SA destination for investment?

Summit TV (BusinessDay.co.za) 2008-08-20

Semeyi Zake interviewed Frank Vos from the local Miele subsidiary with regards to what South Africa needs to do to remain an investment destination in the emerging markets.

“Political uncertainty, the ongoing energy crisis and massive strikes by labour unions – these are just some of the things impacting investor sentiment in South Africa…. Given these and other challenges how are foreign businesses coping in our environment?… Is South Africa still a preferred investment destination?” asked Zake.

According to Vos, “to say preferred is to use a strong word – I think since the emergence of many opportunities in the East in Asian countries South Africa is now competing with many other interesting destinations – but we would like to think from our perspective it’s still a very good destination indeed.”

When asked if the subsidiary plans to increase investments in South Africa in the future, Vos replied: “We have embarked on investment drives since 2004, and now in the middle of 2008 we intend carrying on with our investments. We believe investing means investing in our future – and we see a happy future for our company in South Africa.”

There are a number of challenges in the country. “I think the challenges are challenges we will find in other emerging countries – that could be regulations and the legal framework, and that could be issues around infrastructure. Our particular frustration at the moment is lack of broadband – although we have been promised that the situation will improve in the next year or so.

For as an international subsidiary and part a group where there are 42 subsidiaries around the world good affordable communication is of the utmost importance – and that’s been frustrating us for the last two years. That is perhaps a small issue – but operationally it’s an important issue for us”, Vos said.

When compared to other emerging markets, South Africa is made favourable by “the access that it provides for us to its neighbours – to Africa”, according to Vos. “We believe that South Africa is the perfect springboard for our particular marketing activities into the rest of Southern Africa. Of course this is a beautiful country with a diversity of people that suits our product. Also, we have had a long historical bond as a company with this country therefore it’s always been first in my awareness.”

“Now we have the regional trade era that’s just been launched – how does this impact or change things?” asked Zake.

“It fits perfectly into our expansion plans”, said Vos. “As I said before we would like to not only focus on the South African market with our investment drive but also on our neighbours – and our first contacts across the board have been positive. Currently we are working on some of the islands around our southern coast that are also very promising – so we believe this new initiative is a very promising one for us, and we view it very positively.”

The impact of skills shortage is a concern. “As an investment destination we’ve particularly found in the last two or three years that finding skilled labour particularly in the disciplines we use in our organisation has become a source of concern in the first place to find the skills, and in the second place to secure the skills. We have had some very highly skilled South African people in our organisation that have left the country for greener pastures – or so they believe – overseas”, said Vos.

“That’s a sad trend we are noting – and we have to make do sometimes by bringing in people from our own subsidiaries overseas to fill the gaps. But that’s not something we see as a final solution to this problem – we would like to obviously employ South Africans because we are operating in South Africa.”

In order to improve the investment environment in South Africa, Vos said that “we have to look at things that have been said before – one of the issues we have is exchange controls, where we would like to see more liberalisation of those.”

“The Governor of the SA Reserve Bank has promised that and we are waiting. I think we would like to see a stronger message on the issue of crime – although it doesn’t directly influence our business success it has a huge impact on our staff complement, our families and also our customers. We believe that a strong message and strong action is required. I also believe that it would be good if the political game playing that’s happening at the moment – if there were better signals to the business communities in general. I believe we are all concerned about things that are being said in the election rallies – those things are not good for business.”