17 May, 2013 16:28

SA is Trading More With Africa.

Engineering News is reporting on a Manufacturing Circle survey which suggests a jump in South African exports to the rest of Africa, with 50% of those questioned saying they now export more to Africa than to Europe. This is yet another indication that the pattern of our trade is changing, with a swing away from traditional markets and a move to our neighbours in Africa and our BRICS partners. Here is a link to the article: http://www.engineeringnews.co.za/article/sa-manufacturers-have-turned-export-attention-to-africa—survey-2013-05-16

Expert views

1. Duane Newman from Cova Advisory:

With all the positive growth projections on Africa compared to the rest of the world, these results do not surprise me. I would expect the biggest opportunities and growth areas to be in consumer spending and infrastructure projects in Africa. By 2020 it is expected that the consumer alone will have a spending power of $1.4 trillion in Africa, with over 50% of the African people living in cities. This will definitely create many more opportunities for South African businesses focusing on the consumer. The proposed free trade area for Africa is a challenging one to move forward, as many of the African countries are still heavily reliant on customs duties as a source of government revenue. One only has to look at the R42billion (approx. 5% of total tax collected by South Africa) paid to our Southern African Customs Union neighbours in 2012/13 – where the majority of their revenue comes from an allocation from the customs duties collected under the agreement. Without this funding these countries (especially Lesotho and Swaziland) would literally collapse. I hope that the South African exporters are taking advantage of the numerous government grants on offer to expand their manufacturing base, but also to do research and to get a better understanding of the opportunities in Africa.

2. Craig Pfeiffer from ABSA Investments:

China and Europe are traditionally our large key export markets but one can read into the survey that perhaps a significant chunk of the exports to China is in the form of raw materials rather than manufactured or beneficiated goods. Exports to Europe are lower as their demand for our manufactured goods has been substantially reduced by their own domestic recessionary conditions. With the African continent growing at over 5% there is a market on our doorstep for our manufactured goods and the proximity of the market appears to facilitate exports from the country. The Walmart acquisition of Massmart has highlighted the importance of Africa as a growth area and we have already seen the pioneering work of Shoprite into Africa and the current scramble to expand into the region by the latecomers. This survey highlights the opportunities that do exist on the continent and the opportunities that are being exploited by the more nimble-footed manufacturers.

3. Chris Gilmour from ABSA Investments:

None of this is surprising. South African manufacturers, with a few notable exceptions like SABMiller, tend not to be very globally competitive on price. Thus the rest of Africa, where the price of just about everything is very expensive, is an obvious destination for our manufactured goods. The weak rand improves that attraction even further. And while Chinese manufactured goods have been very cheap for many years now, that is changing, albeit very slowly, as wage rates in many parts of China rise sharply. When one takes account of shipping costs, the comparative advantage that Chinese goods have enjoyed over many other countries in terms of price is beginning to be eroded. Although SA manufactured goods may not be cheap, they are least relatively well made and reliable, so the market for these goods in Africa should grow. An obvious example here is the SA motor industry. At long last we are starting to see motor exports into the rest of the continent.

Conclusion

Watch this space. As long as African countries can work together, and can minimise instability, corruption and nepotism, the potential is massive.

Tweet of the Day

Sarah Britten @Anatinus I wonder if the Gupta guests noticed the real Africa on the side of the road as they were chauffeured back from Sun City.


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