• Australia
• Chile
• China
• India
• Japan
• Mexico
• Russia
• South Africa
• South Korea
• Spain
• United Kingdom

International Resources: Global Market Profile: South Africa

As part of its commitment to providing its members with market analysis and insight, PMA has compiled the following information about South Africa from Attaché Reports submitted by the U.S. Department of Agriculture’s Foreign Agricultural Service, as well as the CIA World Factbook, embassy sites, and business etiquette reference guides.

Entering the South African Market

South Africa is one of the most multicultural countries in the world. In urban areas, many different ethnic groups will make up the population. There are major differences in communication styles depending upon the individual's cultural heritage. In addition to the indigenous black peoples of South Africa, colonialism and immigration have brought in white Europeans, Indians, Indo-Malays, Chinese and many more. As such, it is difficult to generalize at all on South African etiquettes and culture due to the diversity.

Due to the diversity, South Africa has 11 official languages. All documentation is presently printed in English and Afrikaans. English is more frequently used commercially and most companies in South Africa are able to correspond in either language. A majority of the white population speaks both languages, as does a considerable proportion of the non-white population. There is some language sensitivity in South Africa, particularly among the Afrikaner population; consequently, many firms print much of their literature, including annual statements, in both languages. You should try to do the same with your literature and proposals. The effort will be appreciated.

Relationships are built in the office and most businesspeople are looking for long-term business relationships. Even though the country leans towards egalitarianism, businesspeople respect senior executives and those who have attained their position through hard work and perseverance. Most South Africans, regardless of ethnicity, prefer face-to-face meetings to more impersonal communication mediums such as e-mail, letter, or telephone. South Africans want to maintain harmonious working relationships, so they avoid confrontations. Don’t be surprised when your counterpart uses metaphors and sports analogies to demonstrate a point.

Women in South Africa have not achieved senior levels in business. If sending a female representative, be prepared to face condescending behavior and to be tested; whereas, a male contact would not. Women need to prove themselves worthy in the South African business world.

Generally, business hours are weekdays from 8:00 a.m. to 1:00 p.m. and 2:00 p.m. to 4:30 p.m. Most offices observe a five-day week, but shops are generally open from 8:30 a.m. to 5:30 p.m. weekdays and from 8:30 a.m. to 1:00 p.m. on Saturdays. Business transactions in South Africa are commonly carried out on open terms with payments being made within 45 to 50 days after bill of lading. However, when working with new clients, irrevocable letters of credit are advisable. Cash against documents arrangements are also used, although there are some risks in these arrangements that make letters of credit a safer alternative for the exporter.

Gift giving is not a common business practice. If being entertained at a South African’s home, it is common to bring a gift. Take time in wrapping your gift, it shows extra effort and is valued. Good gifts to bring to the hostess are flowers, good quality chocolates, or a bottle of good South African wine. When giving a gift, present it with either both hands or the right hand. Never give a gift with the left hand. Gifts are opened upon receiving.

South Africa is a large fresh fruit exporter: 38% of all fruit produced in 2003 was exported. The top three fruits are: oranges, grapes, and apples. South Africa is the Southern Hemisphere’s largest orange exporter. South Africa also exports many citruses.

South Africa is considered self-sufficient in vegetables. The top vegetables exported from South Africa are tomatoes, onions, and cucumbers.

Their top exporting market is to the European Union (significantly with the United Kingdom). Other markets are Russia, the U.A.E. and Japan. South Africa is in more competition with Australia and Chile due to geography than they are with the U.S. Fruit exports to the Middle East have grown in the past few years.

Currently agriculture counts for 2.6% of South Africa’s GDP and 30% of the country’s labor.

Doing Business in the South African Market

First impressions are important. To help bridge the gaps, we suggest that you:

• Upon meeting a South African, normally a hand shake and a smile is appropriate, and leave time for some small talk.
• Dress is more informal, but for a first meeting, it is better to be conservative. Men in dark suits, and women in elegant business suits or a conservative dress.
• It is not required to have a long-standing relationship with business partners, but if you are a new company unknown to South Africa, a formal introduction will go a long way. Personal relationships are important, so from the first meeting try to create a good rapport. This will help prove you are trustworthy.
• Networking is a big part of the South African business culture.
• Always make appointments, even before a business call. Do so as far in advance as possible, because it will better your chances of meeting with higher levels of management.
• South Africans are very punctual, and South African business people make every effort to be on time for appointments.
• Business cards are usually simple, including only the basics such as company logo, name, business title, address, telephone number, and fax number.
• Business meetings can be held over lunch or dinner at a good restaurant.
• You must have developed mutual trust before negotiations can begin. You should start with realistic figures, because South Africans don’t like to haggle over prices.
• If negotiating, do not interrupt a South African.  Also, try to reach a consensus, your counterpart prefers win-win situations.
• Decisions are often made at the highest levels of a company after conferring with subordinates, meaning the process is slow and protracted so be patient.
• Include delivery dates in all contracts, because deadlines are seen as fluid, not as firm commitments.
• When invited to a South African’s home, it will normally be a barbecue, called a braaivleis (roasted meat in Afrikaans) or braai. Be on time for the occasion and ask if you need to bring anything. Dress is normally casual, but ask to make sure. Also offer to help your host with the meal preparation or clean-up.
• Avoid scheduling meetings from mid-December to mid-January and the two weeks surrounding Easter, because this is when most South Africans go on vacation.
• After you meet with your South African counterpart, send a follow up letter summarizing what was decided at the meeting and the next steps.

Consumer Preferences, Tastes, and Traditions

These ideas may help you focus your product approach. Attention to catering to customer preferences is a key to success in the South African produce market.

South African food retailers serve a wide range of consumers. At one end, there are supermarkets very similar to those found in the United States. These shops provide most of the products and services found in U.S. grocery stores like processed foods, packaged meats, and fancy produce. South Africans are also able to purchase organic products and vegetables, which are fast growing segments of the retail food market (led by organic baby food). Many supermarkets serve pre-assembled meal items such as roasted chickens and cut vegetables ready for soup, stir-fry, and salads, while others sell ready-made meals like sandwiches and sushi. At the other end, consumers are also well-served by a thriving informal sector. Spazas are independent grocers that are typically found in townships and generally specialize in staple foods like cornmeal, rice, cooking oils, and meats.

Despite the variety of options available to South African consumers, price sensitivity rules their behavior. A source survey in 2002 found that 47.8% based their decisions on price and 16.9% buy store brand (generic brand) items because they are good value for money. Only 13.4% mentioned quality as a motivator. Products that are successful with store brand labels include milk, syrups, dry pasta, nuts, canned fruits, and jellies.

Although many South Africans choose products according to price, consumers in townships often demonstrate contradictory demands and characteristics. For example, spazas and other informal shops tend to only supply leading brand items because their customers demonstrate strong brand loyalty. Adding to this trend is the fact that the black population’s buying power is increasing. At the same time, product attributes that may help a product succeed in township markets are less expensive and/or single service package sizes and ambient-stable products that do not require refrigeration.

Export Business Reminders

Before coming to South Africa, use the many sources of information, for example, the U.S. Foreign Agricultural Service, state agricultural offices, and state/regional trade organizations.

• Build at least a minimum team within your company to help on the South African market.
• Use metric terms.
• Ensure that all sales documentation is correct.
• Be patient regarding requests for documentation, ingredients lists, production process, and quality assurance.
• Respond to such requests with diligence and in a timely fashion.
• Use letters of credit to reduce risk.
• Hedge export values with your U.S. bank if you are concerned about exchange rate risk.
• Set up wire transfers for payments.

Food Standards and Regulations

Food standards are set by the Directorate of Plant Health & Quality with the National Department of Agriculture responsible for setting standards for certain agricultural and agricultural related products.

Food labeling is determined pursuant to the Foodstuff, Cosmetics & Disinfectants Act of 1972. Labels must include: a) the name of the product b) name and address of the manufacturer, packer, seller, importer, or person on whose behalf the foodstuff is pre-packed c) a list of ingredients in descending order (of mass) under heading “ingredients” d) a written label in at least one of the official languages of South Africa (English is one such language) e) instructions for special storage conditions, when applicable f) the product’s country of origin.

Check out the 2006 GAIN Report for import regulations and standards.  

Advantages and Disadvantages to doing business in South Africa

Information: Import/Export

Agricultural imports from all countries (2003, in millions): $1,754, U.S. market share: 8%.

Consumer food imports from all countries (2003, in millions): $508, U.S. market share: 6%.

U.S. Exports to South Africa

*Calendar Year and Year-to-Date Comparison (In Thousands of Dollars)

U.S. Imports from South Africa

*Calendar Year and Year-to-Date Comparison (In Thousands of Dollars)

Trade Agreements

South Africa is a part of the South African Customs Union (SACU). Talks surrounding the pending Free Trade Agreement with the United States, which began in 2003, failed again in April of 2006. The two countries have instituted “Trade Investment Cooperation Agreement" (TICA) - the first of its kind. The TICA sets up a mechanism for developing work programs in areas that could lead to memoranda of understanding around certain areas typically included in an FTA like customs, trade facilitation and even intellectual property. The main objective seems to be to lead SACU governments back to the FTA negotiating table once the areas of greatest difficulty have been worked out.

South Africa Annual Exporter Guide

http://www.fas.usda.gov/gainfiles/200507/146130273.doc

Information regarding:
a) market structure/trends available page 10 of the guide
b) retail sector also available page10 of the guide

South African Related Links and Resources

Currency - the currency of South Africa is the Rand, which is divided into 100 cents. Use the free currency converter to compare to dollars, British Pounds, etc.

Weather - visit Yahoo!'s up to date Weather for South Africa.

News - check out all the latest Google news on South Africa.

Intercultural Know-How - use the Intercultural Business Communication tool for tips.

Dialing Code - the international dialing code is +27.

Time -South Africa is +2 hours GMT. Find out the current time.

History - read about the long and rich history of South Africa.

Government Resources

• South African Department of Agriculture:  http://www.agric.za/
• U.S. Embassy and Consulates in South Africa: http://pretoria.usembassy.gov/
• Background Notes on South Africa
• The three agencies tasked with developing and enforcing food safety standards in South Africa are:
  • The Department of Health (DOH)--Directorate of Food Control  (DFC)
  • The Department of Agriculture (DOA)--The Sub directorate Agric Product Quality Assurance (SAPQA) and the Directorate of Plant Health and Quality (PHQ). http://www.nda.agric.za/docs/npposa/default.htm
  • South African Bureau of Standards’ (SABS)--Directorate of Regulatory Affairs and Consumer Protection.