South Africa’s private sector is “arguably the most competitive new actor in Africa”, particularly in Anglophone countries, according to Martyn Davies, the chief executive of consultancy Frontier Advisory.
Presenting the MasterCard Worldwide Insights report in Johannesburg yesterday, he said investors “are having both an enabling and disruptive impact on the continent”.
Davies described China as “the big disrupter because of the extent of its demand”. The term disruptive, he noted, was not meant to be negative. It was a neutral description of a powerful change agent.
He said the interest in Africa from Brazil, Russia, India and China (the original Brics countries) was illustrated by the number of major companies invested in the continent.
Davies said China had 73 companies on the Fortune 500 and, of these, 50 had “sizeable business interests in Africa”. Of eight Indian companies on the 500, all had a big footprint in Africa, of seven Russian countries four were in Africa and of eight Brazilian companies six were in Africa.
Referring to South Africa, the latest Brics entrant, the report said, excluding mining, the firms most commercially committed to Africa were MTN and Barloworld.
Commitment was measured by revenue contribution by Africa as a percentage of total revenue: MTN 68 percent and Barloworld 58 percent. Next was Absa at 16 percent.
In contrast to MTN, Vodacom received only 9.8 percent of its revenue from African operations. Retailers Shoprite and Massmart had also established strong footholds. The former earned 9.4 percent of its revenue from Africa and the latter 8 percent.
While South Africa had made big inroads into Africa, China was the major investor, with banks leading the way, aggressively expanding loan portfolios in Africa.
Davies said: “The main actors are the Export-Import Bank of China, the China Development Bank through the China-Africa Development Fund, China Construction Bank and the Industrial and Commercial Bank of China.”
In the case of India the “new wave” of investment was from its aspirant multinationals.
“Corporate India’s expansion into Africa is adding to the traditional and typical entrepreneurial small trading business model of the migrant ethnic Indian diaspora. India is transplanting business models that are arguably tried and tested for frontier and emerging markets – India itself being among the world’s largest.
“The country’s traditional corporates are diverse, family-owned and all powerful in their home economy.”
The report identified Tata, Reliance, Mahindra & Mahindra, Ranbaxy and Bharti as firms becoming household brands in Africa’s developing markets, Davies said.
“These emerging multinationals are building their respective competitive advantages in the information technology, health care, pharmaceutical, biotechnology and automotive sectors. As a common denominator, they all have the benefit of a huge domestic market to leverage their global comparative advantage.”
But the report noted India’s major investments remained into the continent’s extractive industries.