Between 2016 and 2017, South Africa’s export sector was worth approximately $13.1 billion. This substantial figure led ESI Africa to speak with the CEO of the South African Capital Equipment Export Council (SACEEC), Eric Bruggeman, to answer some of the concerns that local businesses have when exploring expansion through export opportunities.
In South Africa, export opportunities are significant because the emphasis is on specialised manufacturing and smaller components as opposed to mass production of goods. With high standards of compliance and quality control the products can compete against the rest of the world. However, companies need to maximise the opportunities associated with this good reputation.
Eric, what are the first steps to take to enter the market?
The first step to selling a product is to identify and get to know the right people. For example, if your business deals with solar heating, you should attend sector related meetings or apply to the Department of Trade and Industry when a trade expo takes place in another country. Secondly, your team needs to be trained in how to do business in the new region/country. Learning to navigate language and culture for example will help a great deal.
If you are spending money to take the trip overseas, making contact with an organisation like SACEEC will help to set up the meetings beforehand, which ensures less time is wasted in making contact with the right person in the territory.
While there, it’s important to establish the need and build rapport with regional businesses. Often you need to meet several times before trust and understanding is established. Only then can your business be established there. SACEEC has developed a business centre to assist with these elements, as this step has proved so important.
Forming partnerships is vital and your partners must employ locals and employ localisation initiatives. Lastly, it’s important to remember that people buy from people.
Briefly outline the top risks and key issues in exporting
In a nutshell, the following issues impact a businesses’ risk appetite profile:
• Interest rates are high
• Steel prices are high
• Labour isn’t cheap (although not the most expensive either)
• South Africa is on the tip of Africa increasing our delivery costs
• Many governments support export through tax breaks etc – but not in South Africa
However, taking these risks into consideration, what we need to do is grow our local market:
• Boost manufacturing capabilities
• Grow technology
• Develop entrepreneurship
• Invest in research and development If you do not develop in these sectors, the economy can’t grow effectively.
Eric, what would you identify as ‘things to remember’?
The SACEEC has a programme in place to work with the municipalities and local organisations to increase local spend. The challenge is that previously everything was imported. In order to grow successful markets such as India, China and Brazil, import into local markets must be reduced.These countries are prepared to pay a little more for locally produced goods; an idea we should adopt.
Ultimately it’s very difficult for a local company to export from South Africa without a strong base in South Africa as exporting is expensive. Once you are established and you have grown a customer base, there is money to be made. However, a large capital investment in travel and in the development of the new base is needed.
Manufacturing is one of the biggest employers of skilled and unskilled labour in the country. We must train our people and use those local skills as much as possible. The Council realises that South Africa can’t make everything and import is necessary.
However, we suggest that if people want to import, let them ensure that some portion of it is done locally, such as the assembly.
Will we see a relaxation of trade barriers in Africa?
We are likely to see trade open up on the continent. Africa has huge market potential and if we can get the financing right, we would have a trade boom.
The manufacturing sector could also expect massive growth, but only through partnering with the right countries, for example Zambia or Democratic Republic of Congo. It’s vital to secure funds at a competitive rate to compete with other countries around the world. ESI