SADC, economic growth and way forward for SA
- Andrew Plastow
- 04 Jun 2015 (South Africa)
Last week I was on a pretty routine market visit to Mozambique and had some down time while travelling the 200km from the agricultural hub of Nampula to the deep water port city of Nacala. I posted the following social media status: “Road tripping in northern Mozambique. Good road. Lots of grass-roofed villages full of vendors and simple schools. Brand new mile long coal trains. Baobab trees and 3G. An economy on the move.”
I got a reply from a former South African relative: “Sadly, unlike the one you just left.”
Sometimes the truth hurts. And this gets you thinking.
The first time I visited Mozambique was in 2000. The economy was anything but “on the move”. The country was struggling to deal with the after-effects of civil war and was one of the poorest in the world. Infrastructure was run down, though there were a few capital-intensive-mega projects like the aluminium smelter and port upgrades. Import duties were high and products expensive. South Africans needed visas and the limited consumer goods trade was dominated by European imports and goods smuggled from Komatipoort wholesalers. There were a few products which were repacked locally to avoid duties, but on the whole Mozambicans had to either ‘fork out’, go without or plan a trip to Nelspruit. The place was what I romantically imagined an African Havana might be.
Fast forward fifteen years and Maputo is hip, happening and open for trade. The duties and visas are gone for South Africans, and marketers are falling over themselves to launch new campaigns; after all, every manufacturer these days has African expansion on their strat-plan. This massive commercial turnaround is largely underpinned by SADC’s plan of free trade and economic development. But why did poor Mozambique open its doors to SA goods and travellers, foregoing duties and losing some local repacking jobs, when rich Angola has not? Maybe we have to thank Graca Machel and Madiba’s charm, or Mbeki’s African Renaissance, or maybe the Frelimo economists calculated that they would make a lot more money from VAT on a vibrant trading market than they would lose in duties from a throttled one. But why then do SA goods get the access when the Western and Asian investor and aid nations do not?
Back to my road trip. While it is no surprise that Maputo is the darling of the marketer, the same does not seem to be the case for the rest of the country. On visiting stores in Beira, the port city about half way up the Mozambican coast, it is evident that some SA brands were looking stronger than in similar stores back home (like Bakers biscuits) while others face some cultural challenges (the great SA brand Koo, when enunciated, sounds like the Portuguese slang for ‘bum’, so is referred to as K.O.O.). But often the big multinationals were surprisingly absent. Take for example the huge laundry detergent category: the Beira market seems to be led by the small SA challenger brand ‘Mac’, while mighty Unilever’s Omo, Sunlight and Surf seem to have forgotten the half a million citizens of Beira and their million provincial cousins. Global laundry leader P&G and their Ariel, which has taken leadership in Kenya and is shaking things up in SA, was nowhere to be found. Not spending money on marketing is one thing, not distributing your product is quite another.
We South Africans had a lot to say about foreign shopkeepers during the recent xenophobic violence. Some also think that foreign-owned stores is a uniquely South African phenomenon. After visiting shops in northern Mozambique (and indeed many other countries) I can assure you it is not. I met Portuguese, Yemeni, Somali shopkeepers from across South East Asia, Burundi, DRC and Malawi, but was really stumped when I entered a wholesaler in Nampula. The owner and his two partners knew no English, Portuguese or even broken Kiswahili, and so called a shelf packer who said he would help to translate. So I asked my question in English, my distributor translated into Portuguese, the shelf packer into Arabic and one of the shopkeepers then translated it to the other two in French! They were from Mauritania in North West Africa.
I was never quite able to fathom how or why they ended up 200km inland on the opposite corner of the continent. But what is clear is that if they can make that massive personal investment with nothing in their favour, then South African manufacturers with their duty free access should be doing the same. If you’re from Interpol/CIA/MI5/Mossad and looking for three fugitive Mauritanians, then Nampula wholesale district may a good place to start (Airlink flies daily).
You may be wondering why I would bother with these cities, each with less than one million people. Well, they are all surrounded by millions of currently rural people. When you add the trade I’ve talked of here; the huge gas finds close by; coupled with massive infrastructure investments being made in port and rail upgrades and the new roads and trains; I think we indeed have an economy on the move.
So what, then, of my cousin’s comment on South Africa’s economic stall? Last week South Africa’s unemployment numbers were announced – the worst in 12 years. (Despite the grand promises of job creation at every opening of Parliament.) Government needs to create jobs through enabling economic growth, not by employing people. With 220 million people over our borders in SADC member states, most with economies growing much faster than ours, my belief is that we need to be focusing there for long-term growth. Brands and route-to-markets take time to build and foundations need to be laid early. There is also work that needs to be done to complete this SADC duty free access promise. Angola and DRC, two lucrative markets, remain out of the free-trade fold. International relations with Angola have not been cosy for many years now, and like those with Nigeria, the historical jostling about who would be the biggest fish in the African pond has only succeeded in stirring up mud and damaging the pond for everybody.
To me the big news of the weekend for South Africa was not Nkandla or FIFA, but rather that President Zuma was in Nigeria for President Buhari’s inauguration, and with plenty of sound bites to make it clear that we are ready to bury the hatchet. Trade with Nigeria remains a massive opportunity for both countries, and perhaps the most positive legacy the Zuma administration can leave us with.
The prize for SA manufacturing is much bigger than just SADC. Last week also saw reports that at this month’s African Union summit an announcement will be made outlining the launch plans for the Tripartite Free Trade Area (TFTA). The TFTA would combine SADC with the East African Community and COMESA (dominated by Egyptian and Kenyan manufactures), totalling a massive 625 million consumers. This won’t happen overnight, but SA manufacturers and brands need to equip themselves for the future and focus on growth. The jobs will follow.
The global investment community is in Cape Town this week for the World Economic Forum on Africa summit. Let us deliver a strong message for the SA brand that we are open for business and that with our manufacturing scale, strong capital markets, transport links, weak Rand and SADC market access, we are the obvious choice for investment. Let us also ensure that government and business keep lobbying to turn the promise of TFTA and, more immediately, Nigerian, Angolan and DRC access into a reality. If we, as South Africans, can’t back ourselves to fuel growth with duty free access to hundreds of millions of upwardly mobile consumers, then perhaps we should pack a French phrase book and take a flight to Nampula to get some tips from those Mauritanians. DM
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