Executive Summary
A key challenge for Africa in the 21st century is to develop an enabling business environment. This is a
clear objective of the New Partnership for Africa’s Development (Nepad). Business, it is presumed, can
provide the necessary impetus to unlock Africa’s vast economic potential, allowing it to engage
successfully with its many developmental challenges. However, despite the abundance of economic data,
there is very little qualitative information available on the structural challenges facing business in Africa.
The experience of South African companies in the rest of Africa provides an important focus to
highlight both the problems and challenges of these markets as well as the potential solutions. South
African business and investment on the continent is growing apace, diversifying from the traditional
business of contracts in construction, mining, vehicle components, timber, and steel, into a variety of
businesses including skills training, education, IT and telecommunications, clinics and healthcare,
franchising, advertising, property development and waste management. South Africa is beginning to
replace Europe and the US as a market for Africans in regard to higher education, shopping and skills
training. The modalities of doing business have changed as has the broad business environment
following a decade of reform and liberalisation which, fortuitously, coincided with greater political
openness in South Africa.
In less than a decade, South Africa has become one of the top 10 investors in, and trading partners of,
many African countries, displacing European and American companies which traditionally held the
high ground, particularly former colonial powers.
These developments make an examination of the role being played by South Africa, and particularly
its business community, important to the unfolding picture of trade and investment in Africa. South
Africans believe their commitment to making Africa work is long term. South Africa is tied to the
continent both as a regional powerhouse and as key political player, particularly in the Nepad
initiative. Despite its sophisticated economy, it suffers from the perception problems that affect the rest
of the continent and therefore it is in its best interests to make the continent work. This includes
finding solutions to the various conflicts, encouraging good governance, making available its skills and
resources to other countries, encouraging regionalism and cross-border trade and working to making
countries north of its borders more attractive to investment and a better place in which to do business.
In short, South Africa’s input is crucial for Africa’s renewal.
The South African Institute of International Affairs (SAIIA) has undertaken a three-year Business in
Africa project to complement its current Nepad good governance project.2
Sponsored by the Danish
government, the project aims to develop practical policy recommendations to policymakers, business
(both foreign and local) and academics on the preconditions for the development of a sustainable 2
business environment in Africa. The project will look at the South African business experience in a
select sample of African countries and sectors to extrapolate broader lessons for the continent.
Through this research programme, SAIIA hopes to empower business and governments in Africa
through a series of qualitative and quantitative surveys and field research to make the Nepad vision of
sustainable growth and development a reality. The programme’s findings will be submitted to the Nepad
Secretariat, African governments, the SA Department of Trade and Industry, as well as African and South
African business chambers to inform economic and political policymaking on the continent in a way that
encourages the creation of a sustainable business environment. The study hopes to move the debate
about business partnership within the African context to a new, more practical level with the purpose of
providing institutional capacity to all stakeholders in the development of business in Africa.
This report, which forms part of the broader project, is a preliminary study of the experience of doing
business in Africa of a range of South African companies. It looks briefly at four sectors and four
countries, not necessarily linked. The sectors are: Banking, Telecommunications, Retail and Food, and
Mining while the countries are Morocco (North Africa), Ghana (West Africa), Mozambique (Southern
Africa) and Uganda (East Africa).3
The problems as well as the solutions identified by a wide range of South African companies canvassed
for the report are mostly in line with those identified by multinationals, donors, civil society and other
groups with a political and economic interest in the continent. While it is understood that Africa is not
a homogenous entity and that countries have different starting points, it is true to say that there are
still many overarching problems and trends that apply to the continent generally.
These are:
- low levels of development and insufficient investment in people;
- political and fiscal risk;
- a weak private sector coupled with a strong government presence in the economy;
- high donor dependency for aid and other financial mechanisms as well as projects;
- the high cost of doing business due to the lack of basic services, facilities, infrastructure,
development, competition and resources;
- insufficient air and road links;
- poor leadership and bad governance;
- pervasive corruption at all levels of government;
- high costs of finance due to high risk and weak economies; and
- currency fluctuations.
Suggested potential solutions involve, in the main, several key elements:
- effective leadership and accountable governance geared to the needs of the population, not the
needs of government officials and elites;
- the rule of law, which includes a strong and independent judicial system capable of enforcing
contracts and agreements, including those between outside parties and governments;
- the creation of sound and stable macroeconomic environments with strong private sector
participation and benign government intervention, where necessary;
- a deepening of democracy where it exists and its restoration where it does not;
- resolving conflicts and thus reducing the political and economic costs they impose;
- increasing competitiveness and diversifying economies as well as encouraging exports;
- reducing dependence on aid and other multilateral financial support systems through domestic
growth and development and the fostering of strategic partnerships;
- investing in people to develop skills and build capacity;
- strengthening regionalism to expand markets, bring down the costs and difficulties of doing
business across borders and create greater competitiveness; and
- focusing on success and excellence as examples of what can be done.
What Multinational Companies Say Dissuades Them from Investing in Africa4
Footnotes:
- DIANNA GAMES is a Director of Africa @ Work, a conferencing and publishing company focusing on the
African market, as well as the Managing Editor of the South African Institute of International Affairs journal, The
SA Journal of International Affairs.
- Inquiries about the project can be directed to Ms Neuma Grobbelaar, Deputy Director of Studies and Head of
the Business in Africa project at grobbelaarn@saiia.wits.ac.za.
- The information was gathered through a variety of means including interviews, questionnaires, research
reports, articles in the press and personal research for other projects.
- This table is taken from the UNCTAD World Investment Report 2000. New York: UN, July 2000.
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