South African capitalism – a new way of doing business?

by oneafrikan on July 22, 2005

Taken unashamedly from The Good News:

Corporate South Africa’s increasing global presence was highlighted this week as SABMiller entered its 40th market, becoming the world’s second-largest brewer by volume, and Old Mutual joined Anglo American and BHP Billiton in Fortune’s listing of the 300 largest companies in the world.

In a relatively short space of time, South African business has emerged from the isolated laager of apartheid South Africa to become a significant and influential player in the global business arena.

As highlighted by Stephan Malherbe and Nick Segal in their report on corporate governance in South Africa, many of South Africa’s corporations in the late 1980s were bloated, unfocused and run by entrenched and complacent managers. With local business operating in isolation from the rest of the world and shielded from international competition, our business practices, laws and regulations fell behind international norms.

In the past two decades, much has changed: South African business has been exposed to a changing political environment; rapid integration into the global marketplace; the stringent demands of international investors; an emerging market crisis; and changing regulatory reform.

Cumbersome conglomerates have been unbundled and businesses have become more streamlined, focussed and competitive. Legislation, regulations and corporate governance has converged to international standards.

As a result, South African firms have been able to compete internationally and we have witnessed the emergence of world-class industries, such as the oil-from-coal, offshore oil-from-gas, health care, deep mining, armaments, information technology, forestry products and food processing.

South African companies are playing an important role in mobilising private capital flows in Africa, both for new investment within South Africa and as an important source of foreign direct investment in other African countries.

After 1994, South African companies had a surplus of investment capital and with its rundown transport and utilities infrastructure, Africa offered considerable opportunity for the brave investor. With the rest of the world wary and disillusioned with Africa, South African business and state-owned enterprises took advantage. Isolation had made it difficult for South African businesses to compete with the developed world, but they understood the African market and enjoyed a comparative advantage.

Today, South African management expertise is running the Cameroonian national railroad, managing power plants in Zimbabwe, Zambia and Mali, developing the physical infrastructure in Malawi and Mozambique and controlling banks, breweries, mines, telecommunications, supermarkets and hotels throughout the continent.

The strength and expertise of its corporate sector is evidenced by the emergence of South African multinationals with a significant international presence in banking, mining, construction, brewing, retail finance and information technology. Of the world’s 50 largest multinationals from developing countries, seven are from South Africa.

What is it about South African business that has enabled us to make such significant progress in the hugely competitive global arena? Is there something that sets South African companies apart?

A recent Accenture survey of 581 executives in 18 countries found that South African firms know how to ride a “storm”; are responsive to organisational change; are proactive in expanding their opportunities in new markets; and are more likely to reappraise their range of products and services and convert them into saleable commodities than companies in almost every country surveyed.

South African executives reported that, because of their experience of working through periods of economic instability, they are more resilient in the face of downturns in the economy, fluctuations in the exchange rate, and yo-yoing inflation. The Accenture survey also found that South African executives are in touch with their organisations and understand how to transform them to achieve their objectives.

Operating in foreign markets requires companies to be flexible and open to new ideas and ways of doing business. Old Mutual Communications Consultant Elian Wiener believes that the enormous developments that have occurred locally in the last 20 years have meant that South African companies are well versed in adapting to change.

American business protocol website Executiveplanet.com offers advice on doing business with South Africans. It describes South African business people as entrepreneurial, well-prepared, strategic and decisive. From an American perspective, South Africans are not ‘cut-throat’ negotiators. Instead, South Africans strive to build consensus and prefer all sides to gain something.

PricewaterhouseCoopers’ Doug Franke echoes the sentiment that South Africans are adept at developing mutually beneficial arrangements, particularly between business and labour leaders. “Our leaders,” he says, “strive for more extensive buy-in from the very start, as (they) are passionate about securing an outcome that is accepted and embraced by a broad base of stakeholders.”

Michelle Atkins of Dimension Data, a leading network service provider with 5000 employees in 36 countries on five continents, believes that South Africans’ entrepreneurial attitude, positive drive and outlook sets us apart from the rest.

South African firms are leaders in the global corporate responsibility movement. South Africans have embraced the ideals of the ‘triple bottom line’, of developing business solutions that with economic, environmental and social benefits. In the World Competitiveness Yearbook 2005, South African business leaders’ commitment to social responsibility was ranked eighth out of the 60 countries surveyed.

Business consultant Wayne Visser believes that in the next ten years, South African multinationals will become increasingly recognised for global best practices in social and ecological design

With our world-class codes of corporate governance, our leading work in sustainable development, and our values-based ubuntu philosophy, South Africa is forging a new model of capitalism, transcending the divisions between the First and Third worlds and bringing the soul back into the workplace.

Armed with these qualities, South African business can be expected to increase its global footprint and firmly establish its own brand of corporate and management expertise in the 21st century.

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