Reports that foreign companies are downsizing in Africa’s largest economy do not reflect the overall picture of the market, according to feedback from IAM members.
The Wall Street Journal reported that major corporate accounts from from Shell to British American Tobacco are reducing their presence in South Africa as estimates from the World Bank suggest that concerns of corruption, lawlessness, and poor infrastructure costs the country at least 10% of gross domestic product annually. Companies that have reduced or closed their operations include Rolex, Shell and BP, BNP Parisbas, and British American Tobacco, which announced the closure of its last manufacturing facility by the end of this year.
To provide greater context, IAM reached out to members in the commercial center, Johannesburg, for their feedback. While Gert Mostert of Sterdts confirmed that the closure of a unit of Continental Tyres had impacted some commercial business, members were more optimitistic about the overall condition of the South African market. Ryan Gibbons of Biddulphs felt that international prospects were more positive for South Africa as the Rand stabilizes and South Africa’s removal from the Financial Action Task Force “grey list” signals a definitive return to international financial standards.
Gibbons also said Biddulphs had seen a dramatic shift in trade flows from volumes that were heavily weighted toward exports to a surge of over 30% in import shipments, largely driven by “lifestyle” decisions by private/consumer customers attracted by South Africa. “While global exports are facing cyclical pressure, characterized by a shift toward groupage and smaller shipments, our corporate outbound volumes remain resilient. We view some current corporate realignments not as a localised decline, but as part of a broader global cyclical trough,” he said.