Digby, Lord Jones of Birmingham

Lord Jones of Birmingham, the former UK Minister for Trade & Investment and now a British Business Ambassador, embarked on a South African roadshow recently organised by UK Trade & Investment, to promote the UK as an investment destination for South African investors.

The UK and South Africa have a long relationship, dating back hundreds of years, and while the country gained independence in 1961, its membership of the commonwealth has seen the relationship endure.

TradeInvestSA took the opportunity to speak to Lord Jones about the special relationship between the two countries and found him optimistic about South Africa and Britain’s future and the opportunities that are available for investors from both sides.

“Without a doubt, Britain is still the best place to invest in Europe. We’ve got the most globalised economy,” says Lord Jones, adding that Britons think globally and have a more outward view to business affairs than some other European nations.

“Britons always look outward; which means we’re a good platform if you want to invest in our country and then sell elsewhere. It also means that we’ve still got a lot of skilled people available,” he adds.

Much is often made of the incentives of doing business in South Africa and other emerging economies, as they offer cheaper labour costs and can also offer higher returns on investment. So what incentives are in place for a South African investor to choose Britain?

Lord Jones says there are a number of regional development agencies in the UK, and they’ve all got incentive plans to encourage employment, particularly with the rising jobless levels currently all over Western Europe.

“If you’ve got rands or pounds that you want to spend, then you’ll get a fabulous deal from some of the regional development agencies. In terms of help, the agencies may provide money, but also they always have lots of advice,” he says.

So any wealthy South Africa looking for somewhere to place some of his cash can include Britain on his watchlist, but what of investment in the opposite direction.

Historically, the UK has been the biggest single investor into South Africa, so with the current global financial crisis, and its subsequent mauling of global stock markets and banking systems, is there much interest from the UK to South Africa at the moment?

Lord Jones says there is, outlining three factors as to why South Africa remains, and will always be, a suitable destination for FDI from the UK.

"A British investor looks more fondly on South Africa than anywhere else on the African continent, to be fair.”

“There is this enormous, fabulous bond between our two countries,” he says. “It’s family; therefore a British investor looks more fondly on South Africa than anywhere else on the African continent, to be fair.”

Secondly Lord Jones says that South Africa’s unique location, situated as it is at the foot of Africa and between two emerging powerhouses, Brazil and India, make it an ideal location for any would-be exporters.

“It’s got a good workforce, the rule of law, an Anglo-Saxon base in terms of understanding, it’s in the right time zone and you can fly either westwards or eastwards and use South Africa as a platform to export,” he adds.

Finally, Lord Jones also notes that Britain is soccer crazy, so the World Cup has simply raised South Africa’s profile even more in the UK. “This is only set to increase over the next year. Every month from now until kick off we’re going to get more and more of South Africa on the world map.”

In fact he says the timing of the World Cup – coming just two years before the UK is due to host the Olympics – means that an even closer relationship can be forged between business entities in the two countries.

“In 2010 I want to come here and bring with me a business delegation of British businesses that invest in South Africa. I’ll come to Cape Town, and we want to run some events here, so that we don’t just do the sport but we actually run the business off the sport,” says Lord Jones.

“A formal link between Cape Town 2010 and London 2012 would be fabulous, and it just takes an exchange of letters between the mayor and myself, which I intend to engineer,” he adds.

While the UK remains one of the biggest investment partners with South Africa, Lord Jones also notes that it can offer expertise in many areas, noting that Public-Private Partnerships (PPPs) – which have led to partnerships in projects such as prisons and toll roads - were a UK concept originally.

“The UK actually gave birth to PPPs, we were the first country in the world to do it. That means we also have the greatest experience. Some of them didn’t work so well, although the majority worked brilliantly, so our know-how and advice on PPPs is second to none.”

“A formal link between Cape Town 2010 and London 2012 would be fabulous, and it just takes an exchange of letters between the mayor and myself, which I intend to engineer”

“When you look around the world, you notice that there are British advisors on PPP. If you look at the Metros and airports, there are British advisors on PPP. I’m proud to say we are number one in the world on PPP, and our advice and expertise is available to you.”

Questioning Lord Jones about what kind of experience the UK can offer the South Africa economy, he becomes particularly animated, noting that the UK has much to offer in terms of specific skills.

“In ICT and Creative industries, we’re number one in Europe. I mean we are number one in Europe in ICT and that’s amazing. So there is some expertise that we could bring here and share with you.”

Lord Jones also notes that the UK offers very specialist expertise in Environmental Engineering, whether that be in dealing with pollution, making clean coal and other relevant environmental issues.

“Also of course, you’re developing an oil industry of your own, offshore, and up in Aberdeen we’ve got some fabulous oil support services businesses. They are small but very good at what they do, and they would love to come down here and sell you their advice and expertise,” he says.

While the relationship between South Africa and the UK has been a tumultuous one, it also remains critically important, evidenced by the fact that the UK remains the biggest source of FDI into the country and the third biggest trading partner.
 
Lord Jones notes that this relationship cannot be taken for granted, however, as the young generation of Britons now entering the workplace do not share the same knowledge of the SA-UK past.

“You’ve also got lots of young South Africans in their twenties who don’t understand the commonwealth or anything else. I think both our countries mustn’t take it for granted. That’s hugely important.”

While the two countries must work equally hard to maintain their good relationship, recent investments by Barclays and Vodafone have only served to underline the lucrative potential South Africa offers to UK investors.