Op-eds

Israeli companies can’t apply ‘cookie-cutter’ approach to SA

  • JordanIsraelSATradeAmitLev
Open a newspaper in Israel on any given day, and you will probably see an article about an Israeli company having just been bought by an international corporate, one that has just been listed on the stock exchange, or a big success story about an Israeli tech company. Many of these stories will be extraordinary, disruptive, and inspiring.
by AMIT LEV | Dec 05, 2019

As a Jew and Israeli, it warms my heart to see the achievements of the Israeli state and economy. But I wonder how these solutions could be relevant to South African companies and its economy. Given that most of the Israeli companies aim first at high-gross-domestic-product (GDP)-per-capita countries such as the United States and countries in Europe, would it be reasonable to expect cutting edge Israeli companies to operate in South Africa?

I have been living here for close to two years, and base my observations on the hundreds of Israeli companies that have approached the trade mission requesting assistance. In assessing Israeli companies’ attitude to the South African market, I would say it’s positive, and not so positive.

It’s positive because even in the current South African economic climate, there are pockets of excellence that perform very well, even on the global stage. To give you some examples, in terms of agriculture, the export of South African products grew 7% in 2018 to more than $10 billion (R146.1 billion). This represents a record since 2001. Eighty five percent of all agricultural products in the Western Cape are exported. It means that farmers and co-operatives are competing internationally.

This opens the door to Israel agri technology that is good at creating high-end solutions that can give farmers the edge to be competitive in international markets. In addition, agriculture is a seasonal industry. It makes it attractive to Israelis, because South African southern-hemisphere seasons don’t coincide with those of the US and Europe. This means that Israeli companies have an opportunity to work with South African companies in a way that doesn’t exclude their relations with Europe and the US.

Israel can also make a big difference in the field of cyber security in South Africa. A few weeks ago, the City of Johannesburg was hit by a cyber-attack from a group called Shadow Kill Hackers. They shot down the city’s services to get a ransom of R500 000 in Bitcoin. Based on worldwide statistics, this is actually a very common type of cyber-attack. There are millions of such incidents every day all over the world. With South Africa being a financial hub in sub-Saharan Africa, it is – and always will be – a target for hackers.

Given Israel’s geopolitical issues, it was one of the first countries in the world subjected to cyber-attack when these infiltrations started happening. We called this field information security back in the 90s. Today, Israel has the second highest number of cyber companies in the world (750 companies) and 42 research and development foreign company cyber labs. The export of Israel’s cyber expertise and products is estimated to be in the range of $5.5 billion to $6 billion (R80 to R87 billion) (based on the latest research of Israel’s premier cyber data research centre). With this in mind, Israel can be a great partner to South African companies in tackling cyber problems.

Are you aware that South African has five of the 100 most innovative insurance companies in the world? Israel, by the way, doesn’t have even one.

The Israeli insure-tech segment is evolving, and today consists of more than 250 companies from various sectors such as fintech, artificial intelligence, homeland security, and wellness. Even though South African insurance giants are innovative, they can’t develop all their technologies in-house, and would surely benefit from engaging with small Israeli start-ups that create niche solutions in the insurance space.

In terms of where South Africa is not so attractive to Israeli companies, we need to first consider that the South African market, in general, is not considered to be an early adopter. Israeli companies would need to change all of their marketing strategies from innovative and cutting edge to solutions-driven, established case studies. This isn’t simple.

Then, the South African rand is one of the most volatile currencies around the world, and with slow GDP growth, South African companies are sensitive to buying new technology and expanding to new territories. Therefore, Israeli companies must redesign their cost structure to fit into the South African market. Also not simple.

Lastly, skilled negotiation is required to navigate and bridge cultural differences. Israeli companies often ask me the following questions: Why is no one answering my calls during December? Why do I need a BEE [Black Economic Empowerment] certificate? I sent the person an email yesterday, and he hasn’t replied … Is something wrong?”

As you can see, there’s no cookie-cutter answer to matchmaking between Israeli technology and South African companies. It requires both sides to do their homework and initiate detailed research. Then, they need to be patient and consistent until they formalise the right relationship.

  • Amit Lev is trade and investment commissioner, and the head of the trade and economic mission of the Embassy of Israel to South Africa.

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