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08 Oct 2008Finance: South Africa grows as a target for Italian Investment
Recent Gauteng Business News
In the six months to June 2008, Italian credit management company SACE has approved 215-million in payment guarantees with Africa in eight separate transactions.
SACE provides credit insurance, payment guarantees, financial guarantees, investment protection and political risk cover.
Sixty percent of this funding involved South African financial institutions. The transactions covered sectors such as oil, aircraft, transportation and gas.
Since January 2006 SACE has supported Italian linked exports and projects in Africa to the value of 630-million. 27% relates to South Africa, 29% Angola, 37% Nigeria, 3% Cape Verde, 2% Mozambique and 2% Senegal. Smaller transactions involved Tanzania, Kenya and Eritrea. In addition, SACE has seen a strong demand in Ethiopia.
In 2007, Italy’s major export sectors included mechanical engineering, electronics, electrical equipment and chemicals.
According to SACE’s forecasts, Italian exports to South Africa will increase by 8,1% per annum from 2008 through to 2012 to around €200-million pa.
“Africa is a relatively unknown and untapped market for Italian exporters,” said Michael Creighton, head of SACE SpA South Africa, which recently opened an office in Johannesburg.
The Italian economy is generally made up of small, medium size enterprises, many of which remain family run entities. Africa is seen as a high risk market from both a political risk and commercial risk point of view.
“Many of the markets are logistically difficult, costly and time-consuming for Italian businessmen to reach,” said Creighton.
Italian linked organisations such as SACE and the Italian Trade Commission are introducing these Italian businesses to the opportunities available in the sub-Saharan region, putting into place mechanisms to limit the financial risks involved in trading and investing in this region.
To further facilitate this process, SACE launched the Africa Programme in 2006 to provide greater support for Italian companies investing or exporting in the region through the implementation of more flexible terms of cover.
“Following years of political instability, most sub-Saharan countries went through a broad restructuring process, supported by the IMF/World Bank debt-relief initiative. Structural reforms helped to create a more favourable operating environment. Now some of these countries are experiencing sustainable growth and have become viable markets for Italian exporters and investors,” said Creighton.
“SACE provides an added level of security for Italian exporters and investors thereby reducing the political and commercial risks. SACE’s involvement can also facilitate the financing of such transactions.”
“Many of the projects involve the upgrading of infrastructure such as roads, power plants and facilities which in turn provide benefit to the local communities,” said Creighton.
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