Business Opportunities and Implications for an Organization to Enter Into South Africa

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Table of Contents

Executive Summary
Brief overview of country and main issues
Cultural Context
Political/Legal context
Economic context
Conclusion and recommendation
Recommendations
List of References

Executive Summary

South Africa is the leading economy in the African continent. It gained its independence in 1994 from the Dutch who had took over power from British government in 1910. The country is the focal of Africa. It was the first African nation to host FIFA World Cup in 2010. This country has the highest number of languages considered by the government as official (eleven languages).

It has varied cultural background because of the numerous tribes it has. Some of the cultural values are prohibitive to specific type trade, while others are supportive. The political environment of this country has been very stable. The political class has been very supportive of foreign investments in various fronts.

This has seen many firms’ growth. The legal system is also very welcoming to foreign investment. There are a few formalities that any foreign firm may need to take. The process of getting the trade permit is simple and short. The economic structure of the country is another factor that makes this country attractive to foreign investment.

Although there are a few individuals who are super rich, having amassed most of the country’s wealth, the other populace is still economically viable. The best approach to get into this market is to adopt target marketing technique. Each market segment should be determined based on their wealth and cultural values that affects their purchasing habits.

Brief overview of country and main issues

South Africa is the leading economy in the entire continent of Africa. It has a population of about 51 million people. According to a report by Tarp and Brixen (1996, p. 78), South Africa has a strong economy when compared to other countries in this region. This can partly be attributed to the fact that this nation gained its independence from the British rule as early as 1910.

Although the Dutch remained in power, they took citizenship of this country and as such, the resources of this country were not taken away to the European countries. Another factor that has ensured that this country has a strong economy is its rich natural resources.

South Africa is the world’s largest gold exporter. Gold is a very precious metal and it fetches good money in the international market. Other sectors of the economy are also equally developed. The country has the best infrastructure in Africa, especially after hosting the 2010 FIFA World Cup.

The transport sector was upgraded, and so were other sectors like communication, banking and other social amenities. The country has some of the best harbors in this region (Best 2009, p. 98). Since the time the blacks took over power in 1994, the country has relatively been peaceful, save for the xenophobia that was witnessed in the late 2009 following economic downturn in the world that affected this country.

Amidst all these positivity, the country experiences a great difference in the distribution of wealth. The wealth of this country is held by a few individuals, leaving the majority wallowing in poverty. This has greatly affected the purchasing power of the people of this country, as discussed below.

This paper seeks to conduct a survey of this country’s business environment in order to ascertain its viability to sustain business ventures.

Cultural Context

South Africa is very rich in culture. Majority of this population are the blacks, making up 80 percent of the entire population. The whites make 9 percent and so are the colored.

The Asians make up 2 percent of the country’s populace. Among the Africans, there are various tribes each with its own cultural practices. There are the Zulu’s who are the majority, the Xhosas, Swazis, the Ndebele, the Sotho, Venda, Tswana and the Tsonga. The country has about eleven official languages, most of them Africa languages, other than English and Afrikaans.

The African cultural values are still cherished in this country. For instance, many of the African cultures values children and this would make men marry many wives. Although this is advantageous to the business world in that it increases the target population, it has an equal negative effect because the little wealth that is available has to be spread among the many, making their purchasing power very low.

The current president of this country, Jacob Zuma is such typical African. A Zulu by tribe, this president has married several wives as a symbol of being true to his culture. Some of these cultural practices may be a hindrance to business while others may be beneficial.

Among some societies for instance, traditional medicine is highly encouraged as opposed to the pharmaceutical ones. This has had negative impact on the sale of laboratory drugs because the population does not believe in them. Conversely, the sale of electronics has been boosted by the cultural practices of this country.

Most of the African cultures have close family ties. They stay as a large society, always concerned about the others welfare. As such, such electronic products like cell phones that enable communication have been a great welcome. The social media has also received an equally high acceptance among the locals. As such, items like the iPad, iPhone, and computers in general have found good market in South Africa.

Most of the country’s cultural practices have been influenced by the west because of the increased interactivity between Africans of this country and the west. Such products as the Hollywood movies are very popular among the youths. There is a shift in the cultural practices of the country’s citizens, especially among the youths.

Because of the influence from the west as fostered by various channels, the youths are abandoning some cultural practices that were highly valued by different tribes of this nation for the western culture which to them is more liberal and less restrictive. Their dressing code is changing and as such, business firms that operate in this industry have come to realize that those dresses that are in demand in the American markets would fetch good prices in this country, especially among the youths who want to imitate the west in almost everything.

Political/Legal context

South Africa was one of the most attractive colonies in the entire African region because of its rich resources. During the scramble and partition of Africa, the British government took this country as one of its colony. In 1990, the Dutch declared self governance and took over power. They presided over a government that was highly racial. Africans, the whites, the colored and the Asians had their own facilities that were not to be shared.

The whites had the best infrastructural facilities and other amenities, while the blacks, who were the majority, had the worst (Fifield 2007, p. 78). This was called the apartheid governance. This has had a great effect in the political structure of this country even today. Although the governance of the country currently is purely on a democratic front, there is still a great mistrust between the whites and the blacks.

The conservative whites, who were forced out of the government because of the strong wave of change, still harbor the feeling that they deserve to be treated better than any other race in this country. On the other hand, the blacks are still suspicious of the whites following the oppressive rule that the whites had made them undergo.

This is a source of tension, and although the country’s political environment has been very stable since the onset of democratic rule in 1994, there is fear that this tension could deteriorate to violence as was witnessed in 2009. The law of this land has liberalized trade. Investors who may wish to invest in this country have to undergo a few formalities to open up business units in the country.

Economic context

South Africa has a sound economic structure. According to a report by Roux (2005, p. 67), South Africa is the leading producer of gold in the world. This industry employs many of the country’s nationals as miners of the product, transporters, traders and many other positions.

It is the main foreign exchange product for the country. This country has a well developed agricultural sector. Most of the food products consumed locally is found locally. It also exports some of its agricultural products to other African countries. The fishing industry is also developed, especially on the high seas. Other industries are also well developed.

Despite all these economic prosperity that this country seems to enjoy, there is one major problem with the economic structure of this nation. The country’s economic system is controlled by the minority. Though rated Africa’s best economy, the wealth is in the hands of a few individuals.

These individuals cannot manage to spend all the wealth they have, and at the same time fear that a moment may come where the government may put them to task to explain their source of wealth. As such, they have kept this wealth in European nations where they know that they would be safe from any investigation.

This has left the larger population in object poverty. They cannot afford many luxuries in life. To others, even the basics are a problem. To an investor, the large population of the country and the huge gross domestic product may be very attractive. However, the reduced purchasing power of this high population is a huge impediment to growth of business units in the country.

Conclusion and recommendation

South Africa is one of the most attractive destinations for investors. It is one of the fastest growing economies among the developing nations. The political structure of this nation has been its main strength. The country has experienced a stable political environment since the Africans took over power from the Dutch.

This has provided business opportunities to many investors because of total absence of strife. Save for the little xenophobic behavior that was witnessed a few years ago for about a week, the country has been a safe place to invest in. The political class has avoided interrupting with the business units. The ruling party ANC (African National Congress), which has been in power since independence, has had friendly policies towards foreign investors coming to this country.

The economic structure of the country is also very attractive. Although the country has its wealth with the minority, it is still economically viable. The remaining population is still attractive enough to make a good market. The rich minority can also make attractive market segment for goods of ostentation like top of the range cars.

The social structure is another factor that can facilitate trade. The cultural practices of the majority of the residents would facilitate trade in such products as electronics and clothing. With the legal structure that is not prohibitive of foreign investment, investors have the best opportunity to invest in this country’s various sectors.

Recommendations

To succeed in this environment, the following factors are strongly recommended to ensure prosperity for firm.

Any foreign firm should avoid any practice that would be a sign that they favor a certain section of the community as this would be a strong reminder to this society of the apartheid rule which is abhorred by many of the citizens
It is advisable to have a deep knowledge of the sector one is planning to invest in. The investment should be that which can be supported by the chosen sector.
The investors should adhere to the legal structures that the country has put in place regarding the trade in the country
Target marketing is highly encouraged. This is because this country has people of different cultures and with different amounts of wealth. The rich should be targeted with specific products and so are the middle class and the poor. Similarly, the cultural practice of the specific tribes of this country may dictate the type of product that would be most preferable to them.

List of References

Best, RJ 2009, Market-Based Management Strategies for Growing Customer value and Profitability, Pearson, New Jersey.

Fifield, P 2007, Marketing Strategy: The Difference between Marketing and Markets, Elsevier Butterworth Heinemann, Oxford.

Roux, A 2005, Everyone’s Guide to the South African Economy, Zebra, Cape Town.

Tarp, F & Brixen, P 1996, The South African Economy: Macroeconomic Prospects for the Medium Term, Routledge, New York.

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