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August 27, 2012

South African firms under particular scrutiny in other African markets

Dianna Games for Business Day
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WHY are South African companies held to a different standard than those from other countries when operating in African markets? This issue was raised in a debate in Cape Town last week hosted by the Centre for Conflict Resolution, called “South African companies in Africa — exploitation or engagement?”

Surprisingly, many in the audience seemed hostile towards South African business expansion in Africa, falling back on well-worn arguments about colonialism, “corporate greed” and labour practices rather than examining the many advantages such expansion has brought to South Africa’s own economy and to many other economies.

The debate is by no means new. It began when business first started moving north of the border in the early 1990s. The rapid pace of expansion, the size and scale of the companies that easily dominated smaller local businesses, the high visibility of the sectors in which they operated and, yes, the behaviour of some brought unwanted attention to the South Africans. African newspapers had a field day criticising the southern giant for its “neo-colonial” activities. Non-governmental organisations quickly looked for evidence of exploitation of locals. And, unfortunately, sometimes they found it.

Since then a lot has changed. Companies now have much more experience in other African markets and have learned how to conduct themselves more appropriately — and increasingly have sought local partnerships. Many have brought capital, corporate governance, innovation and skills training. The South Africans are developing agriculture to serve their supermarkets and they have modernised the supply chain.

Despite accusations to the contrary, our multinationals are sought-after employers. Businesses on the continent actively pursue partnerships with South Africans and willingly take advantage of the goods and services they bring to these markets — despite critics portraying locals as hapless victims of corporate expansion.

And yet, the debate still lingers. South African companies do not do business in emerging markets differently to companies from other parts of the world. But they are expected to. There is a greater expectation of altruism and development beyond the bottom line. This is part of the baggage of being an African economic power.

I have no brief for companies that fail to observe local business culture; who are arrogant in their dealings; who may have exploited workers or local partners; who do not uphold the same standards elsewhere in Africa as they do at home; and who still believe that South Africa is an “exception” in Africa.

But it is true to say that much of the negative sentiment comes from people who are not in business at all. And many single out our companies’ activities for criticism while turning a blind eye to similar business practices by other multinationals and by home-grown businesses.

South Africa is not just another country with companies on the expansion trail. It is the continent’s economic power and the African voice in several key forums. This singles it out for attention and many mistakenly believe there is a conspiracy by South Africa to dominate the continent. The conspiracy was raised most recently with South Africa’s bid to occupy a top African Union (AU) post.

The AU battle was divisive and may still have an effect on business, which generally pays the price for government actions that are not well received by other African states. For example, when half-a-plane-load of Nigerians was deported earlier this year over alleged yellow fever certificate infractions, their government immediately threatened to force South African companies out of Nigeria.

Part of the reason this debate refuses to go away is because the true situation is not well communicated. Neither companies nor our government are telling the story very well of what benefits they are bringing to the rest of the continent, whether through investment, development or funding.

It is important that South Africa’s companies remember they are under particular scrutiny in other African markets. Good corporate governance and scrupulous business practice will provide a competitive edge and, hopefully, if business continues to pursue these vigorously, in time South Africa’s critics will see the considerable benefits our businesses are bringing to the continent.

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