SINCE the discovery of vast mineral wealth at the
end of the 19th century, SA has provided fertile ground for many world-class
companies that have grown into formidable global players, both in Africa and
around the world.
One need look no further than SABMiller, Aspen
Pharmacare, MTN, Old Mutual, Bidvest, Remgro, BHP Billiton, Steinhoff and Anglo
American to find companies with solid roots in SA that are now well-known names
on the global stage.
At first, SA’s relatively small size in the
context of the global economy was enough to encourage many South African
companies to turn their attention to seemingly greener pastures offshore to
further their growth ambitions. More recently, headwinds arising from the local
macroeconomic, political and labour environment have provided extra impetus to
South African companies’ desire for international expansion. The reasons are
numerous, but include decreasing local confidence owing to lower-than-expected
economic growth, regulatory uncertainty, a weakening of the rand against most
major currencies, along with a perception that its decline will continue
unabated, and the desire of most shareholders to seek diversification and
offshore earnings.
According to the latest South African Reserve
Bank data (second quarter of this year), outward-bound foreign direct investment
increased, and inbound foreign direct investing decreased on a quarterly basis.
This is not surprising given that South African
real gross domestic product is expected to grow at less than 2% in the near
term, while myriad structural and economic issues hamper business growth and
development. Management teams are heeding the sentiments of their investor
bases, which favour companies with meaningful offshore exposure, a fact
supported by the high market
ratings for companies with successful offshore expansion strategies.
