Global business looks to Cape Town as African gateway
(This article was published on 14 May 2016 in the Weekend Argus, a weekly newspaper published by Independent Media in Cape Town, Western Cape province.)
Written by Yazeed Kamaldien
International businesses are increasingly setting up shop in Cape Town, using the city as a base to expand into Africa while creating jobs for locals.
Company bosses who have made the city their temporal home praise its infrastructure and resources.
And apart from jobs, locals also benefit from new technology, global business know-how and there is a knock-on effect for local suppliers.
Garreth Bloor, the city’s mayoral committee member for tourism, events and economic development, says international companies basing themselves in Cape Town have over the last four financial years contributed an estimated R2.4bn in foreign direct investment into the city.
Over the same period, they have collectively ensured an estimated 6 448 jobs in an economy struggling to create jobs for a sizable unemployed population.
These companies are also based in various parts of the Western Cape and include electronics manufacturers, management consultancies and renewable energy operations.
At the Hisense South Africa head office in Canal Walk, the company’s general manager Youbo Li says they opened their factory in Atlantis in 2013.
Previously, Hisense electronic goods were exported to South Africa via its China headquarters. The company decided to manufacture TVs and refrigerators in Cape Town in its quest to conquer the African market.
“We want to go global and we can’t escape South Africa. We want to export to the rest of Africa and Cape Town is our base in Africa,” says Li.
“Every year (since 2013) we are manufacturing 300,000 TVs and 300,000 refrigerators. This will increase as we have already exported to various African countries.”
Li says Hisense can be more competitive with pricing in the electronics goods market as they are avoiding import taxes. By making the goods local, they cut out delivery costs from China and create employment.
“We have created nearly 1 000 jobs for locals. This includes from the normal factory worker to logistics, warehousing, sales reps, call centres and after sales service. And we have staff at our head office,” he says.
Li says the company has also created “probably 3 000 indirect jobs”.
“This is because we have a lot of suppliers as well. We need rubber, glass and packaging from local suppliers,” he says.
Li believes the company has already impacted positively on Atlantis too.
“We used to have a big empty parking area at our factory in Atlantis. After two years, the car parking is filled with cars,” says Li.
“All the employees have bought cars, even if it’s basic cars. Now we need a bigger parking area.”
On the knowledge economy front, Cape Town’s universities play a role in attracting foreign companies looking for educated employees.
Rachel McLaughlin, local director of S-RM, a London-headquartered business intelligence firm, says it was for this reason they decided on Cape Town as a base in Africa.
“South Africa and Africa have always been important to our business. We advise oil and gas firms and help multinationals based in Libya or Nigeria. It made sense to have an African hub,” says McLaughlin.
“We already have a lot of Africa operations and have permanent staff in Ethiopia and Ghana. But Cape Town is our centre of gravity for Africa.”
McLaughlin says, for their company, Cape Town’s “main attraction is its role as a knowledge nexus”.
“In terms of building up an office, we are looking for young, bright, educated recent graduates. With Cape Town’s universities, it’s a great place for us to be based,” she says.
Most of S-RM’s 22 employees have been locally recruited and only are three from the United Kingdom. They “help clients understand and mitigate risks to their business”.
“One big department for us is our business intelligence department. It helps clients with background research and development on potential business opportunities,” says McLaughlin.
“The other side is risk consulting, with our team putting together risk solutions. If a big multinational is sending a senior executive to the DRC we might help them plan the journey and accompany them o make sure it all happens safely.”
McLaughlin says when they set up their office in Cape Town in February 2014 there were “some bureaucratic slow processes” but generally it was a “smooth experience”.
“South Africa is one of the highest ranking African countries for ease of business. Generally speaking, it’s been good,” says McLaughlin.
S-RM is also “enabling” international businesses to consider Cape Town as a base for their African expansion plans, adds McLaughlin.
“We are helping our clients invest in Africa and it is boosting the economy here in South Africa,” she says.
“Multinationals are realising Cape Town is growing and there’s a tech industry hub based here. It’s an exciting environment and magnetic.”
Written by Yazeed Kamaldien
To ensure international businesses have a painless transition from elsewhere in the world to opening their offices in Cape Town, local government is ensuring it cuts down on red tape.
Councillor Garreth Bloor, mayoral committee member for tourism, events and economic development, says foreign businesses first speak to their counterparts before considering another location.
Chinese companies, for example, are spurred on by successes such as Hisense, says Bloor.
This has led over 100 Chinese businesses expressing an interest in scoping prospects in Cape Town where the could set up manufacturing factories and other enterprises.
To ease the tension of doing business with Cape Town, the city’s Mayor Patricia de Lille late last year set up a one-stop shop in her office.
Bloor explains this was to cut out dealing with a multitude of different government departments. It also offers businesses all the information they might need.
“We don’t want people who come here to invest to be referred back and forth. We want one place where they can have all their questions answered,” says Bloor.
“It’s best practice if you look at other global cities. We live in a world where cities are competing against each other.
“We have to put our best foot forward and get investors that translate into jobs on the ground.”
Wesgro is another entity that assists international businesses start their operations in Cape Town and beyond the city’s borders in other parts of the Western Cape province. It is funded by city and provincial governments.
Its chief executive Tim Harris says they annually seek out foreign investors in other parts of the world on trade missions.
To this end, Wesgro has brought home companies like Kimberly-Clark, Burger King and others who now operate in Cape Town.
“We are attracting multi-nationals across sectors. We have companies making engine blocks for trucks right through to Amazon running a call centre out of Cape Town,” says Harris.
“Many global companies are interested in accessing opportunities in Africa. It’s easy to convince global talent to move to Cape Town. You won’t find this quality of life anywhere else in Africa.”
Wesgro’s head of investment promotion, Salman Kajie, says multinationals are choosing Cape Town “because of the core competencies on offer”.
“When we interviewed multinationals who have a base in Cape Town, the reason for their choise was proximity to new domestic markets,” says Kajie.
“Industry also tells us they are here to capitalise off our growing middle class and export to the rest of Africa.”
Kajie says the majority of foreign direct investment in the city over the last decade has included businesses from Germany, the Netherlands, United Kingdom and United States. Asian countries are meanwhile fast catching on.