South Africa’s North West: An opportunity for investors
United World had the pleasure of catching up with the CEO of North West Development Corporation to discuss advancements in the business environment in North West and the province’s plan to industrialise and attract key investors to the province.
There is a lot of regional competition in South Africa and Africa in general to attract investors. What are the sectors that are flourishing here in North West and can you tell us about the opportunities in those sectors?
The biggest sector in the North West province is mining, it occupies a large percentage of the GDP input and is followed by agriculture, tourism and manufacturing to a certain degree and the services industry broadly speaking.
Now, in mining, as far as we are concerned, we are leading as a province but we don’t think we are competitive enough as long as we are still exporting primary goods. We want to move a little bit further to get into the beneficiation of the minerals that we have. If you look at countries like America and other developed countries, we would want to work with these kinds of companies, given their level of development as far as technology is concerned. Beneficiation would require more technology and skill, which are the things we are still lacking in the province, so we need to build the skills base and the utilization of advanced technology to make sure we are competitive as a province.
I must indicate that the Premier’s view is that we must focus on agriculture, culture and tourism. For obvious reasons, as far as tourism is concerned, we have been, as a province, a leading attraction given golf course destinations such as Sun City and the Lost City. It has been one of the most attractive destinations for a number of years. We will be hosting the Nedbank Golf Challenge with a number of key players in the world, both from the US PGA and the European PGA attending. So, most of the people come around this time for that but, generally, Asian markets dominate the visits to Sun City and recently we have been attracting more visitors from Africa.
But beyond that, North West is amongst the leading provinces when it comes to game or safari, as people say; if you want safari you will find it in the North West province. We are second or third to Kruger National Park, we have Pilanesberg, we have the Madikwe Game Resort, but we are developing more and more tourism for that. Also, the world yacht competition is held in the North West Province in an area called Bloemhof Dam. Every year we have the world competition coming down to our shores.
On the cultural side the idea is to develop what we want to call cultural tourism, to make sure there are cultural products that people can learn more about. When I was growing up the most famous film from Africa was one called The Gods must be crazy. If you watch that film all that you see is the African that is still wearing skins and a really bad stereotype of Africa. It is not our worry that we are showing the international community we are still wearing skins, what is key is the exposure that we are making to the international community about what our heritage is, the cultural heritage of South Africa.
Remember, the pride of South Africa is this diversified culture of Africans and Afrikaners and so on. So you will find a diversity of cultural orientation in South Africa, and North West is a host of a number of these cultures, you will find them in terms of different activities that are happening and this is what we want to promote.
On the agricultural side, we are predominately a rural economy. What I mean by rural economy is that you have vast arable lands that are not utilized the way they are supposed to. Of course, we still have challenges of rain here and there but given the new technologies to bring about irrigation systems and so on we believe that land can be better utilized in our province. We are the leading producers of maize, we are the leading producers of sunflowers and there are quite a number of other fruits that you can find in the North West province. We simply want to enhance this capacity.
But this challenge of vast land is also an opportunity, because gradually there are a lot of economic development activities that are happening, in Johannesburg, for instance, and which will probably expand to other places, but in this province we want to be the home for food security, we want to secure food for people, we want to bring back the importance of agriculture so far as production is concerned.
So these are the key issues you will find in the North West as far as the economy is concerned. We still boast that we have a university with two campuses and is ranked amongst the top five in the country. So we think that there could be a good relationship between the university and the economic activities to make sure that we increase our skills base.
One of the first considerations of an enterprise thinking of coming into South Africa is not only the cost of doing business but also the business environment and infrastructure they are going to find here. How would you rate the infrastructure in the North West?
Comparatively speaking we are up there with the best, but we still have some difficulties. For instance, with regard to roads; the roads in the North West province have deteriorated due to the heavy rains we have experienced and the replacement, resealing and maintenance of roads has been slow. Of course, among other things, it is due to the limited resources we have. We have not as yet had high demand for electricity, for instance, the supply that we have in the North West province we consider to be adequate, for example, when there have been electricity shortages in the country we have never faced outages but by and large we are able to resolve our electricity problems.
We still have challenges in the case of water supply, there are certain parts of the North West where we don’t have adequate water. We are currently working on key economic infrastructure premises, for instance, industrial parks. The special economic zone is one of those but we are trying to establish as many industrial parks as possible. Currently we have premises that we lease out to small and medium firms and as far as costs are concerned we consider ourselves to be the lowest given where we are. And we can still provide more particularly, as the development corporation responsible for the allocation of factory space.
We have an airport at Mafikeng that was supposed to be highly functional by now, but there have been challenges in the past given the demand from the passengers. But we are currently working on this airport to become a cargo airport from where we are going to export.
One of the key issues you deal with here is bringing foreign investment into the North West. Can you tell us a little bit more about the services that your corporation can offer investors?
The first key element is that we as the corporation are promoting the entry model of joint ventures. It becomes easy, for instance, for companies from the outside to work together with companies that are already in South Africa, and such kinds of partnerships are key because you already exploit the experience of local companies, the knowledge of the terrain and the competition in the country. So we think it would be easier for international companies to come through joint ventures and we do facilitate that as a corporation.
If anybody comes and says they are starting from scratch we are going to be very excited. There are generic incentives that you get in South Africa provided by the department of trade and industry, including tax tariffs and so on. In the province, what we ensure is that if there were companies that need startup capital, for instance, or need local people to make a contribution, it becomes our role to make sure that we facilitate the process through our national industrial development corporation for people to be able to access equity funds or funds that are going to contribute to that.
We engage local municipalities, for instance, to make sure that rates and taxes for international companies are competitive. We had a few companies for which we have approached the municipality to negotiate rates and so the taxes are going to be affordable for those companies. And we also provide factory space, but if a company needs land to start we have a good relationship with our local traditional leaders here, in whose hands you will find most of the land, and we negotiate and facilitate the process for them to make land available.
These are the key attractive elements we provide as a province but we really utilize the national incentive schemes that are available.
Can you think of any examples of companies that have come here to invest?
In the main there are companies in the mining sector. Currently we have companies in the automotive sector that are supplying the OEMs, like Nissan, Volkswagen, Bosch and the Malaysian company, Pasdec. These are the companies that have been granted licenses to provide OEMs and they have been in the business for quite some time. We are working on creating a support center for them so that they are able to secure whatever assistance they need, in case of economic hardships they are able to access funding for companies in distress. We are also helping them with challenges like electricity and water in the area where they are operating. In the retail sector we also have some companies. We have a company, Choppies, from Botswana.
The economic development zone is a key project, how far advanced is it and what kind of availability is there?
We now have 147 hectares of land available with infrastructure, water and electricity already available. We have combined this zone with a factory space, which is about 47 hectares of land. These are factories that are already available for anybody who wants to start manufacturing. We have started now marketing the zone, on the 26th of this month we will be in Japan and on the 27th some Canadian companies will be arriving and we will talk to them about investment. There is a key company that has already showed interest, just like Fuji, which is a Chinese company. There is also a German company that has shown interest in manufacturing mining equipment in the area.
The zone is going to be dual in nature: heavy manufacturing as far as fuel cells are concerned, but on the other hand there will be mining suppliers. The zone is sitting within a radius of 18 kilometers in a reachable distance of about 4 mines that are leading producers, and that is why we are situated there. It is almost within a reachable distance to Pretoria and about 200 kilometers to O. R. Tambo International Airport.
Our view is that any company that is ready now, we will be ready to accept them. The DTI has worked out special incentives for economic zones that are different from the generic incentives in the rest of the country, especially incentives for the zones to be issued in due course by the Department of Trade and Industry. So we are ready to move, we have a project executive structure in place that can begin discussions with whoever. For instance, one of the leading companies that are helping us is Anglo American; in fact they spearheaded the installment of a project were fuel cells were used as energy supply for a village. And we are working on piloting another village in the North West province where we are going to demonstrate that fuel cells can actually become alternative sources of energy.
So the special economic zone project is going to move with momentum and immediately take off. Hopefully after our international marketing trips we will have secured a few of those people that will be interested to come and manufacture here different types of products that use fuel cells, be they portable or highly mechanized programs. And we will be happy to host them.
When you do talk to international investors what are the common misperceptions about Africa?
Often there are questions about labor issues. There are companies that believe the South African labor market is rigid and that the rigidity of the market is such that it poses high risks for them to be able to operate. Our answer all along has been that the issue of conflict in the economy between labor and market is not unique to South Africa, in fact, this conflict between employer and employees goes way back. What we see in South Africa is just a situation where the desire to strike a balance between making profits and sharing in the profit has not reached levels where the workers who are the contributors of profit, and the owners as contributors of capital, are reaching an equitable share.
The good thing is that this whole discussion is not happening outside the framework of government. The South African government has provided bargaining councils, it has provided a platform where workers and owners are able to negotiate issues of salaries. The concern is when sometimes these discussions get out of hand and there is violence and people abuse the system that has been put in place to ensure that these issues of salaries must be quickly resolved without having to cost the economy or costing businesses to lose money. So such platforms are within the framework of the South African government’s policies, so there is nothing unique about it as far as we are concerned.
Secondly, you come across people talking about crime and you come across certain reports that appear in the media and on TV and so on and our response is, as it would be in Mexico or elsewhere: we are a country that is not immune to having individuals with criminal minds. Criminal minds are all over the world, in South Africa you still find people who believe they can make a living through criminal activity. Of course on our side, we get solace from the fact that the type of police system we have put in place is supposed to help us make sure we bring the level of crime down. Recent statistics have shown that we were able to deal with violent crimes and it has also shown that crimes such as murder have gone down. So as much as it is a concern of investors, all we are saying is you can still find this elsewhere, but find comfort in the fact that we don’t leave it to be. I believe as a country we still have the most effective judicial system that is able to make sure that whoever is offended in the country finds justice.
Recently we have been seeing public reports from rating companies, the most notorious one is Moody’s that continuously rates South Africa down and down. So I started trying to look deeper and find why we are rated in this way, and one of the things I discovered is that we are rated against developed countries, so if we are rated against the United States or the United Kingdom we are obviously going to come out at the bottom. But if we were rated with other developing countries we believe we would be somewhere at the top. But South Africa doesn’t take these ratings for granted; they are an important indicator that shows certain things we must deal with.
We see much enthusiasm and excitement from those who happen to understand South Africa for the first time, when we introduce them and they would want to know more, they would want to come. Given the trend of the global economy now, Africa is beginning to become the promising economy and people want to exploit the advantages and they want to come first. And, as South Africa, we provide that base. If any country wants to register their brand now, let them come now, let the people get used to that brand, because when more and more people start coming down to Africa at that time they will be those that have already occupied the center stage and will be more competitive than the newcomers. So we are getting more and more interest coming forward.
If you were to describe the North West as a brand, what would be the characteristics you would associate the North West brand with?
We always say we are a trade and tourism destination. The people in the North West province are still conservative in terms of taste movement. If you go to Johannesburg or any other developed metropolitan area you will find that your product wouldn’t last for three days because there would be more products coming in, so the taste movement is very frequent, but in North West if you have established yourself, you have established yourself.
The province is not necessarily crime free but compared to other areas we still feel we have low levels of crime. And there is very good quality of life. You have heritage and a very rich culture. There is still a lot of open space and fresh air.
On a personal level what motivates you and drives you to work towards attracting investment for the province?
We have about 3.5 million people in the North West province. We have high levels of unemployment and a desire to develop young people, in terms of them going to school but at the same time to start making a living at early ages. Broadly speaking, development is the key and I measure development in three ways: there must be good life, people must have longer life expectancy and people must have good health to achieve that; and for them to be able to have income generating activities the literacy level must go up. These issues are the ones that makes you wake up early in the morning and come to work and say to investors: “Come down to the North West, because with you being here people are going to enjoy the benefit of trade.
And benefit of trade does not only come in money and returns, it also comes in terms of technology transfer and in terms of developing infrastructure. And once you have improving capital formation in the country, for me, I see the potential for savings to increase. Now, North West is limited in terms of this, but it will become a future hub: after London has saturated, after Moscow has saturated, Tokyo, Beijing, Johannesburg, where else do you go? North West is supposed the next destination for you to build cities, to bring about more industrial development and so on and so forth. When all of this happens I think our cost of developing people will be met.
Source: The World Folio