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March 13, 2017

Engagement with Sub-Saharan Africa critical to SA's own growth

With the focus in SA increasingly inward due to the political shenanigans and concerns about the domestic economy, it is easy to forget about the rest of the continent, with which the country is inextricably linked.

The reality of SA’s interconnectedness with sub-Saharan Africa hit home with the recent attacks on Africans and foreigners from other regions.

But many South Africans, including government officials, mostly do not realise the extent of this country’s dependence on the rest of Africa for its own economic growth.

The perception is not helped by the mainstream media, which appear to have limited interest in issues related to the continent, despite the huge growth in this regard, especially over the past decade.

The issue was raised last week by the IMF’s senior resident representative in SA, Dr Montfort Mlachila.

Speaking at the University of Johannesburg, Mlachila reminded the audience that the rest of Africa accounted for 30% of SA’s total exports in 2015, much higher than China’s 12%.

Sub-Saharan Africa continues to be the main destination for South African exports, particularly value-added goods.

Mlachila said the influence of this trend on SA’s economic performance was being underestimated by many commentators, who tend to believe that the trade and investment focus is on China, Europe and the US.

SA continues to hold its own, despite some pull-back in various markets as a result of increased challenges.

These include currency turmoil, rising inflation and interest rates, foreign exchange shortages in oil-dependent countries and even import bans in key markets such as Nigeria and Zimbabwe.

In the year from December 2015 to 2016, SA’s exports to Nigeria plummeted nearly 28% from the previous year.

Countries that have been hit by external and internal factors are putting increased pressure on foreign investors, including South Africans, in terms of regulatory requirements and overzealous tax-collection measures, as they scramble for ways to raise revenues.

But the continent still has many high-growth economies with great potential.

Ivory Coast, Kenya, Senegal, Tanzania and Ethiopia are looking at growth of 6% and more in 2017, notwithstanding different challenges in each of them.

This must be attractive to companies in a country that has projected growth of less than 1%.

Assets are getting cheaper and risk-tolerant South Africans are well positioned to snap them up.

Investment firm Allan Gray last week announced investments in two Nigerian banks despite the challenges being faced by that country’s banking sector.

The growth in other African markets has enabled many companies in SA, such as Shoprite, to bolster their domestic operations with growth offshore. There seems to be a growing perception that SA’s presence and corporate engagement in Africa is waning.

This is partly because of the superficial research in this regard that abounds in analysis of the continent and the high-profile failures of a few large companies in certain markets — Woolworths, Tiger Brands and others — that have led commentators to ask if South Africans just do not have what it takes to succeed in difficult African markets.

This negates the many success stories of SA in the rest of Africa involving both large and small companies. In fact, SA continues to be a leader in the corporate space in Africa.

But as its market share is gradually eroded by increasing competition from within and outside the continent, it is critical that companies and the government recognise the importance of this large and diversified market to SA’s own fortunes and do what is necessary to maintain the country’s competitive advantage in its hinterland.

• Games is CEO of business advisory Africa @ Work