As the ‘S’ in ‘BRICS’, South Africa has received some major attention as a top emerging market.  While the populous, diverse nation certainly offers opportunities for would-be importers and exporters, it also presents its fair share of challenges.

1. Where are the best opportunities?

South Africa boasts a total population of 54,956,900 people and counting, making it the 36^th largest export economy in the world. Trade is growing and in the past five years both imports and exports have increased at promising rates. In 2015, South Africa imported US$85.7 billion worth of goods and exported US$81.5 billion. To date, its top imports include petroleum products, cars, computers and gold.

The World Economic Forum’s Global Competitive Index lifted South Africa two rankings in its 2016 report from 49^th to 47^th overall and improved its ranking in 10 out of the 12 pillars measured, making it that much more enticing for potential investors. In fact, South Africa has the most competitive economy of all nations on the African continent, often referred to as the “Powerhouse of Africa”.

This rise in ranking marks the best outcome for the country in five years, largely thanks to improvements in the competitiveness of its markets and business and labour relationships. In the past year South Africa has also made moderate improvements to its quality of education.

The African Growth and Development Act (AGOA), signed in 2000, is another boon to prospective exporters from the United States. The trade agreement eliminates a significant portion of tariffs on almost all marketable goods produced in AGOA member countries that enter the U.S.

Businesses looking to enter the South African market will find opportunities in a wide range of sectors, including agri-food, environmental technologies (power), mining, communications technology, and transit infrastructure.

2. Be prepared for a lengthy and costly set-up

The business environment in Sub-Saharan Africa is known for its lengthy and costly start-up procedures and, unfortunately, South Africa is no exception. That being said, the cost of starting a business in South Africa settles in at about 0.3% of income per capita, compared to up to 60% in other parts of the continent.

The country has made some big improvements in smoothing import and export procedures, but one can expect it to take approximately 43 days to start a business, involving seven different procedures. Compare that to the other BRICS nations: Brazil (101 days), India (26 days), China (28 days) and Russia (11 days).

Infrastructure is also a concern. Both transport and electricity infrastructure development has stalled and numerous power disruptions have occurred over the past year. Political uncertainty also increased over the course of 2015 and into 2016 with a rise in security concerns, a drop in overall transparency, and some loss of trust in the nation’s politicians.

3. Successful business relationships are based on personal relationships and commitment

Consider doing business in South Africa as a long-term investment. The business culture in the region favours personal relationships and business owners there are more likely to do business with companies that have a local presence. Seeking an introduction via a mutual contact will yield much better results than cold calls, and keep in mind that the first meeting will be more of a ‘get-to-know-you’ exchange to establish trust and a rapport before business can proceed. To get connected with local business people you can contact one of the many business networking organizations, such as the South African Chamber of Commerce and Industry.

Though South Africans tend to make decisions based on facts and figures, an overly aggressive hard-sell technique will often be unsuccessful. Business is typically done in a more informal setting but businesspeople take a more direct approach in communication.

South African business culture isn’t typically tied to hard and fast deadlines, and businesspeople like to take their time to come to decisions. The upside of this for those doing business with South Africans is that they also prefer for both parties to come out of negotiations with some gain, and will work to reach a consensus.

South Africa is a country of long-standing traditions which are highly valued. The country is also known for its personable people, and those who take the time to establish a rapport based on mutual understanding and respect will be rewarded.

4. Forget about a one-size fits all approach

South Africa is known for its cultural, ethnic, religious and linguistic diversity. There are 11 national languages and many others are spoken as well. You will also find diversity in the region’s sociopolitical framework, levels of education, rural and urban populations, and class structure.

When applying business strategy to South African markets, it simply doesn’t make sense to apply a blanket one-size-fits-all approach. Companies looking to do business in the region should take the time to do careful research and study each cultural subset to determine which segment it makes the most sense to target.

It’s crucial that any business entering South Africa take the time to understand the unique needs of each group as influenced by their culture.

5. South Africa is a nation under construction

South Africa depends on its ability to move goods into, across, and out of the country to support its economy. A significant effort has been made to make that easier in the past decade, including a $5 billion investment in transportation ahead of hosting the 2010 FIFA World Cup. However, those in the import export business bemoan the lack of investment in freight and logistics infrastructure, including ports, railways and pipelines, which are often subject to delays.

South Africa is leading its continent in transportation infrastructure, but a pivot away from major investments in this area have driven up usage costs and created transport slowdowns and bottlenecks over the past few years.  Fortunately, due to strong public pressure, the government has renewed its focus on infrastructure, introducing projects that will expand container capacity among other transport improvements. South Africa is once again under construction.

The country is also working to address socio-economic inequalities with programs such as the Black Economic Empowerment (BEE) project, issuing guidelines for investors in certain sectors, including companies bidding on government procurement projects.

The post Top 5 things you need to know to export your product to South Africa appeared first on Trade Ready.

Ann Archer, CITP|FIBP, is an International Logistics Specialist for General Dynamics Land Systems – Canada (GDLS-C), a company based out of London, ON which manufactures light armoured vehicles (LAVs) and provides full fleet life cycle support including upgrades, repair services and training. Its global customers are governments and armed forces around the world.

With twenty-three years of experience in international trade, Ann is capable of taking on even the largest projects, ensuring that the goods she is responsible for will reach their destination without issue anywhere in the world.

From small-town Ontario to global markets

Ann’s global trade career began in 1992, working as an Export Sales and Marketing Manager for Cold Springs Farm Ltd. in Thamesford, ON. In the role, she was responsible for the international exports of turkey commodities.

It required close coordination with both the Canadian Turkey Marketing Board, to ensure all production quotas were met at a national level, and the Canadian Food Inspection Agency (CFIA), to ensure all documentation and quality inspection met regulations.

It was during Ann’s years in this role that she first encountered FITT, and decided to take FITT courses.

She says that taking the courses made her feel confident that her skills matched up against the highest competency standards for international trade professionals.

In 2006, she earned her elite CITP®|FIBP® designation, and feels that having the designation has had an enormous impact on her career, particularly in proving her expertise in the industry.

Being a CITP®|FIBP® has numerous positive influences. For example, it is a symbol of competency and credibility when working with other trade partners.

She also says that completing FITT courses has similarly proved her international trade knowledge and commitment to it as a career.

“Education teaches discipline, provides self-esteem. Education tells your employers that you can work hard to accomplish things. Employers look for people who have stuck with their education. They want an employee who they know is going to be able to discipline themselves to come in to work, set goals and achieve them.”

Meeting new challenges in a new industry

After spending fifteen years with Cold Springs, Ann decided to move to GDLS to accept her current role in 2007.

As an International Logistics Specialist, Ann is responsible to ensure both import and exports of material and vehicles reach their international destinations compliantly, meeting cost, schedule and performance.

One step for Ann is dealing with ITAR (International Trade and Arms Regulations) compliance, TDG (Transportation of Dangerous Goods), Canadian import-export controls regulated by  Foreign Affairs and International Trade Canada, and ensuring all regulations set out by the Canadian Border Security Agency  and U.S. Customs and Border Protection are met.

Along with compliance documents, Ann has also had to execute and support letters of credit for foreign government agencies.

Another of her responsibilities is negotiating contract air charters to take vehicles or related equipment like turrets to countries like Switzerland, South Africa or Saudi Arabia for demonstrations or exhibitions to government officials.

Ann frequently uses different temporary export methods to send vehicles to trade shows in countries like the UAE, France, Australia and India, as well as for demonstrations for government officials in Europe, Africa, South America and the Middle East.

She must balance the pros and cons of air, ocean and ground transportation to find the best single or multi-modal method of sending the goods to their intended destination, while working with the necessary freight forwarders and all levels of government officials needed to approve the exports.

Speaking the languages of her trade

Ann says that one of the challenges of her position is remembering not only the terms and acronyms of international trade, but also those of the customer.

“We ship a lot of unique material and use various acronyms and often make reference to military terms.  One day I received an email that simply stated that according to Hoyle, this is how it should work.

“Puzzled, I read it a couple of times, wondering to myself if Hoyle might be a reference to a customer or Army representative. Finally I turned to my coworker who was copied on the same email and asked who or what is a Hoyle? Their response was “You’re asking me? I am from Europe.”

“My supervisor had overheard the question and stated, “Isn’t that an old rule book on card games?” Sure enough, it was.”

It turned out that the phrase “according to Hoyle” now means the speaker is asserting their authority on the subject.

The moral of the story is if you want people to understand you the first time, please be clear and concise and don’t use slang or acronyms.

If you do need to use acronyms, spell them out the first time you use them.  Remember we work in a diverse environment, with different age groups, backgrounds and ethnicities.”

The right people create the right results

Since Ann started her current role, she has managed to achieve major goals.

Ann was able to synchronize the company’s scheduling production with their ocean transportation and end user delivery requirements, saving the company over $6 million.

She is also proud of her ability to play a role in the company’s larger objectives, such as being awarded contracts with the Colombian Government, the Peruvian Government, and Saudi Arabia.

For her efforts, Ann has won several major company awards, being on the team receiving the GDLS Global Supply Chain Management Council Excellence Award twice, as well as “several Spontaneous Recognition awards for cost avoidance, outstanding efforts and going above and beyond expectations” in her role.

She credits the quality of professionals in the company for her personal and team success.

“In today’s global environment, competing against or working with several strategic partners, under a strongly regulated environment, companies cannot afford to be complacent. The strength is in the people.

Having a well-educated, diversified group of people, I believe, has helped carry us forward, and remain strong and ahead of our competition.

After completing her FITT courses and having her CITP®|FIBP® designation for over eight years, there is no doubt that Ann has the education and expertise necessary to continue to excel in global trade, and to help her company stay ahead in international markets.

The post Ann Archer, CITP|FIBP – International Logistics Specialist appeared first on Trade Ready.

In fact, there are a number of exciting, high-potential options available, both for entry and for growth.

But first, it’s important to separate facts from myth; for global business in general, and international markets expansion in particular. Here are the top three myths about going global that people seem to believe:

1. “We should start in a foreign market that speaks the same language as us.”

This logical comment came from a U.S. client of ours with a new product intended for Emerging Markets.

He was referring to his plan to use the United Kingdom as a global launching pad, largely because it has been designated as a pre-dominantly English-speaking country (like the U.S.).

However, at that time, the American dollar – British pound exchange rate was more than 2:1.

This meant that any launch event, as well as general operations there, would have cost more than twice as much as the same efforts here in the United States, and many times more than what it would cost in his target markets.

Canada might also have been a strong candidate, with the English correlation, and (usually) a better exchange rate.

Ideally, however, a pilot or launch would be conducted in an Emerging Market country in order to replicate the conditions anticipated in the primary market(s), and happily reduce costs.

2. “Africa [North America, etc.] is a largely populated market. With all those people, we’ll make a killing in sales.”

One of the most compelling and important aspects of international and domestic marketing strategy is segmentation. It makes otherwise small markets “big” and sometimes renders big markets small.

When segmenting any potential new market, it is important to be data-driven, by performing a series of research exercises and analyses.

Doing so will yield target markets, segments and niches that, when penetrated with incisive strategies and tactics, yield a high ROI (return on investment) and build a a sustainable revenue base over time.

We see this in smaller business-to-business clients who tend towards business-to-consumer thinking.

In large markets, access and purchasing power are also key considerations, in addition to adroit segmentation.

South African major supermarket chain Shoprite leveraged these critical aspects when, in the 1990s, it began offering funeral coverage services in addition to standard goods, and bus and air tickets.

Although it suggests the maxim, “shop till you drop!” could have a whole new meaning, it was a logical strategy for reaching a mass market with transportation and financial challenges, via partnerships with insurance providers.

Shoprite has been voted the #1 Supermarket in South Africa, according to their corporate site, since 2006.

3. “A success in one market, a success in all markets.”

An overseas client of ours, who had been wildly successful in their domestic market with a technology device, expected that when they opened shop in Silicon Valley, the local red carpet would be rolled out for them.

Unfortunately, while they had researched their own market with its culturally driven norms and constraints quite well, they just assumed their widget would be the darling of “Tech Worldwide HQ”. Thus, they arrived uninformed and ill-prepared.

The unique selling proposition that set their home market ablaze overseas was not only irrelevant here; it was deemed deplorable.

Worse still, they arrived with virtually no marketing budget to compete with U.S. startups, in the same space and on their home turf. We continue to wish them well.

Worth the prep

International markets development is not only possible; it is ultimately essential for most businesses who want to lead markets, securing sustainable brands and revenue streams.

That said, success will be awarded only to those who do their homework in depth; formulate and execute exceptionally well on incremental, highly strategic plans; and remain watchful and agile in order to course-correct and/or build upon well-considered metrics, pilots and plans.

So, for those willing to put in the effort, Global Business success awaits…let’s go!

What other popular myths are out there about going global? 

The post The top 3 myths about going global appeared first on Trade Ready.

South Africa’s inclusion in the U.S. African Growth and Opportunity Act (AGOA) trade agreement is less than certain after a protracted battle between South African and American poultry associations over South Africa’s imposition of duties on U.S. chicken.

The squabble over chicken has led some U.S. lawmakers to suggest that South Africa be placed on a three-year probationary period, with reviews every six months, once the AGOA is renewed for a 10-year term.

Why the AGOA is important for the South African economy

The U.S. is due to re-authorize the AGOA, which opens export opportunities to the US for a host of Sub-Saharan African nations, before Sept. 30, 2015. The program was first authorized in 2000 for a fifteen-year term.

Though the amount of imports from AGOA countries totals around 1% of U.S. exports, manufactured goods from South Africa have accounted for the bulk of these goods. The U.S. is South Africa’s third-largest trading partner, after China and the European Union, accounting for 6.8% of its total trade.

South African exports to the States have been particularly focused on vehicles, but also include minerals – such as diamonds, chemical products, and machinery. In 2014, South Africa exported US$8.3 million in goods to the U.S.

Though U.S. economic benefits from the program are minimal, it has served to improve relations with Sub-Saharan countries across the board.

What has chicken got to do with it?

The poultry standoff began when the U.S. expressed outrage over the South African government imposing anti-dumping penalties on U.S. frozen chicken part imports in 2000. ‘Dumping’ refers to foreign companies or countries exporting goods at a price lower than locally-produced goods.

The poultry industry is critically important to the South African economy, one South African trade official said, as it has the “propensity to create jobs” and creates “empowerment” in the workforce, as part of an effort to reverse decades of apartheid-enforced segregation and inequality.

The South African Poultry Association (SAPA) has been adamant about the need to protect South African poultry producers in any trade deal with the U.S.

The U.S. refutes the charge that is undercutting local industries by exporting chicken to South Africa, pointing to a vast increase in demand for poultry.

An April 1 statement from the U.S. Department of Agriculture claims that South African consumption of chicken products has increased substantially; according to this document, South Africa imported 70,000 tons of chicken in 2000, yet imported more than 400,000 tons in 2014. The report states,

The reality is that the South African domestic industry hasn’t been able to keep up with increases in consumer demand, and foreign imports are already an integral part of the market

Could there be a resolution on the horizon?

After several weeks of both sides trading barbs, the SAPA stated on April 21 that it is willing to make concessions to ensure South Africa is included in the renewed AGOA treaty.

SAPA is drafting a letter with “realistic, rational and reasonable proposals,” SAPA CEO Keith Lovell told South African newspaper Independent Online.

“I am confident that what we propose is fair and rational,” he said.

For the Americans, the sweet spot is to get sufficient access to not find it worthwhile to pursue the matter.

The country’s Department of Trade and Industry said the proposed compromise will see U.S. chicken exports restored to 2000 levels, while accounting for an increase in the market since that year.

However, trade negotiators will still have to work out what the tonnages of chicken parts and whole chickens will be. Lovell is understood to be unhappy with proposed volume amounts suggested by the U.S..

It remains unclear when a final decision will be reached, but South African negotiators will have to keep in mind that the current AGOA framework expires at the end of September.

Do you think the parties will reach an agreement in time for the September deadline? Do you think South African sensitivities on the poultry issue are justified?

The post How ‘chicken’ is stalling the South Africa-U.S. trade agreement appeared first on Trade Ready.

These markets remain an unprecedented source of economic growth across various industry sectors, and hundreds of millions of households will continue to join the ranks of the middle-class consumers in the years ahead.

According to the Monitor ICEF, while definitions and classifications of ‘emerging markets’ may vary, the general view is that the BRICS nations and a number of non-BRICS emerging markets (such as Indonesia, the Philippines, Vietnam, Mongolia, Myanmar, Nigeria, Ghana, Morocco, Turkey, and Mexico) will play a prominent role in shaping the new international trade environment.

Predicting future economic growth in emerging markets

Consider what the Monitor ICEF has to say about the growing economic power of the emerging markets:

• Between 2004 and 2013, the BRICS economies doubled in size and now collectively account for 21 percent of global GDP and 53 percent of emerging market GDP.
• Last year, emerging markets were home to 85 percent of the world’s population, and 90 percent of those under age 30. Their total population is expected to grow at three times the rate of developed economies between now and 2020.
• The BRICS countries are home to 268 million households with an income over US $10,000—a figure that is more than the US and Eurozone combined.
• Estimates from The Boston Consulting Group and the global consulting firm McKinsey & Company further predict that the middle class income group in the Association of Southeast Asian Nations (ASEAN) region will exceed 100 million people by 2020.
• McKinsey & Company has forecasted that 128 million African households will earn US $5,000 a year or more by 2020, enabling them to spend half their income on non-food items. Furthermore, Africa’s middle class families—those earning US $20,000 or more—outnumber India’s.

A shift in the central players in international trade

These powerful statistics help us better understand why the emerging markets are more important today than never before, for three main reasons:

1) Rising incomes is a real driver of emerging market economies

The Boston Consulting Group projects that in Turkey, an additional 6 million households will enter the middle and affluent classes in the next five years.

In Indonesia, they project that 68 million people—roughly equivalent to the entire population of the UK—will make a similar leap by 2020.

Thirty-seven percent of Brazil’s 60 million households will belong to the middle and affluent classes by 2020, compared with 29 percent now, and will represent a US$1.2 trillion market.

In China and India, such households will represent US$10 trillion in buying power.

2) Transformation of the emerging markets’ business ecosystems is directly affecting business models in developed countries

In most emerging markets, domestic companies with low cost structures and more advanced knowledge of local consumers are quickly improving their operations.

These young and dynamic companies are also becoming more aggressive in moving onto the world stage and in competing with the companies in the developed economies.

As emerging markets develop further, we should expect that companies based there will continue to expand their presence and compete with companies in developed countries with low-cost production.

They will be growing by invading the traditional territory of industrial countries and fine-tuning their capacity to manufacture increasingly sophisticated products and services.

3) Integration of the emerging markets’ financial institutions is reinforcing their status as central players in international trade

This new trend would allow developing countries to grow in a more financially integrated fashion and provide themselves with a competitive edge for conducting commercial operations by relying on their own financial centers and currencies.

The newly created New Development Bank operated by the BRICS states, for example, stands as an alternative to the existing US-dominated World Bank and International Monetary Fund.

How can businesses identify which emerging markets represent the best opportunities for their needs?

The post 3 ways emerging markets are aggressively re-shaping the international trade environment appeared first on Trade Ready.