India - South Africa: Synergizing for a Better World

Global Gateways Report Series is an initiative by SMEStreet for highlighting global business opportunities for Indian SMEs. ICICI Bank is supporting this initiative by sharing this report among their esteemed Business Banking Customers and WASME is Knowledge Partners for this initiative. Kaspersky Labs is the facilitator of this report.

SMEStreet Special Report on Economic Potential & Prospects between India & South Africa . This is an Opportunity Report for Indian MSMEs

Historically India has a special place in South Africa. The linkages started with old times however, the South African struggle for freedom, during which Mahatma Gandhi started his Satyagraha movement in South Africa is known to the world.

India was at the forefront of the international community in its support to the antiapartheid movement; it was the first country to sever trade relations with the apartheid Government (in 1946) and subsequently imposed a complete - diplomatic, commercial, cultural and sports - embargo on South Afica. India worked consistently to put the issue of apartheid on the agenda of the UN, NAM and other multilateral organizations and for the imposition of comprehensive international sanctions against South Africa.

India’s relations with South Africa were restored after a long gap of over four decades with the opening of a Cultural Centre in Johannesburg in May 1993. Diplomatic and consular relations with South Africa were restored in November 1993 during the visit of the then South African Foreign Minister Pik Botha to India. Since Parliament in South Africa meets in Cape Town, a permanent office of the High Commission was opened there in 1996, which has been re-designated as Consulate General of India with effect from January 2011. In addition to its High Commission in Delhi, South Africa has a Consulate General in Mumbai.

Recent Developments Between India- South Africa

Recently, Hon’ble Prime Minister Mr. Narendra Modi met with South African President Mr Jacob Zuma on the sidelines of the BRICS Summit in Fortaleza in Brazil in July 2014, on the sidelines of the G20 Summit in Brisbane, Australia in November 2014, on the sidelines of the 7th BRICS Summit in Ufa, Russia on 9 July 2015 and on the sidelines of the third India-Africa Forum Summit in New Delhi on 28 October 2015.

However, Prime Minister Modi made a multi country visit in July 2016 visited Mozambique, South Africa, Tanzania and Kenya..

From 8^th to 9th July, Mr Modi was in South Africa and met President Jacob Zuma and other senior leaders across the political spectrum. The meeting was aimed at enhancing relations between India and South Africa.

With South Africa we cooperate and work closely, also in multilateral forums like BRICS, IBSA, G-20 and BASIC. The Prime Minister also visited Johannesburg, Pietermaritzburg and Durban during the visit.

The visit of the Prime Minister to the African mainland reflects India’s desire to further strengthen and reinvigorate bilateral ties with African partners which were renewed at the successful IAFS-III in October last year. The visit provided opportunities to build on close contacts at the highest political level and enhance mutual cooperation and understanding on major issues of common interests.

IBSA & BRICS Initiative

On June 6, 2003, the Foreign Ministers of India, Brazil and South Africa met in Brasilia and agreed to set up a Dialogue Forum for regular consultations. Subsequently, in 2006, this was upgraded to Summit level; five Summits have been held so far, the last in Pretoria in October 2011. IBSA Trilateral Ministerial meeting was held in New Delhi in March 2011. 16 Sectoral Working Groups have been established in areas such as health, agriculture, education, human settlements, S&T and defence.

South Africa was also admitted as a member of the BRICS grouping and attended the BRICS meeting held in April 2011 at Sanya, attended the BRICS Summit held in March 2012 in New Delhi and South Africa hosted the 5th Summit at Durban in March 2013. Thereafter, BRICS Summit was held in Fortaleza, Brazil in July 2014 and 7th BRICS Summit was held in the Russian city of Ufa in July 2015. India is the current BRICS Chair.

Commercial & Economic Relations Between the two Nations

Commercial relations have flourished since the establishment of diplomatic relations in 1993.  During the visit of President Zuma to India, both sides agreed to work towards a target of US$ 10 billion in bilateral trade by 2012. The trade target was revised to US$ 15 billion by 2014 during the visit of the then Commerce and Industry Minister in January 2011 to South Africa as the bilateral trade target was almost achieved in FY 2011-12. India’s imports from SA in 2012-13 and 2013-14 declined mainly due to restrictions on gold imports by GOI and hence, the target of US$15 billion could not be achieved. Recent bilateral trade figures are as follows:

Source: Ministry of Commerce, GOI

There is substantial potential for trade growth between the two countries.  Exports from India to South Africa include vehicles and components thereof, transport equipment, drugs and pharmaceuticals, engineering goods, footwear, dyes and intermediates, chemicals, textiles, rice, gems and jewellery, etc. Import from South Africa to India include gold, steam coal, copper ores & concentrates, phosphoric acid, manganese ore, aluminum ingots & other minerals.

Major Indian investors in South Africa include Tata (automobiles, IT, hospitality and ferrochrome plant), Mahindra (automobiles) and a number of pharmaceutical companies, including Ranbaxy and CIPLA, as well as IT companies and some investments in the mining sector. There is also growing South African investments in India led by SAB Miller (breweries), ACSA (upgradation of Mumbai airport), SANLAM and Old Mutual (insurance), ALTECH (set top boxes), Adcock Ingram (pharmaceuticals), Rand Merchant Bank (banking). First National Bank, a leading bank of South Africa opened its branch in Mumbai in April 2012. Annually approx. 1.2 lakh Indian tourists visit South Africa while approx. 60,000 South African tourists visit India.

Recent MoUs Signed

7 Key Corporate MoUs Signed At South Africa-India CEOs Forum 2016

Top business leaders from India and South Africa during PM Modi’s July 2016 visit signed eight memorandum of understandings (MoUs) leading to increased cooperation in a wide range of areas between the two nations.

The MoUs were signed at the South Africa-India CEOs Forum on the sidelines of Prime Minister Narendra Modi's maiden visit to Pretoria aimed at further bolstering cooperation on economic, political, social and international areas.

Here are some of the key MoUs

1. Hindustan Zinc Limited signed two MoUs with Minova Africa for development and supply of rock support systems for underground mining in India; and with Feremel for the supply and maintenance of underground mining equipment to improve safety, efficiency and productivity in modern mechanised underground mines.

2. MMI Holdings and Aditya Birla Nuvo signed an MoU to form a Joint Venture in the health and insurance sector in India.
3. India's Ion Exchange Safic, a leading waste and water treatment company with a presence in South Africa, will collaborate with Stefanutti Stocks SA in large scale water and effluent treatment projects in South Africa.
4. SAAB Grintek Defence and Tata Power signed an agreement for production of land electronic defence systems in India.
5. An MoU signed between Pioneer Global Enterprises of India and Armscor to produce ultrasonic broken railway detector systems for Indian Railways also includes an emphasis on technology transfer.
6. Gordon Institute of Business Science has signed an MoU with ISB Hyderabad to collaborate on a senior executive programme, student exchange, faculty exchange and joint research.
7. The biggest MoU is signed between the Dube Trade Port in Durban and Cipla India, which will see a Rand 1.3 billion biosimilar plant being set up in the special export zone to produce cheaper drugs for local government and private sector supply as well as export.

Areas of Potential Synergy

The areas of cooperation in these include Information Communication Technology, Tourism, Sport, Culture, Grassroots Innovation, Renewable Energy, Audio-Visual and Visa Simplification Procedures.
One of the best prospects for exporters to South Africa is seen in capital goods such as heavy machinery, though opportunity exists in a wide range of consumer products such as electronics equipments and services as well. Some of the other sectors are Electrical/Electronics Power Systems, Telecommunication Services, Aviation, Automotive Parts/Service Equipment, Transportation, Infrastructure and Civil Construction, Franchising, Alternative Energy, Safety/Security Equipment, Pollution Control Equipment, Mining Equipment, Medical Equipment, Telecommunications Equipment and Information Technology.

Investment Opportunities in South Africa

The South African economy is mainly based on private industries and enterprises even though the government participates in many ways. Through the Industrial Development Corporation, the government started and controlled a wide range of public corporations, many relating to industrial infrastructure. During 1990s the government partially privatized airlines and telecommunications despite fierce opposition from various trade unions. The official economic policy has continues partially or completely privatizing many public enterprises.

The total inflow into South Africa through the FDI for the following years has been listed below.

South Africa holds a wide range of natural resources thus giving it a lot of opportunities for industries like agriculture, mining, energy, tourism etc.

Opportunity in Agriculture Sector

The climate in South Africa helps in growing many different crops.The province with the most varied and prolific agricultural sector is the Western Cape. There is a massive export of wine by South Africa which is now the 5th largest producer worldwide. Deciduous fruit is also of major importance which includes grapes, apples, cherries, pears, peaches, citrus and other fruit being exported in great quantities with the majority being exported to Europe. There is a great amount of wheat production in the region Mpumalanga and the Free State. The Free State has the highest production in maize which is considered a staple food in South Africa. The Karoo inland region provides for good opportunity for livestock farming, sheep farming. Cattle farming is popular amongst the locals and flourishes more in the more well watered eastern areas of South Africa. The province of Western Cape is famous for its ostrich farming along with an extensive dairy farming in the Garden Route area just to the south. Sugarcane farming is mainly done on the KwaZulu-Natal coast along with other subtropical fruits such as mangoes, papaya, bananas and melons being extensively cultivated in KwaZulu-Natal, Limpopo and Mpumalanga Thus the great variation in the climate of South Africa provides great opportunity for agriculturists.

Opportunity in Mining Sector

South Africa has a large amount of gold, silver, coal deposits.South Africa’s mineral wealth is found in diverse geological formations, some of which are unique and extensive by world standards. Some of the country’s minerals include:

Gold: the unique and widespread Witwaters Rand basin yields some 96% of South Africa’s gold output.

Diamonds( in Kimberliters, Alluvial and marine deposits): the country is among the top producers of Diamonds.

Titanium: Heavy mineral sand occurrence containing titanium minerals are found along the coastline.

Manganese: enormous reserves of manganese are found in the sedimentary rocks of the Transvall super group.

Platinum: group metals (PGMs) chrome and vanadium- these minerals occur in the Bushveld Complex in Mpumalanga, Limpopo and northwest. More than half of the world’s chrome and platinum reserves are in this deposit

Opportunity in Energy Sector

The African Development Bank has approved a R100-million investment in the evolution of One Fund which will be the first specialized private equity fund on the acceleration and deployment of clean energy and sustainable technologies across southern Africa.The 10-year private equity fund which is managed by Cape Town based inspired Evolution Investment Management will make equity and equity-related investments in sustainable projects and companies with the aim of not only achieving carbon reductions but also ensuring the sound environmental, social and economic performance of these investments.

Opportunity in Telecommunication

South Africa is considered one of the leaders of the telecommunications in the African continent. It has 4.03 million installed exchange lines which represents around 100 lines for every 1,000 inhabitants(approximately).There is a  large transmission area necessitated by the country geographical spread of 1,2 million sq km utilising 125 million km of transmission circuits. The optical fiber and digital micro are the main transmission media for the network interconnecting all the major centres.

In the coming years the current 4.03 million exchange lines is expected to grow around 7 million out of this 2 million would be additional lines and will be aimed at increasing telephone penetration in under-serviced urban and rural areas. The remaining 1 million lines will cater for growth in developed areas.

The 7th session of the India-South Africa Foreign Office Consultations was held in New Delhi in January 2015. It was co-chaired by Shri Vinay Kumar, the then Joint Secretary (E&SA) from Indian side and Amb (Dr) Anil Sooklal, Deputy Director General: Asia and the Middle East, Department of International Relations & Cooperation (DIRCO) from South African side. The 8th session of the Foreign Office Consultations was held in Pretoria in May 2016. It was co-chaired by Ms (Dr) Neena Malhotra, Joint Secretary (E&SA) from Indian side and Amb (Dr) Anil Sooklal, Deputy Director General: Asia and the Middle East, DIRCO from South African side.

Indian Community

The major part of the Indian origin community came to South Africa from 1860 onwards as farm labour to serve as field hands and mill operatives in the sugar and other agricultural plantations of Natal (which was then a British colony). Most of these initial migrants were from Tamil Nadu and Andhra Pradesh with some from eastern UP and Bihar. A second wave of Indians came after 1880. These were the “passenger Indians” – so-called because they paid their fares as passengers on board a steamship bound for South Africa. This was the community of traders who mainly hailed from Gujarat.

The South African Indian origin community numbers around 1.5 million and constitutes about 3% of South Africa’s total population. About 80% of the Indian community lives in the province of KwaZulu Natal, about 15% in the Gauteng (previously Transvaal) area and the remaining 5% in Cape Town. South Africans of Indian origin are well-represented in Government, business, media, legal and other professions. The year 2010 marked the 150th anniversary of the first arrival of Indians in South Africa. 2014 marked 100 years of Gandhiji’s final departure to India from South Africa; he reached India on 9th Jan 1915; this date is now commemorated annually as Pravasi Bhartiya Divas.

Export Import Data Bank
South Africa

Dated: 29/09/2016
Values in Rs Lacs

Country:  SOUTH AFRICA

Note:Since 2006-07, Petroleum figures are being computed from
Import Daily trade Returns (DTRs) to genetate country-wise/port-wise tables.
Up to 2005-06 consolidated petroleum import figures were being received from
the Petroleum Ministry.

Useful Resources

Website of High Commission of India: http://www.hcisouthafrica.in/

Department of Commerce, Government of India