By Phil Couchman, CEO, DHL Express UK & Ireland
Business confidence among SME exporters has never been higher, according to the latest DHL report conducted in conjunction with the British Chambers of Commerce. The DHL/BCC Trade Confidence Index found that UK exports are at the highest they have been since 2007, with confidence levels in both future turnover and future profitability both remaining high. Within this optimistic backdrop, there is now an opportunity for UK SMEs to spread the risk associated with exporting by diversifying overseas. South Africa — now in the UK’s ‘premier league’ of trading partners — can be one such option for SMEs looking to capitalise on this newfound confidence.
Known definitively as the economic powerhouse of Africa, South Africa has been identified as one of the key markets driving the expansion of economic activity in Sub-Saharan Africa. With a growing affluent population and a well-established manufacturing base, more than half of South Africa’s trade is now with developed countries. DHL Express in the USA has found that African trade lanes like South Africa are reporting strong double-digit growth on both inbound and outbound volumes.
South Africa also possesses a politically stable government and has held four successful national elections post 1994. This in itself has lead to a strong infrastructure through much of the country and good internal transport links. The construction industry also benefited from a huge programme of government investment ahead of the 2010 World Cup.
The economic powerhouse of Africa
Currently the 25th-largest country in the world and with a population close to 53 million, South Africa’s economy is by far the largest in Africa. Along with China, Brazil, Russia and India, the country also belongs to the BRICS club of emerging world economic powerhouses.
Figures recently released by the International Monetary Fund also reveal an extremely positive economic outlook for the continent of Africa as a whole. The figures highlight that Africa is proving to be less susceptible than other regions to the highs and lows in the global economy, as it diversifies its trading partners. Activity in the region is projected to expand by 5% in 2012 and 2013, a similar pace to the one observed in 2010-11.
There are short-term benefits to SMEs looking into trading with South Africa, with the country currently only one hour ahead of GMT. It is also worth pointing out that English is recognised as one of the official languages of the country — which makes it much easier for businesses to set up local partnerships and liaise with local retailers.
South Africa’s primary exports remain fuel and mining products, machinery and transport equipment and other semi-manufactured goods. Over time however, the country is gradually moving from mainly commodity-based products to a more broad profile of products that includes manufactured products.
With an annual bilateral trading relationship of over £9.6bn, South Africa is one of the UK’s top trading partners — and this figure is set to double following challenging targets set by ministers in both countries
UK Trade and Investment is focusing on high value and infrastructure opportunities that form part of the South African government’s agenda, at a value of £90 billion over the next four years. Key projects in healthcare and acid mine drainage are also focuses for the UK, with work in the energy and water sectors to come.
However, there are many other opportunities that exist for the UK’s innovative products, services and technology in other sectors of the economy. It is an exciting time for the two countries’ trading relationship, and SMEs have never been in a better position to take advantage of this.
Of course, trading with international countries always proves more complex than when dealing solely within the UK, and research needs to be undertaken on specific trading areas in South Africa before kick starting an exporting programme.
Whilst English is recognised as an official language, less than 10% of the population are listed as fluent and there are also 10 other languages spoken — isiZulu is the most common. UK businesses not familiar with this language would find it useful to partner with an international logistics expert such as DHL, which has been operating in the region since 1978.
Furthermore, unemployment, poverty and inequality remain a challenge in South Africa, with official unemployment at nearly 25% of the work force.
Seeking help and advice
An understanding of the necessary customs, finance and import/export regulations will help to facilitate distribution abroad, and there are many advisory bodies out there that provide support. UK Trade and Investment offers a range of services for UK exporters, including a flexible business tool called the Overseas Market Introduction Service (OMIS), and the British Chambers of Commerce (BCC) also offers export-training services.