Reports abound of more and more South African companies doing business in Africa, but why are they not investing that money locally, are there challenges to making development work locally? Looking back over the last few quarters some disturbing stories have emerged.
It can’t be a good sign when you hear the news that a company like Resilient is looking elsewhere to do business.
Johannesburg-based real-estate investment company Resilient, which has a local market capitalization of 11 billion Rand is looking to Nigeria to expand its business. This on its own is not a worry since many SA firms are expanding into Africa. However it’s the stated reasons and comments from its executive that raise some eyebrows.
According to The Citizen’s Micel Schnehage, Resilient’s Director Des de Beer explained that it’s the firm’s struggle with local government. “(Resilient) is hampered by extensive bureaucracy and red tape, resulting in expensive delays.” He went on to state that the era for Resilient to develop non-metro malls was over.
What seems to have been the last straw was the loss of documents pertaining to the Mafikeng Mall by local authorities 17 times. “They’re not accountable to anyone so they don’t really care,’’ said de Beer.
Unlike South Africa, is the implication, Resilient believes there is a sincere intention in Nigeria to see the country raised up and that officials are largely positive facilitators of the investment process.
Another big player in the industry, Redefine, the second largest listed SA property loan stock company by market cap on the JSE, with assets exceeding R37bn, claims to be hampered by red tape.
The value of the group’s properties declined by 1.7% in the review period while the South African portfolio valuation increased by R260million. Red tape involving local authorities and other government departments are holding back developments in rural areas.
Redefine’s CEO Marc Wainer announced last year that Redefine intended to launch a shopping centre of between 20 000m² and 30 000m² in a rural area which could create between 4 000 and 5 000 jobs. This includes cleaners, security guards and other workers needed by retailers.
However, Wainer said instead of the authorities welcoming these developments, processes are being frustrated by officials wanting their palms greased before setting the ball rolling.
The Redefine head said retailers are keen to enter into rural areas with a growing segment of the market’s buying power increasing in terms of social grants, but are now rather opting for Africa. Wainer cited a recent announcement by Liberty Properties to opt for its new growth in Zambia. “It’s easier to do business in Africa than South Africa,” Wainer told reporters. He added that money being spent offshore should be spent locally, but conditions frustrate this.
In an interview with CitiBusiness Wainer lashed out at government, criticising the administrative practices of local authorities. At the time he added Redefine was not going to invest in areas where bribes were expected, citing the former Hammanskraal as an example.
But this doesn’t mean everything’s rosy in Africa either, doing business where local authorities are concerned can be a red tape head ache for developers in general. By way of example consider Steven Singleton’s story.
Steven Singleton wrote to the Daily Maverick about his struggle in setting up a Private hospital in Zambia where he was frustrated at every turn by Zambia’s top banker and business mogul Rajan Mahtani: “Business in Zambia is very much like this and magnates such as Mahtani make sure it stays that way and he retains control.
In my case I offered him what I considered to be “a project on a plate” and, instead of rewarding the provider, he not only took the project, but the plate as well. Why? Because he could, and there was no recourse to be had.
This is all too often the nature of doing solo business in Africa. Powerful and politically connected parties are able to move with relative impunity as long as their alliances are intact or until a change of regime shifts the balance of their power base.”
Although not the same situation, the dynamics are similarly reported when trying to do business involving local authorities in South Africa it seems. Whether this is an African challenge or a South African challenge, developers have their work cut out for them as they try to invest and develop under