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

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144 Outward Foreign Direct Investment by Enterprises <strong>from</strong> South Africa Table 10. South Africa: OFDI and selected competitiveness indicators, by types and enterprises Types/indicators of competitiveness Enterprises Remarks Increased revenue and expanded markets Significant portion of assets located abroad Sappi, Sasol, Anglogold, Barloworld, Mondi, Steinhoff, MTN Group, Datatec, Illovo Sugar Sappi, Sasol, Anglogold, Naspers, Barloworld, Nampak, Steinhoof MTN Group, Datatec A significant proportion of revenues generated abroad. Access to overseas markets contributed to expanded market; improved market position. Suggest greater exposure to international business. Able to diversify risk. Increased profitability Illovo Sugar, MTN Group Overseas operations are more profitable than at home. A significant proportions of profits came <strong>from</strong> abroad. Access to technology Source: UNCTAD. Dimension Data Holdings, Datatec Access to R&D and technology infrastructure and facilities of host countries, which contribute to competitiveness. Table 11. Growth and profit of Top South African TNCs, 2005 Avg. percentage growth � last 5 years (financial) Company Market capitalization Attributable income Percentage of revenue generated outside South Africa Percentage of assets outside South Africa Sasol Ltd 28.8% 16.8% 38.0% 37.7% MTN Group Ltd 43.3% 96.2% 36.5% 56.9% Anglogold Ashanti Ltd 29.1% 31.3% 67.0% 50.0% Gold Fields Ltd 29.5% 2.9% 49.7% 67.4% Naspers Ltd 53.6% 71.2% 58.0% 32.0% Bidvest Ltd 2.2% 1610.0% 35.0% 44.0% Barloworld Ltd 82% 107.7% 54.0% 51.0% Steinhoff International Holdings 21.1% 25.0% 73.0% 74.0% Sappi Ltd 17.2% -17.2% 74.0% 68.3% Nampak Ltd 11% 17.2% 74.0% 68.3% Alexander Forbes 2.6% 2.6% 52.0% 71.0% Illovo Sugar 20.7% -1.7% 52.0% – Datatec Ltd 24.4% 68.1% 95.2% – Source: Johannesburg Stock Exchange (data extracted a at 26 July 2005), media profiles and annual reports.
the exchange control limits, South African companies would still be required to make application to South African Reserve Bank’s Exchange Control Department for monitoring purposes, as well as for approval, including the need to demonstrate benefits of the project to South Africa. 116 In June 2004, the tax on foreign dividends repatriated to South African shareholders in companies where those shareholders have more than a 25 per cent beneficial interest was removed. The existence of this remittance tax had the unintended incentive of encouraging investment in developed or capital-exporting countries rather than developing countries, such as those in Africa. 117 F. Conclusion Exchange controls prior to 1997, which were eased gradually thereafter, discouraged OFDI as well as portfolio investments. Residents were not allowed to have foreign bank accounts or invest in foreign funds. Neither outward nor inward direct investment was at the top of the agenda at the time of political instability in the 1970s and 1980s. The restriction on South African companies in raising finance against domestic assets limited OFDI. The lack of institutional support also played a role. Despite these obstacles, South African companies, SOEs and private enterprises, large enterprises and SMEs, have invested abroad to improve competitiveness in earlier periods and recently. They have invested in greenfield projects and acquired assets abroad to strengthen their market position, access new markets, secure natural resources, increase profitability, gain better control of their value chains, and access technology, 116 “Exchange control on outward FDI abolished”, Business Africa, 26 October 2004 (http://business.iafrica.com/mini_ budget_2004/385554.htm). 117 Medium Term Budget Policy Statement 2003, National Treasury, Republic of South Africa, 12 November 2003 (http:// www.finance.gov.za/). CHAPTER XI 145 skills and management expertise. An improved policy environment, liberalization and relaxation of exchange controls have further encouraged South African OFDI. OFDI by South African SMEs has been limited as compared with that by larger enterprises. This is because SMEs faced more constraints than larger firms in investing abroad. These include the lack of access to finance and market information, concern over the additional risk of operating in an unfamiliar environment, and the lack of managerial skills and expertise in handling international business activities. OFDI by SMEs could be encouraged by providing support measures such as information on market and investment opportunities in target host countries or regions. Financing facilities for SMEs could be offered when consistent with the development objectives of the country. Equally useful would be the setting up of a special agency or division to cater to the specific needs of South African companies with regard to internationalization. OFDI promotion programmes such as outward investment missions can be useful as well as facilitation activities such as public-private sector dialogue and forums to exchange experiences, including with regard to policy issues, on internationalization through OFDI. Training and linking with business schools can also play an important role in strengthening capacity-building, especially regarding doing business abroad, risk management, cultural differences and international management. The analysis of the internationalization of South African SMEs through OFDI in this chapter has been limited by the lack of statistics. This is one area to which attention should be given in order to gain insights into the strategies, drivers, challenges, benefits, obstacles and risks for South African SMEs with regard to investing abroad to improve competitiveness.
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United Nations Conference on Trade
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Preface The landscape of internatio
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