The tendency of certain local markets to become monopolised and dominated by single entities presents challenges for Italian small and medium-sized enterprises (SMEs) aiming to establish themselves in the South African market, says Italian- South African Chamber of Trade and Industries trade analyst Dylan Stewart.
“This makes it difficult to create competition in certain markets, particularly when there are well-established Italian companies that are export-ready and looking to establish themselves in South Africa.”
Stewart also highlights that increased legislation governing certain industries reinforces the monopolisation and, subsequently, makes it more difficult to create competition.
“Increased restrictions and regulations are more easily managed by dominant companies that monopolise an industry, as the companies are more established in the local market.”
These companies have more resources and funds at their disposal to ensure that they meet regulations, while SMEs are not able to do the same.
“When you’re dealing with SMEs that do not have the resources and funds that larger and established companies have, the appetite for risk is reduced and SMEs have to be very careful in how they spend their resources,” states Italian-South African Chamber secretary-general Pamina Bohrer.
She emphasises that a significant challenge for Italian SMEs in establishing themselves locally is becoming familiar with and adhering to South Africa’s broad-based black economic-empowerment (BBBEE) requirements. “Accessing corporate supply chains and State-owned enterprises without a BBBEE component is a challenge for foreign-owned companies.”
Italian SMEs being unfamiliar with, for example, BBBEE requirements, means that the role of the Italian- South African Chamber also includes assisting SMEs in understanding and complying with such policies.
The chamber assists established Italian SMEs, which are experienced in exporting to international markets, in their being export-ready in the South African context, Stewart points out.
“We normally deal with them when they’ve already built significant muscle in other international markets and decide that South Africa is the correct market to expand into next, owing to the fact that the South African market isn’t well known and understood. One doesn’t come into South Africa without this local point of reference,” explains Bohrer.
The Italian-South African Chamber assists Italian companies with macro and sectorial overviews of certain products that the companies want to export.
For example, the chamber would examine the harmonised code of an imported product, understand the landscape and market of the product and advise an SME on how to proceed.
It would also consider where products already present in the local market are imported from or if they are manufactured locally. The overall competitiveness of those products and the local relevant sectors would also be considered.
If an Italian SME does decide to enter the South African market, Bohrer says the company can proceed in several ways in terms of its export strategy.
“The company could either decide to find a local importer or distributor, which is your low-risk model of expansion into the South African market, or it could consider a stronger partnership. “Typically, it’s actually a progression from using distributive agents forming stronger partnerships, rather than an either-or situation,” Bohrer suggests.
Companies would generally test the market using a distributive agent. If a product gains traction, the company would consider further investment by establishing a local branch or looking for a local partner.
Southern Africa–Europe CEO Dialogue
The chamber is a key promoter and organisational partner with multinational think-tank organisation the European House-Ambrosetti for the Southern Africa–Europe CEO Dialogue, which will take place in Johannesburg from October 29 to 30.
The event will cover issues related to developing socioeconomic, political and cultural relations between the European Union and Southern African Development Community countries.
The event was originally established as the Italy-SA summit in 2014, and was created by multinational consulting group the European House-Ambrosetti, with the Italian-South African Chamber collaborating as a key promoter and organisational partner. The event will adopt a more multilateral format this year, with other European countries, such as France and Germany, also participating.
“Other bilateral chambers are assisting in promoting the event. “Our collaboration makes us stronger and enables us to present a larger workshop with more key people in the room. “The other chambers will have similar interests, as all European chambers essentially have similar issues and focus areas, such as regulation, visas, industry 4.0 and environmental sustainability. “It’s only a positive that they’ve expanded it because we’re stronger united,” she concludes.