Broad international investor participation in the Imara Group’s second annual Zimbabwe investment conference confirms the growing pull of Africa’s ‘frontier markets’, say the upbeat organisers.
Leading international fund managers have confirmed their attendance at the event in Harare on June 7 and 8, says Sean Gammon, MD of Harare-based Imara Capital Zimbabwe.
In a move which is likely to provide further re-assurance to the African resource sector, global consulting firm Stratfor is reporting that Zimbabwe has dropped its highly contentious Indigenization Law.
Stratfor reports that a spokesman for Zimbabwean Prime Minister Morgan Tsvangirai said April 13 that the Indigenization and Empowerment Act has been rendered null and void following a cabinet meeting.
This is potentially a critical development for Zimbabwe, South Africa and the African continent as a whole following economic collapse in Zimbabwe. This has had a significant knock-on effect to neighbouring countries which have been forced to absorb refugees from this region and has deterred foreign investment as government officials have attempted to enforce a law which threatened to force all foreign companies in Zimbabwe with assets worth more than $500,000 to sell a majority ownership stake to black Zimbabweans by 2015.
In December 2009, geo-political analysts had suggested to Ferronews.com that president Mugabe’s grip on power in Zimbabwe was coming to an end with the more aggressive expecting him to relinquish power before the end of 2010.
With the Indigenization Law being a corner-stone of president Mugabe’s rein in power, this would appear to put these predictions on target despite some bickering between the Tsvangarai and Mugabe power-sharing agreement.
“2009 changes in the China supply chain” was the theme of the SCLG workshop held recently in Houghton. The delegates wanted to learn more about buying from suppliers in China, and about handling competition from there, both at the strategic level, and also in practical operational terms (presented in case studies by speakers from Cadac and Hollard Insurance).
Dr Martyn Davies of Frontier Advisory has a wealth of experience in trade relations between China and the whole continent of Africa. Dispelling many of the clichéd stereotypes we are usually fed, his first point was that the global cost of labour is set in China, not by politicians in any country that competes with China, nor can they control trade. Low labour costs in China are accompanied by work force discipline, and also intense domestic competition. These all build up to economies of scale which enable a dominant position around the globe. Meanwhile, SA manufacturers have to live with obstacles such as a perpetually volatile currency which obstructs planning.
China is now seizing the opportunity to use their financial reserves for counter-cyclical investments, not only in the obvious area of natural resources, but even in service industries such as the recently announced Fantawild Adventure theme park in Johannesburg, at a cost of $250 million and aimed at attracting 2 million visitors a year by 2012. Shades of the global spread of American culture via Disney.
At the more prosaic level of procurement from China, one example has been Cadac, who have evolved from being a fairly typical SA manufacturing company struggling with a cost price higher than their competitors’ selling price, into a trading company exploiting their brand leadership by specialising in logistics, manufacturing outsourcing, and R&D.
It would not often occur to us that a major part of an insurance company’s business is controlling the cost of settling claims such as windscreens, which is why it made sense for Hollard to deal with a major plant in China producing 10% of the global market- a reminder of the spectrum of low- to high-tech manufacturing in that country, from toys to PC’s and other electronics products.
There are of course plenty of potential gin traps for companies interested in following in their footsteps. A hands-off approach is definitely not to be recommended, unless expensive lessons are covered in your budget. Supply chain architecture needs to cover the whole gamut of expertise from quality management, manufacturing engineering and tool investment, through procurement contracts and pricing, to logistics (including transport within China). The cash-to-cash cycle requires focus, and constant new product development helps in the intellectual property battle.
Many of our economics and manufacturing operations textbooks mention only the days when Japan and Germany led the way, but a gradual shift in favour of China has turned into a loud crunching sound in the last 2 years. We talk a lot about “agility”, but do we act more like a scared tortoise, or perhaps a Canute?
Footnote
Dr Martyn Davies was the organiser of the recent launch of the offices of the China-Africa Development Fund in Johannesburg, and is CEO of Frontier Advisory, the leading research and strategy firm specializing in emerging markets. He has lived, worked and studied in Asia for 14 years and is currently writing a book on China’s commercial engagement of Africa. He has been a regular commentator in local and international media, from the BBC to Al-Jezeera to Davos.
The workshop leader was Craig Voortman, author, consultant and manager at the department of transportation and SCM at the University of Johannesburg, who has just returned from a study trip to China
SCLG is a non-profit organisation registered in South Africa, affiliated to the Supply Chain & Logistics Group of Dubai. See www.sclgme.org and for further details contact Dave Tootill on 083 453 8318.
The new IMD World Competitiveness Yearbook rankings have placed South Africa’s overall competitiveness from a ranking of 53 in 2008 to a marked rise in position to 48 in 2009.The global competitiveness survey
released by Productivity SA ranks 57 countries in various areas of competitiveness.
SA improved dramatically in business efficiency from 38 last year to 30 this year. Infrastructure improved from 55 in 2008 to 54 in 2009 while economic efficiency deteriorated from 55 in 2008 to 56 in 2009.
In economic performance SA ranked high for its terms of trade index and cost of living index but low for its high unemployment rate especially for youth unemployment and long term unemployment.
In the competitiveness ranking area of government efficiency SA scored high for effective personal income tax rates and employee’s social security contribution rate but ranked low in the areas of exchange rate
stability and equal opportunity legislation that encourages economic development.
Despite SA improving its ranking this year it is clear many challenges remain, especially in light of the global recession.
According to Sello Mosai, Executive Manager of Knowledge Management and Research at Productivity SA, the biggest challenges will be protecting the poor and building capacity for long term growth by accelerating investment spending.
In addition he said the country needs to focus on sustaining employment growth and expanding training opportunities, addressing sectorial barriers to growth and investment and maintaining a sustainable debt
level.
Internationally trading companies in manufacturing and services are key growth drivers he said, consequently it is vital to ensure that high productivity levels and growth are consistently attained and
productivity initiatives at all levels are intensified.
Mosai also said more initiatives are required to enhance the skills and knowledge of the SA workforce through education and training and intensify R&D by government research institutions, universities and
industries in order to develop new products and services for the local and global market.
At the company level there is a pressing need to increase the benchmarking of activities and best practices sharing and implement productivity and quality systems.
Mosai said this productivity drive needs to be supported with measures to increase productivity in the public sector. These include interventions to remedy constraints that negatively affect local
economic growth, like infrastructure bottlenecks, a shortage of skilled labour, lack of ICT infrastructure, barriers to entry and limited new business investment.