Transcript South African Multinationals and Economic Development in

South African Multinationals and
Economic Development in Africa
Presentation to Conference on “Emerging Multinationals. Who
are they? What do they do? What does it mean?”
OECD Conference Centre, Paris
Michael Spicer –
CEO Business Leadership South Africa
Monday, 27 March 2006
BUSINESS LEADERSHIP SOUTH AFRICA
Former South Africa Foundation, re-branded
November 2005.
Analogous to US Business Round Table,
Canadian Council of Chief Executives and
Australian Business Council.
Represents top 50 Johannesburg Stock
Exchange listed companies, top 20
multinational subsidiaries in South Africa and
top 5 State Owned Enterprises (SOE’s).
Market cap of listed members R2 264b ($360b)
66% total JSE
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EMERGING MULTINATIONALS
THE SOUTH AFRICAN CASE
Only indigenous Sub Saharan African
multinationals to have emerged in C2O.
Apartheid and isolation largely restrict
companies to SA and Southern Africa.
Few exceptions like Anglo American
with Minorco (North and South America)
and long African legacy
Post 1990, SA rejoins world economy
and SA companies rapidly globalise,
playing catch up
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EMERGING MULTINATIONALS
THE SOUTH AFRICAN CASE
Mid 1990’s with exchange control and need for global
capital and reach, London listings.
Billiton, subsequently BHP Billiton, now world’s largest
mining company.
Anglo American, world’s second largest mining
company.
South African Breweries, world’s second largest
brewing company.
Old Mutual, just taken over Skandia, insurance/financial
services company.
Didata, IT company.
Investec, bank.
All in FTSE top 100 save Didata.
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EMERGING MULTINATIONALS
THE SOUTH AFRICAN CASE
Top 50 non financial TNC’s from developing economies
ranked by foreign assets (UN World Development Report
2004 and 2005)
Sappi (11th) – Paper and packaging
Sasol (12th) – Energy and chemicals
MTN – Cellular telephony
Barloworld – Manufactured goods and logistics
AngloGold
Naspers – Media company, significant investment in
China
Nampak – Packaging company
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SOUTH AFRICAN vs SUB-SAHARAN AFRICA: 2003
Largest economy in Africa: 36,4% SubSaharan Africa GDP, 69,1% SADC.
63,5% telephones (fixed).
45,7% telephones (mobile).
39,8% personal computers.
50% paved roads, railways.
Largest investor in Africa from 1994 to
2004 - $1,4 billion per annum (UNCTAD
figures)
Source: “World Bank, World Development Indicators, 2005”
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COMPANIES ACTIVE IN AFRICA
Sasol
MTN
AngloGold
Barloworld
Banks – Standard, ABSA (now taking over Barclays Africa
interests), FNB/RMB, Nedbank
Retail – Shoprite and 10 others
SOE’s – Eskom, IDC, DBSA, Transnet
In 2004 – 92 top 100 SA companies active in Africa. Just under
half having investments which might be regarded as significant.
(Versus 18 in 1993, almost exclusively in Southern Africa).
These companies had made 232 investments in 27 countries
employing 72 000 people with profit margins of 25 – 50 percent
since 1994.
Source for this and following slides unless otherwise states: “South Africa’s Business Presence in Africa”, South Africa Foundation,
2004.
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SOUTH AFRICAN BUSINESS AS A REGIONAL INVESTOR
1993
18 of SA top 100 listed companies
invested in rest of Africa
2004
40 of SA top 100 listed companies invested
in rest of Africa
232 investments in 27 countries employing
72 000 people
Source: “Who Own’s Whom, Africa In., November 2004
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SOME MAJOR SOUTH AFRICAN INVESTMENTS ON THE
AFRICAN CONTINENT
BHP Billiton: Mozal Phases 1 & II = >$2bn
Sasol:
Temane-Secunda pipeline = $1.1bn
MTN:
Nigerian licence fees = $280m
Total investment 2004 = $900m
Vodacom:
Tanzania = $150m
DRC = $150m
Mozambique = commitment of $150m
Anglo Platinum:
Unki (Zimbabwe)
Implats:
Zimplats (Zimbabwe)
AngloGold:
Mali = $400m
Ashanti = $1.5bn
Anglo Base Metals: Skorpion (Namibia) = $450m
Eskom:
DRC – Inga project = $1bn
SA Breweries:
Maputo and Beira breweries = $50m
Source: Mail & Guardian various.
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MTN NIGERIA - CASE STUDY
Invested $900 million in 2004
Results
Revenue
EBITDA
PAT
2005
$1,55m
$800m
$500m
2004
$1,162m
$593m
$400m
Increase
34%
37%
50%
(Rand figures have been dollarised and rounded off)
Source: MTN Annual Report 2005
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SABMiller’s investment pattern into the rest of Africa
Country
Date
Effective Ownership
Botswana
Swaziland
Lesotho
Zimbabwe
Tanzania
Zambia
Mozambique
Ghana
Uganda
Kenya
Angola
1978
1981
1982
1990
1993
1994
1995
1997
1997
1998
1998
47%
60%
39%
23%
66%
90%
65%
69%
40%
87%
Management Contract
Source: Based on SABMiller annual reports, cited in Grobbelaar op cit.
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NIGERIA MARKET INFORMATION
Population
Mobile penetration
MTN Market Share
Prepaid/Post paid mix
Total subscriber base
Total potential market
133,8 million
7,02%
47%
98/2
155% (year on year)
4m to 10,2m
27m/134m
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INVESTMENTS IN AFRICA - TOTAL
Number of Investments in Africa of Selected SA-Based TNCs
70
60
50
40
30
20
10
Other
Madagascar
Mali
DR Congo
Uganda
Nigeria
Angola
Mauritius
Ghana
Kenya
Malawi
Tanzania
Lesotho
Mozambique
Swaziland
Zambia
Zimbabwe
Botswana
Namibia
0
Source: Whitehouse & Associates, cited in South Africa Foundation report.
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INVESTMENTS IN AFRICA – NON SACU
Number of Investments in Non-SACU Countries by SA-Based TNCs
45
40
35
30
25
20
15
10
5
Other
Gabon
Algeria
Senegal
Rwanda
Egypt
Madagascar
Mali
DR Congo
Uganda
Nigeria
Angola
Mauritius
Ghana
Kenya
Malawi
Tanzania
Mozambique
Zambia
Zimbabwe
0
Source: Whitehouse & Associates, cited in South Africa Foundation report
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WHY ACTIVITY IN AFRICA?
1990 rejoin world economy, catch up.
Initial weakness domestic economy
conducive to growth in African markets.
Unique position in terms of access.
Platform of decades of integration in
Southern Africa (SACU), Zimbabwe and
Zambia.
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WHY ACTIVITY IN AFRICA?
Role of President Mbeki and African
Renaissance.
Creation of African Union to replace OAU.
New Partnership for African Development
(NEPAD).
However South Africa not an aid donor, little
direct government support for private sector
activity (unlike major competitors China, India,
Europe and US).
So main thrust pragmatic expansion driven by
interaction of trade, projects and investments.
Investment mostly follows liberalisation in
African countries but not always (mining and
energy).
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FEATURES OF ACTIVITY
Large financial, ICT, retail, mining: main sectors.
Emergence of services sector.
Oil industry services sector cluster in Cape Town
promoted by
$200 billion prospective oil spend in West Africa
Relocation of multinational oil companies African
business headquarters to Cape Town
Other multi national companies relocate Africa
headquarters to South Africa.
Advertising, franchising, architectural and design
services, education, management and consulting.
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IS SOUTH AFRICAN INVESTMENT
CONTRIBUTING TO DEVELOPMENT
Thickening of Civil Society (Study of
multi national companies in China, Prof
Gordon Redding, Head Hong Kong
Business School, late 90’s).
Controversy over SA Investment – a
predatory “tiger”, a “fire in a dry bush”.
Figures show that African investment
has grown slightly slower than total
foreign investment (see next slide) and
is a small proportion.
However average size of Sub-Saharan
economies $3,6 billion (R21,6 billion)
which means even modest investments
have big impact.
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SOUTH AFRICA’S FOREIGN
ASSETS 1994 - 2004
Table 1: South African foreign assets in Africa, 1994 - 20044
Year
Africa’s % of Total
Value of Africa’s share
(R bn)
South Africa’s total
foreign assets (R bn)
1994
5.7%
6,143
106,129
1995
5.4%
6,751
123,580
1996
4.9%
8,131
164,219
1997
4.0%
9,357
232,956
1998
4.6%
15,318
332,899
1999
3.3%
20,453
606,258
2000
3.3%
24,170
721,569
2001
3.2%
26,801
818,782
2002
4.5%
30,009
662,758
2003
4.6%
32,399
688,882
2004
4.9%
36,668
746,118
Total
N/A
216,200
5,204,150
Source: Various South African Reserve Bank Quarterly Reports, 1995 - 2005
Source: “South African Engagement with Africa: Impacting Negative & Positive Perceptions” Neuma Grobberlaar, SAIIA, 2005.
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IMPACT OF INVESTMENTS
SABMiller purchase and operation 3 breweries in
Mozambique (semi-moribund) increase taxes paid 700%;
by 2003 SAB pays 5% total tax.
Mali gold production 6,6 tonnes (1996) – 51,6 tonnes
(2003) following RandGold and AngloGold investments.
Gold contribution to GDP grown 2,25% to 14% from 1992
to 2002, raised Mali growth rate to 5,2% between 1999
and 2002, first ever trade surplus.
Anglo American invests $450 m in Skorpion zinc mine in
Namibia: output equivalent to 4% GDP.
4% GDP is the South Afrcian Reserve Bank calculation
of total contribution of Anglo American to SA GDP.
Source: “Can South African Business Drive Regional Integration on the Continent.” Neuma Grobbelaar,
SA Journal of International Affairs, Vol 11, Issue 2, 2004
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IMPACT OF INVESTMENTS
SAB, BHP/Billiton and Sasol in Mozambique: introduce
best operational procedures, reliable wages, medical
health insurance and pensions.
BHP Billiton and Business Trust roll back malaria in
Southern Mozambique (down 80%) also Anglo
American in Zambia.
Anglo American, De Beers extended comprehensive
HIV/AIDS including ARV’s from South African to
Southern Africa and other African operations.
AngloGold Ashanti case in Ghana.
IMF calculates 2005 that impact of 1% extra growth in
SA economy 1994-5 equivalent to 0,5 to 0,75% extra
growth in Africa.
By extrapolation and given other key variables, 5 years
of 4 – 5% growth would translate into 2 to 3, 75% extra
growth in Africa.
Source: Various, IMP Working Paper, WP/05/58
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IMPACT OF INVESTMENTS – THE RETAIL SECTOR
More than 10 retail groups active and highly visible.
Accused of flooding markets with South African goods,
displacing informal markets and traders, undermining
local manufacturing capacity and charging more than in
South Africa.
South African companies say competing with
unregulated informal sector that pays no tax, often deals
in smuggled goods and is erratic in cost and supply.
South African companies provide consistent supply,
stable prices that reflect real costs of goods.
However Botswana diversification hindered by South
African tax and other policies.
Source: Grobbelaar op cit
.
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OTHER ASPECTS OF DEVELOPMENT
London and NYSE listed South African companies most
pro-active in formal sustainable development
programmes.
However King II Code of Good Governance and JSE
Sustainability Index also influential.
Under NEPAD more than 300 companies majority South
African signed onto 4 codes of good practice.
Business Covenant on Corporate Governance.
Business Declaration on Corporate Responsibility.
Business Covenant on the Elimination of Corruption
and Bribery.
Business Declaration on Accounting and Audit
Practices.
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CONCLUSION
SA investment is:
Leading to growth of private sector in Africa.
Increasing revenue generation of government.
Improving economic growth and exports.
Transferring technology.
Ensuring re-industrialisation of some economies through
acquisition and revitalisation of moribund SOE’s.
Formalising the market, ensuring price stability,
discipline in pricing and improved consumer choice.
Creating employment.
Transferring business skills.
Introducing good corporate practice and governance.
Boosting confidence of other investors.
However:
More companies need to adopt deliberate sustainable
development approach to deal with criticism.
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