South Africa-Vietnam: Harnessing great potentials

Update: 12:05 | 12/09/2019
TGVN. In an interview with The World & Vietnam Report, South Africa's Ambassador to Vietnam Mpetjane Kgaogelo Lekgoro said that South Africa - Vietnam economic cooperation has great potentials. When doing business in South Africa, Vietnamese businesses have opportunities to access to a market of 1.2 billion people.
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South African Ambassador to Vietnam Mpetjane Kgaogelo Lekgoro.

Could you share with us the potentials of the South African market for Vietnamese businesses and the Vietnamese market for South African businesses?

Trade between the two countries is sound with significant potential that still remains to be tapped. Following the impact of the 2008 Global Financial Crisis, which also impacted negatively on South Africa - Vietnam trade relations, total bilateral trade has steadily improved from 716 million USD (2012) to 1,5 billion USD (2016), before slowing to 1,04 billion USD in 2018, with a healthy trade balance in Vietnam’s favour.

South Africa, with a population of over 56 million, is Africa’s most developed economy and already an important market for Vietnamese enterprises, but with huge untapped potetials. It is home to an abundance of resources, well-developed financial, legal, communications and transport sectors, a stock exchange that ranks among the top twenty in the world and a modern infrastructure supporting an efficient distribution of goods to major urban centres throughout the southern African region.

During the 12th Extraordinary Summit of the African Union (AU) held in July 2019, the African Continental Free Trade Area, (AfCFTA) was officially launched into its implementation phase, after 54 African countries signed the agreement and 27 countries ratified it.

Trading under the terms of the AfCFTA is intended to come into effect on July 1st, 2020. Africa will become the world‘s biggest Free Trade Area, connecting 1.2 billion people into a single bloc where products will be manufactured, bought and sold between countries, without any trade tariffs. This means if a company in Vietnam does business with a South African counterpart, that company can have an opportunity of tapping into this big market.

With regard to the potential for South African businesses in the Vietnamese market, Vietnam is one of the fastest growing economies in Southeast Asia. As the demands for goods and services expand, South African businesses could look into Vietnam for joint ventures in construction, financial services, and food chains sectors.

What are South Africa’s investment policies to attract international investors?

President Ramaphosa has made reviving South Africa’s economy a top priority and has unveiled a stimulus and recovery plan, which earmarks funds for job creation and infrastructure development. The Government is determined to build a country that is driven by enterprise and innovation, to develop an economy that is diverse, resilient and prosperous, as well as creating companies that achieve sustained returns not only for their shareholders, but also for the workers and the supportive communities.

South Africa is reviving the most productive economic sectors in the country, which include the automotive industry, as well as clothing and textiles, gas, chemicals, plastics, renewables, steel and metal industry. We are reinforcing our agriculture and agroprocessing industry by supporting key value chains, and we are developing new markets to bolster the mining sector for South African minerals through targeted beneficiation. The government undertook to elevate local industrial parks, business centres, and digital hubs.

South Africa is improving the ease of doing business, so new companies could register within a day, and the turnaround time for permits and licenses should be less than 6 months.

South Africa provides active support for investors by providing a wide range of comprehensive suite of tax incentives for investment in Special Economic Zones (SEZs). These include a preferential 15% corporate tax rate, employment incentive, a building allowance, a Valued Added Tax (VAT) and customs duty suspension in customs-controlled areas. Financial assistance can be provided by state-owned development finance institutions (DFIs) such as the Industrial Development Corporation (IDC), the Development Bank of Southern Africa (DBSA) and the Land Bank.

In addition, South Africa offers a One Stop Shop (OSS) service to all investors. The One Stop Shop is a focal point of contact for all investors to facilitate the relevant government departments involved in regulatory, registration, permits and licensing.

The Composition of South Africa’s GDP is similar to those of developed economies as it is diversified and positioned to generate sustainable long-term returns on invested capital. Inward Foreign Direct Investments have traditionally been dominated by European investors, particularly from the United Kingdom. However, in recent years, there has been a fast-growing presence of Asian investors, predominantly from China and Japan.

Thank you so much!

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(TGVN)