(Investment Banking Coverage, Energy, Utilities and Infrastructure (Africa, incl. South Africa)
Thomas Orr Poster
Say Ni Hao (Hello) to Opportunity
Everyone knows Beijing has nine million bicycles but did you know that cars are now so cheap in China that there are currently 4.5million in the city and that number is increasing at a rate of 1100 a day.
Food for thought? Thomas Orr thinks so. It is just one indication of China’s phenomenal rise.
Although currently Standard Bank’s Manager in the Investment Banking Client Coverage Department; covering the Energy, Infrastructure and Utilities Sector; Africa-wide focus, Orr was stationed in the bank’s Beijing Office for 18 months as Manager in the ICBC Strategic Partnership team.
Speaking at one of Rhodes University Investec Business School’ (RIBS) April business forums, Orr helped make sense of China's rise, spelling out the challenges and opportunities it held for South African businesses.
China has made some startling advances over the past decade. Its economy has grown at an average of 9.5% for the past 30 years, a growth that has “lifted 250 million people out of poverty”. While, on a per capita basis, Orr says China is still much poorer than South Africa, there are many lessons to be learnt from this phenomenal growth.
He said China had invested heavily in resource assets in Africa (oil, copper, iron ore), and Africa now supplied China with one-third of its total oil imports.
Not only has China invested heavily in Standard Bank (ICBC owns 20% of the Standard Bank Group), but Chinese companies have also invested in the South African mining sector and real estate while South African companies such as SAB Miller, SASOL, and MIH (Naspers) have made significant investments in China.
China’s aggressive growth held challenges for South Africa, but also huge opportunities, said Orr. One of the greatest challenges the country faced was staying competitive in a globalised world. The erosion of domestic manufacturing capacity was leading to job losses, he warned. The textile sector had been “decimated” by imports from China and elsewhere. “We need to adapt and up-skill to become competitive.”
South Africa also faced serious competition from Chinese companies and products, especially in the African construction sector. He warned that South Africa also had to overcome its “inherent fear of the foreigner”, and realise that “globalisation is not neo-colonialism”.
But challenges aside, he said China’s strong and sustainable appetite for commodities could underpin South Africa’s mining sector, which would be crucial to the South African economy. “But infrastructure challenges are preventing us from fully benefiting from this opportunity. We need to get our resources to markets and this requires infrastructure.”
He said there was also a “huge and largely untapped market” for non-mining exports such as fruit and wine. And the good news about importing quality “Made in China” goods was that it could keep our inflation under control, especially in the high-tech equipment and infrastructure capital goods sectors.
Orr said that during the current era of tight liquidity, Chinese financiers could provide the debt and equity capital that South African companies needed to grow and Chinese construction companies had the finance and the skills to help Africa repair its “infrastructure gaps”.
Chinese people also loved to travel and Chinese tourists could boost economic growth and employment. South Africans simply had to say Ni Hao and take advantage of the opportunities offered.