Generalizes on the best strategy to enter the market, e.g., visiting the country; importance of relationships to finding a good partner; use of agents.
Last Published: 7/14/2019
Because the South African market is sophisticated, entry should be well-planned, taking into consideration the following factors:
  • the skewed demographic income distribution pattern, where 10% of the population earns 45% of national income (Gini coefficient is 0.61);
  • the price-sensitive nature of most consumer demand;
  • a potentially volatile rand-dollar exchange rate (the rate tends to be very predictable over the medium term – its volatility can spike in the short term);
  • an unreliable and under-capacitated electricity supply network;
  • distribution issues, given that large retail centers are concentrated in five metropolitan regions;
  • well-developed consumer protection rules and, recently, better enforcement;
  • a conservative market bias that tends to stick to known suppliers and therefore requires sustained market development; and
  • South Africa’s position as a stepping stone for developing market opportunities in Sub-Saharan Africa (the marketing mix should anticipate this medium-term option).      
However, the NTM foreign supplier will find markedly different conditions when venturing northwards. This lack of regional integration relates especially to financial services, trade documentation, and road transportation networks, and may have a significant impact on risk exposure and the cost of doing business. A selection of one of three low-risk entry strategies (representation, agency, or distributorship) should be considered. If an NTM is selling to the government or government-funded organizations, any local partner should be B-BBEE-compliant and aware of local procurement regulations.

In addition to this Country Commercial Guide, the Commercial Service offices in Durban, Cape Town and Johannesburg offer many services designed to assist NTMs in developing a market entry strategy into South Africa. For a detailed description of these services please visit:
http://www.export.gov/southafrica/servicesforu.s.companies/index.asp.
 

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.