Thursday, June 07, 2007
South African businesses eye China potential
By Alec Russell in Johannesburg
Published: May 7 2007, FT
The inaugural flight of the first direct service from China to South Africa did not attract much attention in the media, perhaps because it coincided with Freedom Day - the anniversary of South Africa's first democratic election.
But as the China Eastern Airlines airbus from Shanghai touched down on April 27 at Johannesburg's airport, on the runway at least, a small celebration ensued.ensued.
It was a striking indication of the increasingly strong two-way traffic between the two countries. While China's blossoming relationship with most of sub-Saharan Africa is often a one-sided affair - Africa provides raw materials, while China offers finance, cheap goods and infrastructure projects - South Africa's businesses are showing growing interest in investing in China.
"South Africa is one of the few countries in Africa that can take advantage of China's domestic market," said Lucy Corkin, the project director of Stellenbosch University's Centre for China Studies.
The centre estimates that South African investment in China is worth nearly $2bn (£1bn, �.5bn), dominated by South Africa's biggest companies.
Since moving into the Chinese market in 1994 at the end of apartheid, SAB Miller, the drinks company which is listed in London and Johannesburg, has with its government partner won 15 per cent of the local market. Two of South Africa's most venerable mining companies, Anglo American, the London-listed giant, and Gold Fields are both investing in China. Then as potentially the crowning glory of South African investment in China, Sasol is in discussions to build two coal-to-liquid fuel plants.
In addition, Naspers, South Africa's largest media group has a sizeable stake in the Beijing Youth Daily newspaper and also an internet company. But the launch of the China-SA flight points to a different phenomenon. Below the radar of international attention, hundreds of other smaller businesses in South Africa are waking up to the potential of China's market.
Their representatives are encouraged not just by the scale of the opportunity, but also by the belief that their experience in Africa's developing markets may equip them better than some of their peers in Europe and America to do business in China.
A seminar in Johannesburg for businessmen considering investing in China was packed out. Ray Stout, managing director of Anchor Yeast, South Africa's leading supplier of yeast for bakers and brewers, has been to China four times and hopes to make a final decision within the year on whether to build a factory there.
"China is one of the few regions that have a growing consumption of bread," he said. "Our interest is not to manufacture there for export. Our interest is to harness the local market."
His only concern is how to find the right local partner and to work out how to protect the company's technology.
But, as other African countries have learnt to their cost, there is another side to the story. For every flight to Shanghai taking out South African businessmen, Chinese businesspeople are coming the other way, representing competition for local manufacturing.
Thabo Mbeki, South Africa's president, explained to the Financial Times recently that he wanted to help China forge a partnership with Africa that did not swamp local industry. It is a difficult task as he seeks to stave off trade union anger while not seeming to support the views of some in the west who question the benefits of Beijing's involvement.
But his, and indeed Mr Stout's message is clear: South Africa is keen to forge reciprocal business ties. If they have their way, in a decade or so there may be another reason to remember April 27 ¶ 4:19 AM
Published: May 7 2007, FT
The inaugural flight of the first direct service from China to South Africa did not attract much attention in the media, perhaps because it coincided with Freedom Day - the anniversary of South Africa's first democratic election.
But as the China Eastern Airlines airbus from Shanghai touched down on April 27 at Johannesburg's airport, on the runway at least, a small celebration ensued.ensued.
It was a striking indication of the increasingly strong two-way traffic between the two countries. While China's blossoming relationship with most of sub-Saharan Africa is often a one-sided affair - Africa provides raw materials, while China offers finance, cheap goods and infrastructure projects - South Africa's businesses are showing growing interest in investing in China.
"South Africa is one of the few countries in Africa that can take advantage of China's domestic market," said Lucy Corkin, the project director of Stellenbosch University's Centre for China Studies.
The centre estimates that South African investment in China is worth nearly $2bn (£1bn, �.5bn), dominated by South Africa's biggest companies.
Since moving into the Chinese market in 1994 at the end of apartheid, SAB Miller, the drinks company which is listed in London and Johannesburg, has with its government partner won 15 per cent of the local market. Two of South Africa's most venerable mining companies, Anglo American, the London-listed giant, and Gold Fields are both investing in China. Then as potentially the crowning glory of South African investment in China, Sasol is in discussions to build two coal-to-liquid fuel plants.
In addition, Naspers, South Africa's largest media group has a sizeable stake in the Beijing Youth Daily newspaper and also an internet company. But the launch of the China-SA flight points to a different phenomenon. Below the radar of international attention, hundreds of other smaller businesses in South Africa are waking up to the potential of China's market.
Their representatives are encouraged not just by the scale of the opportunity, but also by the belief that their experience in Africa's developing markets may equip them better than some of their peers in Europe and America to do business in China.
A seminar in Johannesburg for businessmen considering investing in China was packed out. Ray Stout, managing director of Anchor Yeast, South Africa's leading supplier of yeast for bakers and brewers, has been to China four times and hopes to make a final decision within the year on whether to build a factory there.
"China is one of the few regions that have a growing consumption of bread," he said. "Our interest is not to manufacture there for export. Our interest is to harness the local market."
His only concern is how to find the right local partner and to work out how to protect the company's technology.
But, as other African countries have learnt to their cost, there is another side to the story. For every flight to Shanghai taking out South African businessmen, Chinese businesspeople are coming the other way, representing competition for local manufacturing.
Thabo Mbeki, South Africa's president, explained to the Financial Times recently that he wanted to help China forge a partnership with Africa that did not swamp local industry. It is a difficult task as he seeks to stave off trade union anger while not seeming to support the views of some in the west who question the benefits of Beijing's involvement.
But his, and indeed Mr Stout's message is clear: South Africa is keen to forge reciprocal business ties. If they have their way, in a decade or so there may be another reason to remember April 27 ¶ 4:19 AM
