A glimpse into a decade
Some of SA companies are encountering conditions and obstacles unlike any they've experienced before - and some have burnt their fingers as a result. Meanwhile, dissatisfaction is mounting over what a growing number of African governments and businesspeople perceive as a one-way street. Trade balances are tilting heavily in South Africa's favour, raising concerns that the country - or its business sector, at least - may be the new colonisers of the continent.
A decade ago, when South Africa went from political polecat to welcome guest at the world's trading table, African nations were quick to embrace their newly liberated brothers and sisters. Yet business's first steps in exploring trade and investment opportunities beyond South African borders were somewhat tentative, concentrated mostly on the fairly familiar turf of the 14-nation Southern African Development Community (SADC).
Then opportunity beckoned enticingly further up north. In Nigeria, where an estimated 85 per cent of its 122 million people had never used a telephone, government was pressing ahead with plans to auction off at least three mobile phone licences. A similar scenario was unfolding in Ghana, Uganda and Rwanda, all nations with so little telecoms infrastructure that a ringing telephone was a rare event. Racing to fill those gaps, MTN South Africa led the charge, investing $480 million in the first year of its Nigerian operations and claiming more than one million Nigerian subscribers by February 2003.
The ice broken by the telecoms companies and banks, the flood gates opened, with construction, manufacturing, retail, tourism and beverage companies flocking up north. South African brands are flavour of the month. Its national airline, South African Airways, is preparing to breathe new life in Nigeria's skies, paying $60 million for a 30 per cent stake in that country's carrier. In Ghana, South African mining companies now account for 60 per cent of all foreign direct investment, and South African retail and supermarket chains are overshadowing all other investors. In Kenya, South African beer and chicken outlets have become the taste of choice for upmarket consumers.
In the wings, though, some storm clouds are gathering. For one, South Africa's entry has put pressure on the margins of local businesses, particularly in Kenya, whose business community is bogged down by rickety roads and the high cost of power and credit, hampering their ability to compete on an even footing with imports from the south. Kenya has also been at the centre of a beer war, with local breweries fighting back against the growing popularity of South African Breweries' Castle brand.
Disgruntlement has also been growing at the seeming one-sidedness of the trading scene. Early in the new century, Kenya was threatening to impose restrictions on South African imports, although oil has since been poured on troubled waters through behind-the-scenes dialogue.
Even so, the reality remains that trade balances in Africa are skewed firmly in favour of South Africa, thanks largely to its sophisticated manufacturing base and strong demand - although fingers have also been pointed at supposedly anti-competitive trading practices on the part of some South African businesses.
Fact is, South Africa, now exporting around 70 per cent of its manufacturing exports to African countries, enjoys substantial trade surpluses with many of trading partners on the continent. In 2003, for example, exports to Zimbabwe, South Africa's biggest African trading partner, totalled R6,5 billion, compared to imports from that country of only R2,5 billion. The gap was even wider in Angola, which imported R3 billion worth of SA goods in 2003 but exported only R28 million in return, as well as in Mozambique (R5,6 billion in SA imports, R280 million in exports) and Kenya (R2,2 billion in imports from SA, R106 million in exports).
While a few countires, notable Nigeria, Botswana, Swaziland and Lesotho have bucked this trend, most AFrican nations are feeling the balance of trade pinch, indicating that a more reciprocl relationship will remain high on the agenda.
By the same token, though, not all South African companies are having an easy ride in Africa. In Ghana, for example, clothing retailer Pep Stores collapsed in the country's cluttered clothing market, a development blamed on poor industry regulation that has seen uncontrolled dumping of used clothing. South African companies are also quick to point out that their African successes have come on the back of heavy investments, returns on which are often slow to flow in.
One reason is the still widespread lack of basic infrastructure, from telecoms and power to rail and road that oils the wheels of business. With virtually no power supply or transmission backbone connecting Nigeria's major cities when the mobile operators arrived, networks like MTN had to do it themselves, installing diesel generators at almost all base stations.
Diesel being scarce in a country where kilometre-long queues at petrol stations are common, they also had to post security guards to protect their fuel tanks. The poor state of Nigeria's roads, only a fifth of which were paved, added to the cost of network rollout, as did exhorbitant customs duties on all imports, an almost complete lack of credit, and the absence of a central property register to regulate land ownership. That explains the $26 million loss suffered by MTN Nigeria for the year ending March 2002.
That goes some way towards explaining the $26 million loss suffered by MTN South Africa for the year ending March 2002. Similarly, in Ghana's banking sector, South African-backed Stanbic experienced negative returns but, after three years in the country, appears to be making headway.
Still, the returns that will ultimately be reaped outweigh the high cost of doing business with Africa - even if the profits don't come overnight. In any event, few South African companies are taking a short-term view of their African ventures. Long-term partnerships come with the territory, as African markets resent the hit-and-run style of business that smacks of making a fast buck.
On the contrary, South African companies have taken pains to emphasise their long-term commitment, as well as to using local resources, including staff, wherever possible. In Nigeria - yet again - MTN Nigeria alone has been credited with creating well over 10 000 new jobs, many of them through partnerships in distribution outlets. Likewise, the arrival in Nigeria of SAA is expected to lead to the creation of another 2 000 jobs, while also stabilising cut-throat pricing and opening up new routes for Nigerian passengers, whose choices are severely limited under current conditions.
So South Africa continues to spread its wings, not just in business, but also politically. Its peacekeeping forces are playing a valuable role in countries such as the Democratic Republic of Congo, and its politicians have thrown their full weight behind Nepad, the New Partnership for Africa's Development, the continent's biggest, most powerful thrust yet to take its destiny into its own hands. And while concerns remain about lopsided trade balances and the importance of more reciprocal trading environment, the state of South Africa's trading relations with Africa is essentially sound.
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