SIX WEEKS ago I arrived in South Africa to take up my new position as the regional director of a pan-African strategic communications and advisory company. South Africa has been, and should continue to be, full of promise for a company that advises investors seeking to harness the opportunity that lies in the rest of Africa.
There are plenty of data available to attest to the foreign direct investment flows from South Africa into the rest of Africa, and how many international and South African companies have chosen to establish their regional headquarters here.
Yet, around the time that my relocation from east Africa was confirmed, Nigeria had just completed its gross domestic product (GDP) rebasing exercise and the media were flooded with commentary about its rise and other fast-growing sub-Saharan economies, and the declining role of South Africa as the continent’s powerhouse. Subsequent months of media coverage have not, by and large, been kind to South Africa.
The questions and concerns raised by the Mineral and Petroleum Resources Development Act, a hastily introduced new immigration policy, and the protracted platinum workers’ strike have dominated and influenced coverage of the country.
Coinciding with the announcement of Nigeria’s GDP surpassing that of South Africa, these developments have brought some commentators to conclude that South Africa’s role as the regional hub for investment into the continent is diminishing as investors look to friendlier and faster-growing African markets.
As a business leader coming into South Africa, I found this commentary concerning, as well as the tangible concerns of the wider business community in South Africa. Reassurance was not forthcoming from the Department of Home Affairs either, which facilitated an unwelcome six-week separation from my daughter, as she awaited her study visa.
My first month in South Africa has been a period of assessment of the veracity of the naysayers’ conclusions and commentary. I have spoken to clients, friends, colleagues, and members of the business community in a bid to strengthen my understanding of the role of South Africa today, and where it may be tomorrow. So far, my conclusion mirrors the comments of an old hand in Africa’s private sector, who advised me that “South Africa remains the gateway to Africa, but almost in spite of itself”.
To take the perspective of an investor seeking to invest in the wider sub-Saharan African region and wanting to establish a regional hub office on the continent, the checklist of primary considerations includes good transport linkages to the rest of the region, ability to attract talent or offer a strong local talent pool, strong legal and financial institutions, and general ease of doing business. On almost all these counts, South Africa fares far better than other countries in the region.
Its airports and direct air linkages to the rest of the continent are unparalleled. It has a larger pool of highly educated people, and the best academic institutions. The quality of life that can be enjoyed is head and shoulders above the competition in the rest of the continent, making it a top choice for global talent relocating to Africa. Constitutional rights and institutions are robust, and legal and financial institutions provide security in their strength.
However, it would be wrong to ignore trends and events that threaten to weaken South Africa’s standing in these key areas. The new immigration regulations have hit tourism and business hard, and disrupted the lives and families of foreign workers and executives, who have chosen to bring their skills and talent to this nation.
The seeming lack of consultation and consideration that went into both the content and implementation of such a crucial policy is a red flag to those wanting to do business in and with South Africa. Fundamental democratic institutions and rights are also suffering from interference, characterised recently by ANC-led efforts to discredit the public prosecutor, Thuli Madonsela, following her report into excessive expenditure of public funds on upgrades at the president’s Nkandla property.
Currency exchange rules and employment laws remain restrictive, hampering a company’s ability to staff in such a way as to build a business successfully beyond the country’s borders. To maintain and foster a compelling proposition as the continent’s hub, these factors need real consideration.
There are also secondary considerations that remain important for many investors seeking a location for a regional hub office, including the negotiating power of the host country’s government and its ability to open doors and facilitate market entry in the rest of the continent.
Again, South Africa’s recent record on this front has been weak, with examples of its weakening diplomatic clout including the struggle to secure the election of Nkosazana Dlamini-Zuma to the position of AU Commission chairwoman.
Furthermore, as the world becomes smaller and better connected, and African markets become better understood by the global investment community, the reasons for requiring a regional hub diminish. More and more companies are simply entering African markets one by one, leapfrogging the step of establishing hub operations. Unless South Africa is able to excel in the areas that make for a strong regional hub location, then many more companies may simply choose not to bother.
For now, however, South Africa retains the role of the leading regional hub location for companies seeking to establish themselves in the Africa region. Anecdotally, as a newcomer, I have gratefully noticed that within South Africa, nobody seems to need our services to help them understand why their legally acquired licence has been inexplicably retracted, or their long-standing contractual terms have been redrawn overnight. Nor have I been asked to pay a bribe for any services.
My flights between Cape Town and Johannesburg have been smooth and easy experiences, and driving on the roads does not feel like a near-death experience. All of these observations and appreciations are in notable contrast to my previous three years in east Africa, based in Dar es Salaam.
As a business leader in Africa, this is where I want to be, and this is where I would like my family to be. For these reasons and more, I believe that there must continue to be a role for South Africa as a host for the regional hub operations of companies with pan-African ambitions. But it must roll up its sleeves and work hard to retain this prestigious position, and the jobs, revenues, and exposure to new skills and experience that it brings.
Anna Riley is africapractice’s incoming southern Africa director.