Exporting and Importing: Doing Business with South Africa - Term Paper Example

? Exporting Importing: Doing Business with South Africa Details: al Affiliation: Submission Exporting / Importing: Doing Business with South Africa 1. Important cultural determinants concerning doing business with South Africa Cross-border businesses oftentimes encounter cultural stopovers characterized by unique personalities with unfamiliar languages, value systems, beliefs, and behaviors. In the mix are fundamental display of consumption driven lifestyles and enduring norms that greatly influence the dimension of any given international business. From the simple straightforward, verbal communication to the mannerism of body language, South Africans have a deep running cultural markers evolved over many centuries. Indeed as it is unlike the political, legal, and economic systems that are far more readily available for quick cross examination, the influences of culture on international business are complex and broad, incorporating a range of explicit interpersonal exchanges as well as value-chain operations right into the product and service design to the last point of customer contact, sales. Commonly referred to as The Rainbow Nation–a symbolic expression of a level head maturity of a multicultural diverse population with a troubled past marked by a separatist ideology of apartheid, South Africa stands on a uniquely sensitive but emerging fertile ground characterized by accommodative co-existence (Hamann, Khagram, & Rohan, 2008). Consisting of the Black Africans (79%), Whites (9%), Indian/Asian (3%) and the Colored (9%), the country harbors an incredibly rewarding business environment (Irwin, 2011). It is, however, a market that requires considerable understanding, time and effort for proper navigation. Patience is thus a key ingredient for success. Depending on the varied sectors of interest, entrepreneurship in South Africa­–much like elsewhere the world over–demands thorough networking and relationship-building. Though English is the official business language in this particular country, with many of the legal and tax customs modeled along the Anglo-Saxon modus operandi, identity, as insinuated above, is nonetheless firmly rooted in ethnicity, thus making acquisition of cross-cultural proficiency more of a necessity (Enterprise Ireland, 2012). Each of the ethnic groups mentioned exhibits distinct cultural and linguistic traits complete with some form of religiosity. Accordingly, there exist significant communication differences depending on individuals’ cultural descent. Majority of the black English-speaking South Africans, for instance, are more reserved, conservative and always weary of conflicts of interests in their language of communication, at least as demanded by their heritage of origin. In contrast, the whites are descriptively liberal, more direct and explicit in their approach to communication, especially where the objectives are forthright and honest. Noteworthy, personal engagements are valued and are at most preferred as opposed to email, letter and/or telephone messages. Advantageously, scheduled face-to-face meetings serve a very important function of establishing rapport and gauging mutual trust between parties involved in hammering business deals (Enterprise Ireland, 2012). Generally, polite and formal manner of address is observed across the ethnic divide. ‘Ubuntu’–a traditional African concept that denotes a humanist philosophy of mutual respect, interdependence, unity, team work and responsibility forms the hallmark of inter-personal engagements. While their [South Africans] approach to time management, which is key in certain aspects of business decisions, is somehow relaxed, the reasoning is understandable; business deals are carefully thought through. Engagements must therefore be dealt with sensitively to avoid sending the wrong signals. Where appropriate, pressure should be applied selectively and tactfully to cultivate the needed trust, for this is what all businesses strive to achieve. Even though cultural values of South Africans seem somewhat similar to those of the west, it is important to communicate effectively, ironing out any gray areas open for misunderstanding. Sticking to the main business objectives while dealing with prospective clients/partners is a more preferable approach [in fact, a necessity] in working with South Africans, as opposed to complete dominance, which only reminds of a soiled history. Notably, many South Africans are welcoming, and may expect friendly an atmosphere devoid of rigidities in return. While most companies the world over task decision making with the top leadership, South Africans preferably are more at home with consultative decision in accordance with the general African culture; a culture that well defines the idea of collective responsibility. Even so, respect for senior executives and colleagues is observed, particularly where such positions are earned. For the most part, it is deemed highly offensive if proper respect for an elder is not shown. For this reason, stereotypical assumptions are, at best, not allowed in business settings as they may cause offense, especially for those in the rural set ups. The overall aim of business negotiations is building the always elusive consensus. A firm handshake is advisably important, both at the start and at the end of negotiations. On the whole, none would want to be the underdog in business (Enterprise Ireland, 2012). Confrontations and aggressive bartering off a fair, win-win deal, just like anywhere else, may be costly and should be avoided at costs. Finally, South Africans prefer dealing with familiar faces. Consequently, letters of introduction from known third parties may well help in reaching key decisions in time speedy progress. Doing business in South Africa is without doubt conditioned by the legacy of apartheid. As one of the fastest growing economies in the modern world, it is moderately fair enough to adapt to their [the South African] way of life by adhering to ethical aspects that took a back seat in their painful historical past; “For a business that makes nothing but money is but a poor business” (Venter, 2008). Apparently, the cultural aspects, such as ‘Ubuntu’ and the associated connotations which bear significant influence in conditioning employees’ behavior in the workplace are geared towards creating a favorable environment where all can participate in harmony (Irwin, 2011). For the law abiding individuals keen on making just wealth in an environment where non-discrimination and equal opportunities is guaranteed, South Africa fits the description of an investment destination with enormous potential in all aspects. 2. Important governmental, compliance management, and security requirements concerning doing business in South Africa Though mentioned in the foregoing paragraphs, it is important to reiterate that South Africa’s checkered chapters in the history books gives meaning to almost every undertaking within its borders, and business is no exception. What soiled the country’s image before the international community–apartheid– is now regarded as a strength fashioned to power synergy. Like all the other countries on the planet earth, doing business in South Africa follows the almost natural steps of acquiring business permits. Unlike other nations with almost straight forward entries, however, the broad based Black Economic Empowerment (BEE), a government policy that aims at accelerating the participation of the hitherto sidelined people of the black race, sets the country’s investment environment apart. While it may seem legally binding only on the state owned enterprises, BEE is more of a necessary requirement for investors; for disregarding the noble initiative comes with a heavy, indirect penalty of losing out on plum contracts open to those entrepreneurs wishing to do business with the government (Du Toit, Kruger, & Ponte, 2008). For the investors with desire of tapping on the massive unexploited potential in South Africa, BEE is but a hidden risk to cater for in advance. To be clear, The Public Finance and Procurement Act of 1999 actually prohibits the state and its associated corporations from granting tenders and/or entering into partnerships with businesses that are not sufficiently in compliance with the legislation. It is also important to note that In spite of the heightened incentives to invest in the Rainbow Nation, opportunities only fall into place for those with the knowledge of navigating the obvious hazardous thicket. That South Africa offers a unique combination of a highly developed world class economic infrastructure with a vibrant promising market economy is not in doubt (Kruger, 2011). Nonetheless, the knowledgebase is still not up to speed with those of the developed world. Investors, thus, have to contend with shortage of skills in certain key areas, which must be properly taken care of for effective takeoff. Additionally, a thorough scrutiny of the available opportunities, adjusting to the basic conditions of Employment Act, 1997 adds weight to the challenges of doing business in South Africa. Negating all the optimism is not an option though, for business must abide by certain rules. 3. Action steps towards initialization of export / import activities in South Africa BUSINESS GUIDE TO EXPORTING 1. Market Research: Selection of the product(s) to be offered for trade on the international market of South Africa. Delineating the short and long-term objectives of the business in terms pricing, value addition , demand and profit margin [the guiding principles of whether to proceed with intentions or not] 2. Proper analysis of the overseas target market in terms of Export Controls / Licensing Requirements Demographic Factors Political Factors Economic Factors Social / Cultural Issues Market Access Issues [business certification] Local Distribution, Marketing and Production Practice Product Potential Evaluation [What sets the product(s) offered for trade unique for an overseas market? Is there enough inventories to participate and sell overseas?]. 3. Target Market Evaluation [Identification and Selection] Narrowed down to fewer market targets as much as possible with promising results. Prioritizing target markets offering a combination of potential and ease of access 4. Finding overseas partners [agents and/or distributors] to offer a steady stream of business. choice of market entry [through an agent, a distributor, value added reseller or direct retailing to end users] Identifying the overseas partners and/or buyers [consulting agencies may help with a databank list for networking overseers] Ensuring partner with experience in the preferred industry is selected 5. The export transactions Establishing a relationship with banks offering full international trade support Choosing Freight Companies with the capability to safely deliver the specified products to the required destination Careful calculation of export pricing strategy to guard against unforeseen costs that can quickly turn the business into net miseries [Sales Forecast, overhead expenses, and projected income analysis] 6. Readiness to Export Assessment 4. Recommendations on the governmental/private assistance to streamline the export trade China has officially overtaken the United States as the world's leading trading nation in goods, cutting to size centuries of the latter’s competitive dominance (Inman, 2013). Contributing to China’s newfound status has been aggressive investment in export credit assistance surpassing such initiatives by the US in leaps and bounds. The US Export trade has been a rare spot in an otherwise sluggish economy; only improving by slight margins over the years, yet the weight over the overall economic growth is roughly half (Ezell, 2011). Narrowing the huge trade deficit critically depends partly on expanding governmental export credit financing efforts, particularly through Export-Import Bank’s activities to enhance US exporters’ competitiveness in a global markets where competitors enjoy aggressive funding support from their countries’ export credit agencies. References Du Toit, A., Kruger, S. & Ponte, S. (2008). Deracializing exploitation? Black economic empowerment in the South African wine industry. Journal of Agrarian Change, 8(1): 6–32. Enterprise Ireland. (2012). A Guide to doing business in South Africa. Retrieved from http://www.enterprise-ireland.com/EI_Corporate/en/Export-Assistance/Market-Research-Centre/Access-South-Africa.pdf Ezell, S. J. (2011). Understanding the importance of export credit financing to U.S. competitiveness. Retrieved from http://www.itif.org/files/2011-export-credit-financing.pdf Hamann, R., Khagram, S., & Rohan, S. 2008. South Africa’s charter approach to post- apartheid economic transformation: Collaborative governance or hardball bargaining? Journal of South African Studies, 34 (1), 21–37. Inman, P. (2013, Feb 11). China overtakes US in world trade. The Guardian. Retrieved from http://www.theguardian.com/business/2013/feb/11/china-worlds-largest-trading-nation Irwin, J. (2011). Doing Business in South Africa: An overview of ethical aspects. London: Institute of Business Ethics. Kruger, L. P. (2011). The impact of black economic empowerment (BEE) on South African businesses: Focusing on ten dimensions of business performance. Southern African Business Review, 15 (3), 207-233. Venter, W. (2008). Ubuntu and social capital factors in family businesses. SAJESBM NS, 1 (1), 66-93. Read More