Business Leadership South Africa CEO Busi Mavuso discusses competitiveness in her latest weekly newsletter, published on August 14, saying that if the country is to build its businesses, enabling foreign operations is important.

She believes this should be a consideration within wider economic policy, if the country wants to establish South African multinationals that can operate from a domestic base efficiently and compete in foreign markets as effectively as possible.

Historically, Mavuso points out, exchange control has made it difficult for South African companies to invest abroad. This is, however, no longer the case, as the thresholds for investment are high and companies make investments largely without restraints.

Exchange controls nonetheless still pose a hassle and cost, requiring South African businesses to spend a great deal of time completing forms, filing notices and paying fees for their international transactions.

“That is a fractional cost to South African businesses that is not faced by many foreign competitors who can move money across borders with far less hassle,” she explains.

Mavuso adds that tax can also be a constraint, especially if foreign competitors face a lower tax burden than South African companies’ foreign subsidiaries face.

“We should want our companies to be able to operate abroad on a level playing field, structuring themselves in a way that best positions them for success.”

Should we fail to offer an effective base for companies to compete abroad, there are two obvious consequences. For one, opportunities for growth of our businesses will be fewer, damaging economic growth here, Mavuso states.

Second, some South African entrepreneurs will establish their companies in more conducive markets to manage foreign business. That would be businesses and economic activity lost to our economy.

Mavuso elaborates that competitiveness is vital to achieving sustainable economic growth and that export-led growth is not only about selling to foreign customers from the South African base, but generating sales and deals in foreign markets directly.

“From restaurant chains to beverage makers, foreign subsidiaries provide a way to leverage intellectual capital and generate revenue from a global market.

“We have several South African multinationals that operate globally, which send profits back into South Africa,” she adds.

Mavuso encourages companies to reach out to her with their experiences of running foreign subsidiaries, particularly those who have encountered specific obstacles, so that the BLSA can continue supporting government in enhancing the overall competitiveness of the economy.