World City Guide

Business

Business Profile
Cape Town is somewhat removed from the frenetic business hype of South Africa’s major financial and industrial centre, Johannesburg. However, the Western Cape accounts foR 14% (R81,800 million) of the country’s Gross Domestic Product (GDP), the third highest in the country, and the city is home to some of the country’s major financial institutions. These include insurance giants Old Mutual and Sanlam, financial houses like the Board of Executives, Investec, Merrill Lynch and Fedsure, and petroleum multinationals BP, Shell and Caltex (Chevron).

The economic mainstays of the region are agriculture, information communication technology (ICT), tourism, financial services and property, and manufacturing and construction. Since 2001, a general economic slowdown has occurred, largely due to the strengthening Rand and particularly affecting agriculture, transport, communication and financial services.

The ICT sector is currently the most important for growth and employment, although the monopoly of telecommunications giant, Telkom, is restricting many companies and the industry has struggled since the 2001 downturn, as has the financial services sector.

The single most significant industrial source of employment in the region is the clothing and textile industry, which supplies jobs for a massive 170,000 people. Ever since the tourism boom in 1995, the city has been reaping rich rewards and tourism is now the largest overall employer in the region, providing employment for a massive section of the workforce, both directly in the service industry and indirectly for street traders and other informal operatives.

Information Technology (IT) has also emerged as one of the major industries in the city, particularly during the recent IT downtown, during which time it proved resilient. The industry is one of the largest employers, with Cape Town boasting some 1,200 IT companies employing some 27,000 people. Within the IT industry, the focus is mainly on software development and consultancy, with 32% of the exported products and services going to Europe, 17% to the USA, and the rest to Africa.

The agriculture industry also employs a large number of people, with the emphasis being on wine production and fruit farming. With 200km of commercial fishing zone and an expanding port, fishing and shipping are also significant industries in the city. Fishing alone creates jobs for 27,000 people. A booming industry in Cape Town is the media. The city is favoured as the ideal location for international film crews, attracted by excellent foreign exchange rates, a first-rate infrastructure, a good film service industry, stunning locations, excellent weather and well-stocked modelling agencies. However, rising prices and a strengthening Rand are currently threatening this industry.

Another significant industry is printing and publishing – Cape Town has the lion’s share of this segment of South Africa’s economy.

The awarding of the 2010 FIFA World Cup will have significant benefits for the economy and is expected to contribute R21,3 billion to the country’s GDP, as well as create 159,000 jobs. Many, however, fear that the resulting construction and infrastructure of roads, stadiums and hotels will not be sustainable. Much of the action will be focused on Cape Town and the knock-on effect for tourism and investment is expected to be massive.

With the Western Cape boasting the highest adult education level in the country (with 93% of the people over the age of 20 having undergone schooling), 80% adult literacy (also the highest in the country) and five residential universities and technikons, Cape Town boasts a highly skilled workforce. However, only 45-52% of school leavers matriculate and inequality persists. Government spending on education currently falls short of the other provinces, although it is steadily increasing. This is undoubtedly a city on the grow, annually attracting around R1.1 billion foreign direct investment. However, poverty is still rife, with 29% of the population in the region living in poverty, which is nevertheless the lowest in the country. The official unemployment rate for South Africa is estimated to be almost 28% as of March 2004, while the expanded national unemployment rate is 42%. Unofficial unemployment rate estimates for 2004, according to the Cape Times newspaper, are 18% for the Western Cape and 20% for Cape Town (set to rise to 21% in 2005). Another problem facing the city is the increasing HIV infection rate – the Western Cape has an infection rate of 7.1%, which is already one third of the current average South African infection rate.

The Western Cape government is currently working on the iKapa elihlumayo project, which aims to increase economic growth, employment and economic participation, as well as reduce geographical and socio-economic inequality, and provide a sustainable social safety net. Initiatives include the introduction of a Rapid Bus Transport system, the construction of a film studio, and a further education and training programme.

Cape Town’s central business district is situated in the city centre and Foreshore, although business and industrial parks can also be found in the southern suburbs (Claremont, Rondebosch and Wynberg) and on the outskirts, with Epping, Parow, Retreat and Montague Gardens the core industrial areas outside the city. New developments are appearing in Saldanha and Vredenburg, as a result of the massive Saldanha Steel Project. The new Cape Town International Convention Centre, Convention Square, 1 Lower Long Street (tel: (021) 410 5000; fax: (021) 410 5001; e-mail: info@ctconvention.co.za; website: www.capetownconvention.com), is situated on the Foreshore, linking the V&A Waterfront and the city centre. The centre opened in June 2003 and has proved a great success, contributing two and a half times more to the national economy (R2.4 billion) than was originally anticipated. It will also create some 3,900 direct jobs in the city during 2005, over and above the 3,668 created during its first year. Over the next five years, the centre is expected to earn another R9.5 billion for the country’s GDP. The centre has also had a massive knock-on effect for Cape Town’s tourism industry. The V&A Waterfront, in the heart of the city, is an extremely popular and ever expanding business district. The University of Cape Town’s Graduate School of Business (tel: (021) 406 1338/9 or 1175; fax: (021) 421 5693; e-mail: info@gsb.uct.ac.za; website: www.gsb.uct.ac.za) is located here, producing some of the big minds in business, both for South Africa and abroad.

The Cape Chamber of Commerce and Industry, Cape Chamber House, 19 Louis Gradner Street (tel: (021) 402 4300; fax: (021) 402 4302; e-mail: info@capechamber.co.za; website: www.capechamber.co.za), was founded in 1804 and is a one-stop shop for business information and advice.

Business Etiquette
Business practices in Cape Town and South Africa are very similar to those in the UK and USA. Despite the fact that Cape Town is more informal than Johannesburg, most industries do expect a suit and tie. The more modern or artistic industries, such as information technology and the media, tend to display a more informal attitude to dress – particularly in the summer months. However, it is advisable for foreign business visitors to maintain formality and only resort to the casual uniform of shorts, T-shirts and sandals when the after-hours entertainment begins.

Business hours are 0900-1700, although many companies finish earlier on a Friday. The exchanging of business cards is an important ritual in Cape Town and a firm handshake between both men and women is common. In some instances, the African triple handshake will be used: this is a normal handshake, then a tilt to the hand is executed to clasp the fingers at a 90-degree angle (but without letting go) and then a return to a normal handshake.

Socialising is a big part of the business scene in Cape Town and much business is conducted over lunch. Wine will more than likely be included and visitors should note that South African wines often have a slightly stronger alcohol content than the majority of European wines (usually nearer 13%). Admiration of the local wine will be appreciated, although over-indulgence is certainly not recommended. Capetonians pride themselves on being hospitable to foreign visitors and an invitation to a business contact’s home is not unusual. These will, more than likely, take the form of a braai (barbecue), which tend to last throughout the entire afternoon and often into the night. Alcohol flows freely here and a gift of a bottle of wine is always appreciated, unless the host is Muslim, in which instance alcohol is strictly forbidden. In this case, a gift of chocolates, flowers or a speciality gift from the guest’s home country is more suitable.