Role of Business in Promoting Ideals of Foreign Policy in SA: Seminar

FOREIGN AFFAIRS PORTFOLIO COMMITTEE
30 October 2007
ROLE OF BUSINESS IN PROMOTING IDEALS OF FOREIGN POLICY IN SA: SEMINAR
 
Chairperson: Ms F Hajaig (ANC)

Documents handed out:
The Role of Business in Promoting South Africa’s Foreign Policy – A Vodacom Group (Pty) Ltd Perspective
In the Footsteps of Cecil Rhodes? The Role of South African Businesses in Africa [contact [email protected]]

Audio recording of meeting

SUMMARY
The Committee met to discuss the role of business in promoting the ideals of foreign policy in South Africa, and received presentations from Vodacom and the Centre for Conflict Resolution. Vodacom noted that its operations were restricted to Southern Africa because of shareholder arrangements, and listed the countries in which it had operations.  Operational challenges included slow bureaucratic process and service delivery. Vodacom’s success was evidenced by the fact that they were market leaders and generally profitable in the countries of operation. Vodacom believed that South Africa could facilitate easier relations between South African business and embassies to promote a favourable investment climate. 

The Centre for Conflict Resolution warned of South Africa asserting their dominance on the African continent and alienating the rest of Africa. There were ambiguous perceptions of South African business, furthered by the fact that business was still mostly white-owned. It was noted that South Africa should adopt a more enlightened policy toward the rest of Africa. The relationship between South Africa and Nigeria was also highlighted, and it was noted that the lack of suitable infrastructure in Nigeria was the result of corruption and fraud. There had been an impressive growth in bilateral trade between the two countries, however, there had also been huge failures that could provide a setback. The relationship between China and Africa was also mentioned and caution was advised as China’s constant exportation of goods could risk having Africa enter into a ‘colonial relationship’. It was highlighted that South Africa could be seen as promoting regional relationships in order promote diplomatic interests.

Questions were posed by Members on the contradictions of development, why Vodacom did not operate in French speaking countries, how Vodacom adapted to differing labour laws, and how training was conducted. Members asked if business and government were sufficiently unified in entrenching the foreign policy options, linked to human rights, the debt, the focus that had been placed on the past practices of the apartheid government, the causes of resentment from other countries in Africa, areas of social responsibility, particularly those practised by Vodacom, and the quality of infrastructure being development by business in other African countries. Further questions related to development of  the local industries and suppliers, the need to consider supply constraints, dropped calls by the mobile operators, the cost of cell phone roaming, the relationship and competition between South Africa and Nigeria, possible remedies for dissatisfaction from Nigeria, the role that South Africa should play, the role of black economic empowerment, and what matters were taken into account when deciding on investment.

MINUTES
Introductory remarks: Business and the SA Foreign Policy
Mr D Sithole (ANC) made the introductory remarks, and stated that the issue of business and South African Foreign Policy had been outlined to the Portfolio Committee for three years.  South African businesses in the African Continent were in pursuit of investment, but there had to be a process of balancing economic interests with moral standing on the Continent and the world. At the core of South Africa’s foreign policy was the Continent and protection of its freedom. South Africa considered itself as an integral part of the Continent and South Africa’s success was dependent on the success of the Continent. South African foreign policy should also be a reflection of the domestic policy. It must communicate the country’s values through foreign policy and would not want to comprise ideals and morals for the sake of ‘bottom-lines’. Furthermore it should be asked whether South Africa had been able to attract business, and how it ensured that South African business remained patriotic.

The Chairperson reiterated that development in Africa was the cornerstone for peace and security, and the issues included how to balance profit margins, development of the country and how to mobilise the domestic resources of the country of investment.

The Role of Business in Promoting South Africa’s Foreign Policy; Vodacom Group Perspective
Mr Mthobi Tyamzashe, Executive Director: Vodacom Foundation, began by stating that Vodacom was committed to the African continent and was actively seeking new investment. The key strategic objectives of Vodacom included democratising communications on the continent, deploying innovative technologies and establishing local partnerships. Its manner of operation was premised on the values underpinning the South African foreign policy objectives, respect and recognition of each country’s laws, norms and policies and the continuous reinvestment in the country of operation.

Vodacom had operations in Tanzania, the Democratic Republic of Congo, Lesotho and Mozambique. The key investment criteria influenced the choice of markets. In assessing new investment opportunities, Vodacom looked at the economic value that would be added for the shareholders, the risk profile of the country and the potential to reach one million subscribers in a reasonable to timeframe. Other factors were the existence of  bilateral trade agreements with South Africa and targeted countries.

Mr Tyamzashe shared the experiences of Vodacom and the operational challenges facing these countries. Regulatory concerns included undue preference for government owned incumbents. Political instability and security concerns were also prevalent, as these affected safety of employees and property of the business. The slow moving process of bureaucracy and government hindered service delivery. There were achievements and milestones, which included profitability and becoming the market leader in the new markets.

The South African government could play a role in facilitating investment by promoting an effective relationship between South African businesses and embassies.  This would enhance diplomatic relations between the two entities. The host governments could facilitate by setting up structures for official and continuous engagements with foreign investors on the government’s policies, and by improving service delivery levels and professionalism.

Vodacom was historically restricted to Southern Africa due to shareholder arrangements. Though operations had been successful there had been obstacles and challenges. Vodacom thought that the South African government and host government could promote a positive investment climate.

‘In the footsteps of Cecil Rhodes? The role of South African Businesses: Centre for Conflict Resolution (CCR) Perspective
Dr Adekeye Adebajo, Executive Director: Centre for Conflict Resolution, began his presentation by comparing Cecil Rhodes and the Apartheid government’s similar behaviour. The military bombing of Mozambique, Angola, Lesotho, Botswana, Zambia and Zimbabwe during the Apartheid regime, causing one million deaths and $60billion in damages was fresh in the collective memory of the regional states. This also affected the  perceptions around  South Africa’s mostly white businesses on the continent. However, since 1994, South Africa had become a continental leader that was both envied and resented. There were a few analysts who understood the damaging effects of South Africa’s current continental leadership ambitions of mercantilist trade policies.

In a sense, post-Apartheid South Africa was still haunted by past structures that disturbed its present. Domestically, South Africa’s economy and key institutions - such as universities and the military - continued to be controlled by the white minority, who of course had been the beneficiaries under apartheid rule.  Most of South Africa’s trade was now with Asia and Europe in trade partnerships that were established during the Apartheid era. Regionally, South Africa controlled 80% of the regional economy.

Dr Adebajo said that South Africa’s preponderant power over its neighbours was seen as “imperialism” by those Southern African states that were economically dependent on South Africa. The Apartheid government had used military dominance to secure control over their neighbours, and in 1998 the South African government justified its military intervention into Lesotho as a bid to restore order after fears of a military coup d ‘etat. However, Lesotho, had a Highlands Water project that supplied water to the industrial heart of South Africa, and the military intervention could also be seen as a strategic venture.  Western imperialism had involved spreading religion, private business interests and justifying building empires. The question was whether South Africa’s peacemaking efforts could be linked to interventions in strategically important countries such as the Democratic Republic of Congo (DRC), in which it dominated the telecommunications market.

Post-Apartheid South Africa could wield considerable ‘soft-power’ to pursue leadership ambitions. It was Africa’s richest country and represented a third of sub-Saharan Africa’s economic strength. South African fast-food chains such as Nando’s, Steers and Chicken Licken were spreading across Africa and becoming household names. These chains, the 72 Shoprite stores in the rest of Africa, NuMetro’s expansion to the rest of Africa and South Africa Breweries (SAB) buying Millers, thereby being able to compete internationally; could all be seen as further examples of South Africa exporting a ‘shopping mall culture’ to the rest of the continent.

Resentment was evident in countries such as Kenya, Tanzania and Nigeria, where South Africa’s expansion was seen as exporting apartheid labour practises and destroying the infant industries. South African businesses had not helped their cause by speaking of Africa as if it was a conquest. South African firms had established interests in mining, banking, retail, communications, arms and insurance, often with the support of the host governments. In 2000, South Africa was the largest single foreign investor in the rest of Africa. By 2002, the rest of Africa accounted for 16.74% of South African exports, while imports from the rest of Africa were only at 3.62%. President Mbeki had constantly stressed that South Africa had no ‘power pretensions’, and had initiated efforts to ensure that South African firms developed Broad-based African Economic Empowerment (BBEEE), through strategic partnerships that promoted economic development in African countries.

Despite the positive developments there were parallels between the Apartheid and the current foreign policy in South Africa. President Mbeki was trying to create a State that lifted the black majority out of poverty. The economic activities of the country had become a major obstacle to South Africa’s political leadership ambitions. South Africa had made great strides with a Constitution that was widely celebrated. It was reporting an economic surplus for the first time in the country’s history. The socio-economic inequalities, which remained along mostly racial lines, were among the highest in the world.

South African corporates had discovered Nigeria, which was the largest market in Africa, and after Mobile Telephone Network (MTN) took the initiative and became listed on the Nigerian Stock Exchange, several other South African businesses followed. In 2003 Nigeria was South Africa’s third largest trading partner. Nigeria mainly exported oil, (representing 98.3% of its trade) to South Africa, whereas South Africa had diverse goods that it exported to Nigeria. South African businesses had complained about corruption, fraud and ‘419’ scams that had damaged Nigeria’s reputation internationally. Flaws in the Nigerian infrastructure included having to pay bribes and the lack of a stable judiciary. Nigeria for its part had complained about the patronising behaviour of South African businesses and had described them as ‘neo-colonialists’ determined to dominate Nigeria’s huge market. Other Nigerians had praised South African businesses for their skill and professionalism and the fact that Nigerians were the main beneficiaries of the jobs created.

He concluded that post-Apartheid South Africa was an aspiring middle power seeking to be an active participant in global politics. It had grasped the concept that by working regionally South Africa could promote its diplomatic interests within Africa. There had been questions whether the next President would continue to maintain the impressive commitment to Africa. The economic rivalry between South Africa and China was noted, and the fact that the recent purchase of 20% of the shares of Standard Bank could establish a future partnership for economic domination. South Africa must adopt an enlightened policy for developing the region to enhance the country’s security, create viable markets for its goods and prevent an influx of poorer populations into the country.

Discussion
Ms D Motubatste-Hounkpatin (ANC) commented that Dr Adebajo’s presentation gave a clearer understanding on the attitudes of the African countries. However, the presentation also highlighted what she called  ‘contradictions of development’ with reference to Africa and South Africa.

Ms Motubatste-Hounkpatin noted that Vodacom had operated in the English speaking African countries, except Mozambique, but had not expanded into the French speaking countries. She asked for clarification on how it operated in other African countries, pointing out that there was a need for good governance. The input lacked the policies of the governments of those countries. She wanted to know if Vodacom was able to develop policies in those countries or if appropriate policies were already in place.

Mr Tyamzashe replied that there were constraints that limited Vodacom to only operating in Sub-Saharan Africa. He continued that a strong regulator led to a strong operator, and that there was capacity building within the regulator.

Ms Motubatste-Hounkpatin asked about the labour laws of those countries, and how Vodacom adapted to those laws.

Mr Tyamzashe replied that Vodacom subscribed to the labour laws of the country in which it invested, when employing citizens of those countries.

Ms Motubatste-Hounkpatin asked how training was conducted for those in other African countries.

Mr Tyamzashe replied that training was tailored to the particular requirements. Training was dependent on the level and developmental stage of the people. He added the company had an interest in the training of the employees, and had to commit a specific percentage of the profit to training.
 
Mr M Ramgobin (ANC) commented that during the Apartheid era there was a Goodhope and Carlton initiative, after the burning of Soweto, where business and the State could rationalise intervention in South Africa both to protect the country and to keep business going. He asked if both presenters were satisfied that business and government were unified in entrenching the foreign policy options of South Africa. The policy was rooted in human rights, linked to the African agenda, and South Africa was committed to global co-existence. He asked to what extent did national interest compete with the visions presented by the foreign policy.

Dr Adebajo replied that government and business were unified in wanting to improve the growth of South African economics, and in an abstract way business was trying to improve the stability in Africa. He thought all capitalists behaved in similar ways, by increasing their market share, destroying the competition if they could and creating monopolies where they could. It was important to remember what the interests of business were, but businesses should be smart when defining those interests. African governments should also be able to negotiate in a way that promoted their own interests.  The South African government was more sensitive in terms of the historical baggage that business carried. The government wanted to play a leadership role and it wanted a stable Africa in order to market its goods and attracting investors. It was common for investors to view all the African countries in the same light. 

Mr Ramgobin asked if Africa could depend on business to ensure that the continent was sufficiently equipped to have a Marshall plan.

Dr Adebajo replied that in his opinion the Marshall plan would not happen. He thought that Africa should push for the $290 billion debt to be cancelled, as it was clear that it would not be repaid. There was a moral argument that this debt was actually accumulated by dictators and that the grantors of the aid knew that the leaders of the African countries were embezzling the funds.

Mr Ramgobin noted that South Africa was not seeking charity, but was stating that it was entitled to foreign policy options that were not impeded by the modernised version of imperialism. 

Mr M Sibande (ANC) raised a concern that Dr Adebajo had focussed on the past government of South Africa, and asked how Dr Adebajo perceived the current government. He did not want South Africa to be perceived as an instrument of imperialism.

Ms M Njobe (ANC) commented that the extent of colonisation in countries in Southern Africa, including South Africa, had to be taken into consideration. The conditions in these countries were favourable to the colonialists. She asked if South Africa was addressing issues resulting from colonisation and Apartheid. 

Dr A Luthuli (ANC) agreed that it seemed that South Africa was being judged on the past government rather than the present government, and she asked what this was trying to achieve. She added that South Africa’s interaction with other African countries should be assisted if it would lift harsh perceptions against the country.

Mr Sithole asked what could be the cause of the resentment towards South African business by other African countries. He wanted to know whether it was because South African businesses managed the companies and local talent was not developed, or because South African business was more disciplined.

Dr Adebajo replied that post-Apartheid South Africa had played an extremely important role in Africa. South Africa had sent 3000 peacekeepers to Burundi and the Democratic Republic of Congo, and there were peacekeepers in Ethiopia and Eritrea. There was a heavy investment of time and resources. In a decade South Africa had gone from being the greatest de-stabiliser to the most active peacemaker in Africa. However, the past could not be separated from the present. As long as white people were in control of the economy, and dominated the intellectual output in South Africa it begged the question of whether the black government was really in power. Domestic transformation should be accelerated. 

Ms Njobe was interested in the area of social responsibility as practised by Vodacom. She also mentioned that the countries in Africa want real practical assistance, and asked for more examples in these.

Mr Sibande was concerned by the role played by Vodacom in terms of giving back specifically to the rural areas in South Africa.

Mr Sithole asked about the quality of infrastructure that was being developed by business in the DRC and other African countries. This was directly linked to the amount of social investment business put into African countries, as it was an indication of their commitment to those countries.

Adv Z Madasa (ANC) commented that the inputs had highlighted the values of forging a closer relationship with business. They had also highlighted the different strategic thinking of business. He continued that social responsibility should be seen as part of the bottom-line, and should merely not be reactive.

Mr Tyamzashe replied that Vodacom performed remarkably well with regard to social responsibility. Currently it was rated number two in the country for consistently contributing to social upliftment. Education and health were the main areas of focus. Vodacom looked at ways to alleviate poverty and utilised technology to solve social problems. Vodacom, together with the Department of Education, built a school in every South African province every year.  Vodacom gave fifty bursaries, every year, for electrical engineering, accounting and information technology, which were the scarce skills. It participated in the training of teachers by collaborating with National Business Initiative (NBI) and Education Alive. Vodacom also assisted school governing bodies as they were critical components of schools. Vodacom tried to ensure that a province received funds annually from the company. Vodacom had funded 1000 cataract operations for elderly people. This year it has spent approximately 7% of the turnover of the company, on these and other initiatives. 

Mr Sithole remarked that during his time in the DRC he had noted that South African commercial businesses would invest and take complete control. He asked what could be done to develop the local industries and suppliers.

Adv Madasa saw the value of local partnerships,  but there was the reality of supply constraints by local businesses. This issue should be dealt with at policy and developmental levels.

Mr Tyamzashe replied that local suppliers had safety mechanisms when it came to quality. However in the telecommunications industry the reality was that specific suppliers only supplied certain technology, and who supplied what would be determined by the nature of the technology. The Black Economic Empowerment (BEE) Charter penalised companies when products were bought from different non-approved suppliers and that resulted in negative reinforcement.

Mr Sithole queried the number of dropped calls, despite the fact that there were several communication businesses in the country. Placing that situation in the DRC, he asked the extent to which businesses would extract profits using unconventional methods.

Mr Tyamzashe replied that Vodacom had to report to the Communications Portfolio Committee annually to report on issues such as dropped calls. He added that dropped calls were a phenomenon caused by a number of factors. Vodacom was operational in 186 countries and was rated in the top three in terms quality of service.

Mr Sithole commented on the fact that cell phone roaming in Europe was less expensive than the roaming in DRC. He assumed that the investment would reduce the communication costs.

Mr Tyamzashe replied that cell phone roaming was getting cheaper. The trend was to ensure that roaming became less of an issue, through negotiations with several networks all over the world. He continued that the way in which technology was evolving, the phone would be able to choose the cheapest form of roaming. Vodacom had to continuously monitor cell roaming.

Mr Sithole asked at what strategic level could the relationship between South Africa and Nigeria be described. There were several instances where the countries competed, for instance for the non-permanent seat on the Security Council of the United Nations.

Dr Adebajo replied that he was more critical of Nigeria, as he was himself a Nigerian. Nigeria, despite a huge amount of natural and human resources, had a completely dilapidated infrastructure. A visionless and corruptive leadership should be avoided. The strategic partnership of South Africa and Nigeria was the most important partnership in Africa. South Africa and Nigeria accounted for about three quarters of the economic strength of Sub-Saharan and West Africa, these countries had the biggest armies and without them there would not have been an African Union (AU) and New Economic Partnership for Africa’s Development (NEPAD) . Even though there had been some differences of opinion between the two countries, this was considered normal in the course of a relationship. Of greater importance was how issues would be resolved. Dr Adebajo recommended possible remedies as including that more Nigerian managers should be put in place in South African companies, and more local partnerships and ownerships should be developed. He added that a diversification of the trade to South Africa from Nigeria should happen, as 98% of Nigerian exports to South Africa were oil.
           
Mr Sibande made reference to the fact that Dr Adebajo said that South Africa could be perceived as a mercantilist state, and he asked what role South Africa should play.

Adv Madasa mentioned the racial perception by others of the South African business, and asked how could this issue be remedied.

Dr Adebajo replied the BEE was important in transforming South Africa and the rest of the Africa. There were many Africans who could easily be brought back, by creating a Pan-Africa brain trust, assisting South Africa in identifying its African identity and provided black role models and mentoring to up and coming black students.

Mr Sithole wanted to know what South African business should do to ensure South African Foreign Policy informed their business decisions. In addition he wanted to know why had Vodacom left a market as huge as Nigeria and dismissed executives.

Mr Tyamzashe replied that companies tended to recruit from a pool of knowledgeable people in order to make informed decisions. As a representative of Vodacom, he could not respond, as he did not have a mandate to answer.

Dr Luthuli was concerned that there was no business forum where their approach to the continent could be unified.

Mr Tyamzashe replied that Vodacom had established a business forum in their countries of operation and hoped that it would be successful.

Ms Hajaig asked if business looked at the NEPAD view of a potential investment country and whether the Millennium Development Goals (MDG) were taken on board. She felt that business should be discussing these matters, keeping in mind the African Agenda. 

Mr Tyamzashe replied that it was in the interest of the company to factor as many conditions as possible when making the decision to invest in a country. Vodacom did look at programmes such as Nepad, and this was precisely why the company recruited from a knowledgeable pool of people in order to factor in all issues.

Mr Tyamzashe commented that Vodacom received a request to share their experiences in the rest of the African countries. Unfortunately, he felt that he was not properly equipped with the information to answer the type of questions that were posed.

The meeting was adjourned.