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Cape Town – South African companies are leading the way to support economic integration across Africa, research by the Boston Consulting Group (BCG) has found.
The research report released on Tuesday, titled Pioneering One Africa: African Corporations Trail-Blazing Across the Continent, shows that economic integration across Africa is increasing.
The primary drivers of the integration are by companies within the continent, according to the report. BCG identified 150 companies supporting integration in the continent. Among the 75 companies in Africa, 32 are based in South Africa and are contributing to integration on the continent. The remaining 75 companies are multinationals with track records in Africa.
Among the SA-based included are pharmacare groups Aspen and Ascendis Health; financial groups Discovery, FirstRand, Sanlam, Standard bank; retail groups Massmart, Woolworths, Famous brands and Shoprite. Others include Naspers, Sasol, MTN and Dimension Data.
The “African pioneers” have eight characteristics which are integral to their success. This includes actively expanding their footprint across several African countries. They make significant greenfield investments, a form of foreign direct investment where the parent company builds its operations in a foreign country.
They build strong African brands. They expand using mergers and acquisitions. They innovate locally to adapt to the African consumer and invest in local talents. They build local ecosystems and connect Africa by facilitating the movement of people, goods, data and information.
Challenges
The research also noted geographic fragmentation on the continent which adds to integration challenges. The average distance between major cities is 4 100km, and the average flight lasts 12 hours. This is in comparison to Europe, where the average distance between major cities is 1 300km and the average flight lasts 3 hours.
Africa also has fragmented trade zones. In total there are 16 trade zones and 80 countries require visas, according to the report. In Europe, there are only four trade zones and no visas are required. In North America there is one trade zone and nine countries require visas.
“Fragmentation in Africa is much greater than anywhere else in the world, and it adds significantly to the economic challenges facing countries that typically lack the critical mass to compete globally,” said Patrick Dupoux, senior partner at BCG who also co-authored the report.
At a briefing about the African Continent Free Trade Area (AfCTFA) last week Trade and Industry Minister Rob Davies told journalists that South Africa wanted more clarity on details related to the agreement before signing.
Only 44 African countries signed the agreement at the 10th Ordinary Session of African Union (AU) Heads of State last month. South Africa committed to signing the agreement in future.
Davies explained that the agreement would benefit the continent by supporting deep industrialisation along the value chain and by creating higher diversification.
The African market is important to SA and in 2017 it was a R23.7bn market for SA exports, said Davies. SA imported R8.6bn from other African countries. “There’s a big trade surplus in our favour,” said Davies. Many jobs can arise from exports into the African continent.
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