A slippery slope for SA

2008-04-10 00:00

The Boston Consulting Group’s recently published the report The 2008 BCG 100 New Global Challengers. How Top Companies from Rapidly Developing Economies are Changing The World, makes interesting reading. South African political and business leaders would do well to take heed of its contents for two reasons. Firstly, it focuses on those regions of the world that are currently displaying rapid economic growth, as well as the fast growing companies that operate within these territories. Secondly, many of the world’s largest and most powerful corporations have been studying this report in order to examine and better understand which of these organisations are customers, suppliers and competitors that will be soon be challenging them in global markets. If this practice is good enough for the likes of General Electric, then surely it is good enough for any South African company, and indeed our government?

The members of The BCG 100 (as this ranking is now being called), are to be found in 14 countries — Argentina (1), Brazil (13), Chile (1), China (41), Egypt (1), Hungary (1), India (20), Indonesia (1), Malaysia (2), Mexico (7), Poland (1), Russia (6), Thailand (2) and Turkey (3). Note that South Africa is absent from this list. In 2006, according to this report, these 14 countries collectively accounted for 17,3% of the world’s real GDP. Its authors have also forecast that if China continues its export growth of 27% per annum during 2008, (achieved since 2006) then it will overtake the United States as the world’s largest exporter.

While the China Syndrome draws criticism from many business and economic quarters, there are two further developments that should be of concern to the South African business and political communities. Firstly, the member countries of The BCG 100 are starting to develop closer ties with one another. For example, in 2006, trade between India and China grew by 38%, with telecommunications and IT products and services accounting for a healthy share of this exchange.

Secondly, during the same time period, the level of Foreign Direct Investment (FDI) across these 14 Rapidly Developing Economies (RDEs) reached $245 billion. Compare this to The Economist Intelligence Unit’s (EIU) forecast on South Africa’s investment attractiveness to 2011. In its 2007 report World Investment Prospects to 2011: Foreign Direct Investment and the Challenge of Political Risk, which was produced in collaboration with Columbia University’s Programme on International Investment, the EIU believes this country will receive about $3.2 billion in FDI. This is yet another indicator of how far we are falling behind the movers and shakers of the RDE world.

The new global challengers not only wish to grow, they want to be recognised as leaders in their industries. They are hungry for success. For that to happen, they understand that being big in their own countries is not enough, and that they need to globalise. Companies such as China’s Nine Dragons Paper Holdings, that country’s largest producer of paperboard — packaging, and one of the largest in the world, achieved a sales growth of 64% in 2006 with $1 billion in revenues. PKN Orlen from Poland, Central Europe’s largest company as measured by sales, achieved $17 billion in 2006, 46% of which was generated offshore. Then there is the MOL Group from Hungary which recorded revenues of $13.7 billion in 2006 from the oil refining, fuel retailing and gas transport sectors. More recently came the news that shocked the world when Tata Motors, a division of India’s giant Tata Group purchased Jaguar and Land Rover from Ford for $1,15 billion in March this year.

Over the past few months, this columnist has utilised a number of key global indices and statistics pertaining to matters such as global competitiveness. Collectively, these indices suggest that South Africa, its cities and companies are rapidly sliding down the world competitiveness rankings, or in the case of the BCG 100, do not appear at all. Moreover, the governments of the new global challengers appear to be supporting their companies’ efforts in the global arena. They assist the globalisation strategies of locally-based companies in a variety of ways, from being an active investor to creating the proper kind of domestic environment and infrastructure conducive to global growth. They also promote exports, provide low cost financing and support Research and Development and technology creation. Yet the South African government continually fails to create and sustain the conditions necessary to assist our business organisations to succeed.

The Eskom debacle aside, the priorities of this current administration are almost beyond belief. Instead of assisting our companies to build global capability, the ANC government has become stuck in the rut of liberation ideology, when it really needs to move on and take the country forward. While many South African companies have expanded into Africa, this does not constitute globalisation.

Instead of being able to embark upon globalisation endeavours, many of our companies, such as Absa Bank, have already become part and parcel of the global plans of other countries’ companies, in this case Barclays Bank Plc. South Africa desperately needs a non-politically aligned globalisation strategy to take the nation and its companies into the world beyond Africa’s shores. As truly globalised Africans, we could help globalise the continent. The alternative will only fuel the ever increasing fire of Afro – pessimism, and may well cause the very countries that helped create and support a democratic South Africa to rethink their position.

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