South Africa is a country with immense potential, both in its own right and as a gateway into Africa, but despite this, the country is not yet on track to realise its full potential. One of the major reasons for this is a lack of investment in critical infrastructure, which is vital for any successful economy.
According to Liu Haishi, Chairman and CEO, ZTE Corporation South Africa, Chinese companies like ZTE have identified this lack of access to capital as one of the principle obstacles preventing high levels of economic growth in South Africa. In turn, a concerted effort has been made to develop and adopt clear strategies to help South African clients overcome this capital investment shortfall. “Several of these investment strategies have already been successfully implemented in the South African context. This sense of commitment to the development and economic growth of the continent in general, and South Africa in particular, is a product of China’s evolving relationship with Africa,” says Haishi.
He notes China’s growth has followed a trajectory that has already been seen in Europe, the United States and some other Asian countries. “At its inception, the country positioned itself as a low-cost manufacturer and its primary focus was on finding markets for its goods. Over time, though, China’s manufacturing capabilities have matured and it has begun outsourcing its basic manufacturing to lower cost areas elsewhere in Asia and, increasingly, in Africa.
“When it comes to manufacturing, for example, Chinese car manufacturers have already invested substantially in South Africa – the latest announcement was in April, when BAIC announced an R11-billion investment in local assembly at Coega in the Eastern Cape. This is merely the most recent example of the many multi-million dollar investments in Africa by Chinese business,” he says.
Haishi adds that at the same time, China has shifted its focus from manufacturing cheaply to manufacturing quality, and this also necessitates developing markets with the appetite for higher quality goods.
“China’s focus on moving into quality goods and developing more robust markets that are not dependent solely on price is driving a massive readjustment of its relationship with Africa and South Africa. Whereas, in the past, Africa was seen primarily as a market for sales, it is now viewed as a strategic partner, both as an expanding market for quality goods and as a co-manufacturer. This new approach is visible in the growing amount of Chinese enterprises within South Africa, the excellent relationships between the Chinese and South African governments, and the multi-faceted approach of companies like ZTE.”
The telecommunication deficit
Haishi says one of the most critical infrastructure deficits in South Africa is in telecommunications, where it has been playing catch-up for many years. “This is particularly important because a modern telecommunications infrastructure is a critical enabler of other forms of infrastructure; thus, for example, without an adequate telecommunications backbone, it will be impossible to achieve the benefits that will flow from other infrastructure investments by implementing such initiatives as smart cities, safe cities, e-education and e-health. This technology deficit will become more pronounced as the emerging Internet of Things develops into the Internet of Everything.
“This lack of investment muscle is exacerbated by a poorly conceived investment strategy in telecommunications. For example, the current focus on laying down a fibre backbone is insufficient to take the country to where it needs to be. Fibre will benefit only a small proportion of the population within urban areas, but will not be economically viable for the rest of the country where large numbers of disadvantaged people live. However, a combination of fibre and 5G can make it commercially viable to provide broadband to a much greater proportion of the population. There needs to be a shift in thinking by considering the needs and requirements of the disadvantaged and aligning the telecommunication infrastructure accordingly,” he emphasises.
ZTE has been operating in South Africa for more than 10 years, and has developed a strong local capability based on its determination to play a role in developing the country. “At least 50% of our local employees are South Africans, and our policy is to use local sub-contractors and suppliers. We are committed to training our South African staff via both computer-based training and in-person at our facilities in China. Coupled with the provision of capital funding, ZTE continues to look for opportunities to grow the South African economy and benefit the South African people through skills and knowledge transfer. This requires a concerted effort and in order to create the most benefit, alignment with the right partners is imperative.”
Haishi says that more importantly, ZTE is focused on bringing the latest technology to the country. “We are working with various operators to roll-out 4G and to bring fibre to the home but, as noted above, we believe a hybrid approach that marries fibre and a new technology like 5G is more suited to conditions on the ground in South Africa. ZTE is a global leader in 5G, with many pre-5G projects already underway around the world, so we can contribute not only technological know-how but also a growing body of hands-on experience in the best deployment models for 5G in various markets.”
He highlights one critical component of ZTE’s strategy – which is aimed at spearheading the provision of the latest technologies – is the company’s willingness to adjust its business model to South Africa’s realities. “This means that instead of operating simply as a supplier, we are prepared to participate in financially supporting the project, either by financing it ourselves on a build/ operate/ transfer model or by helping clients to access the finance needed for mega-projects from the large Chinese banks with sufficient capital resources to fund and support these mega infrastructure projects.”
As China’s largest stock exchange-listed telecommunications solutions provider, ZTE is well positioned to deal with these banks. “Therefore, we can play a key role in helping South African clients access the capital for large projects. Through ZTE’s relationships as a main member of SACETA (South African Chinese Economic and Trade Association), we are well positioned to facilitate and promote other capital investment projects within South Africa.
“We believe this combination of long-term commitment to the country’s development, access to capital, flexible business models and technology leadership can play an important role in helping South Africa realise its potential,” concludes Haishi.