Intrepid companies are using South Africa as a springboard to the rest of the continent,writes Joe Humphreys in Pretoria

Some Irish investors still perceive Africa as an economic basket-case but times are changing if this week's trade mission to the continent's Southern-most country is anything to go by.

A small fraction of the 30 companies, which travelled to South Africa with Enterprise Ireland and Minister for Enterprise, Trade and Employment Micheál Martin, signed contracts with local partners during the mission.

Without exception, however, all were keen to return to explore the potential for new business.

"If you ask me what are the most significant regions for growth, I would put China number one, India number two, and South Africa and the African continent number three," said Michael O'Donovan of Co Cork-based Audit Diagnostics.

"We are expecting a turnover of millions [ of euro] in this region in the next couple of years. The potential is absolutely huge." The medical supplies firm, which exports to 105 countries, has been doing business in South Africa since 2003, selling its patented sanitising products as well as testing kits for HIV, malaria, TB and other diseases.

After getting a foothold in the local market, through a South African selling agent, the company has begun to spread north - as far away as Nigeria and Ghana. This week, it added another country to the list, securing a deal with both public and private-sector purchasers in Botswana.

All technical support is provided by Audit Diagnostics' South African partner company. Mr O'Donovan said: "In other African countries, the infrastructure is not there, the technical support is not there and it's a very difficult trading environment."

Another company using South Africa as a springboard to the rest of the continent is Ossidian, a small Dún Laoghaire-based software company which sells web-based training for telecoms companies. The firm's sales and marketing director Rupert Bowen said it first secured a contract in the market three years ago with MTN, one of South Africa's top three mobile operators. The contract has been renewed twice, this year extending into nine other African countries, including Nigeria.

Ossidian, through a South African partner company, has also secured contracts with Vodacom - another of South Africa's top mobile operators - and hopes to piggy-back on MTN's recent purchase of 11 networks in North Africa and the Middle East.

"From our starting point in South Africa, we are now potentially in 21 countries," Mr Bowen said. "It's all down to the good working relationship between our partner and the customer.

"The personal relationships, and the golf, the drinking, the meals, the chatting about rugby and cricket - all of that is so important to build up trust. Local customers would probably have bought an inferior product from someone they knew over a superior product from someone they did not know."

This is repeated like a mantra by other investors in South Africa: Chose your local partners carefully. Ronan King, director of business development at Howard Eurocape, which has invested heavily in Cape Town, says: "We found, through trial and error, excellent professionals here."

But, as in Ireland, he remarked, there were problems with those "operating under the cushion of protectionism, whether in the legal profession or banking".

He added: "We found a conservative attitude to property development locally," and said this needed to change if South Africa was to grow.

A basic lending rate of 11 per cent - more than three times the interest rate in Ireland - acts as one disincentive to investors. Another is the inevitable amount of red tape, exacerbated in part by South Africa's Black Economic Empowerment (BEE) initiative.

The scheme, which demands that companies tendering for public contracts show a commitment to racial equality, is controversial locally. Aimed at redressing the inequalities of the apartheid era, it puts an onus on domestic and foreign-owned companies operating in the country to have a relevant proportion of black shareholders.

While the BEE's "codes of good practice" are not legally binding, they have discouraged some foreign investors. Domestic critics claim the scheme has done little more than enrich well-connected black business leaders.

Andrew O'Callaghan, a partner in PricewaterhouseCoopers, who recently set up an Africa advice desk for Irish investors at the company's offices at George's Quay, Dublin, said BEE was an added layer of bureaucracy. But he added: "I don't think the overall framework is a disincentive - once people look at it, and examine it."

He said the manner in which companies were "scored" under BEE needed to be clarified to give investors greater certainty, and he noted the South African government had plans to do this in the near future.

Enterprise Ireland said it was now considering expanding its presence in the region to deal with increased requests for assistance.