On the banks of the Congo River just upstream from Kinshasa, a leisurely Sunday barbecue is in progress. Among the guests sitting around a table shaded from the afternoon sun by a gazebo are Congolese business people, French industrialists and traders, and the sales representative of a South African wine and spirits conglomerate. He is in Kinshasa to expand the company’s market share and take away business from the mainly French competition. White and stockily built, the sales representative lectures the other guests: “Our message to the consumer is why should he buy from the old colonial powers like France when he can buy from Africa? Our wines are just as good as theirs and better priced too.”
The guests – even the French ones – agree that South African wines are excellent and welcome the fact that there is competition. However, eyes start to roll heavenward as the man goes on remorselessly about how wonderful South Africa is and how well he understands the African market “because we are African too”. All the while, he brushes aside comments from his audience about Congolese peculiarities, quirks and qualities that he, as a non-francophone white foreigner, might not yet have grasped.
The event seemed to encapsulate the strength and vulnerability of South Africa, the continent’s economic powerhouse, in its continuing mission to engage with the rest of Africa. The country has the capacity, human resources and products that are second to none on the continent. Alongside this is a tremendous self-confidence that can slip easily into unattractive arrogance, alienating many a potential partner.
In late February, the Congolese government rejected a proposal by Westcor, a five-country partnership led by South Africa’s Eskom, to develop a 5,000MW hydroelectric project at the Inga Dam on the lower reaches of the Congo River, apparently preferring to deal with mining giant BHP Billiton. Westcor CEO Pat Naidoo blamed Congolese politics on the decision, but several sources close to the project claimed that Eskom never “got it”. “They were too arrogant,” said one, “always making the Congolese feel like they knew better. Sure, they often did, but that is not the way to do things here.”
South Africa has been the dominant partner in the Southern African Customs Union for decades, but its economic overtures to the rest of the continent only began in earnest in 1994. Today, there are South African businesses operating nearly everywhere in Africa, from engineering companies to fast food outlets, telecom giants to retailers. In addition, South Africa, and more particularly Johannesburg, has firmly established itself as the African headquarters of choice for multinationals, eclipsing contenders such as Nairobi, Accra and Lagos.
The main attractions are the sophistication of South Africa’s and the city’s infrastructure, world-class financial services, Johannesburg’s enviable position as a transport hub and the relatively high standard of its telecommunications facilities and human resources. For international companies that are located there, South Africa is a gateway to the continent.
Telecommunications giants Vodacom and MTN are two of the South African companies that have most successfully ventured further into Africa. MTN’s Nigeria operations, in particular, have been a fabulous money-spinner for the company, easily compensating for the often exasperating difficulties of Nigeria’s business environment.
“Vodacom’s South African roots have certainly given us an advantage when it came to expanding the business into Africa,” says Richard Boorman, Vodacom’s spokesman. “There are practical benefits in terms of time zones and transport links, but more important is the understanding of the consumer. It’s not at all that consumers think and act the same way across the continent, but in many situations there is a similarity that we have been able to build on and then adapt to the differences.”
At the same time, Boorman warns against South African companies thinking that what works back home will automatically work elsewhere. “Africa clearly isn’t homogeneous – it would be a mistake to assume that just because something works in a South African context that it will translate directly into another African country. The context and demographics may be similar but everything from language to regulatory regimes vary widely.”
South African companies that require direct supply lines to South Africa have discovered that there is a limit to how far they can extend into the continent. The JD Group owns a number of South Africa’s top retail brands, including Price ‘n Pride (which sells furniture), Incredible Connection (which sells electronics), Joshua Doore, Morkels, Russells and the Hi-Fi Corporation.
The JD Group is present in Swaziland, Namibia and Botswana. “We tried going into Zambia but we found that it was just too far away. Our business depends on extending credit to customers and we found it was just too hard to manage that aspect from here, too hard to chase delinquent creditors,” CEO Grattan Kirk told The Africa Report.
Kirk argues that JD has not behaved arrogantly outside of South Africa, but admits that the company was sometimes guilty of assuming that other legislative frameworks were the same as South Africa’s. “These other countries have their legislation, just like South Africa. When we go up and try to do things like we do back home, it causes problems. It’s not that they are trying to stuff us up. They just want us to know that we must do things their way.” Although JD Group had retreated from Zambia, Kirk says the JD Group is looking to expand into Mozambique, where South Africa’s shopping mall culture is spreading rapidly.
South Africa’s supermarket giant Shoprite is already firmly entrenched throughout almost all of Southern Africa, with stores scattered throughout West Africa. Unlike the JD Group, Shoprite is not greatly dependent on South African supply chains. It uses South African management to run its businesses but sources most of its material locally. This has proved a winning formula, particularly since the strength of the rand is making South African exports increasingly expensive.
The number of Shoprite’s non-South African stores is still growing despite adverse economic conditions, providing a steadily rising proportion of Shoprite’s revenues.
The successful African ventures of Shoprite, Vodacom, MTN, Standard Bank, Murray & Roberts and a host of many other companies are testimony to South Africa’s role as a premier gateway to the African continent. The risk is, however, that a larger African footprint will increase the temptation for South African companies to convince themselves that by virtue of being African, they ‘know it all’ when it comes to African business. But they will do so at their peril, for nowhere more than Africa is the old maxim true that pride comes before a fall.
Understand Africa's tomorrow... today
We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.