U.S. Firms Poised to Tap New Markets After S. Africa Vote : Politics: Social changes are likely to create opportunities for foreign investment, more demand for consumer goods.
American makers of computers, telephones, clothing, drugs and other consumer products are beating a path to a democratic South Africa to tap a market long deprived of full access to the world’s latest technologies.
Wall Street companies are also set to launch global bond offerings to fund massive growth projects for the new government and private firms.
South Africa’s first all-race election has inspired talk of nation building that involves massive investments from local and foreign governments and companies.
“South Africa is now playing catch-up” after years of being severed from U.S. business, said Meg Voorhes, an analyst at the Investor Responsibility Research Center, a Washington-based nonprofit group.
“Policies to redress past social inequities are clearly going to be a central feature of economic policy,” said Geoffrey Brooks, assistant professor of management at the Wharton School in Philadelphia.
“Building housing and electrification are going to create all sorts of opportunities for investment,” he said.
At least 152 American companies have offices in South Africa, 45 of them opened since July, 1991, when President George Bush lifted the 1986 ban on new U.S. investment in the country, according to the IRRC.
Companies are moving in even faster now that apartheid has crumbled and they are spared the sanctions by American states, cities, investment funds, colleges and consumers that caused an exodus from South Africa in the late 1980s.
AT&T; Corp. and Apple Computer Inc. this week announced plans to enter South Africa, while companies such as Bristol Myers Squibb, Colgate-Palmolive Co. and WordPerfect are expanding existing operations.
In January, Sara Lee Corp., the largest U.S. employer in South Africa, pumped new capital into its shoe polish, hosiery, intimate apparel and sales network there, hoping to boost its annual revenue base of $150 million.
American companies wary of making direct investments are testing the market through local distributors. Such firms have quadrupled to about 400 since July, 1991, according to an IRRC survey.
“Companies making lower-priced consumer products are looking at the black consumer market,” Voorhes said.
Winning customers is expected to be easy since many U.S. products found their way to South Africa through third-party distributors before sanctions were lifted. American brands are also well-known through television and movies.
“So there’s a ready market, and it’s easy to get up and running and become profitable,” Voorhes said.
As a result, U.S. companies, which looked to Eastern Europe for greener pastures when South Africa was blackballed, are now setting their sights on the world’s latest democracy.
“On my first trip to South Africa, people were already consuming software,” said Corey Freebairn, WordPerfect’s regional director for Africa. “In Eastern Europe, they were wondering whether to computerize or not.
“It’s also English-speaking, so the software is already available in the language they want,” he said.
Moreover, South Africa’s developed infrastructure and banking system make doing business there a breeze compared to former communist countries.
But the country still lags in telecommunications and banking technologies that Americans now take for granted. And despite a wide gap between the rich and poor, its growing economy and per-capita income are whetting an appetite for a better lifestyle, companies believe.
“We see significant demand for telephones and pagers,” said a spokesman for Motorola Inc., which plans to reopen a sales office in Johannesburg, which it left in 1985.
Corporate growth will require bank funding, and Citicorp will reopen its South African office by year’s end, initially to serve commercial customers, a spokesman said.
More ambitious projects by the new government and private companies will be funded through capital market borrowings, and Wall Street firms such as Salomon Bros. Inc. are already gearing up for global bond offerings.
“By next week, things will get clearer,” Salomon managing director John Purcell said of an imminent offering. “We’re thinking of starting with a bond issue and then moving quickly to mergers and acquisitions and various kinds of deals.”
Recent violence in South Africa has not deterred American plans to move into the country, according to a survey of eight companies by IRRC.
“They all told us they had been expecting violence to increase in the short term and are not fazed by it,” Voorhes said. “South Africa still looks like an exciting long-term possibility.”
