South Africa: UK’s gateway to the African continent
Of all the countries comprising the BRICS (Brazil, Russia, India, China and South Africa) bloc, South Africa is of particular interest to UK businesses. For those wondering why, the answer lies in the social and cultural similarities between the two geographically disparate countries. The British domination over South Africa for more than a century and a half till 1961 has ensured a common language, a cultural connection and historical roots going back till the 18th century.
The multiple points of similarity between the two nations have formed the base for forging strong trade relations between the mighty island nation and the gateway to Africa. The UK and South African governments have set targets in 2011 to double bilateral trade by 2015.
Africa offers a huge market for any business firm. A vast continent, containing around 15% of the world’s population, it is still treated with a sense of trepidation by the corporate world. While it may sound counter-intuitive in a world which is fast becoming a global village, many business leaders confess they have never been to Africa at all and neither does Africa rank highly on their list of potential export destinations. However, South Africans firmly believe – supported by favourable rankings by the World Economic Forum on global competitiveness and the Rand Merchant Bank on investor attractiveness – that their country is a great launch-pad into the African market and offers a secure political and market environment for business operations.
South Africa is about five times the size of the UK, although its population is smaller, at 48.6 million. When setting up in South Africa, businesses tend to head to either Cape Town or Johannesburg, which have populations of 3.35 million and 3.6 million respectively, as they offer the most opportunities and a good quality of life. The other major city, Durban (2.8 million), is a major manufacturing hub and has a busy port.
Businesses interested in the country are well advised to attend networking groups here in the UK that are run and attended by South Africans. Businesses in the UK will need partners in South Africa as it is too far away to manage from home. Typically, South Africans are direct, open and happy to make recommendations and offer advice. The South African Chamber of Commerce is a good first port of call. Other key organisations include the government body UK Trade and Investment (UKTI), which runs trade missions to export destinations.
The UK and South Africa share similar legal and financial systems and business is conducted in much the same way. For entrepreneurs especially, it seems like a comparable market to that in the UK. Nevertheless, those keen to invest in start-ups are advised to spend time researching the market and talking to suppliers and manufacturers based in South Africa before committing.
With salaries and rents lower than in the UK, South Africa makes sense for a lot of companies. Infrastructure is improving, but it is an emerging market and this means there are also stark differences. For instance, South Africa’s apartheid history still looms over the country and policies enacted in the 1990s, designed to elevate the black population, are still in place. Black Economic Empowerment (BEE) affects growing companies as it demands that a certain percentage of employees, directors and shareholders are black, once these companies reach certain thresholds.
Businesses planning to gain government contracts, or even to work with suppliers that hold such deals, should be aware of how this legislation will affect them. South Africa is known as the rainbow nation due to its multi-racial composition and entrepreneurs would do well find out about its history and political situation.
A final word of advice: setting up operations in a country such as South Africa is a major commitment as, in spite of its similarities, it is a considerable distance away and the process will require significant effort and resources. Successful entrepreneurs caution that finding partners, researching well and then committing fully to the project is the best approach.
Image: The Queen formally greets South African President Jacob Zuma at the start of his three-day state visit to the UK, Source: www.mydreamcourse.co.za
Source: The Guardian