Karen Harveson
Over the next two decades, three-quarters of world trade will take place in the emerging markets, of which South Africa is one.
Speaking at a Bell, Dewar and Hall presentation on trade and business in South Africa last week, United States Minister Counsellor for Commercial Affairs Millard Arnold said the US, along with other major trading partners such as the United Kingdom and Germany, were positioning themselves to become major players in these markets.
“By 2010, the big emerging markets are expected to exceed the combined market size of Japan and the European Union.”
He commented that German chancellor Helmut Kohl’s present visit to South Africa and an expected British delegation at the end of the month were a measure of the growing importance of South Africa as a trade destination.
As the only emerging market in Africa, South Africa was viewed as the most important market to the US.
Arnold said the US gave up its market leadership in South Africa during the sanctions period which enabled other countries to establish themselves more firmly.
He said South Africa was now seen as the market of the future for US traders and investors.
“It is an attractive market — South Africa would have a growth rate of five to six percent if it wasn’t for the drought and a poor performance from the gold mining industry.”
“With South Africa’s transition to democracy, the US feels it is important to re- establish itself in the country and in fact every 10 days, a US company sets up business in South Africa.”
“It is the largest export market for US goods in Africa with exports reaching $3,4- billion in 1994. An expected $4,1-billion will be reached in 1995,” said Arnold.
He added that South Africa has passed Russia as a destination of US goods and now ranks 34th overall.
He said aircraft and aircraft parts are two major target markets for the US, with South African Airways looking to refurbish its fleet.
“Both Boeing and Airbus will be competing for the contract.”
Other important markets for US companies are in industrial chemicals, computers and peripherals, drugs and pharmaceuticals, franchising, machine tools, telecommunications, security and safety.
Arnold said there were a few barriers to trade but these were not seen as insurmountable.
These included exchange control, protection of intellectual property rights, and tariff issues.
“By and large, these are not serious impediments but mere annoyances.”
Commenting on the court case between US company MacDonald’s and a South African company seeking to expunge MacDonald’s trademark from the registrar, Arnold
said he felt that the outcome would be closely observed by other US companies interested in setting up franchising operations in South Africa.
He said while violence should always concern a society — it was not in itself a major barrier to trade.
“The first issue facing potential investors is whether they can make a profit and repatriate the profit to shareholders in their own country.”
Local businesses ignore foreign trade interest
Karen Harverson
Foreign investment of more than R1,5-billion has flowed into South Africa as a result of a business delegation led by Gauteng Premier Tokyo Sexwale to South East Asia in May.
“There is massive interest from China and Hong Kong in investing in South Africa,” said chairperson of the Gauteng Economic Standing Committee Andrew Feinstein, at a breakfast presentation hosted by Bell, Dewar and Hall last week.
However, he said the international torpitude and apathy of certain local businesses was doing as much to discourage foreign investment as crime, lack of investment incentives and the post-Mandela factor.
He said that on the trip to South East Asia, the Chinese had expressed shock at the lack of follow-up to enquiries sent to South African businesses.
“The world’s second biggest toy manufacturer based in Hong Kong had complained that of the 18 enquiries he sent to local manufacturers, not one had bothered to reply. We have to develop an international mindset if we want to compete in the international market,” said Feinstein.
He said the biggest threat to South Africa’s newfound democracy was unemployment.
“Of the five-million unemployed, one-million reside in Gauteng. If we are unable to create sustainable employment, we will not engender the social stability necessary for economic growth.”
One of the options to create employment was to become more competitive, to broaden the market base beyond import substitution and accepting the reality of a general agreement of tariffs and trade (Gatt) dominated world.
Feinstein said greater investment was needed in research and development in specific growth sectors, as well as prioritising human resources development and training.
On labour, Feinstein said the quality of the workforce and of much machinery and plant was uncompetitive and there needed to be an acceptance by labour and business that wages and profits cannot increase without commensurate increases in productivity.
“Greater flexibility is needed — one of the most important attributes of the international economy is its ability to adapt to changing market circumstances. Our local labour market and capital productivity do not enable this to happen.”
He said the undermining of trade unions was not the answer and said the government had made a conscious decision not to marginalise trade unions just to suit business’ interests.
On economic policy, he said the government was focusing on developing the world’s fastest growing industry — tourism. He said it was also looking at downstream petrochemical products and the infrastructure sector which had massive potential. Other growth sectors include financial services, fabricated metals and other value added products.
He warned business not to disregard affirmative action which was needed to instill the social stability required to grow the economy.
“In Malaysia, the ethnic majority controlled only three percent of the economy in 1970. Now through affirmative action programmes, it controls 24 percent which is expected to rise to 30 percent by 2000.”
He adds that without the commitment to an affirmative action programme, Malaysia would have been plagued by social instability.