Friday 1 March 2024

“A minimum level of local investment is needed to further develop commercial relations with Europe,” says French diplomat

By Radithebe Rammutle

In 2022 South Africa (SA) posted R 5.1 billion trade deficit against France, the third-largest amongst European countries after Italy and Sweden. However, the French government believes that the trade imbalance between the two countries could improve if South African (SA) firms continue to establish a strong foothold in Europe.

In March 2022, Sibanye Stillwater, a South African Gold, and Platinum Mining house finalised its € 85 million purchase of Eramet SA, France’s second-largest industrial port company that processes hydrometallurgical nickel, based in Sandouville near Le Havre. In its media statement announcing the deal, the mining house said “This acquisition will enable Sibanye-Stillwater to build a leading battery metals platform in Europe. It is seen as a low-risk entry into the nickel beneficiation business and our initial focus will be to ramp up throughput, as per existing plans.”

Sibanye Stillwater did not expressly state that its acquisition will have a strategic impact on SA France trade relations, but it could have a positive impact on SA exports. “The Aspen pharma group some years ago build a factory in France and today it is a platform for the distribution of its products in the French and European market. So, many products made in SA from Port-Elizabeth factories go to Europe because there is a distribution network,” said Furno.

Historically investment and trade relations between SA and France were not as strong as relations with Germany, Britain, and the Netherlands. Respectively, trade relations with these countries represented 31%, 14%, and 12% of the total trade with partners in Europe while trade with France represented only 5% in 2022. While trade relations between France and SA are stable, they were stronger a few years ago. Back when South African Airways (SAA) was still importing Airbus aircraft trade amounts between the two countries were sizeable. Today, France exports mostly chemicals to various industries including pharmaceutical firms and cosmetic products to SA’s retail industry. In 2022 chemicals and cosmetic manufactures in France exported R 3.5 billion of their products which represented almost a third of France’s total imports to SA. Industrial machinery were the second-largest main exports (R2.34 billion) followed by aircraft and vessels (R 1.19 billion) and prepared foodstuff (R1.17 billion) - see exhibit 2. The top five exports from France to SA including plastic and rubber products represented 75.36% of the total imports.  

This contrasts with SA’s exports which are less diversified – see Exhibit 3. The three top exports to France from SA represent about 71% of the total exports. SA minerals industry exported R 2.97 billion of mineral products to France. This represented 42% of the total exports to France. The second main exports were passenger cars, aircraft and vessels accounting for 25% of the total exports. About 4% of exports were iron and steel products. Fourth was the Agrofood exports that grew on the back of 18% market growth of SA fruits and avocados. 

In 2016 South African Development Cooperation (SADC) and the European Union entered into a new Economic Partnership Agreement (EPA). While the agreement was meant to further improve commercial relation and resolve disagreements the two regional bodies still disagree over Agro-Food trade arrangements. SA and SADC have complained about EU’s sanitary and phytosanitary measures that limit entry of agricultural products into its market. Equally EU member states have raised concerns over limited access to SA’s poultry meat market. 

While some of these issues are still unresolved French companies are focusing on other alternatives to have a stronger presence on the SA and African market. 

Since the launch of SA Investment Conference (SAIC) French companies have been making commitments in support of President Cyril Ramaphosa’s reform programme. In 2019 French firms announced R 20 billion of investments to cover three years from the announcement year says, Furno. The results are already visible for SA consumers with the latest arrivals such as Decathlon and Leroy Merlin, two recognisable retail brands from France. In March 2022 French companies announced R 50 billion of new investments for the next three years in sectors such as renewable energy.   



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