SA’S presence in China anchored

Significant opportunities exist for SA to grow its exports to the country even further

SA is one of the only African countries to have direct foreign investments in China with a number of local companies that either have — or have had — a presence in China. The most significant of these is Jse-listed Naspers through its investment in China’s largest Internet company, Tencent. According to SA’S embassy in China, SA companies are invested in the chemicals sector through Sasol; construction equipment through Landpac; mining through Anglo American & Master Drilling; financial services through Standard Bank, Hollard and Old Mutual; tourism through SAA and Naked Hub; the food and beverages sector through Babylonstoren, Distell, KWV and Rooibos Ltd; the consulting and procurement sector through Beijing Axis; and health care through Aspen Pharmacare.

Jse-listed Naspers owns a 31.2% stake in Tencent, a Chinese messaging, social media and gaming company which has undergone explosive growth as a result of Chinese demand for content consumption over mobile phones. Tencent has a leading position in this space through its Wechat app. According to the China Internet Network Information Centre, by end-2017 there were 753m Chinese mobile Internet users, with year-on-year growth of 12% over 2016, and this is expected to grow another 10% this year. Internet data usage expanded 162% in 2017 alone.

“Tencent’s Wechat app stands to benefit from all aspects of mobile phone usage, from messaging, gaming, shopping, and video content consumption, as well as sharing user-generated content,” says Pieter Hundersmarck, coportfolio manager of the Old Mutual Titan Fund, a global equity fund.

As China’s consumer economy expands at a rapid pace, there are significant opportunities for SA to grow its exports to the country, particularly in the agricultural sector. Chinese President Xi Jinping has pledged greater openness for foreign companies doing business in his country including increased financial liberalisation, lower tariffs and less ownership restrictions as well as greater intellectual property protection. At the end of last month foreign companies were allowed to hold a controlling influence on Chinese-based joint ventures. Ownership restrictions will be eliminated for foreign mutual funds and futures firms by 2021.

As the third-largest global economy when measured by GDP — behind the US and EU — China is an attractive investment destination for SA investors looking to diversify overseas, says Hundersmarck.

Its economy continues to grow rapidly and according to the World Bank, its contribution to global

GDP has increased from 3% to 15% over the past 25 years, the fastest in recorded history.

“It also has the second-largest population in the world behind India, offering multiple opportunities to invest in underpenetrated consumer categories ranging from smartphone penetration to coffee consumption to automotive ownership,” says Hundersmarck.