Global Players from Emerging Markets: Strengthening ... - Unctad

142 Outward Foreign Direct Investment by Enterprises from South Africa
in an offshore oil field in Nigeria. The company also
bought a stake in a gas-to-liquid fuel project in the
Islamic Republic of Iran and in a fuel grade methanol
project in Qatar. PetroSA OFDI was to access natural
resources in oil and gas. Anglogold Ashanti (gold
production), a merger between Anglogold (South
Africa) and Ashanti (Ghana), has operations in 11
countries. Investment opportunities provided by the
opening up of mining industries in host countries
and access natural resources were among the key
motivations for OFDI.
Market-seeking. The small size of the South
African market has encouraged many firms to expand
abroad. For example, the main reason for MTN’s
expansion is that as a dominant firm in the cellular
telephone market in South Africa, it was impelled to
seek new markets to pursue rapid growth. Cellular
services provider such as MTN Group has expanded
mainly in Africa. In July 2005, MTN acquired
a 51 per cent interest in Loteny Telecom (Cote
d’Ivoire). Similarly, Datatec invested in countries
where telecommunications and Internet services
are deregulated, especially in developed countries.
Standard Bank Ltd has extensive operations in Africa.
It has a network spanning 17 African countries.
Standard Bank also has, through Standard International
Holdings, subsidiaries in Asia, the United States,
Brazil, Russian Federation and Turkey.
OFDI by South African SMEs. Market
saturation, market-size limitation at home and the
attractiveness of overseas markets have encouraged
small and medium-sized South African TNCs to
internationalize. But they are doing so at a slower pace
and with smaller volumes of investment than larger
companies. Despite the more favourable regulatory
environment for OFDI, and the possibilities offered
by market liberalization since 1990, only a few
companies take advantage of opportunities abroad.
An examination of the 100 companies by market
capitalization on the JSE Securities Exchange reveals
that only about 22 have one or more foreign affiliates
abroad. 111 The motives for OFDI were largely the
same for small and medium-sized companies as they
were for the larger enterprises (table 8).
But trade support and market access were
prominent reasons for the former (e.g. Spanjaard,
Universal Footware). The geographical spread
differs between the larger TNCs and the small and
medium-sized ones. The latter tend to invest closer to
home, often in the neighbouring countries, while the
former ventures both near and far. Access to natural
111 These enterprises have a small turnover, number of employees
and profits. They are not affiliates of larger companies and have
invested, or are likely to invest, outside the country. They are
enterprises listed at the lower end of the JSE listing.
resources drives South African SMEs, as it did for
large companies, to invest where they can secure
supplies.
D. OFDI and implications for
enterprise competitiveness
Of the top 50 non-financial TNCs from
developing economies in 2002, seven were South
African companies as compared with three in 1997
- a fact which implies strengthened positions vis-àvis
other developing country TNCs (table 9). 112 More
than 50 per cent of these South African TNCs’ assets
are overseas and a significant proportion of their sales
was generated from foreign operations. Five out of
the seven TNCs have a transnationality index 113 of at
least 50 per cent, which suggests that they are highly
transnationalized.
OFDI has increased the competitiveness of
South African companies in terms of increased
profitability, revenues, market and assets expansion,
access to technology and exposure to international
business practices (tables 10 and 11). For example,
Anglogold Ashanti, Naspers, Barloworld, Sappi,
Nampak, Alexander Forbes and Illovo Sugar
generated more than 50 per cent of their revenues,
and have a significant proportion of their assets,
outside the country. About four-fifths of Illovo Sugar
profits in 2003 were generated abroad, mainly from
neighbouring countries. Mondi trebled its turnover
to $7 billion a year, of which $5.5 billion originated
from operations in Europe. 114 Steinhoff Ltd, a furniture
manufacturer, generated 73 per cent of its revenue
in the European Union and the Pacific Rim, and
17 per cent in Africa. Of its net assets, 74 per cent are
outside Africa. Steinhoff has operations in Poland,
other European countries and Australia. Datatec is
South Africa’s most transnationalized IT company,
with 95 per cent of its revenue in 2004 from overseas
activities, mainly generated in the United States and
the European Union (table 11). About two-fifths of
MTN subscribers are now outside South Africa, with
31 per cent of them in Nigeria. Its average revenue
per user (APRU) in Nigeria in the financial year 2004
was $51, down from $57 in 2003, but still substantially
higher than the figure for its home base, South Africa,
where the ARPU was roughly $31.
112 Ranked by foreign assets.
113 The Transnationality Index is calculated as the average of
three ratios: foreign assets to total assets, foreign sales to total
sales and foreign employment to total employment.
114 Mondi contributed 22 per cent to Anglo American Corp’s
earnings in 2003, thus becoming the second largest contributor
to the Anglo group.