The letter Club The European House, in its sixty-second number, illustrates the strategic partnership opportunities between Italy and South Africa, discussed on the occasion of the International "Think Tank" promoted by the Ambrosetti Club and of the “1st South Africa – Italy Summit” held on 2-3 October 2014 in Cape Town.
Currently, Italian exports to South Africa are very limited. It represents only 0,5% of our country's total exports, with investment flows that revolve around 250 million euros (data 2012). The reasons above all concern the organizational and cultural sphere of South Africa, which until now has represented a major limitation for the internationalization strategies of our companies in Africa. Nonetheless, South Africa represents a market with great potential, both for creating commercial and productive partnerships, and for accessing the neighboring emerging markets of Sub-Saharan Africa. In the last decade, the Sub-Saharan area has tripled its GDP, quadrupled consumption and, in 2014, attracted FDI (Foreign Direct Investment) for 42 billion dollars, thus becoming one of the main business destinations. In fact, six of the ten most dynamic economies in the world come from this area: Angola, Nigeria, Ethiopia, Chad, Mozambique and Rwanda. South Africa is, together with Nigeria, the main country in this area and enjoys an excellent infrastructural network which also guarantees accessibility to the rest of the region.
South African industry is quite complementary to the Italian one: both enjoy a solid manufacturing base and are extremely diversified and specialized in medium and high technology products, with a widespread presence of SMEs. The most important global value chains, in which South Africa is a leader, are those of the automotive, metallurgical and agri-food sectors. In particular, 86% of African automotive production is carried out in South Africa, where the main multinationals in the sector have decided to establish themselves to carry out the assembly of vehicles destined for that area. The government has recently (2013) launched a program (Automotive Production and Development Program) which will bring production to 1,2 million cars a year by 2020. South Africa is the first African producer of steel and the eighth global of aluminum, thus making metallurgy the first export sector to Italy ( about 60% of the total). These two sectors could represent, together with textiles and furnishings, markets in which to export Italian design and technology, to satisfy the growing demand for quality goods. Other forms of collaboration between South Africa and Italy could take place in design and engineering services and in the production of instrumental mechanics, increasingly in demand for semi-finished or finished goods.
South Africa also enjoys strong potential in the primary sector. The World Bank estimates that in 2030 the value of sub-Saharan food consumer markets will exceed 1000 trillion dollars (today it is around 300 billion). Also in this sector Italy and South Africa could achieve profitable strategic partnerships. South Africa is the leading exporter of agricultural products from Sub-Saharan Africa and has a counter-seasonality in production compared to Europe. Italy, for its part, could export to South Africa the technical-managerial excellence and machinery for the production chain with which Italian companies are equipped. The match between these two realities could be achieved through the development of Integrated Agro-industrial Parks that include industrial production, commercial sales and joint research activities with Italian and South African universities, at the forefront of the sector.
Sub-Saharan Africa has a large energy capacity, with proven oil reserves at 62,6 billion barrels and 221 trillion cubic feet of natural gas. The members of the SADC (Southern African Development Community) will make investments of over 200 billion dollars in this sector by 2030 and by the same date, the South African government expects that the country will double, thanks to the specifically launched energy plan, the current electricity generation capacity. The Italian multinationals in the Oil & Gas segment could enter this market through strategic collaborations with South African companies and banks for the financial and operational implementation of the investment. At the same time, our energy companies could exploit the large deposits of shale gas and the South African government's support plans for the renewable energy sector. Another interesting project for our companies could be the creation of industrial joint ventures for the production of distributed generation systems and the development of intelligent networks (smart grids) which allow the export of South African energy assets to the rest of the Sub-Saharan area. In addition to the sectors mentioned above, there are numerous other areas in which Italian companies could seize interesting opportunities, including tourism, construction and mining.
If Italy wants to return to being competitive on international markets, it can no longer let these opportunities slip away. In fact, to regain economic growth and development, much will depend on the ability of our companies to make up for the drop in domestic consumption with an increase in exports and foreign investments. Why not start in South Africa? After all, as claimed by the general and Chinese philosopher Sun Tzu, in "The Art of War": "Once seized, opportunities multiply".
