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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. I am eager to hear from our members what their experiences of operating abroad has been. This can help shape our efforts to support government to improve overall competitiveness.

That are lots of factors that play into the competitiveness of our businesses. Countries like the United States and United Kingdom have large government agencies dedicated to promoting the interests of their companies abroad. They carefully align foreign policy with mechanisms to enhance the traction their companies have when they 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.

Our government also does much of this.

We are members of important treaties that ensure South African businesses are treated fairly by other countries, although we chose to exit several bilateral investment treaties that provided far greater protection for South African businesses abroad. Government also includes business delegations for some official foreign visits which opens opportunities and new relationships. 

The Department of Trade, Industry and Competition facilitates South African participation in international trade events and offers support for South African businesses looking to build new export channels. It manages an exporter development programme to help small and large companies develop their export strategies.

Competitiveness is very important in underpinning sustainable economic growth.

It means we can trade in international markets because we are offering products and services that are as good, if not better, than alternatives made in other countries. The more competitive we are, the more business we can gain in global markets, supporting growth at home.

But when we talk about export-led growth, it is not just about selling to foreign clients from our SA base. In fact, a great deal of sales and business must be generated in those 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.

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.

If we are to build South African businesses, enabling their foreign operations is important. This should be a consideration within wider economic policy. We want South African multinationals that can operate from a domestic base efficiently and compete in foreign markets as effectively as possible.

Several factors play into that effectiveness. Exchange control has historically made it difficult for South African companies to invest abroad. That is largely no longer the case – the thresholds for investment are high and companies can make investments largely without restraint. To the extent that exchange controls are still a problem it is the hassle and cost they impose, requiring South African businesses to spend a great deal of time completing forms, filing notices and paying fees for their international transactions. That is a frictional cost to South African businesses that is not faced by many foreign competitors who can move money across borders with far less hassle.

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.

I am keen to hear from businesses what their experiences of running foreign subsidiaries has been like, in our effort to support the creation of a conducive environment for business in South Africa to succeed. Please reach out to let me know of any specific obstacles you may have faced in building your business abroad. As we support the government to enhance the overall competitiveness of the South African economy, these insights can help direct our efforts.

Issued by BLSA CEO Busisiwe Mavuso