2016-2020 comprehensive outlook
The global economy saw weak growth in 2015 with a marked economic slowdown in emerging markets and a commodity slump. SA has been heavily influenced by these conditions. The newly released IMF World Economic Outlook report sees this year’s South African economic growth at 0.6%, while a growth of 1.2% is projected for next year. “In SA, growth is expected to be halved to 0.6% in 2016 owing to lower export prices, elevated policy uncertainty and tighter monetary and fiscal policy,” the IMF said in its report this month. Globally, economy is expected to grow 3.2% from an earlier forecast of 3.4%, and in 2017 it is projected at 3.5% from 3.6%. The hope of prosperity lies in the emerging markets like SA and China. According to the IMF, China’s economic growth will rise to 6.5% for this year, and 6.2% next year. “The recovery is projected to strengthen in 2017 and beyond, driven primarily by emerging market and developing economies, as conditions in stressed economies start gradually to normalise,” the IMF said. People’s Daily Online has collected views and opinions from experts, scholars and professionals across sectors to explain what this mid-term forecast figure means to Sino-SA economic ties, and our wealth and future.
Q People’s Daily Online: What industry of the China-Africa economy do you think has greatest potential in the next five years? Could you elaborate more based on A your observation? CHRISTOPHER TORRENS: Foreign investment into the African continent has traditionally been focused on natural resources. Yet low commodity prices in recent years have caused African governments to recognise the importance of economic diversification, and depreciating African currencies have highlighted the dangers of relying too heavily on imports for even basic manufactured goods.
China looks well placed to assist Africa in increasing its domestic manufacturing capacity; not only has China had more recent experience in building its own manufacturing base than Western investors, but it has also already invested more in African manufacturing than many other investors. RANDALL RHATEGAN: In my opinion the two major drivers of trade and investment between China and Africa in the next few years will flow from new growth industries that emerge from the rebalancing of the Chinese economy, and commitments made recently in the Forum on China-Africa Cooperation (FOCAC).
We all know that Africa has a massive infrastructure deficit. China has the expertise and capital to assist Africa in addressing this deficit. The relationship between the two sides is strong, and there appears to be the political will to make this a success.
BOB WEKESA: Industrialisation. Because it has been primed at a major economic driver in the Africa-China relations at the policy level, namely the Johannesburg Summit of FOCAC, China’s Africa Policy. Also China is recalibrating its economic model away from heavy manufacturing towards innovation and services while Africa still needs an industrial base.
Thus, Africa would be receptive to the relocation of some of China’s manufacturing units seeking new a location.
LISA XIE: The greatest potential for the China-Africa economy in the next five years lies in increased domestic demand which is driving private consumption and public infrastructure, water, electricity, road, rail and ports related investments. The most significant investments have recently been seen in countries such as Mozambique and Namibia where more and more Chinese enterprises are participating in the country’s infrastructure construction projects, such as building the road, harbour, port and rail.
Over the next decade, we expect the Chinese to continue assisting in mega-infrastructure projects across sub-Saharan Africa, with the extension of the Kenyan Standard Gauge Railway as a prime example of “rail diplomacy” on the continent, as well as the LagosCalabar coastal railroad.
Given its extensive expertise and experience in industrialisation and infrastructure, one can expect many African countries to continue drawing on China for support in this arena, as they seek infrastructure development in an increasingly costly environment. These projects provide expansionary opportunities for many Chinese companies, and have future benefits of enhancing physical trade in goods from city centres to ports, for example.
At the same time, state-led cooperation in this arena will strengthen the diplomatic ties between sub-Saharan Africa and China.
KENNY CHIU: With its underdeveloped infrastructure in Africa means there is huge potential for foreign investment in infrastructure. If you are looking at countries in Africa which are having 3% to 7% GDP growth, even though from a low base, it is quite astonishing what can be achieved. We are witnessing Chinese State-Owned Enterprises (SOE) and private companies becoming very active in infrastructure in all part of Africa, many of which are supported by Chinese policy banks such as the China Development Bank and the Export and Import Bank of China. Some of these significant transactions we witnessed include CRRC (China Railway Rolling Stock Corporation) won the tender to manufacture and supply 1,064 locomotives to Transnet in SA, the construction of a standard gauge railway in Kenya by China Road and Bridge Corporation.
Chinese SOEs like Sinohydro, China Railway, State Grid, China Harbour are very active in the southern Africa region, ramping up a number of significant projects to the tune of billions of dollars of infrastructure projects.
Consumer-facing industries such as retail, technology, media and telecommunication are set to expand with rising domestic demand. Chinese companies such as Star Times (broadcasting), Huawei (telecom), ZTE (telecom) and Hisense (electronic appliances) are among those operating successfully across the continent.
Africa is also huge in terms of land size and every country has different geopolitical challenges. Overall I see that Africa is transforming at a steady pace and many countries in Africa remind me of China when Deng introduced radical economic reform in the early 1980s — challenging but full of opportunities.
JEREMY STEVENS: We expect some emerging Chinese corporates will be looking to find opportunities abroad. These companies are reshaping global trade and investment cords.
Many of them are armed with low cost structures, appealing products and, most importantly, very ambitious leaders. Already, Africa’s markets are mattering more to China every year. China’s total sales to Africa have more than doubled since 2009, from $47bn in 2009 to $108bn in 2015. So far swelling consumer demand in Africa is reflected in the growth of total imports.
But, this is changing. Already, just like China brought Africa into global trade flows, it has also done the same in terms of investment. First, it was from SOEs who were encouraged to “go out”, but now nearly half of China’s total outbound FDI flow into Africa are by smaller private sector players.
China’s sales to Africa have also propagated by the inflow of Chinese individuals too. Many are pursuing their own enterprises in wholesale and retail trade, restaurants, hotels and manufacturing. Looking ahead, it is a logical progression that outbound investment will follow Chinese sales.
TEBOGO LEFIFI: Three areas that will see phenomenal growth in the China-Africa economy — ocean economies, intellectual property and technology and financial services. China-Africa economic relations will be driven by economic cooperation between them coupled with market development and global trends. During FOCAC China signed a $60bn financial package over a period of three years. China’s Premier Li Keqiang made a commitment of $100bn over five years during his visit in Africa in 2014.
The funding will be directed toward sectors of priority for China, which are outlined in the One Belt One Road (OBOR) strategy and underpinning that the 13th five-year plan. Chinese companies generally follow policy in the outbound investment strategy. Although China is showing a bit of economic slowdown domestically, hitting a lowest growth of GDP at 6,7% for the first quarter of the year since 2009, outbound investment grew by 55%. Despite the bad news there is a positive outlook with expectations the economy will remain stable.
Two industries outperformed the market — tertiary industries and retails sales. China has been moving away from heavy industries to more service led industries and a consumption-driven economy. There will be more opportunities for African companies in service industries and tech start-ups to enter the Chinese market. Chinese companies in heavy industrial plants will start seeking for investment opportunities in Africa.
A shift of labour intensive industries will be welcomed by African governments looking to create jobs and working towards the Africa 2063 Agenda.
To realise is high profile OBOR strategy China has set up three financial institutions, to the distaste of the west — the Silk Road Infrastructure, Asian Infrastructure Bank and New Development Bank. SA is a member to the two banks and will serve as a gateway for the banks for finance projects in Africa, especially in infrastructure development. The OBOR encompasses two initiatives, The Silk Road Economic Belt (SREB) and The Maritime Silk (MSR) — commonly known as the 21st Century Silk Road. Previously the MSR included linking China with Europe through Central and Western Asia.
During FOCAC 2015 China included Africa as strategic partner. The MSR’s plan is to integrate China in the global economy through trade, investment, infrastructure and connectivity and other development projects. The Mombasa-Nairobi connectivity is a proverbial project and more similar projects can be expected in China-Africa economic activity.
China’s ambition in Africa is further enhanced by an MOU between China and the African Union focusing on infrastructure projects. In the next few years we can expect to see more new projects in transportation infrastructure, significantly in road, airport (refurbishment and new airport) and speed railways.
The fourth industrialisation brings its own set of opportunities in integrated economies, mechanisation and automation. This phase of industrialisation is characterised by availability of technologies, artificial intelligence and 3D printing revolutionising industries across the globe.
China can play a defining role in Africa’s growth in terms of technology transfer. New technological advances will impact on banking, health care, green technologies and education.
Q People’s Daily Online: Commodity plays an important role in the trade between China and SA and its price has been slumping for the last five years. We’ve seen some changes in the bilateral trade, not only Chinese exportation but also import. What is the most important change on the trade side according to your observation, and what is the reason behind the transformation?A BARNABY FLETCHER: China is SA’s singlelargest trading partner, a relationship that has traditionally been based on SA exporting primary commodities and importing manufac-
tured goods. Yet reduced Chinese demand for primary commodities means that, at least from the South African side, this relationship is facing some challenges.
In light of a widening trade deficit, SA is looking shift its relationship with China from one based predominantly on trade of goods to one based more on Chinese direct investment into the country.
This coincides with the desire of Chinese companies to look for opportunities to “export” their expertise and capital as their domestic economy slows to a more sustainable level of growth and as the government steps up its “One Belt, One Road” international investment initiative.
RANDALL RHATEGAN: The relationship between China and SA is strong, and the two countries appear committed to ensuring the sustainability of, and growth in, the trade relationship.
More recently, we have seen substantial Chinese investment and commitment in manufacturing and infrastructure. I also expect to see China importing more value-added products from SA in the future.
BOB WEKESA: It would help if some thought was directed towards more value addition and processing of South African minerals rather than exportation of raw minerals. This would help SA climb the value chain globally. Chinese investments in value addition need not to benefit SA alone.
The Chinese investments should gain a return on investment in the value addition. This also fits in with the industrialisation plans under FOCAC.
TEBOGO LEFIFI: SA can expect demand for commodities to remain low even as the market stabilises. China is trying to transform itself from investment spending toward consumer spending economy. This shift is seen in last year’s Chinese steel production, which impacted directly iron ore demand. The much needed shift by SA to shift from resource exporting to more value added, beneficiated resources may eventually happen, but not without growing pains.
There’s also the commitment China made to SA in December. Investment momentum may come from its SOEs and private sector that take the lead from state policy. Some companies started to sniff around for opportunities during the state visit. SA is eyeing China’s investments in key sectors such as automotive manufacturing.
SA will also host the first Africa-China Investment Forum, which is expected to encourage deal flows in the tune of $250bn — this will most likely be in nonextractive businesses.
EDDIE MBALO: The change is in the fact that for China to stimulate its own economic growth, it has to focus on growing its consumer market. The price slump is caused by the oversupply of these commodity products, in particular to China as its economy grew in the way it has been doing for the last few years.
It becomes natural therefore that China encourage its own population to spend more in order to grow the other sectors of the economy, like its retail market.
JEREMY STEVENS: The manner in which China connects to the rest of the world is also undergoing its own evolution. Investment as a share of GDP will fall in coming years. This simply means that more and more firms attached to China’s last three decades of growth will be looking to diversify into new markets, such as Africa.
The new phase of development means that many Chinese corporates that have built up enormous capacities and competitiveness in recent decades — particularly those connected to the old growth model in the Mainland, such as construction companies, real estate developers, engineering firms and so on — will increasingly look to externalise.
KENNY CHIU: In the mining sector, we experienced some slowdown in sub-Sahara Africa not only due to the slumping price of commodity but Chinese companies
(mainly Chinese state-owned enterprises) have acquired a number of significant mining companies in the past few years and much efforts have now been spent on developing those mines.
Having said the above, we are advising quite a number of Chinese private equity firms that are becoming very active in Africa. On other part of Africa, such as Democratic Republic of Congo, Tanzania, Ghana, Mali etc we are experiencing an increased flow of mining mergers and acquisition activities, this is especially true since the dying down of Ebola in West Africa.
LISA XIE: While commodities still dominate trade between China and SA in terms of value and volume, the fastest-growing imports to China since 2010 include vehicles, pharmaceutical products and agricultural products (cocoa, edible fruits, and textiles).
As China has sought more diversified manufacturing and services activities to drive growth, it no longer demands the high volumes of raw materials. At the same time, incomes and the demands of the Chinese consumers have become diversified as incomes have grown and consumers have become more sophisticated. Even product groups such as toys have grown by 39% and essential oils by 51% since 2010.
Q People’s Daily Online: The exchange rate of rand against the dollar has seen its ups and downs since 2015. Some changes are intense and sudden. What is your forecast on the rand for the next five years? Do you Asee the uncertainty remains?
RANDALL RHATEGAN: Short-term currency volatility is impossible to predict. Sometimes the volatility can be linked to specific events but other times the causes are not apparent. If one excludes short-term volatility and assumes that the rand is currently trading around fair value, I would expect it to depreciate marginally each year.
LISA XIE: We do not have an explicit long-term forecast, but we certainly think the worst is behind us. The rand has been undervalued for a number of years and is at the weakest levels we’ve seen historically.
While we are anticipating a downgrade, we believe it has been mostly priced into the weaker rand. The gradual improvement of the current account forms the basis of our expectations.
The wide deficit — which has essentially left the rand vulnerable to low commodity prices and has weighed on consumer confidence — has shown signs of improvement. It appears that export volumes are benefiting from the weaker rand and will continue to do so in the medium to long term.
BOB WEKESA: The turbulence in the rand is based on at least two factors: the global economic downturn and South African political fundamentals. These two factors remain uncertain for the foreseeable future. The corollary is that the rand will remain unsteady as long as the global situation remains turbulent and the South African political situation continues on the fractious path it is currently experiencing.
EDDIE MBALO: The slump in the rand value is caused by many factors in the global economy, but what we also know is that in the past few months, it was mainly caused by domestic uncertainties related to how the economy is managed and political uncertainty. We have seen some improvements earlier this month but it is very clear that unless certain steps are taken to assure investors of the stability of our political system, our current wows might be with us for a little longer.
BARNABY FLETCHER: The rand has always been a relatively volatile currency due to its free-floating and highly-traded nature. This volatility has been exacerbated over the past year as markets react to ongoing political and policy uncertainty.
Confidence in South African Finance Minister Pravin Gordhan — appointed in December 2015 —
China has been moving away from heavy industries to more service-led industries and a consumption-driven economy. There will be more opportunities for African companies in service industries and tech startups to enter the Chinese market. Chinese companies in heavy industrial plants will start seeking for investment opportunities in Africa
should help the rand start to recover some of its losses against the US dollar over the next few years, while greater political certainty after the election of Jacob Zuma’s successor as president of the ruling African National Congress (ANC) in 2017 will help ease volatility. KENNY CHIU: It is submitted that the rand will continued to be under pressure due to political uncertainties and structural economic constraints. Currency risk remains the biggest challenge faced by anyone conducting international business with SA.
Having said that it appears that China and SA are determined to address this concern as witness at the FOCAC Summit in December 2015 where Investec and the Export-Import Bank of China concluded a strategic cooperation agreement aimed at facilitating export finance, project finance and the internationalisation of the Chinese Renminbi.
Although information remains sketchy I anticipate that there will be some sort of hedging mechanism between yuan and rand which, if launched, will provide greater certainty for bilateral trade between China and SA.
TEBOGO LEFIFI: Some of the factors that put pressure on the rand were temporary — the worst drought in 20 year is expected to come to an end this quarter — and this could relieve pressure on rising prices and inflation.
As far as power shortages are concerned, SA can expect some relief in 2017 when the next unit of Medupi and the four units at Ingula pump, which are expected to start adding more than 1,000MW watts of electricity, will all come into operation by 2017.
The South African Reserve Bank (SARB) has committed to some key priorities, which include restoring electricity supply, managing SOEs and reducing strike days in SA. The SARB in March started acting by increasing rates to 7% to maintain price stability and curb inflationary pressure.
The rand’s fall in 2015 was led by three major factors — the slowdown in China’s economy, unexpected changes in finance minister appointments, and the severe drought faced by the SADC.
Technical analysis, which gathers expectations from currency analysts and traders, places the rand at R15.51/dollar by the end of 2016 and R18.95 by 2020. The outlook on the rand is less grim.
JEREMY STEVENS: The rand remains a commodity currency; we believe that commodity prices are unlikely to stage a substantial turn round anytime soon.
In fact, one of the key reasons why the Chair of the Board of Governors of the Federal Reserve System (Fed) Yellen indicated that the Fed should proceed with caution in hiking interest rates is because of growth concerns over China specifically.
If the Fed doesn’t hike because of growth concerns over China, then one has to assume that commodity prices will continue to struggle. As a result, apart from a valuation perspective, we do not believe that macroeconomic environment has changed substantially to justify a substantial shift in a currency and bond view over the medium term.
However, as pointed out, we do believe that the risk of a major currency blowout, due to especially the Fed surprising with more aggressive policy stance, has reduced. Whereas before we were looking for the rand to weaken to R16.50/R17 towards June, we now see less risk of that occurring.
Locally, event risk remains in place as we head into mid-year. These events include SA’s rating review by S&P (in early June), but also Moody’s that visited SA recently. However, from especially a bond market perspective, we believe that non-investment grade is largely priced in already. This view is reflected in our forecasts. Tactically, we believe that from a risk/return perspective there is little value in increasing rand exposure below 15.00 against the dollar as we head into June. Put differently, we believe that the rand will struggle to maintain a foothold below 15.00 into midyear.
Towards the end of this year we see the rand strengthening. Strength is likely to be driven predominantly by higher domestic interest rates and current account compression. Q People’s Daily Online: China and SA have highlighted their collaboration on Special Economic Zones (SEZ), ocean economy, capacity building, energy, infrastructure and human resources development in the 10-year bilateral plan. Which sector do you A think has made the most progress so far?
TEBOGO LEFIFI: The SA-China Bilateral agreement was signed in 2014; in 2015 the two presidents reviewed progress made in the commitments. Part of the agreement’s objective was to promote trade cooperation and create sustainable investment opportunities between the two countries. Additionally, 26 agreements were signed during FOCAC 2015, valued at $94bn. The biggest agreement signed was between FAW and the Industrial Development Bank at $12bn.
I think in addition to FAW’s five-year plan to develop at automotive industry in SA, this sector can be expected to grow really quickly in the next five years.
In terms of infrastructure, Transnet secured $2.5bn from China Development Bank and plans to spend R350bn over the next 10 years. China won a significant share of Transnet’s contracts in locomotive procurement. If China Rail companies remains competitive there will be opportunities opening up in related industries for Chinese manufacturers suppliers and funding.
SA will prioritise industries that contribute to industrialisation and job creation and that is where you can expect the fastest growth.
JEREMY STEVENS: In recent years China’s policy banks have provided at least $50bn in concessional lending to Africa and the government committed more at FOCAC in SA last year. Much of this funding has gone into building Africa’s ports, roads, railways and so on. Importantly much of this secures export markets for China’s higher value added products at a time when unit labour costs are rising in China.
More will follow: Africa’s population is growing rapidly, the people are becoming wealthier, and Africa is urbanising rapidly. Of course, this will require large investments in infrastructure and utilities — at a time when Chinese firms are eager to explore new avenues. STEVEN KUO: To date, the majority of major collaborative investments and initiatives announced by China and SA have focused on infrastructure development. This is an area in which Chinese companies have enjoyed success in Africa generally. While Chinese companies have not been able to enter the South African construction sector so easily because of stricter labour laws and dominant nature of local construction firms in the past, we think that they will steadily increase their share as the two countries forge closer ties in infrastructure and energy.
Nonetheless, as both countries seek to forge closer economic ties the range of sectors in which Chinese companies invest is likely to expand — for example around renewable energy.
KENNY CHIU: The World Bank already recognises the success of the SEZ initiatives in China and has recommended suitable SEZs as an effective instrument for African countries to achieve industrialisation.
With a little more time, dedication and effort, SEZs are potentially successful projects the government should invest in that could bring about unrivalled rewards for the country as a whole.
The concept of SEZs is still relatively new to SA. The approach that the government has adopted is to focus on the socioeconomic and development challenges unique to the region in which the specific SEZ is located. Although the implementation of the SEZ strategy appears to be flexible, it does bring about additional problems that will only be ironed out through time and experience.
The manufacturing sector stands to benefit the most with the promulgation Special Economic Zones Act, 2014. We provided a number of Chinese companies with the necessary information regarding industrial development zone, one of which is Chinese truck manufacturer FAW, whose assembly plant is already in production in Port Elizabeth.
LISA XIE: Chinese investors can bring their valuable experience, contribute, participate and collaborate in the development of SA’s SEZs. We have assisted and witnessed companies that have invested in SA succeed.
To assist Chinese investors with seamless financial solutions, we support Chinese companies from all aspects, making sure they understand SA and African countries’ banking rules and regulations, facilitating our client’s soft landing in these countries, bridging the cultural and languages barriers.
Sectors such as infrastructure, energy, and manufacturing have made the biggest progress so far.
RANDALL RHATEGAN: From my perspective the most noticeable progress appears to have been made in the financial, manufacturing, telecommunications and real estate sectors.
Having said that, I am also aware that a large number of Chinese enterprises have travelled to SA to explore and develop investment and trade opportunities in other sectors. The larger projects typically have long timelines, including intensive due diligence procedures, and hence progress may not be noticeable during the initial stages.
Q People’s Daily Online: Power shortages have affected the local economy in recent years. According to the 2030 Plan, SA is making great efforts in diversifying its energy resources, for example IPPs (Independent Power Producers), nuclear power etc. Some Chinese enterprises have also got involved. Do you think SA Awill further open its energy industry?
RANDALL RHATEGAN: More than anything else, the South African economy needs economic growth. Economic growth will not be possible in an environment where power supply is constrained or unreliable.
Significant investment is required for SA to expand its power generation capacity, and diversify its power sources. This will be difficult to achieve without private sector involvement. I expect SA will cautiously and selectively open its energy industry in the future.
LISA XIE: Absolutely — SA’s energy needs will grow as economic growth begins to pick up. At the moment, it is a constraint to growth and much investment is going into ramping up generation capacity.
There are areas that have been untapped and we believe that SA’s natural gas reserves could be a game changer in terms of our oil dependence.
There has also been a large focus on investment in renewable energy which we are very encouraged by. Government is very aware that it needs the private sector’s participation to make this a success and we expect further collaboration between government, the private sector and investment partners as the energy industry is inevitably liberalised.
KENNY CHIU: At the moment a number of Chinese companies have already been awarded a number of IPP projects, mainly in the wind and solar domains. SA has been doing very well with the renewable energy sector but more can be done to expand this exciting sector.
Eskom currently owns and operates the national transmission grid. A radical reform in Eskom is imminent and a key driver will be to split the generation, transmission and distribution of electricity.
The ageing transmission grid is in dire condition and with limited resources (both finance and technology) it would be very difficult for Eskom to effect an overhaul upgrade of its national grid. There should be an open and transparent access to the national transmission grid and to ensure transparency as regards transmission costs. Split and privatise or semi-privatise its grid.
Given our current fiscal constraint, it is a matter of time due to lack of maintenance our existing grid is no longer capable to transmit efficiently and continue to sustain greater electricity loss related to transmission and distribution.
China has extended experience in the construction, optimisation and maintenance of a smart grid. Chinese companies such as State Grid Corporation of China, which is currently employing more than 1.5-million people in China, could share some valuable experience and assistance to South African and African governments in managing the ever-increasing demand for electricity. BOB WEKESA: In the long term, I see SA opening up the energy sector to external investments. In the short term, political factors, the uncertain policy and regulatory environment, budgetary constraints and worries by external investors over returns on investment might prove to be challenges.
BARNABY FLETCHER: While power shortages have eased since mid-2015, SA still operates on a very thin reserve margin and is therefore keen to maintain investment into electricity generation.
One of the key changes in recent years has been the increasing involvement of IPPs in both the renewable and conventional energy sectors, and opportunities for IPPs are likely to expand further.
Nonetheless, plans to fully liberalise the sector have consistently been rejected by the government in the face of opposition from the ANC’s left-wing allies and state-owned utility Eskom will remain the dominant player for the foreseeable future.
EDDIE MBALO: SA is guided by the National Development Plan (NDP), which has the support of all main role players in the political and economic spheres and investment in the energy sector and in infrastructure development generally is central to the NDP.
Q People’s Daily Online: A large number of businesses in China are taking advantage of the internet and have been developing rapidly. Do you see such a A trend in SA in the near future?
EDDIE MBALO: This is a worldwide phenomenon and any society that seeks to keep its people informed but also conduct business effectively and efficiently has to take advantage of the internet. SA — and the rest of the continent — has to ensure that access to broadband is affordable to bring the rest of its people on board.
BOB WEKESA: Yes — but with the right policies, plans and implementation.
RANDALL RHATEGAN: Internet penetration in SA, although better than in most African countries, can still be improved. Affordability appears to be an inhibitor in SA, but I expect that prices will reduce as competition increases. This will lead to more companies taking advantage of the benefits of the internet.
LISA XIE: Definitely, broadband roll-out and take up has been very slow in SA. Data has been prohibitively expensive for most South Africans, but is gradually becoming cheaper.
We are also seeing far more aggressive roll-out of fibre to the home, which we believe will unlock tremendous value in several related industries.
We are playing catch-up, but government and the provinces are trying to roll out access to all South Africans as part of the NDP.
China has made significant progress in the past 20 years. The internet penetration rate between rural and urban areas has been narrowed due to the popular and wide use of electronic devices such as cellphones, smartphones and tablets.
It’s well known that China developed the largest ecommence market in the world. Although e-commence is still in its infancy stage in SA compared to the Chinese market, more and more Chinese companies have spotted potential growth opportunities in SA.
We have assisted some Chinese companies to set up e-commerce operations, as well as logistics and courier services management.
KENNY CHIU: Rapid urbanisation across Africa and a growing middle class are driving demand for infrastructure development and consumer spending. The ecommerce sector is further boosted by a significant uptake of mobile phone in Africa.
The Chinese co-invested Kilimall, Kenya’s largest online shopping portal, is changing the way consumers shop in Kenya, although Kilimall is not operating in SA at the moment but I foresee that competition in local online shopping market will become more robust, creating new consumer behaviour and ancillary industry such as logistics and financial services.
STEVEN KUO: With the third largest number of internet users in sub-Saharan Africa, SA definitely offers potential for internet-based businesses. However, these opportunities come with challenges.
Cyber-attacks are a particular concern in SA due to a number of factors, including relatively low levels of cyber security spending, an inadequate government response to cyber threats, and the popularity of pirated software in the country.
The concept of SEZs is relatively new to SA. The approach government has adopted is to focus on the socioeconomic and development challenges unique to the region in which the SEZ is located. It does brings about additional problems that will only be ironed out through time and experience Chinese companies such as State Grid Corporation of China, which currently employs more than 1.5-million people in China, could share some valuable experience and assistance to South African and African governments in managing the everincreasing demand for electricity