BUSINESS BRIEF: for
our full 8 page brief recently updated, click here.
Southern Africa
is not a traditional trading location for most American companies.
It is, though, one of the best intermediate sized markets for American
firms to investigate. South Africa’s GDP is $280 billion,
in Purchasing Power Parity measurements about double that. South
Africa has a stable democracy, well managed economy, an educated
workforce, and a highly developed infrastructure. English is language
of business and popular entertainment. South Africa and most neighboring
countries have a good transparency rating and legal and administrative
environments similar to the USA. These factors allow businesspeople
to transact deals with a minimum of cultural and administrative
hurdles. Similar situations exist in Botswana, Namibia, Mauritius
and other fast developing countries in the region.
Recently, South
Africa has been encountering some of the fastest growth it has ever
seen. Business and consumer confidence as well as the stock market
were at record highs. The currency, the rand, is at a record high
versus the US dollar in purchasing parity terms. Inflation is low,
government spending is well managed. By January 2006 the Johannesburg
Stock Exchange had risen to record levels. In USD terms, the JSE
rose 40% in 2005, indicating a high degree of domestic and international
investment confidence in the country.
The economic
outlook for South Africa and the region as a whole is excellent.
There are issues which South Africa is coming to terms with: the
historical legacy of Apartheid, HIV/AIDS, high crime and a lack
of skills and education in many key industrial sectors. Critical
issues are dealt with and managed, and the country has the resources
to deal with them over time. South Africa has elements that define
it as both a developing and developed market – a factor which
benefits American companies coming into the market. The region is
a fast adopter of high tech imports. American exporters are well
advised to look carefully at this market which allows them to compete
favorably with domestic and international competition.
SOUTH
AFRICAN ECONOMY AND BEST PROSPECTS
South Africa
entered the world as a resource rich country. It has almost 80%
of the world’s platinum reserves and about half of the world’s
known gold reserves. Aluminum, vanadium, iron and steel are also
important mineral related industries. Agriculture has always been
important and South Africa is a net food exporter and member of
the Cairns Group of agricultural producing countries. Manufacturing
has grown to the point where automotive parts and assembly are now
nearly 8% of the total economy. Although a high currency mitigates
against labor-intensive exports, high value added export sectors
such as chemicals, instrumentation, aerospace and aviation as well
as consulting services are all doing well. South Africa’s
overall economy is 70% service related, a statistic that is similar
to the USA. Many advisors consider South Africa to be the best managed
developing country in the world – offering immense potential
for sales of commercial and consumer goods for exporters.
Opportunities
exist but are not limited to the following sectors:
Agricultural
equipment and processing machinery
Automotive parts and line technology
Consumer / household / sporting goods
Engineering and consultancy services in construction, waste management
Information technologies and services
Industrial and processing equipment machinery
Medical equipment
Power generation and supply
Safety and Security products and systems
Transport logistics networks port/road/rail
SELECTED SUCCESS STORIES ACROSS MARKETS
These stories
are indicative of recent successes made through our office:
Mining
Refinery Goods Sale: Pennsylvania company: $2.1 million
sale of lined steel piping. This product is now being used for acid
flows in platinum refining. Our office assisted with tariff specifics
and ratings to allow the firm to be more competitive in the tender
process, and ultimately be successful, against domestic and European
competition.
Small
Machinery/Equipment Sale: Pennsylvania company: newspaper
press knives. This highly specialized product benefits the millions
of newspapers published daily in the region. Our office located
the distributor for this product.
Public
Facilities: New York company: public washroom facilities
and equipment. Our office helped locate a new distributor for this
firm in the region.
Consumer
Goods: Indiana company: swimming pool water chemical testers.
South Africa has over 500,000 residential swimming pools. Our office
assisted this firm to locate a new distributor with ongoing sales.
Agriculture
Related: Pennsylvania company: Over $500,000 sale of electrical
insect killing devices for the cattle industry. Southern Africa
has about 5,000 cattle farms, these products kill insects, relieving
stress to allow cows to increase milk production.
Education/Conferencing:
Indiana company: projector screens and projector room systems. This
firm reported sales to a firm in Mauritius relating to our market
research. Mauritius has a growing conference industry with over
90 world class hotels on the island. Our office located the Mauritian
distributor for this firm.
Automotive
Components: Ohio company: headlights manufacturer. South
Africa had a domestic vehicle sales growth of 29% in 2005. Both
new vehicles sales and new OEM exported vehicles have risen substantially
in the past decade. South Africa is home to most of the large American,
European and Japanese OEM automobile manufacturers with new factory
infrastructure being announcedOhio
company: spillage drums. This firm reported its first sale of $35,000
to a South African company in November 2005. An additional order
of $40,000 was placed for March 2006 delivery.
Mining
Equipment: Ohio company: makes laboratory sieves for the
mining industry. An initial sale was made to a South African company.
Additional sales were made a year later.
Small
Machinery/Equipment: Ohio company: makes high pressure
water hydraulic valves and systems used in the de-scaling process
of metals. A distributorship agreement was signed with a South African
company in 2005.
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