Doing business in South Africa.

Author:McCoy, Frank
Position:Includes a directories of helpful resources - Business Opportunities in South Africa - Cover Story - Cover Story

AFRICAN-AMERICANS, WHO ONCE CONSPIRED THROUGH ECONOMIC sabotage to help bring about the collapse of South Africa's racist system, today have a much different agenda. They want to help expand South Africa's economy.

"The business potential we as African-Americans have here is great," says Sharon Leslie Morgan, the joint managing director of Afritel Cellular Systems (Pty) Ltd., the country's only wholly black-owned cellular telephone service provider. "But it has a lot to do with how we carry ourselves. We can try to make this a little America, or we can fit in as people who understand what the struggle was all about."

To take advantage of business opportunities in today's South Africa, entrepreneurs will be expected to support the Mandela administration's Reconstruction and Development Program (RDP). The plan's goal is to narrow the economic gap between the nation's black majority and white minority.

That is a tall order. The New York City-based Africa Fund, one of the oldest anti-apartheid organizations, reports that apartheid left a harsh legacy. At present, South Africa has an estimated 50% unemployment rate. Black Africans, who make up 74% of the population, own 14% of the land, while whites, who make up less that 14% of the population, control 87% of the land. There is one brick house for every 3.5 whites compared to every 43 blacks.

Blacks are also nearly absent from the ranks of such skilled professionals as doctors, lawyers and engineers. And according to the last poverty survey, conducted in 1989, more than 50% of blacks live in dire poverty, making less than $170 dollars a month, compared with 2.6% of whites.

It may cost an estimated $10.5 billion over five years to implement the RDP. Goals of the program include redistributing 30% of the land, building more than 1 million new homes, electrifying 2.5 million homes and providing clean water and sanitation, universal access to affordable health care and telecommunications to all citizens. Naturally, African-American investment in every category is encouraged, particularly when it creates jobs.

The Clinton administration recognizes this potential. Commerce Secretary Ron Brown designated South Africa as a "big emerging market" and appointed Millard Arnold as minister counselor to promote bilateral ties between the United States and South Africa.

To better understand the potential of the South African market, BLACK ENTERPRISE spent several weeks in South Africa last October. In addition to speaking to African-Americans and South Africans in business and government, BE was also represented at the Made In USouth Africa Expo, a Johannesburg-based exhibition of goods and services attracting over 230 exhibitors. (See sidebar, "Resources To Help You Tap Into South African Markets," for details on these and other programs designed to open up South African markets to American entrepreneurs.)

What we found was that the African-American presence in South Africa was striking. There were black corporate executives from AT&T, Duracell and Chrysler at the Made In USouth Africa Expo, More than 30 African-American companies paid up to $7,500 for a booth, lodging and airfare with no guarantee of contracts to attend this event. These included several BE 100s companies new to the South African marketplace. Hair care products manufacturer Luster Products of Chicago and BET International, a subsidiary of Washington-based Black Entertainment Television, which broadcasts programs on a South African network, were among the newcomers. There have been joint ventures between major corporations, African-American investors and black South Africans. A prominent example is New Age Beverages Ltd., a joint venture between Pepsi-Cola International and Egoli Beverages LP, announced last June. New Age Beverages is a Pepsi bottling franchise owned by black South Africans in partnership with Egoli Beverages Ltd., a consortium that includes prominent African-Americans, such as BE Publisher Earl Graves, attorney Johnny Cochran and actor Danny Glover.

For three African-American enterprises, venturing into South Africa has already begun to bear fruit. The first are corporate lawyers who put down their torts and moved to Johannesburg to open a chain of laundry centers. The next is a veteran telecommunications company owner whose appraisal of South Africa's emerging black business class led him to enter the hot cellular phone industry with a South African partner. Finally, two New York businessmen and brothers have learned that a little seed money in Soweto can go a long way.


But before you book your ticket, do your homework. South Africa's urban business environment is similar but different from ours. In South Africa, general foreign ownership of local businesses is not restricted. Government approval for investment is neither needed nor are any areas prohibited. The new government also intends to reduce the tariffs formerly used to protect industry under apartheid. There are a host of investment incentives as well, including low electricity costs, port facilities, relatively low commercial real estate prices and a sophisticated industrial infrastructure.

But there are also differences in the way that business is conducted in South Africa compared with this...

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