Italy looks to South Africa for opportunity

3 October 2014

More than 100 political and business leaders from Italy and South Africa have been meeting in Cape Town for the first-ever South Africa-Italy Summit, which aims to bolster bilateral business and economic ties between the two countries.

Under discussion at the two-day meeting, currently under way Cape Town, are ways to boost the economy of both countries and expand in Sub-Saharan markets, especially investment opportunities in the energy, manufacturing and agro-industry fields.

Also on the agenda are sustainable economic and technological growth strategies, as well as the role of banks and financial markets in supporting bilateral relations.

With the theme “‘Building Communities of Leaders for Growing their Enterprises”, the summit has been organised with the help of the Italian and South African embassies, EXPO 2015 and the Black Business Council. Plans are to hold the summit annually, to foster a strong, long-lasting partnership between entrepreneurs and enterprises of the two countries, and between South Africa and Italy.

Understanding

According to a report in the Cape Times today, Alec Erwin, South Africa’s former minister of trade and industry and now chair of UBU Holdings, told the potential investors that if they wanted to succeed in Africa, they needed to gain understanding of its economies from the economies themselves – not from analysts in New York.

“If you’re going to be serious about Africa, be serious about Africa, don’t take it for granted. Get in and understand these economies, do your homework,” Erwin reportedly said.

Erwin said there were no short cuts to doing business in Africa. Foreign investors who went in with the idea that African countries had to be investor-friendly and do everything the foreign investor wanted would be “sorely disappointed’.

Erwin told the conference that while the institutional environment in Africa was not always easy, it was manageable.

Potential

Trade between the two countries is growing steadily. Bilateral trade between South Africa and Italy was worth around €3.5-billion (R51.5-billion) in 2013, and the investment flows of €250-million (R3.7-billion) in 2012 are below its potential, according to Paolo Borzatta, director of the European House-Ambrosetti, the international think tank that is responsible for initiating the meeting.

“The approach will be to focus on the strengths of both countries to exploit the opportunities to grow together and faster.”

Borzatta said the summit would highlight investment opportunities as well as “create trust amongst the leaders of the two countries so that they can be able to do business together and build long-term relationships”.

He described South Africa as the hub of the “booming” sub-Saharan region, which has experienced yearly GDP growth of 6% for the past 10 years.

Energy sector

The summit heard how energy demand in the region is expected to increase by 107% by 2040, with investments of more than $50-billion (R564-billion) a year. Energy tops the list of South Africa’s economic agenda, with the country hoping to build 42.3GW of power by 2030 to take the pressure off the ageing infrastructure.

Borzatta said there were opportunities for Italy to partner with South Africa in programmes on new technologies, including smart grids and energy efficiency.

He said co-operation agreements in the energy and agro-industry fields would be pursued by South African and Italian universities to assist the training of technicians and farmers. The universities would also share knowledge in the fields of food security, seed and fertilisers, water management and irrigation, Borzatta said.

Manufacturing

Borzatta said Italian businesses are looking to pursue investment opportunities to establish manufacturing plants, helping to create employment in South Africa.

Italy’s medium-sized manufacturing businesses are regarded as world leaders in industrial equipment and machinery.

Manufacturing is an important challenge for South Africa, with the sector’s share of the economy falling from 21.9% in 1992 to 12.4% in 2012.

Italy’s, on the other hand, is growing and it is the second-highest manufacturing country in the EU with a manufacturing gross added value of €216.5-billion.

“We already have plants [in South Africa] and would like to have more joint ventures so that we can invest in other Sub-Saharan Africa countries with the idea of creating clusters,” he said. Companies could be grouped in “value chains”, allowing them to work together and increase their capabilities.

Contribution

Nomatemba Tambo, South Africa’s ambassador to Italy, said the summit being held in South Africa was significant and would contribute to economic growth in the two countries.

She said the renewing of South Africa’s co-operation agreement with Italy on trade and investment in 2012 was “a step in the right direction”.

Vincenzo Schioppa, Italy’s ambassador to South Africa, said the aim for the Italian government was not to boost exports, but to promote investment and establishing plants.

“Our aim is to produce together here to get Italians to invest in South Africa and to create job opportunities in South Africa and for goods to be consumed here,” he said.

Members of the European House-Ambrosetti’s advisory board include Tseke Nkadimeng, chief executive of Afric Oil; Ndaba Ntsele, executive chairman of Pamodzi Group; and Iqbal Surve, president of the Sekunjalo Group.

SAinfo reporter and SAnews.gov.za