Malaysia - South Africa rebuild Trade Relations
4 Sep 2007
Malaysia, which has been one among the largest foreign investors in South Africa post 1994, had pulled back after the country faced the 1997 crisis. However, in a recent visit to Johannesburg, Malaysia’s Deputy International Trade and Industry Minister Ahmad Husni Hanadzlah's has provided a positive and fresh initiative for rebuilding the trade base between the two countries.
Between 1994 and 1997 Malaysia was South Africa's second-largest investor state, with incoming direct investment estimated at R6,8bn. It accounted for 17% of all foreign direct investment during the period. Showcase investment projects included Telecom Malaysia's acquisition of a 30% stake in Telkom SA (valued at R2,2bn) and oil giant Petronas's almost total takeover (97%) of Engen (valued at R1,9bn).
Martyn Davies, CEO of Emerging Market Franchise, says the financial fallout of the Asian crisis, and political differences, resulted in Malaysia disappearing off South African investor radar screen.
Davies says Malaysia's investment in SA was largely politically driven and cemented by the good standing between Malaysian Prime Minister Mahathir Mohamad and former president Nelson Mandela.
"Malaysia's ruling UMNO party had been a long-standing supporter of the liberation struggle and a financial contributor to the African National Congress," says Davies. "With both SA and Malaysia proponents of south-south co-operation, the political fit was expected to develop into a commercial bond."
He says initial Malaysian investments in the South African banking sector were intended to establish a financial foundation upon which further investments could be built. There are 32 Malaysian companies with interests in SA, with investments worth $400m in total.
Davies says investment interest has cooled off dramatically. "This is for both commercial and political reasons. During the financial crisis, Malaysian companies divested heavily from SA. Renong sold its R200m invested in the Hilton Hotel in Durban for R80m. Capital flow to most Malaysian companies dried up; the priority of Malaysian firms was to repatriate funds to parent companies at the expense of international subsidiaries."
He added that after Mahathir's retirement a new impetus has been given to the bilateral relationship. New premier Abdullah Ahmad Badawi is not well known in SA, and Mbeki's visit to Kuala Lumpur served as an introductory session for both parties. New political initiatives between SA and Malaysia are to be expected that can be translated into translate into commercial opportunities. South African companies have recognised the investment potential of Malaysia as a rapidly emerging market with strong resources and a growing consumer base.
The largest South African investor in Malaysia is Sasol Polymer, which committed R1,2bn to the country in partnership with Petronas and Dow Chemicals in the local market. Other investments include a Plessey Telumat fibre-optic plant and a joint venture between civil engineering firm Africon Engineering and the politically connected Renong Group. Construction firms LTA Grinaker and Murray & Roberts have also been involved in a number of projects in Malaysia.
In the food franchise sector, South Africans visiting Malaysia often frequent one of Nando's dozen restaurants in Kuala Lumpur.
Malaysia's main exports to South Africa are primary products. At a seminar on Malaysia-SA business opportunities, Ahmad Husni listed these as: electrical and electronic products ($152,1m); palm oil ($131,7m); chemicals and chemical products ($56,6m); transport equipment ($41,7m); and machinery, appliances and parts ($39,2m).
Major imports from SA are iron and steel products ($227,1m); metal manufacturing ($134,5m); metalliferous ores and metals ($20,8m); chemicals and chemical products ($18,5m); and machinery, appliances and parts ($7,6m).
Ahmad Husni said he would like to see more South African investment in Malaysia, especially in the manufacturing sector, in areas including electrical and electronic products, transport equipment, machinery and equipment and agriculture and food processing.
Furthermore, according to Davies political forces have largely determined Malaysian investment into Africa, which is likely to alter existing relations in favour of trade expansion between the two countries under incoming Prime Minister Badawi. At the end he added, “it presents new learning challenges in Malaysia's changing political structure and commercial opportunities for South African companies”.
Released on: 4 September 2007
Resource: www.allafrica.com
