[This is the latest “hot thing” in South African business! But I have personal experience of how stupid such a thing really is! The huge company I am currently working with, is also now setting its sights on expanding into Africa, and you know what, I think it is, to put it mildly a DUMB F*CK move!!!

In 2001, I worked for a company which was an off-shoot of Western Union, an international company which does money transfer. This South African off-shoot was funded by a wealthy white man who had been in the business for years. He decided that money transfer, and micro-lending were the perfect business to expand into Africa. His rationale was perfect. There is a real demand and need for this in Africa. He saw a niche, and pumped in millions of rands into this company.

They created a company called eSave, and I was one of those recruited to design and write the software to enable us to do some serious business in Africa.

I worked for them for 18 months. During that time we wrote a system and got it working to Botswana. That went quite well. Then we expanded into Namibia – but we began experiencing problems with distance, and slow lines. Then my bosses got bolder. We’d expand into Tanzania, Kenya, Rwanda. And that’s when this whole thing started unravelling. They spent tons of money – they even gave them computers! People from our company travelled up into Africa. Then, the black Africans started reneging on their deals which they had signed, and so forth.

One day my bosses walked into the office and announced to us: “You are working for us at your own risk. We are not sure if we will have the money to pay you at the end of the month!” I was shocked beyond belief! I was the luckiest of all… because I was extremely lucky, and a friend was able to offer me a job within a weekend, and on the monday morning I walked in, and told my bosses, “Thanks, but I am leaving now!” No notice, no nothing. Stuff them! Many other people suffered a lot in the later months as they got paid a pittance for doing their work – simply because they could find no other jobs. The whole business went BANG! End of eSave!

I heard a story, some years ago about a wealthy American woman in the cell phone industry who tried to expand into Africa. She also lost millions and was FURIOUS with the blacks. It really hurt her badly. She left Africa an extremely bitter person. I think she lost about US$10 million.

Expanding into Africa is a complete STUFF UP. Africa, north of our borders is more screwed than you can believe. If you think you can waltz in there and start doing business, you’re wrong. In Africa: Things don’t work. Normal things, which DO WORK in other countries – do NOT work in Africa. People lie, people steal, people make bold promises which they don’t keep; services which you THINK or are told DO WORK, actually DON’T WORK!

But I’m saying nothing to my superiors. Zilch. They have billions of Rands which they can waste… and I don’t care. They won’t go belly up – but they can get hurt – and I say, cool!

But all this talk of “expanding into Africa”… is crazy talk. Few know HOW to do it. The White Farmers from Zimbabwe… did well… but in the end, they may lose. The only business that ever achieved it, and did EXCELLENTLY at it was a British Business called: LonRho – an acronym for “London-Rhodesia”. LonRho, headed by Tiny Rowland, made stacks of money. But, they did so by playing African politics, bribing the necessary people, etc. Later the blacks did not like that… well… and it was their loss. LonRho is the only International Company that really knew how to do business in Africa. It was filthy, but it worked because that is the only way to do business. And it kept parts of Africa running for quite a while.

But all these others, like the businesses in S.Africa, who operate on the same principles as business in the USA and Europe… they’re like lambs being led to the slaughter. Let them go into Africa, and later you will hear the stories of the losses they took and the failures they had.

I think the most successful so far, is MTN, a cell phone company in S.Africa. Cell phones are a hot product in Africa because there is virtually no infrastructure. But other than MTN, I know of no other success stories. Jan]

South Africa: SA Firms in Scramble for Africa

MAJOR changes announced by Finance Minister Trevor Manuel in this year’s budget to exchange controls will facilitate greater merger and acquisition activity by South African companies in the rest of Africa, says Ernst & Young corporate finance partner Loyiso Jiya.

Exchange control limits have been dropped from 50% plus one to 25% on South African companies wishing to invest in Africa, which will smooth the way to greater South African-driven foreign direct investment in the rest of Africa, and will promote merger and acquisition activity on the rest of the continent.

Until this year, South African companies were hamstrung when it came to their merger and acquisition activity ambitions for Africa. Before this year’s announcements by treasury, local companies were forced by law to take a minimum 50% plus one share in any investments outside of SA in Africa if they wanted to control the dividend flow.

Speaking ahead of the release of Ernst & Young’s report on mergers and acquisitions for last year, which will be released next week, Jiya said South African firms had been gearing up their global ambitions for several years, especially since 1994.

The Ernst & Young review contains information on the latest statistics and major transactions which took place last year.

“The logical place for expansion has always been the rest of Africa. However, exchange control regulations have placed a major constraint on any designs that domestic companies have had regarding foreign direct investment into Africa,” said Jiya.

The regulations on exchange controls were significant to local firms as they brought enormous exposure to risk. For most companies, the risk was not affordable, or their shareholders or directors would not let them take on acquisitions because of their risk management policies,” says Jiya.

In last year’s budget, treasury lifted the amount local companies could invest in Africa without approval from R750m to R2bn. “The upshot is that the relaxation in exchange control will make a big difference to local companies that have wanted to invest in Africa,” Jiya says.

He says most of the goods sold in Africa are imported, mainly from Europe. However, in many countries the laws were changing so as to foster foreign direct investment in manufacturing.

For instance, Nigeria is rebuilding extensively, which means increased demand for cement. Until recently, 80% of cement was imported.

Source: AllAfrica.Com
URL: http://allafrica.com/stories/200603290153.htm…/p>