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Engineering News, June 2006
AFRO-CHINESE FUSION - Growing Links Between SA & Chinese Business

BUSINESS to business relations between Chinese and South African enterprises are now swiftly increasing in tempo.

“Over the past three years we've seen a significant acceleration in companies from both countries engaging with each other,” reports The Beijing Axis (TBA) MD Kobus van der Wath.

“And its increasing rapidly.”

Originally, companies on each side employed only an export model in dealing with the other country, using local agents.

Now, while this model is still in use, a growing number of companies in both countries are moving towards direct business to business relationships.

“So the commercial relationship between the two countries is becoming multi-layered, involving investment, co-investment, joint ventures, Memorandums of Understanding (MOUs) – in fact everything, in addition to straightforward exports,” he sums up.

The Chinese sectors most interested in South Africa, and in Africa in general, are the mining and related (such as heavy engineering, project engineering, and mining equipment) industries.

“But following behind them is quite a range of industries – the Chinese telecommunications industry is interested in South Africa, the Motor Industries Development Programme is attracting the Chinese automotive industry, and Chinese electronics companies are interested in the South African and African markets,” he points out.

“However, Chinese mining and minerals companies do enjoy Chinese government support in penetrating Africa,” he highlights.

In contrast, South African companies do not have the benefit of low cost labour enjoyed by their Chinese counterparts.

“South African companies need to compete in niche sectors of manufacturing and services in China,” he cautions.

“This applies across the South African economy – mining, engineering, services, automotive, telecommunications – South African companies need to be selective as it is not usually successful for South African companies to compete head-on with the Chinese,” he warns.

Arreas in which South Africa holds technological advantages include mine safety equipment, information and communications technology, Sasol's gas-to-liquids technology, and Pebble Bed Modular Reactor nuclear technology.

The good news is that South African enterprises are coming to grips with the challenges and opportunities presented by China, and boardroom discussions are becoming better informed as to the sectors, niches, and products in and with which they compete in China – or compete with Chinese companies elsewhere in Africa.

“China will not go away; that country is still seeking to increase its exports but it is also seeking to increase its imports, especially with regard to technology; each South African company must chose the model it desires to do business with China, whether it is sourcing low-cost equipment and other inputs, JVs, co-investment in third countries, or selling technology and/or services – each requires a different approach,” he affirms.

“Don't forget, the Chinese also struggle when they try to do business abroad; strategic partnerships and cooperation are something to flag – South African companies that ignore competition from China (and other major emerging economies) and do not develop cooperation with them will lose in the end,” he asserts.

TBA is a company that acts as a business bridge between Africa and China, with offices in Beijing, Shanghai, Hong Kong, Johannesburg and Cambridge. It provides specialist strategic advice, operational support, and trade solutions to African (including South African) companies seeking to do business in or with China, and Chinese companies seeking to do the same in or with Africa (including South Africa).

For example, TBA facilitated the MOU recently signed between Bateman Engineered Technologies and China's Citic Heavy Machinery (see Engineering News July 7, 2006).

“Our company's trade and enquiries flow has also grown at an increased rate over the past few years – for example, five years ago perhaps one to two South African businesses would visit our Beijing office every month; now it is two to three times per week or even more,” reveals Van der Wath.

”On the other side, there are now about two hundred to three hundred Chinese business delegations to South Africa each year – approaching nearly one a day,” he cites.

“We service companies across the entire spectrum from agriculture, to industry, to mining, to services, and it is very much a two-way flow,” he concludes.

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