Double dutch

SA and the Netherlands are benefiting from long-established commercial and economic relationships

Double dutch

When SA President Cyril Ramaphosa welcomed King Willem-Alexander and Queen Máxima of the Netherlands to SA in 2023, he remarked on the ‘long-established historical ties, between the two countries’. Much of this is rooted in a cultural resonance that goes back hundreds of years. Indeed, SA’s third-most widely spoken language (Afrikaans, behind isiZulu and isiXhosa) is a daughter language of Dutch and the two tongues are mutually comprehensible.

Ramaphosa pointed out that the Netherlands is one of SA’s major trading partners. The Netherlands is the ninth-biggest recipient of South African goods, while South Africa is the Netherlands 39th-largest market. However, the official trade figures require close interpretation. SA’s biggest exports to the Netherlands are ores slag and ash ($1.1 billion in 2023) and various categories of fruit products ($1.01 billion), according to Trading Economics. After that comes aluminium ($462 million),followed by mineral fuels, oils and distillation products ($341.9 million).

SA fruit growers and exporters may laugh when it is suggested that the Netherlands is their major EU market. In fact, the fruit goes from SA to the Port of Rotterdam, in the Netherlands, from where much of it is transported onward to other European national markets. It travels by truck, train and barge (up the Rhine river) to countries such as Germany, Poland and the Czech Republic. Some SA fruit is reported to be trucked as far from Rotterdam as Moldova, which borders on Ukraine.

A similar point applies to the iron ore and coal briquettes, as well as two other major South African exports, raw aluminium and ferro-alloys. Only a portion of these products is intended for the Netherlands, with most being transported onward to other EU destinations.

Ramaphosa argued that SA exports to the Netherlands had ‘doubled between 2019 and 2022’. But this reflects a once-off leap in demand for SA coal after EU sanctions were imposed on Russia following its invasion of Ukraine. European imports of coal exports surged eight-fold in the first eight months of 2022, although by no means all of this came through the Netherlands.

Nevertheless, there is much business done along the agricultural value chains that are rooted in SA and pass through the Netherlands. Logistics – including packaging, transport and maintaining the integrity of cold chains – require inputs at bother ends. Buyers and brokers from the Netherlands maintain offices in SA, and SA growers and sellers do the same at the Netherlands end of the chain.

Considerable Dutch investment, development aid and expertise has, over the years, focused on the SA agricultural sector. A single example shows how broad this collaboration is. The HortiDemoCentre – a Netherlands-funded ‘hortipreneurial’ centre of excellence at the Stellenbosch University, founded in 2022 – is intended to advance a climate-smart greenhouse-based horticultural model in SA.

In addition to the university and the Netherlands Enterprise Agency, it draws on the expertise of Netherlands companies in the sector, including the Ridder Group, Ludvig Svensson, RijkZwaan, Koppert Biological Control, Control Union and Delphy.

‘Dutch companies can provide many agricultural techniques and expertise. The challenge is to integrate them in the agricultural market of South Africa,’ says Bernard Likalimba, agricultural adviser to the Royal Netherlands Embassy in Pretoria.

This closeness of the relationship is illustrated by the mutual relationships between large corporates. The Netherlands is a major banking centre and was the single-largest source of FDI (35%) into SA in 2022. However, as with SA’s exports, more detailed interpretation is required.

A considerable portion of the Netherlands overseas investment is European capital routed through Dutch banks with the ultimate beneficial owners located elsewhere on the continent. The Netherlands is the channel of choice thanks to its rigorous regulations and vast range of investment treaties and protocols around the world.

The Dutch, family-owned Heineken, the world’s second-largest brewer, has since 2023 been one of the two giant companies in the SA liquor industry. It is currently going head-to-head with AB InBev, the owner of South African Breweries, for market share throughout Southern Africa. Ironically, both companies are listed on the Euronext Amsterdam market, even though AB InBev is headquartered in neighbouring Belgium.

Other prominent companies with a strong presence in SA include Philips, once an electronics manufacturer but now a healthcare technology operation, and the well-established Anglo-Dutch firm Unilever. Unilever produces personal care and food products from six manufacturing sites in Durban. The Amsterdam-headquartered automotive maker Stellantis is currently building a manufacturing plant at Gqeberha in the Eastern Cape.

One of the largest Dutch companies listed on the Euronext market is Prosus, with its strong SA roots. Listed in September 2019 at a value of $100 billion, Prosus is effectively the international investing arm of SA’s Naspers. Its share price boomed for many years as the company reaped the benefits of early ownership of Chinese internet giant Tencent. But when listed only on the JSE, Naspers’ price always traded as a discount to the value of the assets it owned. The company quite simply became too large for the sums of capital that could be mobilised through the JSE. The Amsterdam listing enables it to play in a whole range of other e-commerce markets, including payment apps in the Indian and other markets, and on-line deliveries in Latin America.

The Netherlands also has another attraction for SA companies – a more generous tax regime than most other EU countries. Sometimes called the ‘Dutch sandwich’, it is essentially an exemption for foreign companies from the Netherlands dividend-withholding tax, similar to that offered by Ireland. This has led some to describe the Netherlands as a tax haven. A tax break is also experienced by skilled individuals who relocate from SA to the Netherlands. They are tax-exempt for the first 30% of their salaries. According to the Netherlands Central Statistical Bureau, there are 41 300 South Africans employed in the country.

Certainly, South Africans who relocate to the Netherlands find it easier to adapt than in many other countries. ‘There is a deep involvement of the two countries with one another,’ says Kees van de Waal, an emeritus professor in social anthropology at Stellenbosch University. ‘There is greater mutual knowledge than any other pair of countries outside the Netherlands, with the exception of South Africa’s United Kingdom links,’ he adds.

Van de Waal, who was born in the Netherlands and maintains close ties to the country, points out that younger Dutch people are mostly fluent in English. ‘Language is not a problem and the cultural transition is relatively easy,’ he argues. Many young South Africans are employed in IT – the Netherlands is not only strong in software but also hardware. The country’s biggest firm, ASML, is one of the world’s leading producers of machines for printing circuits on silicon chips.

The Netherlands’ wealthy and sophisticated economy allows many of its citizens to holiday in SA (131 371 in 2023). The Netherlands is SA’s fourth-largest tourism market. ‘There is a considerable awareness of South Africa in the Netherlands, going back at least to the Anglo-Boer War, when the Netherlands supported the Boer side,’ says Van de Waal.

The Netherlands appears to be undergoing a considerable political shift, with a right-wing coalition government under Prime Minister Dick Schoof, who has been in office since mid-2024. ‘It’s not clear whether this will affect business relations,’ says Van de Waal. ‘However it may well be more of a threat to cultural and academic ties.’ The new government has promised to tighten citizenship requirements and to restrict the ‘anglicisation’ of higher education in the Netherlands.

Despite the possibility of political differences at national government level, the Netherlands will remain SA’s primary entry point to the European market for the foreseeable future. The wheels of business will continue to be greased by cultural affinities and historical links. Commercial, tourism and personal links will keep both countries high on their mutual-awareness radars.

By David Christianson