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International Resources: Global Market Profile: South Africa |
Maize |
6 923 |
Wheat |
2 172 |
Sugar cane |
20 275 |
Grain sorghum |
110 |
Ground-nuts |
84 |
Sunflower seed |
541 |
Deciduous and other soft fruit |
1 536 |
Citrus fruit |
1 945 |
Subtropical fruit |
648 |
Vegetables |
2 151 |
Potatoes |
1 854 |
Preliminary source: Directorate Agricultural Statistics, Department of Agriculture
Exports
2002 |
2003 |
2004 |
2005 |
2006 |
|
Total South African products |
314 927 |
273 127 |
292 079 |
327 125 |
393 047 |
Total agricultural products (R’000 000) |
25 460 |
22 794 |
22 074 |
25 458 |
26 978 |
Agriculture as % of total exports |
8,1 |
8,3 |
7,6 |
7,8 |
6,9 |
Source: Directorate: Agricultural Statistics, Department of Agriculture
Fresh Flower Market
South Africa is the leading exporter of protea cut-flowers, which account for more than half of the proteas sold on the world market. There is a hearty global demand for South African floriculture. Currently Germany, the United Kingdom, Japan and the Netherlands represent the greatest market opportunities.
South Africa’s indigenous flowers—gladioli, nerine, freesias and gerberas—have been researched in Europe for many years and have become major crops worldwide. South African proteas and so-called Cape greens (fynbos) are sold in Europe and are mostly concentrated in the Western Cape.
Consumer Trends
South African food retailers serve a variety of consumers. Supermarkets provide most of the products and services such as processed foods, packaged meats, and fancy produce. South Africans are also able to purchase organic products and vegetables, which are fast growing areas of the retail food market (led by organic baby food). At the other end, consumers are also well-served by a thriving informal sector. Spazas are independent grocers that are commonly found in townships and generally specialize in staple foods like cornmeal, rice, cooking oils, and meats.
Despite the variety of options available to South African consumers, price sensitivity governs their behavior. A 2002 survey found that 47.8% based their decisions on price and 16.9% bought store brand (generic brand) items because they were good value for money. Only 13.4% mentioned quality as a motivator.
Although many South Africans select products based on price, consumers in townships often display paradoxical demands and characteristics. For example, spazas and other informal shops tend to only supply leading brand items because their customers demonstrate strong brand loyalty. Adding to this trend is the fact that the black population’s buying power is increasing. At the same time, characteristics that may help a product succeed in township markets are less expensive and single-service package sizes and environment-stable products that do not require refrigeration.
Entering the South African Market
It may be very useful for companies to make a contract with a South African agent or partner who would be depended upon to market the product, hold stock, and realize purchasing transactions.
Companies interested in discovering more about South Africa’s mail order sector may contact the South African Direct Marketing Association.
Joint Venture/Licensing: Exchange control regulations maintain that the South African Reserve Bank (SARB) must approve the payment of royalties. When a licensing agreement does not involve manufacturing, the request for exchange control approval is sent directly to SARB. For a company entering into a licensing agreement with a local company that would manufacture a product in South Africa, the South African licensee must submit an application to the industrial Development Branch of the Department of Trade and Industry. The application should include a draft licensing agreement and a questionnaire (Form MP 337). The Department of Trade and Industry will then make a recommendation to the SARB. Additional information on licensing regulations can be obtained from the Directorate of Technology Promotion.
Steps in Establishing an Office: Foreign companies wishing to create a subsidiary in South Africa must register in accordance with the Companies Act of 1973. The Act regulates the formation, conduct of affairs, and liquidation of companies. The Act does not distinguish between locally owned or foreign owned companies, and companies may be either public or private. For more information, see the Department of Trade and Industry website at www.dti.gov.za.
Generally, business hours are weekdays from 8:00 a.m. to 1:00 p.m. and 2:00 p.m. to 4:30 p.m. Most offices observe a five-day week, but shops are generally open from 8:30 a.m. to 5:30 p.m. weekdays and from 8:30 a.m. to 1:00 p.m. on Saturdays. Business transactions in South Africa are commonly carried out on open terms with payments being made within 45 to 50 days after bill of lading. When working with new clients, irrevocable letters of credit are advisable. Cash against documents arrangements are also used, although there are some risks in these arrangements that make letters of credit a safer alternative for the exporter.
Trade Agreements
South Africa widely engages in trade with countries all over the world. The following links provide valuable information about trading partners in each of the major regions with which South Africa does business: (NOTE links at end of document)
- Europe (European Union, European Free Trade Area)
- The Americas (North America, Latin America)
- Asia (Southeast Asia and Australasia, Northeast Asia, South Asia)
South Africa belongs to of the South African Customs Union (SACU) and therefore has a free trade agreement with its members (Botswana, Lesotho, Namibia, and Swaziland). The Southern African Development Community (SADC) Free Trade Agreement should also allow the free exchange of goods among the 14 countries of the region when it comes into full effect.
Trade Negotiation Updates, South Africa government:
Document: |
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Summary: |
Participation of Directorate Plant Health on the 5th AGOA Forum Washington DC, USA 6-7 June 2006. |
Document: |
SA agricultural exports and the USA AGOA: the problems with TRQs - 2004 |
Summary: |
Update on trade negotiations |
Document: |
SA_EU Trade Development and Cooperation Agreement (TDCA) - 2006. |
Summary: |
Update on trade negotiations. |
Document: |
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Summary: |
Update on trade negotiations. |
Document: |
Food Standards and Regulations
Food standards are set by the Directorate of Plant Health & Quality with the National Department of Agriculture responsible for setting standards for certain agricultural and agricultural-related products.
Food labeling is determined by the Foodstuff, Cosmetics & Disinfectants Act of 1972. Labels must include:
a) the name of the product
b) name and address of the manufacturer, packer, seller, importer, or person on whose behalf the foodstuff is pre-packed
c) a list of ingredients in descending order (of mass) under heading “ingredients”
d) a written label in at least one of the official languages of South Africa (English is one such language)
e) instructions for special storage conditions, when applicable
f) the product’s country of origin.
Check out the 2006 GAIN Report for import regulations and standards.
Business Protocol
South Africa is one of the most multicultural countries in the world. In urban areas many different ethnic groups make up the population. There are major differences in communication styles depending upon the individual's cultural heritage. In addition to the indigenous black peoples of South Africa, colonialism and immigration have brought in white Europeans, Indians, Indo-Malays, Chinese and many more. As such it is difficult to generalize at all on South African etiquettes and culture due to the diversity.
South Africa has 11 official languages. All documentation is presently printed in English and Afrikaans. English is more frequently used commercially and most companies in South Africa are able to correspond in either language. A majority of the white population speaks both languages, as does a considerable proportion of the non-white population. There is some language sensitivity in South Africa, particularly among the Afrikaner population; consequently, many firms print much of their literature, including annual statements, in both languages. You should try to do the same with your literature and proposals. The effort will be appreciated.
- Upon meeting a South African, a hand shake and a smile is appropriate. Leave time for small talk.
- Dress is more informal, but for a first meeting it is better to be conservative. Men should wear dark suits, and women should dress in elegant business suits or a conservative dress.
- It is not required to have a long-standing relationship with business partners, but if you are a new company unknown to South Africa, a formal introduction will go a long way. Personal relationships are important, and so from the first meeting you should try to create a good rapport. This will help to prove you are trustworthy.
- Most South Africans prefer face-to-face meetings to more impersonal communication mediums such as e-mail, letter, or telephone.
- South Africans want to maintain harmonious working relationships, so they avoid confrontations. Don’t be surprised when your counterpart uses metaphors and sports analogies to demonstrate a point.
- Networking is a crucial part of the South African business culture.
- Always make appointments, even before a business call. Do so as far in advance as possible, because it will better your chances of meeting with higher levels of management.
- South Africans are very punctual, and South African businesspeople make every effort to be on time for appointments.
- Business cards are usually simple and include only the basic information, such as company logo, name, business title, address, telephone number, and fax number.
- Business meetings can be held over lunch or dinner at a good restaurant.
- You must have developed mutual trust before negotiations can begin. You should start with realistic figures, because South Africans do not like to haggle over prices.
- When negotiating, do not interrupt a South African.
- Try to reach a consensus in negotiating; your counterpart prefers win-win situations.
- Decisions are often made at the highest levels of a company after conferring with subordinates. The process may be slow.
- Include delivery dates in all contracts, because deadlines are seen as fluid, not as firm commitments.
- When invited to a South African’s home it will normally be a barbecue, called a braaivleis (“roasted meat” in Afrikaans) or braai. Be on time for the occasion and ask if you need to bring anything. Dress is normally casual, but you should ask to make sure. Offer to help your host with the meal preparation or clean-up.
- Gift giving is not a common business practice. However, if being entertained at a South African’s home, it is common to bring a gift. Take time in wrapping your gift. Good gifts to bring to the hostess are flowers, good quality chocolates, or a bottle of good South African wine. When giving a gift, present it with either both hands or the right hand. Never give a gift with the left hand. Gifts are opened upon receiving.
- Women in South Africa have not achieved senior levels in business. If sending a female representative, be prepared for the possibility of being tested and facing condescending behavior; women need to prove themselves worthy in the South African business world.
- Avoid scheduling meetings from mid-December to mid-January and the two weeks surrounding Easter, because this is when most South Africans go on vacation.
- After you meet with your South African counterpart, send a follow up letter summarizing what was decided at the meeting and the next steps.
Export Business Reminders
- Build at least a minimum team within your company to help on the South African market.
- Use metric terms.
- The date is written: Month/Day/Year
- Ensure that all sales documentation is correct.
- Use letters of credit to reduce risk.
- Hedge export values with your bank if you are concerned about exchange rate risk.
- Set up wire transfers for payments.
Related Links and Government Resources
- Currency - the currency of South Africa is the Rand, which is divided into 100 cents. Use the free currency converter to compare to dollars, Great British Pounds, etc.
- Weather - visit Yahoo!'s up to date Weather for South Africa.
- News - check out all the latest Google news on South Africa.
- Intercultural Know-how - use the Intercultural Business Communication tool for tips.
- Dialing Code - the international dialing code is +27.
- Time -South Africa is +2 hours GMT. Find out the current time.
- History - read about the long and rich history of South Africa.
Government Resources
- South African Department of Agriculture: http://www.agric.za/
- South African government’s Agriculture and Land Affairs page, which contains a wealth of information about everything agriculture-related.
- http://www.info.gov.za/aboutsa/agricland.htm
- Foreign Embassies and Consulates in South Africa: http://www.embassiesabroad.com/embassies-in/SouthAfrica
- Foreign Embassies and Consulates, list 2: http://www.saet.co.za/foreignembassy.aspx
- U.S. Embassy and Consulates in South Africa: http://pretoria.usembassy.gov/
List of international organizations represented in South Africa. http://www.dfa.gov.za/foreign/forrep/intorg.htm
The three agencies tasked with developing and enforcing food safety standards in South Africa are:
- The Department of Health (DOH)--Directorate of Food Control (DFC)
- The Department of Agriculture (DOA)--The Sub directorate Agric Product Quality Assurance (SAPQA) and the Directorate of Plant Health and Quality (PHQ). http://www.nda.agric.za/docs/npposa/default.htm
- South African Bureau of Standards’ (SABS)--Directorate of Regulatory Affairs and Consumer Protection.
Background Notes on South Africa.
The official links page of the National Department of Agriculture, the Provincial Departments of Agriculture and the Agricultural Research Council (ARC) in South Africa. http://www.agric.za/