South Africa needs to fight if it wants to survive

South Africa needs to fight for its space as a global competitor in business if it wants to build a thriving economy back home and draw and retail the critical skills it needs to do so.

According to Business Leadership South Africa (BLSA) chief executive, Busi Mavuso, while a lot of focus is put on making the business environment more competitive locally, more support is needed from the government to launch enterprises internationally.

“For South African business to thrive, we need to be competitive abroad. We often talk about improving competitiveness locally but we don’t often talk about one element of that in particular: how well our companies are able to operate abroad,” she said.

The CEO noted that countries like the United States and United Kingdom have large government agencies dedicated to promoting the interests of their companies abroad, and they carefully align foreign policy to enhance the traction their companies set up in foreign countries.

“They have extensive support networks to help their companies enter new markets, providing information services and contacts in those markets,” she said.

While the South Africa government also has these kinds of agencies – and the country is party to treaties that ensure local businesses are treated fairly in other markets – more needs to be done.

Notably, Mavuso said, South Africa has exited several bilateral investment treatis that have given greater protection to local businesses abroad. The country’s geopolitical missteps in recent months have also put some trade agreements at risk.

Mavuso said that global competitiveness is crucial to building sustainable economic growth – something that South Africa has been lacking for a very long time.

However, she said that it is not only about exporting local products abroad – global competitiveness entails businesses being generated in foreign markets directly.

“From restaurant chains to beverage makers, foreign subsidiaries provide a way to leverage intellectual capital and generate revenue from a global market. We have several outstanding South African multinationals that operate all over the world,” she said.

“Those businesses send profits back into South Africa and are very important channels for goods and services created in South Africa to find their way into foreign markets.”

To build effective South African businesses with foreign operations, the country needs to establish an enabling economic policy. This means addressing some of the key problem areas that persist, such as:

• Exchange control red tape – while the thresholds for investment are high and companies can make investments largely without restraint, local companies still have to spend a great deal of time completing forms, filing notices and paying fees for their international transactions.

• Tax – tax can also be a constraint, especially if foreign competitors face a lower tax burden than South African companies’ foreign subsidiaries face. We should want our companies to be able to operate abroad on a level playing field, structuring themselves in a way that best positions them for success.

“Should we fail to offer an effective base for companies to compete abroad, there are two obvious consequences. For one, opportunities for growth of our businesses will be fewer, damaging economic growth here.

“Second, some South African entrepreneurs will establish their companies in more conducive markets to manage foreign business. Those would be businesses and economic activity lost to our economy,” Mavuso said.

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