While the African Continental Free Trade Agreement (AfCFTA) opens up the potential for trade with East Africa, the largest barrier for South Africa is that it has no presence in the region.
This is the opinion of Africa House market access and strategy director and analyst, Duncan Bonnett, who told FTW that local companies looking to export into East Africa needed to understand that countries in the region were not looking for anything from South Africa as they had the entire world from which to procure.
“We’re nothing special. As a South African company, if you want to export into Kenya you need to go there,” he said.
Bonnett pointed out that visiting countries in the region only once and handing out a few business cards at a conference was not enough. Instead companies had to build up their relationships with stakeholders in the industry and their counterparts in the region.
“We’re not going to export one cent more of goods there unless we go and fly the flag because there are competitors from Turkey, Morocco, Russia, India, China, Canada and the UAE who have an advantage over us as they are there in the region all the time,” he added.
“There is still an assumption that the rest of Africa will come to us and we don’t need to go to them,” he said. “It is completely erroneous and we are losing business because of it.”
Bonnett said that by constantly and consistently visiting the region, companies would be able to suss out who the other players in the market were and note where their own advantages lay in relation to their competition.
“When you go there with your pricing and you’re 40% out on your first visit, you are able to see how you can get that down to be able to become more competitive,” he said. “Maybe your advantage lies in quality – which it quite often does – or perhaps it’s in terms of delivery times, payment terms or what you can uniquely offer.”
Bonnett noted that there were also other traditional barriers that needed to be overcome in trade with East Africa such as the measures East African countries would inevitably implement in order to protect domestic producers from external competition.
“I can guarantee that the Kenyan Association of Manufacturers is already putting together a hit list of South African products to exclude from the AfCFTA,” he said. “Unless South Africa is ready to do a quid pro quo where we start importing a lot more from Kenya, I don’t see us being able to easily expand exports into the country.”
There were however a few things that could be done to facilitate trade with East Africa and drive down the cost of doing business in the region, to the benefit of manufacturers, exporters, importers and maybe even the consumer, he added.
Beefing up customs and excise at key ports, ensuring compliance with requirements of origin, and ensuring the logistics infrastructure was in place to lower costs of moving goods or services between South Africa and East Africa would improve the likelihood of gaining easier access to the region’s market to increase exports, he said.
“One Stop Border Posts are not the silver bullet for anything, but they can definitely speed the process up,” he said.
According to Bonnett, implementing these actions would make South African goods more attractive compared to those from Asia, Europe or other countries outside of the continent as the structure of South Africa’s economy was set up, in a way, to cater for East Africa.
“What this means is that South African companies are able to provide for the smaller orders of goods that most East African companies would be looking for,” he said. “A company might be looking for a consignment of only 10 000 circuit boards. South Africa can do these kind of short runs whereas a Chinese manufacturer would likely require an order of no less than a million.”
Bonnett pointed out that the products most suitable for export into East Africa, manufactured by South Africa, were machinery, mechanical supplies, mining equipment, valves, pipes and electronics.
He also noted that there was appetite in French-speaking East African countries for South African wine.
However, he added that South Africa should not jump the gun when it came to the AfCFTA, especially as it would open it up to competition from big regional players like Kenya and Ethiopia.
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We’re not going to export one cent more of goods there unless we go and fly the flag. – Duncan Bonnett
