EXPORT CREDIT INSURANCE CORPORATION OF SOUTH AFRICA SOC LTD
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Prospects for Exporters & Investments

Mining and extractive industries

South Africa currently has significant competence and activity in a number of upstream oil and gas service and supply areas, including the repair, maintenance and upgrade of various kinds of oil and gas marine vessels. There are opportunities in engineering services with respect to the design, fabrication and construction of specialised modules or facilities for the oil fields, including storage tanks, processing modules for offshore platform or onshore facilities, docking facilities, tugs/barges, civil structures, platforms, etc. At the product level, South African firms can provide equipment and materials such as pumps, valves, pipes, motors, instrumentation, process equipment, etc. for the specialised needs of the upstream industry.

South African firms are recognised as leaders in turnkey new mine design and operations, mine safety, ventilation, tracked mining, geological services and shaft sinking. Fuel cell technology and products that use platinum have been applied in the tracked mining area, which includes rail-based track mining and the use of underground locomotives. In addition, the level of South Africa’s development and expertise in the ventilation area is considered to be much greater than in comparable mining countries. Some of the risks and challenges in Africa for the mining sector include resource nationalism, price and currency volatility, inadequate supporting infrastructure and cost inflation.

Infrastructure-related industries

PIDA and other inter-regional infrastructure plans present opportunities for South African exporters of electrical equipment, rural and urban electrification, the construction of renewable energy plants, and transmission and distribution networks and substations, transport equipment, water and wastewater treatment solutions for residential and industrial use. Despite vast opportunities presented by the envisaged infrastructure projects, funding remains a key challenge.

Agriculture

In the horticulture segment of agriculture, commodities with significant consumption patterns both within and across regional blocs present viable export and investment opportunities for South African firms. South Africa has a competitive advantage in a number of crops, including table grapes, citrus, essential oils, maize, sugar cane and vegetables for processing. South African exports of fruit and vegetables into Africa have grown at a compound growth rate of 10.4% in the past decace. Sugar exports and related products have grown at an average of 6.5%, whereas essential oils grew by 18.9% over the past decade. There are opportunities to create infrastructure for facilitating cleaning, grading, packing and other primary processing activities for both food grains and perishables.

In the meat industry, Africa – being a net importer of livestock - presents potential opportunities for South African small-scale livestock farmers to participate in the industry. There are a number of production systems that could be practiced in the continent. The most ideal systems are weaner production, steer production, cattle breeding and feedlotters and speculators. South African exports of meat products into the continent have grown by 8.1% over the past ten years.

Constraints and risks in agribusiness in Africa include complications over land acquisition processes and uncertainty regarding land rights. Moreover, infrastructure is still lacking in many regions, and any establishment there would have to include heavy investment in farm and irrigation equipment and transport. Crop losses due to drought and flooding still remain a threat to the agro-food industry.

Manufacturing

In agro-processing, the expanding number of middle- and high-income consumers on the continent has shifted consumption patterns and personal tastes to processed food and beverages. The expansion of South African retail and supermarket chains into the rest of the continent is creating shelf space for these consumers to satisfy their new tastes. Supermarkets in Africa do not have developed firm-specific private standards to differentiate their products, and codes of conduct for suppliers that allow them to develop “credence goods” to meet consumers’ concerns for social and environmental sustainability are non-existence. This offers local agro-processing industries upgrading opportunities. South African companies can add value by deepening processing activities (washing or chopping), combining products (mixed washed, peeled and chopped vegetables, ready for cooking) and packaging (for speciality products). With 11% of the world's arable land (86% of which is still uncultivated) and very low tractor penetration, Africa holds strong potential for mechanisation development in the longer term. Although agricultural machinery sales growth will be slow to start off, it is expected that opportunities will become available in the longer term, especially in North, East and Southern African countries.

In the chemicals subsector, South Africa is considered a world leader in coal-based synthesis and gas-to-liquids technologies. The recent discovery and exploration of coal and gas on the continent presents further opportunities for the South African chemicals industry. Chemicals and related exports accounted for approximately 14% of South Africa’s total export basket into the continent in 2012. Between 2003 and 2012, chemicals exports have almost doubled from US$1.1 billion in 2003 to US$2.1 billion in 2012 – a compound growth of 9.6%.

Export and investment opportunities in industrial electronics lie in the development of access control systems and security equipment, automotive electronic subsystems, systems and software development in the banking and financial services sector, silicon processing for fibre optics, integrated circuits and solar cells. There are also significant opportunities for the export of hardware and associated services, as well as software and peripherals.

South Africa's is also a net exporter of metals, and export and investment opportunities include the manufacturing of primary steel products and semi-finished products, such as billets, blooms, slabs, forgings, reinforcing bars, railway track material, wire rods, seamless tubes and plates. Exports of metal products into the continent have grown by 11% between 2003 and 2012 and constitute 6.3% of South Africa’s total exports into Africa.

South Africa has leading global transport and haulage equipment products. The export of road vehicles and transport equipment registered US$2 billion in 2012 – accounting for approximately 13.3% of total South African exports and 39% of total South African capital equipment exports into Africa. In addition, exports of road vehicles and transport equipment have grown at a compound rate of 13.1% over the past decade – showing a sustained demand for these products in Africa.

Africa has been the leading destination of South Africa’s exports of forestry, timber pulp and paper products, with exports to the continent accounting for approximately of 60% of total South African exports of forestry, timber pulp and paper to the rest of the world. Key products of interest include doors, windows and their frames, posts and beams, assembled flooring panels and skirting boards.

The export performance of the mining equipment sector is also indicative of South Africa’s global competitiveness. In 2012, mining equipment constituted 19% of the total South African exports into the continent and just over 50% of total machinery and capital equipment exports into Africa. Since 2003, the share of Africa in South Africa’s mining exports has been increasing, on average, by 20% per annum. In this regard, South African firms have an opportunity to manufacture and supply heavy drilling equipment, underground locomotives, hydraulic equipment and haulage, ventilation, conveyors, scrapers, safety equipment and washing spirals, among other mining-related products.

Consumer-related industries

Demand for consumer electronics products in Africa has grown rapidly in line with rising disposable incomes, continued downward pressure on the prices of mobile handsets and digital television sets. Increased demand for mobility, lower prices and channel expansion will fuel demand for notebook computers, as well as digital lifestyle products, such as digital cameras, plasma displays, LCD and plasma television sets, LCD monitors and mobile handsets. In the AV segment, television sales will be driven by growing demand for the better viewing experience offered by plasma and LCD models, as well as the continuing migration from analogue to digital broadcasting. The main challenges of doing business in consumer electronics include uncertain policy and regulatory frameworks, especially with regard to tariffs and licensing, weak transmission and interconnection agreeements, planning networks for adequate capacity with uncertain market demand, and currency fluctuations.

In the food retail sector, with less than 5% of food sales done through the organised retail sector, growth in this sector is coming off a very low base. Opportunities are immense in both West and Central Africa. Both regions have generally not witnessed the same level of investment in organised food retail as Southern and East Africa. North Africa's mass grocery retail industry remains underdeveloped, with few modern retail outlets and formats. The problems for retailers in Africa include, inter alia, the lack of suitable real estate, high rentals, long supply chains, transport logistical problems, a lack of quality domestic goods and service providers, slow returns on investments and the need for critical mass, high import duties and excise taxes, and uncertain land tenures for property development.

The underdevelopment of the financial services sector in Africa has boosted the opportunities available to local companies willing to take the risks. Mobile financial services across the continent are expected to grow substantially, driven by higher numbers of mobile subscribers, increased deployment of mobile money platforms, the large size of the unbanked population, a rise in intra-country and intra-regional remittance transfers and increased sales penetration of smartphones in the region. These developments provide South African companies with the opportunity to introduce mobile money transfer technologies, such as the eWallet and app. There is a significant opportunity for banks to offer one-stop shopping for financial services that specifically target the growing cosmopolitan and affluent markets in the region with such premium services as wealth management. The main problems in the African financial services sector include currency risks and weak domestic private sectors.

Maritime-related industries

The South African vessel construction industry, in particular boat building, is principally an export industry, with 90% of production dedicated to exports. The South African boatbuilding sector has the opportunity to build on its strengths in multihull production to expand exports into new markets, as well as to build on niche competency areas to diversify its exports. Potential market opportunities exist and the industry can consider expanding its commercial boat supply, including rigid hull inflatable boats into Africa, focusing on military and naval security boats, harbour workboats for fire-fighting and pollution control and patrol boats, oil and gas crew and provisioning supply craft, and ferries and fishing craft.

As oil, gas and port activities increase in sub-Saharan Africa due to increasing investment in extractive industries and infrastructure upgrades, the demand for harbour work boats and supply craft will increase. Furthermore, as African countries continue to address safety and security concerns, there are plans to upgrade patrol and rescue fleets.

South African suppliers may face significant market barriers, including tied assistance by bilateral donors and local procurement requirements. In addition, the lack of presence in target markets means that South African service providers cannot identify purchasing decision-makers in some countries and thus cannot take advantage of unadvertised opportunities.

Tourism and related industries

In the travel and tourism industry several opportunities are available for South African investors, including the design, construction and management of luxury lodges and retreats. Apart from these, marine tourism opportunities exist. Luxury boat cruises or tour operatorships could be great ideas. Balloon flights are a relatively new experience for millions of Africans. There is also room for foreign investors to partner with governments on national park concessions.

The key risks and challenges associated with tourism investment include concerns about the political stability and safety of the host country, and unclear or incomplete laws on property ownership.

EXPORT CREDIT INSURANCE CORPORATION OF SOUTH AFRICA SOC LTD

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