BEE Partner, South Africa Economy Watch

There are signs everywhere for South Africa’s government, its business corporations and its people concerning the trends in and the effects of globalisation. These signs point to the steps being taken by other nations to help them cope with global competition. In other words, clues are emerging on what others are doing to become and remain globally competitive. Everywhere one looks, the indications are that global competition is not only intensifying, but that it is also accelerating at an ever-increasing rate. This adds to the extreme pressure that already exists for the world’s governments and companies to perform and to add value to the lives of their constituents and customers. So, when we hear from the media that South African economic and business performance is improving, it must be remembered that our progress ought to be measured in relation to those countries with whom we are competing on the international stage. They, too, will be striving to improve their performance, thereby contributing to the dynamic nature of competition. South Africa and its people need to read these signs carefully and take cognisance of what they mean in terms of our own competitive prowess. Nonetheless, consider the following six scenarios.

Scenario No. 1

London is one of the world’s most important financial centres. A_scompetition between financial centres throughout the world intensifies, it is facing serious competition from New York and the major Asian financial centres. In an interview with the Financial Times, Sir John Bond, chairman of HSBC, the world’s third larg_est bank by market capitalisation, cautioned the City of London against being complacent about its position in the world of finance. He commented that ‘in today’s world, having a laissez faire attitud_e is fine until your competitors say strategically we’re going to create a financial centre. I haven’t seen anybody else do it, but I think it would be good to make sure we’re very competitive.” What is the significance of these comments (a) in general terms and (b) in the context of South Africa?

HSBC moved its global headquarters to London in 1992, when it purchased Midlands Bank. However, HSBC frequently carries out feasibility studies to check whether London is still the most suitable place for its headquarters. If this practice is indicative of the policy of some multinationals on their investment locations, how long is it going to be before more and more business organisations regularly evaluate the suitability of their host countries and locations for their investments? As more and more countries, and cities within countries, vie for FDI, and the packages to entice investors become more sophisticated and attractive, existing and potential investors will have greater choice. At the end of the day, investors will want to know that their investments in a particular location will continue to assist them to achieve their global objectives. The minute a location fails to achieve that, it runs the risk of its investment customer looking elsewhere.

With regards to South Africa’s level of competitiveness, how long will it be before Johannesburg faces serious competition from the likes of Gabarone to be the financial hub of Africa, as set out Botswana’s Vision 2016?’ Johannesburg may not be a major f_inancial centre in the world, but it is currently Africa’s premier financial location. Is South Africa — and specifically Johannesburg — geared up to handle the kind of attitude and practice displayed by the likes of investor companies such as HSBC? Are Pretoria, Johannesburg, Durban and Cape Town capable of competing against other world cities as preferred investment locations, given the direction in which global competition is heading? What about the smaller centres, such as Port Elizabeth, East London and Pietermaritzburg? What are their administrators doing to differentiate themselves in order to retain the foreign investors who have already placed their trust in them and to attract new foreign direct investors? Or are they perceived like the City of London in the eyes of the chairman of HSBC, who is concerned about London’s future ability to compete as a major financial centre?

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