Once again this year, the U.S. Commercial Service—through its locations in American Embassies abroad—has recruited several foreign buyer delegations under its International Buyer Program to attend POWER-GEN International 2009. Recruiting one of these delegations is Bheki Ndimande, Commercial Specialist at the U.S. Embassy in South Africa, who recently discussed power sector opportunities in the growing South African market.
Q: Could you tell us about the South African delegation to the Power-Gen International 2009 Show?
A: The U.S. Commercial Service South Africa will lead a delegation of about 15 business representatives to Power-Gen 2009. These small and medium sized companies represent the engineering, architectural, electrical generation equipment and project management sectors.
Q: Why should U.S. firms be looking at the South African market?
A: South Africa's power utility Eskom supplies over 80 percent of the country's power and rolled out a budget of about $48 billion to build greater power generating capacity over the next five years. U.S. firms should position themselves to take advantage of the opportunity to supply relevant technologies to Eskom by establishing relationships with existing local suppliers to the utility. According to the South African Government (SAG), 30 percent of all new build power generation will be the responsibility of independent power producers (IPP's). IPP's will have the opportunity to build the extra capacity and provide South Africa access to international best practices.
Q: Do U.S. power products have any type of competitive edge over products from other countries? What perceptions do your delegation members have about these types of products from the U.S.?
A: South Africa comes from the history of isolation because of its past policies of segregation. During this period, the U.S. imposed sanctions on South Africa, which saw all U.S. companies withdraw their involvement the country. As a result of this, the power generation sector is dominated European firms. The introduction of IPP's to take responsibility of 30 percent of all new build capacity gives U.S. firms an opportunity to compete on an equal footing with established European companies. In addition, the Euro/US Dollar exchange rate gives U.S. firm's an added advantage over their European competitors.
Q: What are some challenges associated with selling to South Africa?
A: Eskom essentially operates as a monopoly, and the market has a limited number of IPP's. The power that IPP's generate is still sold to Eskom for transmission and distribution, and this arrangement is likely to remain in force for the foreseeable future.
In the past 28 years, European suppliers (e.g., ABB and Siemens) have enjoyed considerable success with Eskom process control systems business. Many U.S. companies pulled out of the South African market in the late 1970's for political reasons and are only now beginning to engage in the South African energy market on an equal footing again.
The South African Government introduced the Black Economic Empowerment program (BEE) post 1994 introduction of a democratic government. The purpose of BEE is to bring the previously disadvantaged people in the main stream of business. When selling to the government, BEE requires that international suppliers to utilities partner with local black owned companies to encourage skills transfers and promotion of small enterprises.
Q: What are some tips for U.S. businesses looking to sell to South Africa?
A: Although BEE compliance does not preclude international businesses to bid on public tenders, it is advisable that they plan on embracing the requirements of the BEE regulations – sale of equity to a local partner or involvement in equity equivalent activities (i.e. training, skills transfer, social responsibility, etc).
Opportunities for U.S. exporters and investors in South Africa reflect the growth of its consumer base and its efforts to upgrade and develop its infrastructure to match and further fuel its economic growth.
South Africa is the biggest economy in Africa and serves as a springboard to introducing international business to the rest of Africa. Since the establishment of democracy in 1994, South Africa has seen an overwhelming interest from international companies. As a result, the economy has access to the rest of the world, making pricing one of the determining factors of market entry.
Q: What are some benefits to U.S. businesses and foreign buyers in having your delegation at the show?
A: Big businesses have a solid presence in South Africa. However, U.S. small and medium-sized companies will benefit greatly from meeting with our South African delegation. American companies will come away with a better understanding of the intricacies of doing business in South Africa and possible partnerships that can position them to take advantage of the South African and African market. In turn, South African buyers will be exposed to relevant U.S. technologies and have a chance to form alliances with U.S. business.
Q: Can you provide some contact information and resources for U.S companies who want to learn more about market opportunities in this sector?
A: As the gateway to Africa, U.S. Commercial Service South Africa will connect you to other African countries – both those that have resident commercial offices and those that do not have commercial facilities. Partnering with a South African firm often means that you have a partner with extensive contacts and experience doing business throughout Africa. For more information regarding opportunities in the southern Africa power sector, please contact Bheki Ndimande at email@example.com or visit our website at www.buyusa.gov/southafrica/en/
Q: What other services does the U.S. Commercial Service offer U.S. companies and foreign buyers?
A: The U.S. Commercial Service has 108 offices across the United States and a presence in more than 80 countries. It is one of the best resources for U.S. businesses looking to connect with international buyers. Our services include export counseling, customized market research, pre-arranged business appointments with international partners, catalog shows, and much more. For more information, visit your nearest U.S. Commercial Service office at www.export.gov; or our South Africa website at www.buyusa.gov/southafrica/en