BEE Partner, South Africa Economy Watch

The domestic investor is yet another class of customer. In June 2004, Allister Sparks, veteran journalist and political commentator, asked the following question: ‘Why do our business leaders seemso reluctant to invest in the new South Africa?’ In marketing terms, his question was really, ‘Why don’t our domestic investors want to buy South Africa, the product?’ Sparks quoted a figure of R392 billion — nearly a third of South Africa’s GDP — which is sitting in the balance sheets of South African corporations and that could be invested in the country. The truth of the matter is, as a custome_rof the country, a domestic investor is going to weigh up the kind of returns to be received and the risk to be faced before this ‘product‘ is consumed. In other words, will a domestic investor make money in South Africa, the product? Or is the risk far greater than the return he or she believes will accrue? In much the same way that a consumer will want to reduce the degree of actual and perceived risk prior to purchasing a high-risk product, such as a car, a piece of property or an expensive piece of furniture, a domestic investor will go through a similar process. At time of writing, many potential domestic investors see South Africa, the product, in the following light:

• There is what Sparks refers to as Afro-pessimism, which has not been held in check by the government.’
• Domestic investors are not only concerned about Mbeki’s policy of ‘quiet diplomacy’ on Zimbabwe, but also about the criticism his policy has attracted from the international community. (Interestingly enough, at the beginning of 2005, the Mbeki government slightly hardened its approach to Mugabe’s regime.)
• Some domestic investors share the same concerns as many of the potential foreign investors regarding black economic empowerment and affirmative action. Concerns have been raised over the costs attached to these government reforms, as they might raise the cost of doing business and deter companies from achieving their goals and objectives.

Sparks says that if foreign investors do not see any enthusiasm from the locals for investing in the country, then they, too, are unlikely to be enthusiastic. Governments, and particularly those from developing economies, need to be aware that foreign investors in a fast-paced, globalised world are spoilt for choice. Within the neoliberal model of capitalism, where the maximisation of shareholder value is paramount, foreign investors are going to choose the location that will give them the best return on their investment and will help them to achieve their global goals. They face pressures from their shareholders, who want to maximise the returns on their investments, and so they will look for the location that will help them provide their shareholders with an optimal return. It is not a matter of sentiment; it is plain economics.

In the case of South Africa, many foreign investors have decided to adopt a ‘wait-and-see’ policy. Whilst the government is able to manipulate and manage economic policy, at the end of the day a country produces a set of economic results that reflects the confidence its various customers have in the country and the product it offers them. For confidence to exist, the right product needs to be available. For the right product to be available, the right society needs to be created. This is the fundamental marketing principle in the marketing of a country.

This principle is immensely powerful, yet quite simple. If the society is ‘right’, the right ‘product‘ can be produced for each of the target audiences. If the right product is produced and the right society has been created, the customer will have confidence. If the customer has confidence, he or she will buy into South Africa Inc. If he or she buys into South Africa Inc., and continues to do so, the economy will grow. If the economy grows, our business organisations and our people will prosper. Their prosperity will instil confidence in the international community, and the whole cycle will start again. In addition, it will have a positive impact on macroeconomic policy, because the macroeconomic elements from inflation to employment to economic growth, all the way through to what the government can do with the exchange rate, will benef_it — all because time was spent developing the ‘right’ kind of society, which gave customers the confidence to buy into South Africa I_nc.

The marketing campaign by Brand South Africa, under the auspices of the International Marketing Council of South Africa, is aimed at countering negative perceptions about our country. The general notion is to have as many South Africans as possible becom_ebrand ambassadors for their country. The campaign is geared towards promoting messages that will portray South Africa in a positive light, which will hopefully attract foreign investment, as well as boost trade and tourism. Most marketing done in this vein is geared towards foreign investment, trade and tourism, in the belief that that is all that matters. It is very similar to a company always looking to attract new customers whilst neglecting its current ones. A broader and more profound marketing approach needs to be developed. Perhaps it is now time for South Africa to have a Ministry of Marketing to coordinate this.

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