SA has the largest untapped export potential of any country in Africa, which, if exploited, could add as much as $75bn (R1.3-trillion) in annual exports in the next five years, according to the latest “Where to Invest in Africa” report produced by corporate finance major Rand Merchant Bank (RMB).
The results of the annual report, compiled in collaboration with one of Africa’s pre-eminent business schools, the Gordon Institute of Business Science, will add impetus to the government’s push to speed up the biggest reforms to the logistics sector in a generation.
The reforms, which stretch from rail and air freight to ports, are expected to usher in unprecedented private sector participation to improve the performance of the logistics sector, which has not seen significant investment in infrastructure over the past decade, curtailing efficiencies and increasing the cost of doing business.
The study, which analysed 31 African countries representing 90% of the continent’s GDP, finds SA’s untapped export potential is larger than the next three countries combined: Egypt, Morocco and the Democratic Republic of Congo.
The model used in the study to determine the untapped export potential includes the surveyed nation’s capacity to supply a product, an estimate of global demand, and a measure of the barriers to meeting that demand.
“Given the current export capacity, global import demand and market access conditions, SA has the potential to add $75bn to its total annual exports in 2029, based on this model,” the report finds.
Untapped export potential with the US, the world’s largest economy, comes in at $7.3bn (R126bn) of the $75bn overall opportunity, an opportunity SA might find difficult to seize as Washington takes an increasingly hostile approach to Pretoria.
However, the $67.7bn untapped export potential outside the US presents authorities with a significant chance to diversify export opportunities, thus creating local jobs.
SA’s logistics sector is undertaking the most fundamental reforms in decades, led by transport minister Barbara Creecy. Most of the government’s reform efforts are geared at increasing Transnet’s freight numbers to 250-million tonnes by 2030, from 160-million tonnes now.
One of the most ready private sector participation projects now is the Richards Bay dry bulk terminal. Transnet expects to go to market in November for partners for the terminal, for which there is potential to increase tonnes moved from 18-million to 28-million.
Transnet boss Michelle Phillips was in Dubai last month for Standard Bank’s State-Owned Companies Investment Summit, where the audience included deep-pocketed Middle East investors such as sovereign wealth funds — a crucial constituency as Transnet seeks to invest about R125bn in its operations and infrastructure over the next five years.
She told the audience that the plan to rope in private sector players at the Port of Ngqura (Coega Harbour) will take a major leap forward in January through a market-sounding exercise inviting bidders. The project incorporates the Ngqura manganese export facility, with the rail corridor, with an estimated investment of R30bn.
The government’s reform agenda received a big boost this month after the Durban high court ruled that Transnet did not infringe tender rules when it awarded Philippines-based International Container Terminal Services Incorporated (ICTSI) a multiyear contract to operate Durban Pier 2 terminal (DCT2).
The legal challenge was brought by the losing bidder, APM Terminals.
ICTSI’s business case indicates an intention to spend R1.5bn in capital expenditure and on infrastructure maintenance, equipment, overhaul and refurbishment, as well as new equipment. The total spent by ICTSI over 25 years would be R9.4bn.
ICTSI’s R11bn deal for half of DCT2 was R2bn more than that of APM Terminals. DCT2 is Transnet’s biggest container terminal, handling 72% of the Port of Durban’s throughput and 46% of SA’s port traffic.
The infrastructure and design of DCT2 have remained the same since 1963. Over the past 20 years, congestion at the terminal due to shipping traffic and limited operational capacity has led to backlogs at the Port of Durban.
SA has also kick-started the introduction of private sector players on Transnet’s vast and important rail network, with these operators set to transport about 20-million tonnes of freight when they are operational.
SA’s ports are still ranked lowly by the World Bank in terms of efficiency, though notable progress has been made over the past year.
With the US cutting back on aid globally and Africa the most affected jurisdiction, the RMB study says there is reason to believe that trade and investment are superior to development aid in generating long-term prosperity.
“Current reliance aside, a choice has been imposed on African nations. The rapid repeal of aid has opened funding gaps. This report provides valuable guidance on plugging these gaps with investment. Our export potential model aims to guide businesses and policymakers on the export products and destinations with the greatest growth potential,” it says.
The overall ranking in the study largely remains unchanged, with the tiny nation of Seychelles occupying the first place, followed by Mauritius, Egypt, and SA.
Zimbabwe, which has big economic and human capital ties to SA, is ranked at the bottom of the 31 countries surveyed.
“Broadly, Zimbabwe is a challenging business and investment environment,” the RMB study notes.
“Basics, such as currency stability, put it beyond the mandate or appetite of many capital allocators. Nonetheless, every environment has opportunities for success. Zimbabwe’s tourism industry grew by 12% in 2024, and FDI [foreign direct investment] has flowed into steel and lithium plants.
“Small, positive indicators include a doubling of blueberry output. Small movements like this will not move the needle in the rankings, but they highlight the need for nuanced analysis.”
