The Business Climate
Maponya is just one of four malls to open in Soweto over the past two years, and it’s not just retailers that are clamoring to share in the country’s newfound wealth. Automobile companies, telecommunications providers, and banks are all setting up shop there as well. Even search-engine giant Google now has a presence, having opened an office in September.
“Being in South Africa is like being in a boomtown,” says World Bank’s Drum, citing full flights and packed hotels in the nation’s cities. “These are signs of an economy that’s almost bursting at its seams.”
The reason so many companies are moving in has to do with the favorable business climate in South Africa. Out of 178 economies ranked in the World Bank Group’s “Doing Business 2008,” an annual report on the business climates of various industries, South Africa ranked 35th for ease of doing business and 53rd for starting a business. In Africa it ranked as the second best country for doing business, edged out only by Mauritius.
“The business environment in South Africa is good and has been for a long time,” Drum says. “They’re ninth worldwide on corporate governance, and what that says to foreign investors doing business there is that your investment is well protected.”
There are also other reasons why quick-serves should consider South Africa. The country’s high unemployment rate—25.5 percent in September 2006, according to Statistics South Africa—means there is a large pool of unskilled labor from which quick-service restaurants can draw workers. Moreover, the country’s labor productivity is stronger than other middle-income nations, according to a 2005 Department of Trade and Industry and World Bank Investment Climate survey.
South Africa is also a gateway to the rest of Africa. The country accounts for 6 percent of the population, 18 percent of the gross domestic product, and half of the purchasing power on the continent, according to the U.S. Commercial Service.
“I think there are strong long-term opportunities to set up a foothold that will lay the foundation for reach into sub-Saharan Africa,” says Andrew Miller, editorial director of South Africa-based brand consulting firm Unity Design. “If you believe Africa is the global economy’s next big boom-time economy, this could be a good thing.”