Tag Archive for: Globalization

This article was written by Olivier Holmey.

A string of high-profile failures in Western markets has highlighted the brighter prospects that lie in continental expansion for many South African corporates.

Fifteen minutes is all the time it took to wipe out New Frontier Properties’ top brass. Anticipating a fight at the annual general meeting on 24 February, the firm’s executives had come to its offices in Mayfair, London, accompanied by a lawyer.

But the chairman, Franz Gmeiner, promptly asked the lawyer to leave, on the basis that only shareholders and representatives of the business could attend. Minutes later, the 97% of the shareholders present, including Gmeiner, voted to remove Michael Riley, the firm’s chief executive, and Patrick Smith, its finance director, as well as two other directors.

Within hours, all traces of the former directors had vanished from the firm’s website.

The shareholder revolt followed months of turmoil at New Frontier, a real-estate investor listed in Johannesburg but mainly invested in shopping malls in the UK. A tumultuous real-estate market, coupled, investors argued, with serious mismanagement, collapsed the value of the firm’s assets from £192m ($239.6m) in 2018 to £70m in 2019, and reduced its share price to virtually nought.

Big bets, big losses

New Frontier’s ill-fated investment in the UK is just one recent example of South African companies betting big on markets outside Africa, only to see the value of these foreign operations nosedive.

In the UK, Brait, an investment holding company owned by South African businessman Christo Wiese, wrote off its investment in fashion retailer New Look, while Famous Brands, the dining group headed by Darren Hele, wrote down half of its bet on Gourmet Burger Kitchen. Clothing retailer Truworths wrote down more than a third of the £256m it invested into the UK shoe chain Office Holdings, while Intu, the owner of shopping centres in the UK, saw its market valuation crash from £13bn in 2006 to about £50m early this year, before going into administration in late June.

South African corporates have struggled in other developed markets, too. In January, retailer Woolworths fired CEO Ian Moir, who had overseen the 2014 acquisition of troubled Australian department store chain David Jones. David Jones’s profits have halved under its new owner, and Woolworths wrote down half of its £1bn initial investment in the business.

Fuel giant Sasol has faced similar woes in the US, where it aimed to transform into a global chemicals player with the construction of a huge ethylene plant. But the $13bn project has been mired in controversy, with costs surging about 50% above estimates and an internal probe revealing gross mismanagement.

Vanity projects

Some of South Africa’s businesspeople, and observers of the country’s corporate fortunes, have come to see the global ambitions of many businesses as little more than vanity projects. Barring a few exceptions – like the restaurant chain Nando’s and the internet firm Naspers – they say that South African companies have tended to fare poorly in developed markets. They also argue that the country’s firms have a far greater competitive advantage in Africa.

“I agree wholeheartedly with that position,” says Junior John Ngulube, CEO of Emerging Markets at Sanlam. “We want to expand geographically, but we are an emerging-market player. That’s what we know, and therefore our expansion will be limited to other emerging markets. Those are the places where we believe we can add value.”

This vision, which many South African businesses now share, has served Sanlam well. Since the mid-2000s, the insurer has expanded into 33 African countries to become the largest non-banking financial group on the continent. A quarter of its net group revenues now originate outside South Africa, predominantly in Africa.

South Africa’s largest banks have similarly expanded their reach. Standard Bank now operates in 20 African countries, Absa in 10, FirstRand in eight and Nedbank in six. In 2019, Standard Bank’s African operations outside South Africa represented 31% of its headline earnings, up from just 10% a decade earlier.

Beyond banking and insurance, examples of successful expansion into Africa abound. MTN’s transformation into a multinational behemoth owes much to its early push into Nigeria, in 2001. Shoprite launched its first foreign operation, in Namibia, in 1990, and today is Africa’s largest food retailer, with a presence in 14 countries outside South Africa. Shoprite is typical of South African business expansion on the continent, which has tended to start with neighbouring countries like Botswana and Namibia.

South Africa’s direct investment into the continent totalled $10.2bn last year, according to EY’s Africa Attractiveness Report, giving the country’s firms a leading role in continental integration. In 2018, Boston Consulting Group identified 75 African firms driving the continent’s interconnectedness. 32 were South African, though their reliance on foreign markets varied greatly – industrial equipment dealer Barloworld (#26), for instance, derived 26% of its revenue from outside South Africa in 2018, whereas MTN derived 67%.

Analysts say these successes demonstrate that South Africa’s sophisticated businesses can more easily fend off competition from local rivals in Africa than they can in developed markets. Why, then, have the UK, US and Australia drawn so many South African corporates over the years? Speaking anonymously in order to share his candid views on this topic, the CEO of a black-­empowered company listed on the Johannesburg Stock Exchange blames the lingering ideology of apartheid. He tells The Africa Report: “Apartheid had a very strong anti-African tint, looking with a lens that viewed the rest of Africa as a black threat to the apartheid government. […] That propaganda pervaded the minds of businesspeople.”

The lure of London

This disregard for Africa’s economic potential, he argues, has led South African companies into markets for which they were ill-prepared. “You’ve seen big South African companies, like Pick n Pay, like Woolworths, like Old Mutual, like Investec – all of them have had a preference for either the UK and Europe or Australia,” he says. “With the exception maybe of the mining companies, just about every single South African company that has tried to go to Australia or North America or the UK has had an absolute disaster.”

Rob Cannavo, a former South African trade commissioner to Angola, Italy and the UK, sees things differently. He defends the validity – and profitability – of South Africa’s commercial ties to the Western world, in particular to the UK. “Love it or hate it, the historical connection is there,” he says. “London has always been the first port of call [outside Africa].” He cites Anglo American, Investec, Mondi and Mediclinic as examples of companies that started off in South Africa and have now become London-listed giants.

One reason the country’s companies have sought to build operations outside Africa is South Africa’s volatile currency, says Cannavo: “A lot of companies are trying to hedge their earnings.” Western investors are also a strong draw. “There’s a huge pool of capital in London,” he adds.

Challenges in Africa too

He agrees that the African continent is South Africa’s most promising foreign market, with the incentive even stronger now, due to weak growth at home.

That is not to say expansion into Africa is challenge-free.

Ikemesit Effiong, head of research at Nigerian consultancy SBM Intelligence and a former communications adviser to MTN in Nigeria, says tensions between South Africa and Nigeria, which flared up last year, made operations very challenging for a number of South African companies in the country.

Effiong says friends and family called him a traitor to Nigeria because he worked for MTN. “It was actually a very stressful time,” he recalls. “A lot of the criticism is based on prejudice and the natural competition that happens between economic rivals,” he says, but “South African operators support a vast ecosystem of Nigerian businesses, Nigerian talent, Nigerian suppliers.”

South African firms have faced difficulties elsewhere in Africa. In July last year, Pieter Engelbrecht, Shoprite’s chief executive, described trading conditions as “relentless”, as currency depreciation in countries such as Angola, Zambia and Nigeria caused the company’s operations in the rest of Africa to suffer losses. “But given our optimism for the long-term food retail opportunity on the continent, we remain resolute in our purpose to be Africa’s most affordable and accessible retailer,” added Engelbrecht.

Cannavo commends that approach.

“This is the view that you need to have in Africa,” he says. “You can’t go in with a quick and short-term strategy; that’s not going to work. […] If you can ride out the slump in one market, you might have a boom in another,” he argues.

Ken Gichinga, chief economist at Kenyan consultancy Mentoria Economics, points out that many South African firms have simply replicated in Kenya the business model that worked for them in their home market. He cites the example of News Cafe, a South African restaurant chain that he says has not, at times, sufficiently taken into account the habits and tastes of Kenyan consumers.

He adds that South African commercials often depict scenes that have clearly been shot in South Africa. “Nobody in Kenya has a white-picket fence, so it lacks authenticity,” he says of one such ad. “That is really the challenge of South African businesses: they seem very distant.” But Gichinga argues that they have learned from these mistakes by increasingly partnering with local firms and hiring local staff.

Sanlam’s Ngulube shares the view that firms cannot succeed in new markets with an approach designed in Johannesburg and implemented by South African teams flown in. The insurer partners with local companies in every market where it operates, and executive staff are drawn from the local talent pool.

That, he says, has proven key to the firm’s success across Africa: “You are not viewed in that country as a foreigner who is coming to grab profits, you are seen as a local entity that benefits the country in a win-win arrangement.”


For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email info@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: [1], [2].

Second only to emotional intelligence (EQ), cultural intelligence (CQ) is fast becoming one of the most in demand skills for executives in today’s culturally diverse world of business. The growing need for CQ is just one of the consequences of globalization.

It’s true that companies are setting up more bases in foreign countries than ever. But their own societies are simultaneously becoming more culturally diverse, as foreign citizens migrate in search of better career opportunities and lifestyles. This means that culture is no longer a minor concern for executives. It’s a strategic imperative, and high-CQ leadership is needed to intelligently address this trend. So what is cultural intelligence? And is it possible to develop it in your executive team? The simplest and most used definition was developed by researchers Ang and Van Dyne in 2008, as “the capability of an individual to function effectively in situations characterized by cultural diversity.”

They also suggested that CQ is structured in four dimensions, namely, meta-cognitive, cognitive, motivational, and behavioral CQ. These have been adopted, more or less, in subsequent research and can be summarized as follows. Meta-cognitive CQ is “an individual’s level of conscious cultural awareness during cross-cultural interactions”. Cognitive CQ is “knowledge of norms, practices and conventions in different cultures that has been acquired from educational and personal experiences”. Motivational CQ is the “capability to direct attention and energy towards learning about and functioning in situations characterized by cultural differences”.

Finally, behavioral CQ is the “capability to exhibit appropriate verbal and non-verbal actions when interacting with people from different cultures”. In summary, executives must be aware of cultural differences, understand them, be willing to learn more, and act in relation to that understanding. What the above establishes in no uncertain terms is that CQ is not an innate competency. It can be acquired through training and, most importantly, exposure to the culture in question.

The benefits of increased CQ are becoming more obvious by the day. Most CEOs agree that as technology takes over many traditional business functions, success will be defined by how well people interact with each other. They also agree that diverse management teams foster innovation because they bring important cultural perspectives to the table.

However, differences often breed conflict and companies who fail to foster CQ may find themselves unable to manage that diversity. In fact, CQ and innovation are closely correlated. Consequently, they risk losing their competitive edge and corporate sustainability. According to a survey by the Economist Intelligence Unit (EIU), 70% of international ventures fail because of cultural differences. Another source reveals that 90% of executives from 68 countries say that cross cultural management is their toughest challenge.

Culture is becoming so critical to business that in some organisations, astute CEOs are heading up their diversity and inclusion practice groups. It is in every business’s interest, whether they operate locally or internationally, to nurture CQ in their enterprise, especially in their executives and C-suite. If that critical talent cannot be developed in house, it should be acquired externally through executive search.

Michelle Moss is a Director: Assessments at Signium Africa (previously Talent Africa).

Relocation Africa has a diversity training program called The Power of Difference, through which we can assist you with intercultural skills, culture shock, and diversity management, among other themes. If your organization is interested in cultural training, feel free to contact us for more information.

For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email info@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: João Silas [1], [2].

DHL Express has announced the launch of its new mobile and desktop app aimed at improving the online shopping experience for Africa-based consumers.

The new platform, DHL Africa eSHOP, enables customers to shop directly from more than 200 US- and UK-based online retailers, with all shipments delivered by DHL Express, to the shopper’s door.

DHL Africa eSHOP will be available in 11 African markets to start – South Africa, Nigeria, Kenya, Mauritius, Ghana, Senegal, Rwanda, Malawi, Botswana, Sierra Leone and Uganda.

This solution was developed in partnership with Link Commerce – a division of Mall for Africa.

Hennie Heymans, CEO of DHL Express Sub Saharan Africa, says that the DHL Africa eSHOP app offers African consumers much greater access to international retailers on an easy-to-use platform.

“DHL Africa eSHOP provides convenience, speed and access for online customers in Africa. As the global leader in express logistics, DHL is well positioned to connect African consumers with exciting global brands. This is yet another opportunity for DHL to reaffirm its commitment to supporting the growth of e-commerce in the region.”

According to a report by McKinsey Global Institute, the demand for world-class online shopping opportunities is growing exponentially in Africa’s leading economies, as urbanisation and incomes continue to rise.

Despite the growing demand, many US and UK-based retailers do not offer shipping to African countries, owing to the perceived logistical challenges involved such as high last-mile delivery costs and fraud concerns.

However, DHL Express was the first express operator to set up in Africa over 40 years ago, so we are well positioned to offer innovative and reliable solutions for on the continent.”

“E-commerce offers enormous potential for the region, and we are proud to provide this platform to further connect African consumers with global opportunities,” concludes Heymans.

For more information about DHL eSHOP, click here.


For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email marketing@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: [1], [2].

Two KwaZulu-Natal companies are on a mission to explore export opportunities for their products in India. Royalty Agri-Biz, which is based in Pietermaritzburg and Your Best Choice, which is located in Pinetown, will be part of the Outward Trade and Investment Mission to New Delhi and Mumbai in March 2019.

The mission is organised and funded by the Department of Trade and Industry (the dti). The purpose of the mission is to increase the trade of value-added goods and investment between South Africa and India.

The Director of Royalty Agri-Biz, Ms Fatima Cele says the trip to India could not have come at a more opportune time as the company is in the process of expanding by acquiring a tannery that will enable it to produce leather and leather products for the export market.

“We are currently sourcing cow hides from the local farmers and various communities. We then process them and supply people who make drums, shields, cushions and carpets. But we have decided to look at the bigger market and produce leather for the manufacturing of leather products. As part of our process to grow our business and achieve our objectives, we are in the process of acquiring a fully-fledged tannery from which we will be able to produce leather and leather products for the export market,” says Cele.

She also said that she will be using the trip to India to learn about the Indian leather market and to explore possible opportunities that her company can take advantage of and export leather and leather products to India.

“India is big in leather manufacturing and the mission will provide us with an opportunity to get to know how their market functions and how we can penetrate it as suppliers of leather or the actual leather products. We have undertaken a visit to China where we identify possible export opportunities and we are excited that our plans to export our products will gradually fall into place as we are optimistic about the India trip,” adds Cele.

The Chief Executive Officer of Your Best Choice, Mr Subasen Naidoo says his company is on the verge of breaking into the export market after shipping off samples of his moringa products to the United States of America, Colombia, Brazil, Ghana. Australia and the United Kingdom.

“We attended the Americas Food and Beverage Show in Miami through the assistance of the dti in October last year where we got a good order from Ghana and generated a number of good trade leads in America and other countries. We are excited that these leads are steadily developing into concrete deals. As a result, we are on the verge of signing contracts in Brazil and the US,” says Naidoo.

He adds that he will be targeting the fast food market in India and is confident that their proudly South African, organically-produced moringa Ice Tea and sugar-free energy drink will receive a warm reception in the country.


For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email marketing@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: [1], [2].