Local companies embrace global opportunities – IT-Online

Aug 30, 2022
PwC South Africa has shared its eighth South Africa Economic Outlook report for 2022, focusing on how local companies are finding growth opportunities abroad, ranging from exports to direct investment deals.
Local container shipments for export declined by 17,5% y-o-y during the second quarter of 2022 as port activity was impacted by international supply chain disruptions, local electricity load-shedding, and flooding in KwaZulu-Natal. Apart from the transient supply chain challenges experienced, South African ports are also challenged by operational inefficiencies.
On a positive note, Operation Vulindlela, a joint initiative of the Presidency and National Treasury, to accelerate economic recovery, has made some progress of late regarding their objective of creating a competitive and efficient freight transport system in the country. For example, with the necessary legislative and policy requirements now in place, Transnet was expected to release a request for proposals this month to set in place private partnerships in container terminals at the Ports of Durban and Ngqura from January 2023.
Lullu Krugel, PwC South Africa chief economist, says: “Reforms already achieved in the rail and port space, as well as ongoing and planned developments in these areas, will improve rail and port performance to the benefit of South African companies and their export business. Increased private sector involvement in the operation of railways and port terminals will bring key technical skills to the operation of key transport infrastructure and should improve operational efficiency.”
Looking abroad for growth opportunities
South Africa’s economic growth rate is slowing to a long-term potential of 1,5% pa while the global trend is forecast at 2,6%. If these growth rates could be translated into the speed at which a car travels, South Africa would be driving at 60 km/h while the global economy is driving at more than 100 km/h.
Clearly, there are faster-growing markets (compared to the local economy) available to South African firms who are willing to look abroad. Offshore investment is nothing new for South African companies, and during the second quarter of 2022, the country recorded a record-high value of R222-billion of outward merger and acquisition (M&A) deals.
Christie Viljoen, PwC South Africa senior economist, says: “Dealmakers are adapting to a new business climate where inflationary pressures, rapidly rising interest rates, short-term volatility in financial markets, supply chain disruptions, and geopolitical tensions all appear to be developing into longer-term trends. While these trends and the global economic outlook is uncertain, our research has found that deals made during a downturn are often the most successful.”
Some South African companies have focused on neighbouring countries, with a notable deeper expansion into the rest of Africa, or beyond — to Europe, North America or Asia — with each company’s internationalisation route being different.
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