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Viable opportunities for South African companies in Africa were increasingly emerging around so-called development ‘hot spots’ that were anchored by a central megaproject that triggered demand in the local downstream and ancillary markets, the Gas Africa conference heard on Tuesday.
“New development hotspots are driving infrastructure corridors, accelerating the roll-out of basic services and triggering clustered development. This creates clusters of opportunity around an operation, which are unlocked by the anchor project.
“We [thus] need to start looking at opportunities in sub-Saharan Africa in a regional, [project-focused] way and not necessarily using a country approach,” asserted Liz Whitehouse & Associates partner Duncan Bonnett.
The commercial researcher added that growing levels of affluence and urbanisation in Africa were driving requirements for power and utilities, as well as for commercial, industrial, retail and residential property in “virtually every stable region” of the continent.
“These new areas of development tie [in] with established corridors, which are driven by energy, minerals, infrastructure and agriculture.
“Twenty years ago, the debate among development finance institutions was about whether there were enough projects to unlock a corridor, [but] that debate has largely fallen away and now it’s about the funding of these projects,” Bonnett commented.
He cautioned that, while South African companies still provided the bulk of exports into sub-Saharan African countries, such as Namibia, Botswana, Zimbabwe and Zambia, their share of the export market narrowed the further north one travelled.
“This is something we need to look at – how do we take advantage of the mining, energy and infrastructure axes elsewhere in Africa and use our position in the region to access opportunities?
“Don’t think [as a South African company] you can sit in Johannesburg, you need to be locally based and be able to provide the service quickly. If you can’t [re]locate, you may have to look further down the food chain,” Bonnett challenged.
Companies looking to ingratiate themselves into Africa were, meanwhile, cautioned of a growing insistence by the continent’s governments that substantial local investment accompany the awarding of a local contract – a trend expected to grow alongside resource nationalism.
Listing several requirements for South African firms looking to become more active on the continent, Bonnett said companies should ensure that they had all their required Southern African Development Community-required trade certification in place and had an understanding of the logistics of operating in other countries.
They needed a defined strategy for the region and an understanding of the strategies of key anchor project developers as well as the needs of the ancillary operations around key growth nodes.
Companies should also interact regularly with other suppliers in their field and supply chain to harmonise efforts and “hunt in packs”.
An understanding of the support mechanisms offered by Department of Trade and Industry, the Export Credit Insurance Corporation, development finance institutions, commercial banks and insurance companies would further support South African firms looking north of the border.
“Your global competitors use these instruments from their home markets; so should you,” Bonnett advised.