Away from the Cricket World Cup South Africa is hitting new heights in business as well
6 min read
10 March 2015
As the nation's cricket team racks up big score after big score on the field, SMEs are also taking an interest in the country, but for very different reasons. Each see it as a great export market.
Despite its political difficulties South Africa’s economy is growing steadily. Its gross domestic product (GDP) expanded an annualised 4.10 per cent in the fourth quarter of 2014 over the previous three months. The second largest economy in Africa, South Africa is rich in natural resources and is a leading producer of platinum, gold, chromium and iron.
According to United Kingdom Trade & Investment (UKTI), part of the Foreign Office, the UK is in South Africa’s “Premier League” of trading partners, with an annual bilateral relationship over £9.6bn. This is set to double following challenging targets set by ministers.
UKTI is focusing on high value and infrastructure opportunities which form part of the South African government’s agenda. These are worth about £290bn over the next 15 years. “The market offers an unusual depth of opportunities for the UK’s innovative, world-class products, services and technology in different sectors of the economy,” said UKTI.
One British businessman who knows all about the opportunities in South Africa is Luke Dale-Roberts. He opened his restaurant in Cape Town nearly ten years ago. The Test Kitchen is now considered to be one of the most exciting and innovative eateries in the world. “When I first got to Cape Town I said to my wife, ‘We’ve just got to live here’,” he revealed to Real Business. “There are huge opportunities in South Africa for chefs, certainly, but other people who want to start a business too. There’s a great energy here,” he says.
Small businesses obviously don’t have to move to the country to benefit from its growing economy.
DHL sees growing opportunities for exports to South Africa. The continent is ready to get some more products in from the UK,” said DHL Express South Africa MD Hennie Heymans. “The label Made in the UK means a lot, it’s a set a benchmark of quality and style. The mindset for the consumer is open for these products.” He went on to explain that among the other products DHL is exporting from the UK to South Africa at the moment are wedding dresses.
CBNL was founded in 2000 by ten graduates from the University of Cambridge, many of whom had computer science backgrounds and came up with an innovative idea to transport data traffic more efficiently.
Ten years ago the company broke into the South African market and has since established its products and services with the country’s leading mobile operators. Its entry into the region played an important role in supporting the company’s global growth and establishing the company as an industry leader.
South Africa was a burgeoning market in terms of smartphone adoption and telecoms in general – the county’s mobile phone penetration has grown from 1 per cent to 147 per cent over the past ten years, according to the World Bank. With rapidly increasing data use and a low average revenue per user, a cost-effective technology like CBNL’s – which offers up to 50 per cent total cost of ownership savings versus other technologies – was required, and proved to be perfectly suited to address local market needs.
“The fact that the technology was a good fit from a regulatory point of view, coupled with South Africa’s business culture, supported our decision to target this market first,” commented CEO Lionel Chmilewsky. In addition, South Africa also had wider importance, as it acted as a gateway to the wider sub-Saharan African market, greatly supporting CBNL’s growth strategy. CBNL now works in 15 countries across Africa as a result of its deployments in South Africa and is continuing to expand its presence on the continent.
“South Africa has a dynamic and promising marketplace,” added Chmilewsky. “It has a well-developed economic infrastructure and welcomes investment and expertise to help it grow. As a result, import tariffs are very balanced and transparent. However, there is high regulation and specific procurement requirements around ownership of entities. All companies in South Africa take this very seriously so it’s important to be aware of what is required at the outset.” UKTI helped the company to establish strong relationships with local partners.
Establishing local presence is also a necessary step for many businesses looking to launch in South Africa, explained Chmilewsky. “When building a local team, it’s important to ensure that they are equipped with the appropriate skills and knowledge. There are legacy issues with skill shortages in South Africa so there is a natural appetite for training.
“In our experience, customers not only wanted CBNL experts working on their deployments, but appreciated the opportunity to upskill their own workforce. This led to CBNL developing a comprehensive training programme which played a key role in developing successful long-term customer relationships and support the continued growth of the company.”