South Africa held “a special place” in Africa because it had a stock exchange with an $800-billion market capitalisation, said Goldman Sachs International South African office and sub-Saharan Africa investment banking division head Colin Coleman on Thursday.

Speaking at the Frontier Advisory Deloitte Africa Outlook conference in Johannesburg, he said South Africa had “the only really functional capital market in Africa”.

Coleman said the second largest stock exchange, in Nigeria, had seen its total market cap drop from $60-billion to $40-billion.

“They trade $10-million a day, we trade $2-billion a day.”

An “illiquid Nigerian stock exchange” made it very difficult for investors to “get out” in case of negative events.

“If you want to invest in Africa, and you want liquidity to get in and out, you invest in the Shoprites, you invest in the Standard Banks.”

Coleman regarded South Africa as the “pathway into Africa”.

“It is structural. It is not really a question of whether you like South Africa or not. It is a question of what other structural options do you have to play Africa?”

Coleman raised the question, however, of whether South Africa would be able to retain its stock of listed companies as these companies continue to diversify in an effort to survive events and trends such as a weakening rand.

“South African corporates are diversifying at a larger and stronger rate then ever before, so the question for South Africa, from a policy point of view, is whether that is going to result in the effective domicile of these companies being undermined. Will South Africa keep its stock of companies in South Africa as they diversify? The regulators here are very aware of this problem.”

Coleman added that he regarded the current scenario of a soft China and a strong US as “very, very toxic” for South Africa.

Looking at the broader continent again, he said Africa was faced with two themes: Africa rising or Africa uprising.

He said Africa was unfortunately not yet at the tipping point of “sliding into a very positive environment”.

Lessons from Africa
Whatever strategy worked in South Africa was not necessarily what worked in Africa, noted CEO of property developer Attacq, Morné Wilken.

He said his group had learned to take smaller steps in Africa than at home, and to seek out a local partner who understood the local markets.

Deloitte senior strategy director Rodger George highlighted, for example, a South African retailer moving into East Africa, its shops lined with fridges full of frozen meat, as done in South Africa, while its customer base preferred buying its meat fresh at the market.

Nissan South Africa MD Mike Whitfield said it was important to take a long-term view of any investment in Africa.

“We are not in Nigeria for today or tomorrow, but for the next 10,15 years.”

Nissan partnered with the Stallion group to open a Nigerian vehicle assembly facility, in Lagos, in 2014.

Whitfield regarded flexibility as another essential survival skill when doing business in Africa.

“Africa is unpredictable and things can change very quickly.”