Presentation on theme: "South African Multinationals and Economic Development in Africa Presentation to Conference on Emerging Multinationals. Who are they? What do they do? What."— Presentation transcript:
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
2 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 (SOEs). Market cap of listed members R2 264b ($360b) 66% total JSE
3 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
4 EMERGING MULTINATIONALS THE SOUTH AFRICAN CASE Mid 1990s with exchange control and need for global capital and reach, London listings. Billiton, subsequently BHP Billiton, now worlds largest mining company. Anglo American, worlds second largest mining company. South African Breweries, worlds 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.
5 EMERGING MULTINATIONALS THE SOUTH AFRICAN CASE Top 50 non financial TNCs 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
6 SOUTH AFRICAN vs SUB-SAHARAN AFRICA: 2003 Largest economy in Africa: 36,4% Sub- Saharan 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
7 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 SOEs – 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 Africas Business Presence in Africa, South Africa Foundation, 2004.
8 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 Owns Whom, Africa In., November 2004
9 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.
10 MTN NIGERIA - CASE STUDY Invested $900 million in 2004 Results 20052004Increase Revenue $1,55m$1,162m34% EBITDA$800m$593m37% PAT$500m$400m50% (Rand figures have been dollarised and rounded off) Source: MTN Annual Report 2005
11 SABMillers investment pattern into the rest of Africa CountryDateEffective Ownership Botswana197847% Swaziland198160% Lesotho198239% Zimbabwe199023% Tanzania199366% Zambia199490% Mozambique199565% Ghana199769% Uganda199740% Kenya199887% Angola1998 Management Contract Source: Based on SABMiller annual reports, cited in Grobbelaar op cit.
12 NIGERIA MARKET INFORMATION Population 133,8 million Mobile penetration 7,02% MTN Market Share47% Prepaid/Post paid mix98/2 Total subscriber base155% (year on year) 4m to 10,2m Total potential market 27m/134m
13 INVESTMENTS IN AFRICA - TOTAL Source: Whitehouse & Associates, cited in South Africa Foundation report.
14 INVESTMENTS IN AFRICA – NON SACU Source: Whitehouse & Associates, cited in South Africa Foundation report
15 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.
16 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).
17 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.
18 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 90s). 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.
19 SOUTH AFRICAS FOREIGN ASSETS 1994 - 2004 Table 1: South African foreign assets in Africa, 1994 - 2004 4 YearAfricas % of TotalValue of Africas share (R bn) South Africas total foreign assets (R bn) 19945.7%6,143106,129 19955.4%6,751123,580 19964.9%8,131164,219 19974.0%9,357232,956 19984.6%15,318332,899 19993.3%20,453606,258 20003.3%24,170721,569 20013.2%26,801818,782 20024.5%30,009662,758 20034.6%32,399688,882 20044.9%36,668746,118 TotalN/A216,2005,204,150 Source: Various South African Reserve Bank Quarterly Reports, 1995 - 2005 Source: South African Engagement with Africa: Impacting Negative & Positive Perceptions Neuma Grobberlaar, SAIIA, 2005.
20 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
21 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 ARVs 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
22 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.
23 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.
24 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 SOEs. 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.