Accenture Academy Blog

The obvious is usually obvious only after it becomes obvious. Fifty years ago, the assumption that China would be a strategic trading partner for the United States would have produced laughter—maybe even 20 years ago! So where is the “new China” 15 years from now? I would offer you this:  it is South Africa.

For those of you who still view Africa as “the Dark Continent,” I suggest you reassess your vision. In Sub-Saharan Africa, South Africa is the dominant economy. It has more roads, telephone, electricity, banks, and companies than all the rest of Sub-Saharan Africa combined. Years of isolation during the apartheid era forced South Africa into being an economically independent environment. In particular, the economic infrastructure of South Africa is not only dominant but adequately supported by tradition of technological innovation that has the potential for substantial expanded scope.

Yes, there are social problems; yes, there is crime; and yes, there are political conflicts. But those problems are evident in many countries, including China, India, and most of Southeast Asia. If you wait for South Africa to become the obvious choice, you will be in the back of the line.

South Africa is now ready to be a major global supplier of manufactured products. Its heavy industry has superior technology, high-tech engineering, and excellent quality plus a labor source that is both inexpensive and qualified.

Foreign investment in Africa—particularly South Africa—has increased by over 600 percent in the last decade. And who are the major investors in Africa? One of the largest is China. Maybe they are planning for the future. The rate of return on investment for foreign capital is the highest of any developing region in the world. Telecommunications, banking, and retailing are flourishing. Construction is booming. Private-investment inflows are surging. Africa, collectively, has a gross domestic product that rivals Brazil or Russia, and South Africa is the most highly developed economy in Africa.

Need highly engineered parts for automotive, avionics, construction, and other heavy industries? South Africa has existing excess capacity and technological innovations to immediately meet those needs. Unlike China, where it was necessary to transfer technology and develop those industries, South Africa has that as an existing resource.

Need extensive and innovative financial services, world-class transport, and communication infrastructure? South Africa already has that readily available as a first-world provider.

Need a business environment, political stability, and government ministries willing to work with you and not against you? Again, South Africa has that as an established culture and business convention.

Need a skilled workforce, a first-class higher educational system, and a legal structure that parallels Western Europe? South Africa has over 200 years of a business-first mentality.

You do the math. Attached is my sanity checklist that I use to compare opportunities for low–cost-country global sourcing opportunities. Based on your experiences and perceptions, how would you rank China versus Vietnam versus South Africa?

If your numbers approximate mine, I have a suggestion. Call the nearest South African consulate and ask for the business section. You will be pleasantly surprised.

But don't worry, there's no reason to rush into South Africa. You can wait until it becomes obvious and try to catch up on significant opportunities for global sourcing.

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Comparisons of Low Cost Global Sourcing Opportunities

Scale 1 = low; that is, unlikely to be a problem -- 9 = high; that is, high probability this is a negative disruptive and costly factors.

Risk Likelihood of

Economic & Socio/Political factors

China

Scale 1 = low 9 = high

 

 

Your             My

Scoring?     Scoring

Vietnam

Scale 1 = low 9 = high

 

 

Your            My

Scoring?    Scoring

South Africa

Scale 1 = low 9 = high

 

 

Your             My

Scoring?     Scoring

Risk of Gov’t Intervention, Regulation, Competition, or Nationalization

8

6

4

Political, Social, Cultural Disruptions

7

5

5

Educated & Available Workforce

7

5

5

Technological Innovation

4

5

4

Public Infrastructure

7

8

4

Communications

6

7

3

Banking Network

6

8

4

Established Industrial Base

6

8

5

Business Environment & Conventions

6

5

5

Travel Cost & Difficulties

6

6

6

Intellectual Proprieties Risk

8

7

4

Piracy and Corruption

5

6

4

Developing Competition

8

6

4

Damage to Public Image

5

5

5

Cost of Counter-trade

6

6

4

Conflicting Tax Regulations

8

7

5

Conflicting Laws & Regulations

7

7

4

Excess Legal Costs

7

7

4

Labor Conflicts

6

5

5

Sustainability

7

6

5

Environmental issues

6

7

5

Supplier’s Sourcing costs

7

8

5

Admin Costs of Acquisition

7

8

5

Qualify New Supplier

7

8

4

Other (language)

7

8

3

other

 

 

 

other

 

 

 

TOTALS

164

164

111

 

 

Comments:
  1. Don't underestimate the health challenges in S.A.
    By Martin Dober Martin Dober on Thursday, July 29, 2010 at 11:00 AM
    One of the biggest challenges in SA I experienced working for a car manufacturer was around work safety and health. In our manufacturing plant 25% of the workforce was HIV positive. Today the life expectancy in SA has dropped in 2009 to 52 (according to gapminder.org). This fact results in challenges on keeping the knowledge and flexibility of the workforce while still providing reliability and quality up for the ww market. Once these challenges are solved, I fully agree with your observation. The SA plant had the highest production quality in our global production network.
  2. Response to Martin Dober
    By Jack Barry Jack Barry on Friday, July 30, 2010 at 10:18 AM
    Dear Mr. Martin Dober, > >Your comments are just and correctly reflect one of the highest challenges that SA must address. Bishop Tutu observed that a legacy from the apartheid years was the destruction of family values and that is reflected in the high HIV rates and lack of education of many of the young adults. South Africa indeed has significant social challenges but slowly and surely are moving in the right direction. > >My point of reference is not that South Africa has no problems -- it does: social, safety, and political -- but that it has greater potential for the future. Those opportunities for sourcing exist right now. > >Thank you for your comment. > >Best, > >Jack Barry