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Firms listing abroad unpatriotic?

The rather loose usage of the label “unpatriotic” is not particularly helpful as we seek solutions to how we can create a more inclusive economy and lasting prosperity for all South Africans. Last week, ANC secretary-general Gwede Mantashe was quoted as saying that South African companies that have dual listings are unpatriotic and ought to repatriate fully back to South Africa.

If any of our dual-listed companies have made specific negative or potentially unpatriotic commentary, this would be a different matter. If, however, the assertion is (as quoted), that the mere fact of having a secondary listing is deemed unpatriotic, this view is flawed on many levels.

Leslie Maasdorp.

First, supporting the growth of South African companies abroad has direct long-term benefits for the economy and our people.

Second, starting with the Reconstruction and Development Programme in 1994, as well as resolutions from successive policy conferences, the ANC government has fully embraced the idea that our prosperity as a nation is directly related to our efforts to integrate our economy with the rest of the world.

Dual or secondary listings on offshore stock exchanges are a natural consequence of this effort to integrate our economy globally.

Third, it was the ANC government that granted the necessary approvals to the South African companies, including BHP Billiton, SABMiller, Anglo American and Sasol, to proceed with an offshore listing. These approvals are not automatic or granted willy-nilly, but are considered on an individual basis.

Fourth, this view is out of sync with the mood and tone set by President Jacob Zuma and Finance Minister Pravin Gordhan’s recent Budget speech.

They specifically called on us to pursue a different trajectory and establish new meaningful partnerships between government and business to place our economy on a higher growth path.

Business leaders have signalled their intention to heed this call and rise above sectional interests and pull together as we seek to implement the National Development Plan (NDP).

A dual listing is a situation in which the shares of a company are listed on more than one exchange. Through such a mechanism, you are typically able to attract more investors and therefore a bigger shareholder base.

Such a listing enables a domestic company to access a new constituency of investors who might be interested in exposure to South African companies but with the benefits of trading locally. Furthermore, it enhances the stature of our companies as truly global players.

A dual listing provides a useful way for our publicly listed companies on the JSE to benefit from the growing opportunities available from a changing global landscape.

We ought to be encouraging many more of our fast-growing national champions to spread their wings and explore the opportunities to access capital via another exchange in addition to their JSE listing.

Encouraging our local companies to grow across borders to tap into neighbouring growth markets and further offshore into bigger pools of capital is a critical part of the goal to double and potentially treble the size of our private sector over the next two decades as envisaged in the NDP.

In granting these approvals, starting in the late 1990s, the government and the National Treasury in particular set specific conditions which act to protect the interest of South Africa.

For example, these companies had to demonstrate that their global expansion was integral to the growth of the company.

They were also expected to show that a sizeable proportion of their revenue was in any case derived outside South Africa.

In addition, the domestic operations and assets could not be encumbered and had to remain in South Africa.

Last, balance of payments considerations were taken into account to ensure that our foreign exchange reserves were not negatively affected by an outflow of funds.

In sum, the individual decisions to allow these dual listings were taken after careful consideration of the multiple factors involved.

Before 1994, our country was isolated by sanctions and disinvestment and was surrounded by high walls of trade protection. The new government moved swiftly to abandon these policies and implemented a series of structural reforms, which opened the economy.

Since then, our country has been on a steady path of increasing our interdependence, connectivity and integration with the global economy through trade, foreign direct investment and capital flows both ways.

This path, of which dual listings is but one element, has significant spin-off benefits for South Africa.

Conversely, it is impossible to find examples of countries that have been able to grow over a sustained period without opening up to trade and global integration.

South Africa will host the leaders of the Brics nations (Brazil, Russia, India and China) at the fifth Brics summit on March 26 and 27.

Our focus at this time ought to be on how South African companies can best tap into the four largest economies in the developing world and fastest-growing emerging markets.

Our Brics membership provides an opportunity to leverage economic integration with these nations, Africa’s biggest trading partners.

The notion of patriotism is a complex one. In general it is typically understood to mean a deep-seated love and affection for your country.

Having a dual listing on another stock exchange cannot by itself mean that these multinationals do not take pride in our country, its history, culture and aspirations.

Last month, Zuma told the National Assembly that “we should put South Africa first. All of us have a patriotic duty and responsibility to build and promote our country.”

Rhetoric and grandstanding is a luxury the country cannot afford.

It is this kind of sentiment which has the potential to bring us together as social partners to work towards a new shared vision.

In this sense, there is an acute awareness among business of our moral duty to promote our country, its dreams and aspirations. The success or otherwise of all our companies are inextricably linked to this endeavour.

- Maasdorp is vice-president of Business Leadership South Africa.

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