South Africa Global Business Experience

Before Nelson Mandela, South Africa was a country dominated by apartheid. His release in 1990 and his subsequent attempts to reconcile the nation is considered to be the marker of the country’s transformation as a society and economy. The country has been developing in almost every positive aspect, particularly economically ( Chipkin, 2015 ). Regardless, there are still issues, including unemployment and corruption, which hold South Africa back from exploiting its full potential. This paper provides a brief geographic, economic, political and demographic overview of the country as well as data concerning imports, exports, and foreign direct investments. This article also evaluates the managerial practices of South Africa as compared to the United States and reviews the business communication and negotiations between the two countries.

Geographic Overview

South Africa is a medium sized country, with the overall land area being about 1.2 square kilometers. This is about one-third of the size of the United States ( Chipkin, 2015 ). It measures nearly 1,600 kilometers from East to West and approximately the same from North to South.

South Africa lies between 220 and 350 South, border to the east by the Indian Ocean and to the West by the Atlantic Ocean. The waters of these oceans converge at the continent’s southern tip, which is Cape Agulhas. The coastline extends from the border with Mozambique in the North East region, down along the green hills and the beaches on the Indian Ocean coast, then up the Skeleton Coast from Cape Agulhas, then to a desert flank in the Northwest part of the country.

Economic Overview

The economy of South Africa has been growing steadily over the past two decades and grew at nearly 2% in 2015, which was 0.5% more than the previous year ( Chipkin, 2015 ). Even though there are still issues of inequality, poverty, and unemployment, the economic growth is expected to continue over the next few years. South Africa is the most developed and sophisticated economy in Africa and is home to some top-class corporations in real estate, wholesale and retail trade, manufacturing, and finance ( Chipkin, 2015 ). Many investors all over the world consider South Africa to the “Gateway to Africa” because of its relative sophistication, continental competence, ease of doing business, and its capacity to assume a base of vital services such as auditing.

Unemployment continues to be a major hindrance in South Africa’s economy with an official figure of 25.2 %. It has been found that 65% of the unemployed in the country are below the age of thirty-five ( Chipkin, 2015 ). The National Treasury’s projected growth rate is below the 6% that analysts suggest the state requires to control its alarmingly high levels of unemployment. The government’s multi-year capital expenditure program, which is estimated to be £90 billion, is aimed at solving transport, water, and energy problems in the country. This short-term objective of this infrastructure program is to create employment opportunities, while the long-term goal is to provide the infrastructure that is required to accelerate the economic growth of the country.

Political Overview

South Africa is a young but considerably stable democracy. The country has an independent judiciary and an open and diverse media. With at least thirteen political parties in Parliament, the country has a vibrant political system. The most popular political party in this country is the African National Congress (ANC). In May 2009, Jacob Zuma became the president with 65.9% of the popular vote ( Chipkin, 2015 ). He was re-elected to a second term as president with his only rival being his deputy, Kgalema Motlanthe. Motlanthe, who refused an offer for Deputy President after the 2012 elections, was replaced in that post by Cyril Ramaphosa, who is a prominent businessman and trade union leader. According to South African law, the president is elected by the National Assembly and is allowed to serve only two five-year terms.

The latest election was conducted in May 2014 to elect new members of the National Assembly and new provincial legislature throughout the country. This marked the first election after the death of Nelson Mandela and the fifth overall under an environment of adult suffrage since the end of the apartheid period ( Chipkin, 2015 ). The country’s outstanding capacity to eliminate decades of racism and embrace reconciliation was perceived to be a political miracle, provoking similar peace effort in other parts of the world including Rwanda and Northern Ireland.

The highest law in South Africa is the constitution, which has been effective since February 1997 and is deemed to be one of the most reformist in the world. The constitution’s Bill of Rights protects its citizens’ freedom of expression, housing, health care, equality, access to information, education, access to courts and free association. The judiciary is tasked with protecting these rights ( Chipkin, 2015 ).

Demographics

The population estimate of South Africa as at 2016 is 54,300,704. It should be noted that this figure takes into account the impact of mortality as a result of HIV/AIDs in the country ( World Health Organization, 2016 ). The people aged between twenty-five and fifty-four account for 41.44% of the total population, while only 5.57% have an age of sixty-five years or more. The life expectancy at birth for the overall population is sixty-three years. The birth rate as at 2016 is estimated to be 20.5 births per 1,000 population, while the mortality rate stands at 9.6 deaths per 1,000 population.

64.8% of the country’s population lives in urban areas, and the annual rate of change of urbanization between 2010 and 2015 is 1.59% ( World Health Organization, 2016 ). The most populated city is Johannesburg with a population of about 9.4 million.

Export and Import Activities

According to the Economic Complexity Index (ECI), South Africa is the 46th most complex economy and the 36th largest export economy. In 2014, the country imported $102 billion and exported $106 billion, bringing about a positive trade balance of $3.39 billion (Wood and Wentworth, 2014 ). In that same year, the country’s GDP was $350 billion and its GDP per capita was $13,000.

The main exports of the country as at 2014 are gold ($11.9 billion), diamonds ($10.3 billion), platinum ($7.45 billion), coal briquettes ($5.89 billion), and iron ore ($5.52 billion). The top imports include crude petroleum ($16.2 billion), refined petroleum ($6.13 billion), cars ($4.85 billion), computers ($2.31 billion), and gold ($2.17 billion) (Wood and Wentworth, 2014 ).

The top export destinations include China ($9.8 billion), USA ($8.9 billion), India ($7.07 billion), UK ($6.18 billion), and Hong Kong ($6.09 billion). The leading origins for import to South Africa include China ($16.1 billion), Germany ($8.5 billion), Saudi Arabia ($7.13 billion), the United States ($6.96 billion), and India ($5.48 billion) (Wood and Wentworth, 2014 ).

South Africa’s Foreign Direct Investments

Being a large free-market economy, South Africa attracts foreign direct investment (FDI) in both private and public sectors. The factors encouraging FDI into the country include a large population, an effective regulatory structure, political stability, and access to raw materials. The FDI, net inflows as a percentage of GDP in South Africa was 1.64 as of the year 2014 (Wood and Wentworth, 2014 ). The country’s highest value over the past five decades was 5.98 in 2001, while its lowest value was -0.87 in the year 1979. The values for net outflows in 2014 was 2.2%. This value also represents the highest value over the past five decades. The primary investing countries in 2014 were the UK (45.6%), Netherlands (18.6%), and the United States (7.2%). The main investing industries in that year were Finance (36%), mining (30.9%), and manufacturing (17.9%).

Marketing and Advertising in South Africa

The chief marketing and advertising strategies used in South Africa are repetition and claims. Even in instances where an organization uses other approaches to advertising or marketing, they mention the name of the product or organization repeatedly ( Leibold and Hugo, 2015 ). Repetition is particularly useful because even though the consumer may fail to remember what the product does, they are more likely to remember the name of the product or organization. In South Africa, advertisements that use claims are very popular, especially among the youth. However, it has been found that some of the hype created in these advertisements are misleading, compelling the country to set up rules to govern the marketing and advertisement practices of companies.

Regulations

The main objective of the Consumer Protection Act in South Africa is to protect consumers. This law has significant implications for both the organization and the targeted population ( Hughes et al., 2015 ). In the case of small-scale businesses, this Act regulates both the direct and indirect marketing practices that the company may use to promote its products.

The general rule is that an organization’s marketing strategy should not be fraudulent, misleading, or deceptive. This rule extends to the quantity, quality, and price of the products, how they are supplied and sponsoring of events ( Hughes et al., 2015 ). Additionally, the Act specifies some requirements linked to catalog marketing, discriminatory marketing, negative option marketing, and bait marketing.

Managerial Practices in the US and South Africa

The United States is often considered to be a leader in effective administrative practices, a view that has some merit given the stability of American organizations as compared to those of other countries. South Africa, on the other hand, is widely recognized for progressive managerial practices, particularly among other African nations ( Klapper and Love, 2011 ). It is somewhat misleading to claim that a country has a particular “model” for managerial practices and to blatantly compare that model against that of another country because most countries have various approaches toward corporate management. Regardless, there are aspects of management that are dominant in certain countries. For this reason, this section discusses two elements of management that are different in the two nations.

Executive Compensation

In both countries, there is a significant difference between salaries for executives and the average employee. In the past several years, there are many corporations in the United States where workers have complained that their wages are considerably smaller as compared to their employers. Such companies as Starbucks and JC Penny have come under scrutiny by the public for such practices. In South Africa, there have been numerous union strikes, particularly in the case of mining companies, regarding the difference in pay between the average employee and the CEO ( Klapper and Love, 2011 ). As a result, many mining companies have decided to cut down on executive compensation, a move which has led to pay increments for other employees. For some of them, the pay rise has been as much as 8%.

Structure of the Board of Directors

The structure of the board in South African organizations has been influenced primarily by the King documents, which were established to improve managerial efficiency. The nation has made considerable efforts to make the board structure as modern and effective as possible so that it may fit the corporate social aspects required in the country ( Klapper and Love, 2011 ). As a result, South Africa has become one of the leaders in progressive corporate governance in the world, even beating the US in most critical diversity classifications.

Even though South Africa’s system of corporate management is influenced heavily by the law, other parties have a significant role to play. Shareholders, unions, the media, and public watchdog groups also take part in decision making regarding the board of directors, more so than in America.

Hofstede’s Dimensional Analysis of South Africa

Exploring the culture of South Africa through the lens of the five-dimensional Hofstede Model may lead to an understanding of the motivating principles of its culture as compared to other cultures throughout the world.

Power Distance

Power distance demonstrates the attitude of a given culture towards perceived inequalities in the society. This dimension may be explained to mean the level to which the less powerful individuals in the community expect and appreciate that power is distributed unequally. South Africa scores 49 on this dimension, meaning that the people understand the presence of hierarchy within the population and that everyone has their role to play ( Jensen et al., 2013 ). As a result, centralization is prevalent among South African organizations. Additionally, the perfect boss is a compassionate autocrat, and most subordinates wait to be instructed on what to do.

Uncertainty Avoidance

Uncertainty avoidance is associated with the level to which the people feel threatened by unknown situations and have developed ideas that try to avoid such situations. The country scores 49 on this dimension, meaning South Africans have a low preference for avoiding uncertainty ( Jensen et al., 2013 ). This result implies that the society in South Africa takes a more relaxed approach where practice is given more priority than values and deviations from the standard are easily tolerated. Given the low uncertainty avoidance, it may be deduced that the people of South Africa prefer a limited set of rules and the regulations that are vague or ineffective should be removed or clarified. Innovation is not considered to be dangerous, and punctuality and accuracy are not inborn.

Masculinity  

A high score on masculinity means that the society is driven by competition and personal achievement. Such behavior begins while the individual is in school and progresses to the workplace. A low score on this dimension means that the society is inclined towards caring for other and improving the quality of life. The country has a score of 63 on this dimension, thereby making it a masculine society. In such a country, there is a great emphasis on personal achievement in the workplace, and people strive to “get ahead” pf others in most aspects of life ( Jensen et al., 2013 ). In many cases, conflicts are resolved through “fighting.”

Individualism

This dimension has to do with the extent of interdependence among the members of society. In other words, it evaluates the tendency of the people to defining themselves as either “I” or “We.” In an individualist community, every individual is expected to look after their own self-interests and those of their direct families. For communities that embrace collectivism, people associate themselves with groups that care about their interests and to which they offer their loyalty. South Africa has a score of 65 and is, therefore, an individualist society ( Jensen et al., 2013 ). The social structure is somewhat loose. In the organizational setting, promotions are based almost entirely on merits, the relationship between employers and their employees is a contrast that promotes mutual advantage, and management entails the management of individuals.

Long-Term Orientation

This dimension defines the nature of society to be either normative or pragmatic. The normative society concentrates on maintaining the current traditions and demonstrate reluctance in accepting societal changes. The pragmatic society allows change and therefore takes various steps to ensure people are prepared for these changes. South Africa scores 34 on this dimension, meaning the people are normative in their ideas and practices ( Jensen et al., 2013 ). In an organizational context, many people prefer to chase after short-term achievements and barely save for the future.

Business Communication and Negotiations between the US and South Africa

The three key areas of business communication and negotiations between the United States and South Africa include education, employment and health care ( Pienaar and Partridge, 2016 ). The current emphasis on this matter also involves the issues of economic inequality with leaders from both countries sharing their suggestions on the most efficient solution.

The United States has contributed significantly to the increase of employment opportunities in South Africa. The jobs created are also sustainable. They pay proper wages and offer reasonable benefits. Instead of only giving the South African government suggestions concerning the issue of unemployment, the United States has gone ahead to lead by example. The American Chamber of Commerce in South Africa conducted a study on seventy-eight of its largest corporations in 2013. The companies employed about 70,000 South Africans, and indirectly employed 75,000 more throughout the country ( Pienaar and Partridge, 2016 ). These firms spend more than 300 million Rand every year for the purpose of training. This amount is significantly an excess of the required 1.5% of their overall payroll taxes on training.

The message of the United States to South Africa is that increasing exports and attracting investors is vital for the creation of more employment opportunities. The United States economy has added 8 million employment opportunities since 2008 ( Pienaar and Partridge, 2016 ). This is a significant amount, but it still does not suffice. Creation of job opportunities, increasing exports and attracting investors are just as important for the United States as they are in South Africa.

Even though the initiative affects all African nations, the African Growth Opportunity Act (AGOA) was created largely as a result of negotiations between the United States and South Africa. Since 2000, African countries are allowed to export their products duty-free to the United States according to the provisions of AGOA. South Africa exported $2.1 billion in 2012 to the United States under AGOA ( Pienaar and Partridge, 2016 ). Additionally, many industries such as automobile manufacturing have stated that AGOA was vital to their decisions to invest in South Africa. It should be noted, however, that these initiatives are not built as a form of philanthropy for the United States; rather, it is about partnership and business communication because the outcomes affect both nations either positively or negatively.

Poultry Trade

In 2015, South Africa and the United States negotiated business to deepen and strengthen their bilateral investment and trade relations after the Trade and Investment Framework Agreement (Tifa) Council convention in Washington DC ( Zhuang and Moore, 2015 ).

The United States and South Africa have decided to build up and expand their bilateral trade and investment affairs following the Trade and Investment Framework Agreement (Tifa) Council meeting in Washington DC ( Zhuang and Moore, 2015 ). According to this agreement, chicken bone-in cuts that are to be traded from the United States to South Africa would be returned to their value before the year 2000 with a growth factor that is dependent on the current market dynamics in South Africa. As at the time of the final meeting, the only outstanding matter was for the poultry associations from both countries to settle on the amount American chicken that would not be considered for anti-dumping duties.

In that meeting the United States and South African poultry associations negotiated on between offers that may lead to another deal ( Zhuang and Moore, 2015 ). The Tifa Council meeting also reported improvements in investment relations and dedicated to join hands in continuing to enhance the business climate in the two nations.

Key Aspects of Business in South Africa

The business environment in South Africa is challenging to a great extent but may still be considered among the leading among developing countries. Some of the biggest problems include corruption, shortages of electricity supply, poor labor relations, and the skills deficit ( Iguchi and Suzuki, 2015 ). On the other hand, the country boasts one of the best macro conditions, well-developed transport system, and a sound legal and financial structure in the developing world.

The country’s total rank in the World Bank’s 2015 Ease of Doing Business Index went down two positions from the previous year to 43rd. This marked a period of a quiet GDP outlook for the country’s economy ( Iguchi and Suzuki, 2015 ). One of the primary factors that brought about this performance is the country’s limited access to electricity. This drop in performance, however, does not reveal the developments that have taken place in other aspects of business in South Africa. These areas include trade with other countries, registering property, starting a business, and paying taxes.

Like many other developing countries in the world, South Africa is expected to significant socioeconomic challenges, which would require the formulation of effective interventions such as the New Growth Path and the National Development Plan, which offer a solid basis for resolving these matters ( Iguchi and Suzuki, 2015 ). The government continues to emphasize on the creation of an enabling business environment to enhance investment, employment opportunities, and economic growth.

Tenderpreneurs

The term tenderpreneur refers to people who gain through corrupting the awarding of government tenders ( Iguchi and Suzuki, 2015 ). This corruption is often based on personal connection and sometimes includes bribery. In some instances, there is staff involved in these activities. The outcomes are mostly overpricing and sloppy artistry.

BEE Fronting

BEEE fronting refers to the non-compliance with the regulations of the Black Economic Empowerment (BEE), where qualifying individuals are given positions on the Board of Directors of an organization but do not have any influence during decision-making in the group. In such a case, then it may be deduced that the presence of these people on the Board of Directors is just a scheme to qualify for government contracts as per the BEE.

Intellectual Property

Intellectual Property rights tend to be territorial, meaning they only offer protection in the countries where they are registered or granted. Thus, if one considers trading intellectually, then they are required to register their intellectual property rights in the export markets. South Africa introduced the Intellectual Property Right for Publicly Financed Research and Development Act in 2008 ( Iguchi and Suzuki, 2015 ). This law describes duties associated with the ownership of intellectual property right in South Africa and covers functional and aesthetic designs, copyright and marks linked to patentable inventions.

Overall, four Acts in the country regulate South Africa’s Intellectual Property Laws. Among these Acts, the most applied Intellectual Property Law is that of copyright ( Iguchi and Suzuki, 2015 ). The others are mainly related to patents, registered designs, and trademarks.

Conclusions

South Africa is considered to be the “Gateway to Africa” given its relative sophistication, continental competence, ease of doing business, and its capacity to assume a base of vital services such as auditing. The country has experienced a significant growth both economically and politically over the past two decades. From the Hofstede dimensional analysis, it may be concluded that the country has a high power distance, uncertainty avoidance, masculinity and individualism. On the other hand, it has a short-term orientation. The article highlights some of the business negotiations and communication between the United States and South Africa, with a particular mention of the poultry trade between the two nations. Finally, there is a brief description of the main business aspects of South Africa and the issues facing the current economy.

References

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