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Africa the new frontier for S'pore companies
Publication Date : 10-08-2012
The first time Kheng Keng Auto managing director Cher Kwang Siong set foot in Kenya's capital Nairobi in 2004, he hired security guards armed with pistols and drivers to accompany him.
It was Africa, and he was taking no chances with his safety.
He said: "Actually it was unnecessary, because Nairobi is a safe place. The second time we went there, we even drove around on our own."
Kheng Keng is one of at least 40 Singapore companies operating in Africa. Combined, these firms have more than 140 offices across the continent, according to IE Singapore's estimates.
Singapore businesses in Africa span sectors such as infrastructure development, info-communications technology, agribusiness, transport and logistics, and financial services.
They have been involved in countries such as South Africa, Kenya, Nigeria, Rwanda, Ghana, Namibia, Ivory Coast, Mozambique, Angola and the Republic of Congo.
In recent years, much emphasis has been placed on developing bilateral relations between Singapore and Africa.
The Republic's trade with Africa as a whole has been steadily increasing each year for the past decade. Last year, trade rose to S$13.8 billion (US$11 billion) from S$12 billion (US$9.64 billion) in 2010, with a compounded annual growth rate of 5.87 per cent from 1999 to 2011.
Singapore is Africa's largest investor among the Asean countries. As of 2010, Singapore's direct investments in Africa had reached S$23.8 billion, a 29 per cent rise from $18.5 billion the previous year.
To some Singapore companies, Africa might seem like the final frontier, the last continent one would explore for new business.
"Africa is often associated with social unrest and poverty, creating the impression that it is unsafe for businesses," said Lim Ban Hoe, IE Singapore group director for the Middle East & Africa.
"But its macro-economic trends, rising consumer power and large population point to different opportunities for Singapore companies."
With Europe in crisis, sluggish recovery in the United States and a slowdown in China, looking to Africa could prove to be worthwhile now.
Africa may provide an alternative market for export-oriented economies such as Singapore, especially in challenging times, said Dr Iwan Azis, head of the Asian Development Bank's office of regional economic integration.
He said: "During this global crisis, Africa is doing fantastic. The growth is steady."
For a start, the Singapore brand name already carries a positive ring on the continent.
Djoko Prihanto, Surbana Urban Planning Group deputy managing director, said: "They have heard how we transformed from Third World to First World in one generation. They want that and they want that faster."
The continent is hungry for success and is open to foreign investment.
Djoko added: "They are still very open and flexible, like Asia 20 years ago. Markets there are less saturated than in Asia."
Urban planning, infrastructure development, infocomm technology, consumer products and vocational education are among the areas that Singapore can contribute to, said IE Singapore.
Lim said: "We see South Africa as a good starting point for Singapore companies to engage Africa. Companies interested in Africa must do their due diligence both in terms of business operations and personal safety."
The influx of mainland Chinese there in recent years means the Africans are becoming more familiar with talking business with Asians, and finding Chinese food there is a breeze.
Entertaining clients is simpler there than in Asia, said Cher.
He said: "We just treat them to a meal. There's no need to take them to the pubs."
Several Singapore companies have already done well there. They said finding a reliable local partner is key.
One of them is publisher Marshall Cavendish, whose maths school textbooks have been approved by the authorities for use in South Africa.
Its head of publishing Lee Fei Chen said: "The government department people there are hungry for changes. They want to progress and they are willing to put in the money to invest in the country's progress."
Learning to adapt the materials so that they are more familiar to the South African children was key.
She said: "In Singapore, we would feature cats and chickens. In South Africa, we used giraffes instead."
With opportunities also come obstacles.
Hygiene and a lack of proper sanitation are examples, especially in the more undeveloped countries.
Information technology company CrimsonLogic's business director for Middle East and Africa, Mike Yap, recalled having to brush his teeth and shower with mineral water when he went to South Sudan. He said: "That was an extreme case. I made sure I did minimum showering, just once a day, express style."
One must also be prepared for rapid leadership changes.
Yap said: "In one country, they suddenly did musical chairs with all the permanent secretaries overnight, and the next thing we knew, we had to work with a new key stakeholder."
He added that companies should take note of the political situation there, and that the most stable period is usually one to two years after an election.
Another issue is security.
Djoko said: "When we travel around in Angola and Nigeria, the clients will provide us with a driver and armed bodyguard. Safety is still an issue in some countries."
Kheng Keng houses its staff in gated residences in upmarket areas. They clock in and out via a punchcard machine.
Cher explained: "It's not to control their movements but to make sure they reach home safely."