GHANA INVEST SERIES: Africa is the next big thing, but there's no need to go it alone

Sometimes businesses encountered political challenges abroad that could have been addressed had at the government level.

SOUTH African companies are Africa’s second largest source of foreign direct investment after the US; according to Ernst & Young’s latest Africa attractiveness survey, South African firms launched 53 projects across Africa in 2014.

The wider African operations of companies such as Multichoice, MTN, Pick n Pay and Shoprite contribute significantly to company revenues.

In MTN’s case, for example, the company has twice as many subscribers in Nigeria than it does in South Africa, with the Nigerian operation alone contributing 37% of group revenues. 

Significantly, MTN’s Nigerian business is growing while its South African one seems to have flatlined - latest company results show that revenue in the half-year ending June 2014 grew 22% in Nigeria, while it shrank 3.4% in South Africa. 

Mega retailer Shoprite has 357 outlets in the rest of Africa, including 115 Shoprite supermarkets, and more than 100 other furniture, home decor, pharmacy and restaurant stores in 14 African countries.

Just five Shoprite stores in Angola sold more cans of energy drink Red Bull than in all of Shoprite’s 382 stories in South Africa, and 19 Shoprite stores in Angola sold more bottles of sparkling wine JC Le Roux than the entire South African business did.

And one of South African Airways’ most lucrative routes per kilometre is to Angola: the Johannesburg- Luanda route, at about $0.19 per km, is three times as expensive as Johannesburg-London which brings in $0.06 per km - although the UK is six times further than Angola from South Africa.

Venturing north

With such lucrative opportunities, South African authorities are keen to offer support to companies wanting to venture north. South Africa’s Department of Trade and Industry (DTI) has welcomed South African companies to consult with government before venturing into investments in the wider African market.

DTI Acting Director for West Africa’s International Trade and Economic Development, Lebogang Makoloi, raised concern that rushed ventures and investments into these markets might turn sour for the private companies, especially in instances where the government was not properly involved.

DTI Acting Director for West Africa’s International Trade and Economic Development, Lebogang Makoloi, speaking at the Doing Business in Ghana summit.

In an exclusive interview with Mail & Guardian Africa on the sidelines of the Ghana Trade and Investment Forum last week, Makoloi said sometimes companies encountered political challenges that could have been addressed had they involved the government before of pouring investments into markets outside the country.

“Currently there is need for more coordination between government and the private sector, something that should be addressed if South African companies are to invest in peaceful and stable economic destinations across Africa.

“Companies have been going it alone, and levels of success have been varying. Some [companies] got burnt alone…and that’s when they start looking for government intervention.

“To avoid getting burnt, I therefore call upon the private sector to partner with the government,” Makoloi said.

He said the Africa Bilateral within the DTI’s International Trade and Economic Development Division was aimed at facilitating the coordination of smooth investment opportunities for South African companies while on the other hand addressing development integration.

This approach is based on the imperative to position Africa as a long term strategic market for South Africa’s investments, exports, as well as a supplier of strategic human and institutional resources.

Among key South African companies that have successfully done well across the African continent comprise MTN, Vodacom (both mobile and telecommunications), Absa/Barclays Africa, First National Bank (FNB) , Nedbank, Standard Bank, retailers Shoprite, Spar, Pick and Pay and a few individually owned companies.

Most advanced economy

South Africa, which is rated the most advanced economy in the continent, has its companies having a major footprint in other African countries.

DTI has in recent years played an important role in helping the local companies secure such investments, in the form of the Outward Trade and Investment missions, the most recent which was conducted in neighbouring Mozambique.

Among up and coming companies that are hopeful of clinching deals in Mozambique are Clearline, a lighting and surge protection company.

The Chief Executive Officer of the firm, Eaghan Lai Thom, said he was excited to have been part of the mission, which according to him, afforded him with the opportunity to learn and understand the business environment in Mozambique.

“I had good productive meetings with good quality Mozambican companies during the mission, and as a result acquired an agent that I will work with to have my products penetrate the market,” said Thom.

The Counsellor Economic of South Africa to Maputo, Matome Kgowedi, said the DTI would continue to provide platforms to enable more presence of South African products in the Mozambique market.

“While we provide these platforms, it is your obligation as businesspeople to follow-up on the leads and contacts you acquired during such missions,” he added.

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