Archive for April, 2013

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South African sourcing from China

Tuesday 30 April, 2013

The Durban Chamber of Commerce hosted a presentation by Cardinal Global Trading Ltd (CGT) on trade with China, which turned out to be a commercial for their China Trade Services.  CGT works with South African firms to source products from China.  They claim to be able to help their clients avoid the “hidden costs” of enabling a supply chain which includes China.

Here’s their presentation: China Trade Service Presentation Business in China does not take place in isolation.  The emergence of the BRICS consortium puts this into context, & now provides an opportunity to exploit.  Foreign products flooded the South African market in the 1990’s after apartheid fell.  Surprisingly the government did not erect any protectionist barriers to cheap foreign imports, so the flow proceeded unimpeded.

CGT has a sales office in Durban & it’s operations office is in Beijing.  Their role is to validate Chinese manufacturers, ship products, clear customs, & provide delivery to your desired doorstep.  They mitigate the risk of doing business with Chinese firms by doing extensive onsite quality inspections, & management, production facilities, & container load checks.  They make sure their clients do business in a legally sound way, verifying export licenses, etc.  Their staff is fluent in English & Mandarin Chinese in China.  They’ve found that potential suppliers in China are rebellious if they are hiding something, while those who have nothing to hide are much more open.  Shipping is their biggest problem, i.e. the client in South Africa ordered 1 thing, & something else was delivered.  To rectify these situations, they check every step of the way.

CGT was founded in 2007 when they brokered the sale of manganese from Zambia to China.  In 2010 they brokered manganese ore & chrome from South Africa to China.  Other products they’ve dealt with thus far are industrial products, such as grinding rods, belts, chemicals, agricultural goods, textiles, paint, gloves, etc.

The biggest reasons to work with CGT are:  they are on the ground in China, offer a quality solution, & are a turnkey operation.  In the future they plan to enter markets such as India, Taiwan, VietNam, & Malaysia, & export products back into China as well.  Their commission fees run 3-7% with a 30% deposit & 70% due upon shipment via letters of credit.  CGT can work with companies without an importer code because they can use their own.  Minimum order size is 1 container load.  Lead time for them is 7-10 weeks.  Their focus is specifically on serving the needs of customers in/around Durban & the province of KwaZuluNatal.

Q&A
•    Alibaba.com does not do the groundwork that CGT does.  Their access is limited to a certain extent.  In many cases, the 1st internet order is OK.  Then after trust is established, the 2nd order disappears.
•    Exclusivity depends on the product.  CGT works with different factories for different clients.
•    In the event of a problem, CGT will compensate/credit clients up to 100% of the value of a defective transaction.
•    Quality control inspectors ensure standardized products.
•    CGT works with the best freight forwarders & you can get competitive quotes from them.

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Violence in South Africa

Tuesday 23 April, 2013

Violence is 1 of those things about which a lot is written in the media, but people don’t necessarily pay much attention to it because they become desensitized to it over time.  News reports about blood spilled in conflicts far away evoke far less emotion than when our own blood is spilled close to home.  In that vein, (pardon the pun), I wanted to write about a few personal experiences that have happened here in South Africa.

Within a span of a couple weeks the 1st month I arrived in Durban in January, 2013, I was told of 3 incidents which really made me step back & question the wisdom of coming here.  Let me describe each of them.  1st, a colleague related to me how her son was accosted in the front yard of his house.  A guy brandishing a gun robbed him of his laptop, which was sitting in the car.  Shots were fired, but only @ the ground.  The police are supposedly using the shell casings to try to find the perpetrator, but I haven’t heard anything since then about whether or not he’s been caught.  My colleague informed me that her son lives in a rough neighborhood, so this type of thing is not all too uncommon, yet they both were still visibly shaken, had to take time off work, & have seen counselors to deal with the emotional trauma.

In the next week or 2, we were informed that 1 of our colleagues in the office had died.  She had rented a mini-bus taxi & driver to take a trip out of the city.  A wheel from the mini-bus taxi came off on the expressway, flipped over, & she was killed.  Her husband & children incurred serious injuries.  We have not been told if the driver or mini-bus taxi company will be found culpable for any responsibility in her death.

A few weeks later, I was told by our quality assurance person that we need to develop a policy for when exam papers “disappear.”  Apparently what happened was; the car that was transporting exam papers was car-jacked with the exam papers in the back seat.  The person who was driving the car was not physically harmed.    To my knowledge, neither the car nor the exam papers have been seen since.

Finally, I’m not too proud to confess that I was the victim of a bit of violence here in South Africa.  I took a long weekend trip to Johannesburg Easter weekend.  A few hours after I arrived, I went looking for a jazz bar called BassLine in NewTown the evening of Good Friday.  When I started roaming this somewhat seedy neighborhood, the sun was still up.  By the time I had given up finding it, it had become dark.  As I was heading back to the train alone on the Nelson Mandela Bridge @ ~7:30 p.m., a guy walked up next to me & muttered something unintelligible.  He then went ballistic on me, rifling through my pockets & demanded that I give him my phone, cash, watch, etc.  When I didn’t produce these items fast enough, he cocked & put a gun to my head & threatened to blow my brains out.  I informed him I wasn’t ready to die yet, so I gave him all that he requested.  He then gave me a fairly strong blow to the side of the head with the butt of his gun & headed back to his seedy neighborhood.  I was kind of dazed & headed in the direction of the train station as quickly as I could.

Needless to say, I’m thankful to still be alive.  I was also lucky that he didn’t take my credit card, bank card, train card, & keys, because without any of those, I would have been screwed. The thing that he got that I missed the most is my prescription glasses.  I couldn’t read much the whole rest of the long weekend.  I spoke with a colleague from Jo’burg who informed me, it might not have been a real gun.  I questioned whether or not it was actually loaded.  However these questions are irrelevant.  The bottom line is, it’s not worth the risk to find out if either of those are true or not.  Guns give small/weak people a lot of power, so I am now an avowed gun control advocate.  Obviously I was in the wrong place @ the wrong time:  my guide book advised being in this neighborhood after dark, but it was Good Friday, it wasn’t late, & I thought I was invincible.  Nothing like this had ever happened to me before.  I’ve learned my lesson.  I will now follow what these guide books say & I will avoid dangerous areas when told.  I’ve wandered through dangerous neighborhoods in Chicago & other places & come through unscathed.  Now I won’t risk it.

There are dangerous areas in Detroit, Chicago, Oakland, New York, DC,…this could have happened anywhere.  However in South Africa, it’s even more pervasive.  I’m constantly warned to leave work well before dark because it’s not safe to be downtown after dark.  A colleague has given me a ride home after work to keep me out of harm’s way.  Businesses have acquiesced to the level of crime.  Busy malls close @ 5 or 6 p.m.  because people no longer feel safe on the streets @ that time.  Granted, the streets of Chicago aren’t bustling after dark most of the year, but many stores are still open & I do feel for the most part safe, even after dark.  South Africa can be a dangerous place, not unlike other places in the world.  Beware & watch your step.  Don’t fall prey to what I did.  Be safe & secure wherever you go.  You take these things more seriously when they happen to you personally.

 

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South Africa-China Investment Cooperation seminar

Tuesday 16 April, 2013

On the day of the BRICS summit, the trade & investment arm (TIKZN) of the government of KwaZuluNatal (KZN) held a South Africa-China Investment Cooperation seminar, which was attended by about 120 representatives from China & South Africa (SA).  MC Desmond Golding, of KZN Economic development & tourism, kicked off by noting that SA contains 11 hubs of interest to Chinese companies, & that there is interest in ports & airports too.  MEC Mabuyakhulu, provincial minister of economic development & tourism of SA,  indicated that there are 18 ASDA investment projects in KZN worth R240B in among other things, renewable energy & electricity.  The city of Durban is building a bridge across Durban harbor.  Durban together with Richards Bay handles 80% of the shipping of SA’s exports & imports.  KZN’s vision 2030 plan makes the province the gateway to Africa.

Chen Jian, Vice Minister of Commerce of the PRC confirmed their 2010 comprehensive strategic partnership.  China is SA’s trading partner while SA is China’s biggest trade partner in Africa.  He proposed 4 suggestions:

  1. Strengthen cooperation by introducing new products to 1 another as China wants to import more from SA.
  2. Industrial cooperation-SA is good @ manufacturing appliances & agriculture, so they should cooperate deeply in manufacturing
  3. Create a platform for exchange-of people, customs, & cultures
  4. Strengthen mechanisms-with more trade & investment agreements

A surprisingly familiar face showed up to make a presentation.  Charles Manuel, former trade commissioner for South Africa to Chicago, made a presentation on Investment opportunities in SA, specifically in KZN.  At present, China  is the #1 investor in SA, primarily in minerals.  They are seeking to increase the procurement of SA products & services.  The area provides a gateway to global shipping routes which offer access to 200M consumers.  In 2010, SA had 6M internet users.  Africa is changing:  of it’s 54 countries, 35 are now democracies.  There were only 8 democracies on the continent in 1991.  These countries are becoming more attractive according to an Ernst & Young 2011 survey.  SA is Africa’s only UN Security Council member.  SA is in the top 5 countries for cell phone coverage.  In emerging markets, SA has the #2 financial sector, & the $2 business tax rate.  SA is ranked #35 of 183 countries in ease of doing business & #1 in ease of getting credit.  It’s #10 in terms of protecting investors.  The government’s goal is to create 5M jobs to get the unemployment rate down to 15%.  China is SA’s #1 export & import destination.  Opportunities lie in the green economy & renewable energies, which are projected to reach 40% by 2020.  R350B is being invested in upgrading infrastructure.  Automotive is SA’s flagship industry while film & media offer strong incentives.  SA is becoming a business process outsourcing destination.

Liu Dianxun, of China’s investment promotion agency, said many famous state-owned enterprises & private companies are included in the visiting delegation.  China is constructing a 4G mobile network.  China offers 31 economic development zones & has signed 88 memorada of understanding, including a declaration of intent with SA

Zamo Gwala of TIKZN told us more about KZN, which has a population of 10M, 1/3 of which is in Durban.  KZN is 20% of the population & accounts for 17% of the GDP of SA.  Manufacturing leads @ 20%, followed by financial services @ 18%.  Their growth strategy is to create industrial economic hubs with a focus on maritime & tourism.  The plan is to dig out Durban’s port so that it can handle 20M TEU’s (T equivalent units) & make Richards Bay a deep sea port.  It’s also in the plans to build a new city to surround the new  international airport, which will be connected to the existing city & Pietermaritzburg with a monorail.  Other opportunities exist in R&D, renewable energies, & agricultural processing.  Their hope is to also add value to the minerals that are extracted & exported.  The old airport is being turned into an automobile supply park.  600km of coastline are waiting to be developed into entertainment venues & resorts.

An integrated logistics firm with operations in Durban, Transnet Ports SA, made a presentation/commercial, on their take on SA’s role in the future of Africa.  A Chinese health care firm Time Medical Systems, made a presentation on their medical imaging solutions for the developing world.

Here are the participating Chinese companies which have website URL’s:

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BRICS Business Forum in South Africa

Tuesday 9 April, 2013

I slipped into the BRICS Business Forum in Durban, South Africa (SA) the day before the momentous signing day of the BRICS Summit.  The business forum obviously had much more of a business focus than the ceremonial summit, so that was time much better spent for me.  It looked like there were about 2500 attendees, which was supposedly ½ of those attending all BRICS events.

I arrived a few minutes late to a talk being given by SA’s Minister of Trade & Industry, Rob Davis.  He emphasized how much SA must industrialize & encourage development of a  services-based economy, including information technology services.  Davis pointed out that despite that fact that SA does not have the large domestic markets the other BRICS countries do, SA offers access to many other countries in Africa, partially through it’s membership in trade blocs, SAFTA, SADC, & EAC, which are supposedly doing more than just reducing tariff barriers.  SA is seeking partnerships to strengthen its production activities.

The Brazilian Minister of Foreign Trade let us know that Brazil will host the BRICS summit again next year & that Brazil has the largest population of Africans outside of Africa.

Russia’s economic minister spoke, but it was in Russian & my simultaneous translation device was not working correctly.

The Chairman of India’s Chamber of Commerce & Industry, a very influential organization in India, & minister of commerce & industry, Annan Sharma was up next.  He noted the connections between India & SA by making us aware of Mahatma Gandhi’s travels to Durban & Peitermaritzburg.  India is working on a pan-African e-network project which is linking key universities & hospitals.  The project is a gift from the government of India.  To contribute to institution & capacity building, India has welcomed 50K students into its schools. It is forming 17 institutions in Africa, including the Indian-African Institute of Foreign Trade, which will institutionalize the framework for trade & investment.

China’s vice-minister of commerce spoke in Chinese with a bad simultaneous translator again, but I was able to decipher that he made 4 propositions:

  1. Strengthen the international trade & economic order with macroeconomic policies, complete the Doha round of negotiations of the WTO, & safeguard developmental rights.
  2. Direct & focus on cooperation among BRICS countries to maximize their competitive advantages
  3. Intensify investment & promotion
  4. Promote finance, IT, the environment, & SME’s.

BRICS-Africa panel with panelists from Brazil, India, & SA.  SA led off by informing us that SA has the world’s largest radio telescope, which is probing the outer edges of the universe.  It can undo 3k 15” satellite dishes & is 50X more sensitive than it’s nearest competitor.  This provides opportunities in research of high-level technologies & in construction of satellite dishes in SA.  China & India are already members of this 10 member-country international project.

Brazil has been investing in biofuels for 40 years & has the most flexible-fuel cars.  Agrobusiness is huge in Brazil & Brazil leads in the trade of ethanol.  Sudan has implemented Brazilian technology in this area.  This is an example of a positive approach to international cooperation.  The Brazil space agency has experience in working with the Chinese & is offering imaging technologies to SA.  They suggest the way to keep fuel prices low is to focus on clean fuel, simplify complex tax structures, & keep the price of ethanol below that of oil.

India seeks deeper engagement with BRICS countries & believes the key to success is the transfer of technologies.  African countries hold 50% of the world’s resources (I’m not sure which 1’s) & an environment with a free flow of people, goods, & services needs to be created.  India has the workers with construction skills & training-it’s industrialization level is 42%.

CNBC hosted a debate, but it might not have aired yet-here is all I could find  http://www.cnbc.com/id/15840232/?video=3000157571&play=1

The afternoon was completed by an infrastructure breakout panel & the signing of a number of Memoranda of Understanding.  The panel jumped right in to explain how BRICS can help the rest of the continent of Africa.  They’ve invested 4 trillion South African Rand, are working on a World Economic Forum project in Ethiopia, & encourage a focus on localization.

LinkAfrica hired consultants from the US, Terabit consulting, to do a study on fiber optics & the last mile terrestrial connections in Africa.  They signed an MOU with other BRICS countries for foreign trade to create communications on a south-south basis with no northern hubs.  This gets access for BRICS countries to 21 countries in Africa.  Their plan is to build data centers with access to the cloud in Africa.

Brazil’s representative indicated they’ve been in Africa since 1983 & are now active in 14 countries on the continent.  His take was we need to improve the infrastructure network to feed the world.  They are doing that by investing $445B by 2015.

Russia’s Renwa Group has been working in South Africa for 7 years.  Their constraint is in infrastructure in ports.  Their costs double when they must ship their goods 200km from Port Elizabeth to Durban’s port; transportation costs are double their extraction costs.  South Africa’s electricity monopoly is ineffective because electricity costs have risen to 12% of their Gross Margin, & forecasted to become 16% in the next 5 years.

India’s representative indicated that South Africa is India’s 4th largest trading partner.  The Delhi-Mumbai corridor will have $100B invested in it in the next 20 years as 400M people will be moving there in the same time frame.  They are investing $1Trillion in the next 5 years. & seeking $500B from investors right  now.  They privatized their airports 10 years ago, & now they are some of the best in the world.  They are investing in infrastructure funds in a big way.

China’s representative from ZTE was hindered by bad simultaneous translation again.

Pardon the lack of detail in specifics on the speakers, etc.  I tried to snag a program with an agenda but couldn’t pull it off.  I asked the organizers but the bureaucrats have been unresponsive.