Journey from Swakopmund

We’ve arrived in the capital of Namibia,  Windhoek, a 250 mile, 6 hour ride almost directly east from Swakopmund.  Before leaving, I took the opportunity this morning to explore the seacoast city.

Walking around, I found the information center and got a list of “historic buildings” still standing. One intrigued me—the Hohenzollern House, circa 1905, in the same art deco style of so many of the buildings in Qingdao China, which the Germans treated as a colony, although it was leased for “only” 99 years.  The 1907 hotel I saw looked liked the “Strand” in Qingdao also. It’s an attractive style that has been reflected in many of the buildings since the German colonization. Not coincidentally, there’s still a Bismarck Street (I should probably say strasse), a Kaiser hotel, and a wonderful antique store named Pete’s that had everything from old helmets and books in German to the various African artifacts.

My main goal was to visit the Swakopmund museum, which I was told was among the best museums in sub-Sahara Africa, and I needed at least an hour there.  It’s a private museum, started in 1951 by a dentist, and augmented ever since.  It is pretty comprehensive—and here were some of the highlights for me:

From the German period:  a wonderful collection of stamps, covers, and an explanation of the postal service—which included a San (“Bushman”) postal carrier with a sack as a poster to use the mail, and various donkey and other means to get the mail from point A to point B.  Since I collect the Qingdao German stamps, I’ve seen some of this material in auctions, but it’s got to be an award-winning collection.  I also enjoyed some of the military uniforms, including the camel corps that patrolled some of the desert areas.

From life in Southwest Africa, there were several restored rooms, including a reconstructed dining room complete with portrait of Wilhelm II and his wife. The dentist’s shop was reconstructed, including extracted teeth, which I had to admit, I’d never seen before in a museum.  There were artifacts from the Cape/SWA boundary, and a little information on the First World War here—a British warship shelled Swakopmund and hit a pig pen…

There were interesting exhibits on the tribes—the Himba (whom I mentioned yesterday using mud as sunscreen and mosquito repellant, the Herero (rather sketchy on the uprising)—with explanations in 3 languages—Afrikaan (the Boer descendants, many of whom settled in SWA when it was mandated to South Africa), English, and German.

At the information center I got a list of “historic buildings” still standing. One intrigued me—the Hohenzollern House, circa 1905, in the same art deco style of so many of the buildings in Qingdao China, which the Germans treated as a colony, although it was leased for “only” 99 years.  The 1907 hotel I saw looked liked the “Strand” in Qingdao also. It’s an attractive style that has been reflected in many of the buildings since the German colonization. Not coincidentally, there’s still a Bismarck Street (I should probably say strasse), a Kaiser hotel, and a wonderful antique store named Pete’s that had everything from old helmets and books in German to the various African artifacts.

My main goal was to visit the Swakopmund museum, which I was told was among the best museums in sub-Sahara Africa, and I needed at least an hour there.  It’s a private museum, started in 1951 by a dentist, and augmented ever since.  It is pretty comprehensive—and here were some of the highlights for me:

From the German period:  a wonderful collection of stamps, covers, and an explanation of the postal service—which included a San (“Bushman”) postal carrier with a sack as a poster to use the mail, and various donkey and other means to get the mail from point A to point B.  Since I collect the Qingdao German stamps, I’ve seen some of this material in auctions, but it’s got to be an award-winning collection.  I also enjoyed some of the military uniforms, including the camel corps that patrolled some of the desert areas.

From life in Southwest Africa, there were several restored rooms, including a reconstructed dining room complete with portrait of Wilhelm II and his wife. The dentist’s shop was reconstructed, including extracted teeth, which I had to admit, I’d never seen before in a museum.  There were artifacts from the Cape/SWA boundary, and a little information on the First World War here—a British warship shelled Swakopmund and hit a pig pen…

There were interesting exhibits on the tribes—the Himba (whom I mentioned yesterday using mud as sunscreen and mosquito repellant, the Herero (rather sketchy on the uprising)—with explanations in 3 languages—Afrikaan (the Boer descendants, many of whom settled in SWA when it was mandated to South Africa), English, and German.

There was also an interesting geological exhibit, including a lot of information on uranium, which came from the National Uranium institute that was the site of our business visit today.  The report they gave us explained why the lobby group had broken away from the general mining group—uranium is above ground mining, and in that sense is less risky than sending miners underground.  Namibia is one of the top four producers of Uranium (Kazakhstan is the leading uranium producer), and the institute claims nuclear power mining has changed and nuclear energy is safer and more efficient than is generally given credit for==you be the judge.  I do know that along the road was a major pipeline delivering precious water to the mines.  And we have potentially another mine visits.

The bus ride fit in nicely with a flora/fauna explanation at the museum.  For about half the distance we were in the Namib Desert, which is sandy and pretty sparsely vegetated. Then it became savannah, with old pretty gnarled trees, which use a minimum amount of water, and some animal life, including the warthog.  By the time we got here, we’d imperceptibly gone up about 4,500 feet.  That made our Brigham Young faculty happy because Provo is about that high. They may be at home, but for a flatlander who lives where overpasses are sometimes mistaken for hills, this seems pretty high. Still, it’s good to be off the bus.

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Namibia: Salt of the Earth?

The Swakopmund Hotel was built by Germans as a railroad station circa 1900. Namibia was a German colony, German SW Africa at the time. Town architecture still has some German art deco buildings.

The Swakopmund Hotel was built by Germans as a railroad station circa 1900. Namibia was a German colony, German SW Africa at the time. Town architecture still has some German art deco buildings.

We’re in Swakopmund, Nambia, 883 miles from Johannesburg and 4 degrees closer to the equator (22 degrees) according to my gps.  It’s on the west coast of south Africa, where the Namib desert fronts the cool Atlantic Ocean.

Don’t be deterred by the name, which comes from the Swakop river, which means, in the local language (politely put) rear end.   It’s a city that a century ago was part of German Southwest Africa until the British and South African armies captured it, and the colony became part of South Africa, initially as war booty and as a mandate under the League of Nations.  Parts of the city architecturally date back to the German days, including the hotel we’re staying at, which back in the day was a railroad station that has been converted to a five star hotel.  It could be somewhere in Bavaria.  A lot of the tourists here are German (the boat trip I took this morning had German/English explanations, with a French woman translating for her countrymen), and I understand there’s direct flights from Frankfurt to Namibia.  The restaurant some of us at tonight is the Hansa House, and it did serve schnitzel, but it also served game, and I could not resist the springbok steak!

The fact that it was a German colony should tell you something if you know anything about the colonial period: the Germans came late and essentially got what no one really wanted.  Portugal, the first to seize colonies, took Angola to the North, and the Dutch/British South Africa to the South.  Of Namibia, apparently the most desirable part was Walvis Bay, a good harbor, which the British claimed until eventually ceding it to the Germans.

The Namib desert is quite extensive, as we saw flying over it; I can compare it only to Mongolia in my experience, or the Taklamakan, but you might think of it as parts ohef Nevada/Wyoming.  That it is on the ocean provides some livelihood.  Tourism is one attraction. As I drove up to the boat, I was thinking “Florida” because of the new houses fronting the ocean; the image sharpened when we stopped at a mudflat to photograph the flamingos!  Another was salt.  As you may know, salt was part payment to the Roman legions; hence, “salary” derived from it.  Namibia is a major exporter of salt.  I can see the salt company out my window.  A third is a port expansion going on here, apparently not entirely successful, which Chinese help; the thought was to bring to the ocean exports from landlocked countries nearby (Zambia, Zimbabwe, etc.).  That was kind of the German thought, too, in building the railroad station where I’m staying; they found it not viable, too.

A three hour dolphin watching cruise didn't lead to Gilligan's Island.

A three hour dolphin watching cruise didn’t lead to Gilligan’s Island.

The Atlantic here does provide some respite. It’s too cold for swimming, but as I discovered on a dolphin watch this morning, has spawned an oyster industry.  Because of the current along the coast, oysters grow to full size in 9 months; elsewhere, it takes two years.  One local entrepreneur found a way to breed babies ashore (I think he said 400 tons a month), then the oysters get put in cages in the ocean to grow.  The captain assured us they were the best oysters in the world, and at an onboard lunch almost persuaded me!  The tour also featured a pelican that came on cue on the boat, a sea lion that did the same, and a voyage out to an island where there was a colony. There are reputedly more seals in Namibia (2.5 million) than people (2 million).  That was my morning activity, since we were free to do what we wanted, and I thought, “sea and sand; do both”.

Dune 7

Dune 7

The second part was an FDIB sponsored trip to Dune 7, a huge sand dune that makes Mount Tom at the Indiana Dunes look like a junior high player.  The dunes were featured in Lawrence of Arabia, and one of our faculty used his free time to fly in a small plane to an area where the dunes are otherwise inaccessible.  Our guide told us of one tribe that lives in the interior gets so little rain that they wash with dirt….I wonder how many Scouts will start using that as an excuse, but I warn them in advance that they’re not in Namibia.

Namibia’s history reflects in part the turbulence of the 20th century.  The first German governor of SW Africa was Herman Goering’s (of Nazi infamy) father. A local uprising of the dominant Herero tribe led to what has been called the first genocide of the 20th century—a massacre of something like a half million Herero and the poisoning of the wells, etc.  Later in the century, Namibia, part of South Africa, became embroiled in the Cold War.  I think most of us of the right age think of the Cold War as probably Asia, Russia and Eastern Europe, and Cuba.  Namibia independence fighters attracted support from Angola, which in turn invited Cuba freedom fighters, which in turn encouraged the United States to provide support for South African troops.  The consequences of that civil/cold war today are that Namibia tends to side with China and even North Korea. Monuments in Windhoek (the capital—we’re leaving for there tomorrow morning) I’ve been told, look more like Kim Il Sung than local leaders of the revolution (who are still in power here).

Another major product (even though over half of the population lives in poverty, the average income is $11,000, which means a few people have a lot of money!) is uranium, and we’re visiting a uranium mining company tomorrow.  I’ve been told it’s Chinese owned, but I’ll give you a report on that tomorrow—hopefully, not a “glowing” one.

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Last day in Johannesburg

We went to Anglo Ashanti gold where someone told me I’m worth my weight in gold so I tried to get on the assayers balance.

We went to Anglo Ashanti gold where someone told me I’m worth my weight in gold so I tried to get on the assayers balance.

Today is our last day in Johannesburg, and we’re leaving with a much better picture of “doing business in South Africa” especially after our two visits today, both to multinational corporations.

The first was to Anglo Ashanti Gold, the first South African company to be listed on the New York stock exchange, and the third largest gold mining company in the world.  That seemed appropriate because more than half of the gold mined in history has come from South Africa.  It seemed appropriate for another reason as well—the importance of mining in opening up Africa.  The discovery of diamonds at Kimberly and the Witwatersrand gold in 1886 were drivers in the colonial expansion into the continent of South Africa.  Johannesburg really owes its birth to the Gold Rush.  And mining has become a major employer in South Africa, affecting housing, race relations, and South Africa’s place in the world.

The current company is fairly recent, having been born in a merger between Ashanti Goldfields and Anglo American.  The professor leading the tour told me that the roots go back to a joint venture early in the 20th century between a South African named Oppenheimer and JP Morgan. That branch went off to become Anglo American, a company that deals with a variety of mining operations (copper and platinum, for example), while AngloAshanti is only as good as gold.

In fact, that was very much the tack our speaker took in explaining the company to us; it’s only as good as gold, and operates in a volatile environment that has had the price of gold plummet to under $900 from about $1600 in the last few years, and resulted in a major contraction in the industry; Anglo has cut over 10,000 jobs, and sold off a number of mines to reduce its financial exposure and reduce its debt. Like most gold mining companies, he said, Anglo had predicted the price of gold would never decline, and had purchased, explored, and expanded—hence the need to contract.  He used the word “sustainability” in a rather unusual way—arguing that the company needed a “sustainable cash flow”!

He articulately laid out the risks in this industry—in addition to the usual ones all industries face, such as weather and currency fluctuations, but also the growing political risks of being in a dangerous and sometimes environmentally conscious world in an activist and connected world; he admitted he could only explain away as fate the deaths of two miners caught underground in an earthquake, but pointed out the company had made safety one of its goals, but closed with a quotation from Mark Twain: “Mines are dirty holes in the ground with a liar on top.”   Small wonder that one of the messages over the urinals was, “You always have a choice—let our ethics be your guide.”

The business is inherently risky, and becoming riskier.  Mines are increasingly deep he noted—some are over 2 miles underground, and it takes nearly four hours of an eight hour shift to get to and from work (even worse than a commute in rush hour Chicago!).  Small wonder that the company is spending $50 million on developing a robotic gold extractor….especially with the tight connections between unions and the government of South Africa.

He painted, in others, an interesting picture of a company in a dangerous industry, with plummeting prices, focusing on efficiency and cost cutting, compensation for the days when good as gold was an optimistic phenomenon.

At South African Brewery which will soon be part of Anheuser Busch

At South African Brewery which will soon be part of Anheuser Busch

Our other visit was to South African Brewery, one of South Africa’s important industries, but soon to be purchased by the InBev Anheuser Busch company to create the world’s largest brewery; that may in itself cause some major reshuffling as the combination will create almost monopolistic power in some countries.  SAB owns Miller in the US for example, and I read something about the probability one of the brands will have to be spun off.  The company dates back to the 19thcentury, and became a fixture in Johannesburg after the gold rush. A few points during the presentation that interested me: 1) Miller owns the whole channel of distribution.  In the US, post prohibition required independent wholesalers, such as city Beverage in Bloomington.  Our speaker said, “That’s why AB isn’t as profitable as it could be.”  2) she emphasized (as did the video describing the company) “cold affordability”, due in large measure to the demographics—a growing middle class, but with a great deal of uncertainty in the home market.  Growth is relatively flat, though South Africans don’t drink as much beer as most of the rest of the world.  Growth is coming from premium and flavored beer (note to the wise, Chocolate Milk Stout beer isn’t as good as it sounds). 3) SAB has grown through acquisitions (such as Miller Coors), and also moved into non beer products, such as Coca-Cola.4) in response to my one word question, “AB InBev,” she was pretty optimistic about the synergies of new markets.  I don’t think she’s read the St. Louis papers, which are still whining about the purchase of the All American lager by the “efficient” (read cost cutting) Brazilians who run the Belgian company.

We also learned a little more about apartheid and its consequences.  Blacks could not legally drink until the 1960s, for example, but today, government policies rectifying the past include “transformation” of businesses to ownership by Africans.  SAB distributorships, for example, are part of that transformation. We made a brief stop at the Museum of Africa—a large building no one seemed to know what to do or could afford to tear down; hence it has what can at best be described as an “eclectic” combination of displays that you really stumble on.  One was a small Scouting exhibit, smaller than the Ottawa museum’s similar collection of Baden Powell artifacts. Another dealt with a question I had regarding Gandhi, who lived for almost 20 years in South Africa, about half the time in Johannesburg. It was here, the exhibit noted, that he began the practice of non-violent resistance that eventually toppled the Raj in India—here he led protests against the compulsory Asian Immigrant Act which required Asians to register and get passes.

And finally, we had a tour of downtown Johannesburg, which, except for government buildings, our guide described as a “ghost city.”  He noted that whites owned the buildings before the end of apartheid, but abandoned it afterwards.  It’s not totally abandoned, but once five star hotels are vacant, and most buildings have no more than shops on the first floor.  Everything else is empty, with boarded up or broken windows.  As our guide stated, people with money shop at the malls, like the posh Nelson Mandela mall across from our hotel.  I saw a McDonald’s, a Burger King, and a Game (one of the Massmart stores) downtown, but mostly locally owned shops.  There’s a lovely old post office building with broken windows surrounded by scaffolding, which our guide said had been in place for three years, with no progress.

On a more humorous closing note, I picked up a China Daily at the front desk (yes there is a China Daily African edition).  I was drawn to an article on a Chinese agricultural mission in rural Ethiopia that complained about the toilets on the farm.  They wound up getting a Chinese government grant for new toilets and additional TVs so they would have a better stay at the agricultural station.  I hope my experience with the toilets will be better than the Chinese!

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Johannesburg 3

Today is the kind of day I’m really delighted to be on this FDIB trip; the combination of business visits and cultural experiences is exactly what I need to help me bring International Business vividly to students at Illinois Wesleyan (and hopefully to readers of this blog—believe it or not, I am “on the job”.

The site visits were fascinating.  One was to an insurance company started by two Australians in the 1990s to tackle health care insurance. It has since expanded into other financial services (property and casualty insurance, life insurance, banking) and into other countries, including UK,de and through a joint venture with John Hancock to the US and with Ping An, to China.  To me, the most interesting discussion involved what the speaker, a senior executive and former government minister (not an uncommon example in developing or even, as I think about it, developed countries), described as a shared value model.  The model uses the incredible data available to determine and manage risk to the company by determining and helping shape a customer’s behavior.  The Vitality wellness subsidiary of Discovery (the main company) partners (a word we’ve heard a lot) to get rewards to encourage people to eat healthy, and exercise to save money and save money on their health premiums.  Data reveals (and we knew it!) that exercising 5x a week  put you in a healthier category, as will eating right.  Consequently, you get points from the partners, whether it’s a discount on healthier foods or to an exercise club.  I think he said that of the 8.5 million life insurance holders in the country, 3.2 million belong to Discovery/Vitality. The current promotion is the company will give y tiou an Apple watch which 1) you can pay for with your reward points; 2) keeps track of your exercise activities and purchase points; and 3) sends reminders each week of what you need to meet that week’s goals.  The reward program can result in low frequency high ticket rewards (airline travel; he mentioned really cheap airline tickets for his daughter) or low ticket-high frequency rewards (weekly goals=free cup of coffee at Starbucks—though I think drinking caffeine probably ought to cost points).

The data he noted, has not only become more reliable, but verifiable. For example, you get tested for smoking, and the card the company gives you uses food purchases.

The application has been so successful, he noted, that the company is testing using it for automobile insurance, with data from cars that can even alert you if someone not driving like your profile is driving the car.  I think I had heard State Farm developing similar software.  What it does emphasize is what I’ve been urging students to do—learn how to use data; companies are!

The second visit was to a company you might have heard of Walmart, which bought an interest in Massmart, a local retailer with five divisions that Walmart has kept (including a Home Depot look alike), wholesale operations, and a variety of retail operations.

The American who spoke to us (along with the Dutch CFO and a South African) had been in South Africa since the merger, and to his disappointment, was being rotateand out.  He did describe the complicated steps in the merger.  Proposed in 2010, it was approved by a competition commission, and a tribunal, only to be nixed by a combination of government and labor (as I’ve mentioned, the governing African National Congress has strong labor participation), a decision which he said still has repercussions.

For Walmart, negotiations and compromises on Walmart’s part led to eventual approval. Walmart asagreed to recognize unions, not lay off workers, supply funds to help develop local suppliers (I think he said $25 million), and recognize the unions.  There are over 40, he said, some being store specific.

Our speaker said that Walmart was a marketing, supply chain, and logistics company, masquerading as a retailer, while Massmart (with stores in 13 African countries) was a finance company masquerading as a retailer, so Walmart thought there would be synergies.  Five years into the merger, he said they are still   integrating the two companies.  The most difficult operational question for Walmart has been the introduction of food and working with the government regulations meant to favor black-owned enterprises.  Interestingly, he said Massmart was more entrepreneurial and decentralized that Walmart has become; being big, Walmart has become more bureaucratic, and that’s part of the culture clash in integrating the two chains (not to mention, as he pointed out that South Africa is still Eurocentric, with more British business thinking than American).  Our hour scheduled trip easily slid into over two hours, as you might imagine, because every one of the business faculty has used Walmart as an example of something or another in class (but, as the Walmart executive said, watch out for Amazon and the battle for the web space)

Two chiefs meet at Lesedi outside Joburg.

Two chiefs meet at Lesedi outside Joburg.

In the evening, we were treated to an introduction to the African tribal culture.  South Africa is roughly 50 million people, about 10% Caucasian (and ¾ of them descendants of the Boers).  The republic has 14 official languages, reflecting the 14 official tribes. The dinner/theater/hotel about an hour from the city had villages representing 5 of those tribes.  You can lodge in one of the villages, or just have dinner, dances, and a discussion in each of them.  Our guide was a Zulu with a booming voice and a great theatrical presence, who took us to each village, taught us a few words, and described some aspects that differentiated them.  The most memorable? The different number of cows required for a dowry (usually 11, sometimes demanding horses as well), and for one, pretty, hard working, and educated got you xix more cows.  The Zulu, who under Chief Shaka, dealt the British the worst defeat they experienced until World War I in a futile effort to delay British conquest; during that battle, the Pedi so admired the bravery of the slaughtered Highlander regiments that they wear kilts (they kilt the Brits?) to this day, and the Xhosa, from whose royalty Mandela descended, and whose language includes tongue clicks we could not imitate.

I think you can see why I thought the lessons of the day would find their way into class!!

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Johannesburg

Day 2 of our FDIB trip was about education—from both the top and the bottom. The “top” was the visit to the University of Witwatersrand School of Business; the dean said of the two top schools in South Africa, the University of Cape Town where we visited last year had better scenery. His school, he claimed, had the better scholars. Whatever the claims, he certainly had the nicer building (UCapetown school of business is housed in a former prison); its located on the business and governance campus in one of the swankier areas of town. The area was populated after 1900 by the so-called Randlords, the beneficiaries of the gold strike at Witwatersrand. The administrative building is a baronial style mansion built by one of the founders of South African Brewing.

The two hour session introduced us to higher education on the continent of Africa, in an up-to-date building whose library contained 4 terminals dedicated to Bloomberg services that IWU was told would cost us $12000 a month! The Dean welcomed us with a brief background of what makes the school distinctive, including its part (UW’s, anyway) in the protests against apartheid, which led in the early 1990s to one of the first visits to a campus from Nelson Mandela, who thanked the students for their protests against the segregation.

Student protests seem to be part and parcel of current campus life now, too. I’ve read about protests to change the names of the buildings, and the removal of the Cecil Rhodes statue from the Cape (he gave the land on which it is built), and the protests against higher fees. On one bulletin board was posted an unusual court order, enjoining about a dozen students from engaging in any disruptions of the “Senate House” or the campus in general. Increasing fees seem to be part of the stimuli.

The Dean (and his faculty) stressed the challenges of doing business in Africa, and, in particular, the challenges of teaching business. The school has gone to a program with a lot of application—there was advertised a short course (management development seems to be a specialty—and a profit center for the University—with a week at the London School of Economics, followed by stops in Dubai and Singapore, and a focus on being involved in African business beyond South Africa. WSB has introduced a number of imaginative Master’s courses, in design creation, for example, arguing that a school in Africa has to teach more than the traditional business programs—with 36% unemployment (official figures released this week), and a government known for corruption, and multinationals probably incapable of making a dent in unemployment (mining, which once employed about 65% of the workforce has suffered catastrophic declines), the school’s faculty and administrators have chosen to advance education (about other countries—the MBA students must go on visits to other countries in Africa), and give people the tools they need. The dean noted that of the 17000 schools of business, Wits ranks 3A2 in the number of CEOs it has produced.

As I said, the theme was education, and the latter half of the day, we visited a social entrepreneur—in education. We went to a library that he had gotten money from the Mayor to equip with computers—and to create a MOOV (massive online varsity, he called it), that is housed in about a dozen libraries around Johannesburg. The organization provides “facilitators” (we met many of them), whose job it is to introduce people to computers and to become literate in either business or computer skills so as to become employable. The “students” (I think it’s all free) can sign up for a training class on how to (for many the first time they’ve used a computer—computer literacy on the continent is 13%. They take probably 3 courses, using the library based-computers, earning an employable certificate of competence in computers or marketing or finance. The young man who started it told us he was an academic economist who “wanted to make a bigger difference.”

His challenge was highlighted by the news that the library had been robbed earlier this morning—the robbers took the technology, not books—the township is one of the roughest in Johnannesburg. I thought I was seeing what Clayton Christensen described as “Disruptive Innovation” in higher education; he thinks the internet will force the change in the model, but one thing our speaker said gave me hope—as an academic—that the current model is broken but not yet ready for the scrap heap; his main goal is to find a university to give credit for these certificates. What he was saying, in effect, was that universities provide validation for learning—and sometimes make it possible. New tools offer new opportunities as well as threats, even in libraries in townships in South Africa.

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Jozi

I am back in Jozi (one of the abbreviations for Johannesburg) nearly a year later, and it’s probably a good thing I’ve been here before; after 10,000 miles in the air, total of 30 hours, I’m lucky I know where I’m at right now.

I got here around 9 am Jozi time, which is about 8 hours earlier than your time, and rushed to hear the end of our first speaker. Fortunately, we did mostly what we did last year before I left—and fortunately, the visit to the Apartheid museum and the township (read ghetto) of Soweto (short for South West Township) is at least as moving the second time as the first.

Jozi itself is a sprawling city, erected on the largest gold mine in the world (the Witwatersrand), that is the business capital of the Republic of South Africa. In the interior, Jozi acquired population when gold was found here in 1886, a discovery that transformed the Transvaal (a state set up by the Boers, descendants of the original Dutch settlers who clashed with the British (who seized the Cape Colony to keep it from the French during the Napoleonic Wars) back eventually into a British colony that in 1906 became the Union of South Africa. Population is somewhere around 10-12 million, with townships scattered around gated communities, including Sandton, the financial capital, which is where we are staying.

The Apartheid Museum was built by a developer who was given part of the former gold mine region in exchange for building the museum. (He turned the gold mine into another gold mine—an amusement park), but the museum, located in Soweto (the home of Nelson Mandela, who 22 years ago this week, became the first democratically elected president of South Africa, as well as other members of the African National Congress, the party that fought the racial separation laws that intensified after the 1960s) is one of the most moving exhibits of 20th century brutality I’ve seen—and the 20th century is full of them.

The efforts of the white minority to hold onto power (and to keep a cheap source of labor) goes way back into the Dutch colonial past (and to some extent, the British as well; it was in South Africa that Mahatmas Gandhi initially experienced the racism that led to his campaign of peaceful non-violence that eventually sent the British packing from India. Ironically, segregation intensified after World War II—an Afrikaner party supported the Nazis—and there were pitched battles (look up Casspir) that rocked South Africa, Angola, Mozambique, and involved the United States and Russia (this was the cold war period). The Mandela house (he spent 27 years in prison, and less than a month in the house) still bears the bullets from police drive by shootings. I remember some of the efforts that students made at Chicago and elsewhere to bring economic pressure to bear on South Africa—and eventually the resistance led to Mandela being freed, elected president, and providing the platform that the African National Congress has stood on to stay in power for the last 24 years.

We’ll get a better picture of the economic doldrums here—the currency is worth 20% less than a year ago, the power shortage is still real (there are stunning cooling towers that have become murals because the energy company has not invested in infrastructure—as the study trip continues. And South Africa is facing the worst drought in a century, which has led to some interesting marketing (“do you water your plants with grey water?” and a jeans company that I saw in the it-could-be-Michigan Avenue mall across from our hotel that boasts almost never needs washing—just like clothes Scouts take (I almost said wear) for a week at summer camp.

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Faculty Development in International Business – Africa

The 10th Annual Faculty Development in International Business-Africa program, to be conducted in South Africa and Namibia May 09 – 23, 2016, will combine over two dozen business visits, cultural experiences and academic visits and lectures over 14 days, to initiate and/or enhance faculty awareness and insight in the business, academic and cultural world of sub-Saharan Africa. For the fifth consecutive year, a concurrent “guest program” will be offered as well.  Business and academic visits will include:  Wits  University, University of Namibia, U.S. Consulate, U.S. Embassy, Massmart, Discovery Health, Dimension Data, Coca-Cola, SABMiller, Johannesburg Stock Exchange, Export Processing Zone, Industrial Development Corporation, Women’s Entrepreneurship Program, and local NGO’s.  Cultural and Eco-Tourism visit include Namibia’s Skeleton Coast and Etosha Naitonal Park, as well as city tours of  Johannesburg, South Africa and Windhoek, Namibia.

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Some thoughts on South African businesses

Johannesburg

Marketers know that a strong finish colors the entire consumer experience.

If that’s the case, the South Carolina FDIB certainly planned this trip well.  We concluded our business visits today, having come the 800 miles from Lusaka early this morning, with what might be the best visit of the trip. We went to Dimension Data, an IT subsidiary of Japan’s NTC, the telecom giant, where we were hosted by Derek Wilcox, a South African who has been with company as it has grown to major global status, where it is now an $8 billion corporation, operating in  58  countries with 27,000 employees.  Mr. Wilcox is the COO of Asian and Middle Eastern operations, and thus was in a position to enlighten us on the IT industry, his company, Africa and the Middle East, and South Africa.

The company started in 1983 in manufacturing and gravitated to provide applications, installation, maintenance, and other services, which now provide 50% of sales and 75% of profits. (My students who have read “Going Downstream” will understand the value of the shift!).  It was at one time the exclusive distributor for Cisco, and is still one of its biggest partners.

His outline of African business was especially interesting because it covered the entire continent; he divided the continent basically into regions: 1) the Mediterranean countries, which he said were still recovering from the Arab Spring; 2) the oil producers, particularly Ghana and Nigeria (he had a lot to say about Nigeria, which has the largest population in Africa, and by some accounts, the largest GDP, with Lagos being the business center); 3) the East Coast countries which are starting to discover gas, and the African hub starting to consolidate around Kenya. Despite its political troubles with Somalia, he thought East Africa is an attractive area, rapidly developing, and noted that Kenya has a big agribusiness market in Europe (bear in mind, if it’s winter in Europe, it’s summer down here, ala Chile and Peru and the US market); and 6) southern Africa.  He thought one of the countries to keep an eye on was Botswana, a potential model for sound government (not common on the continent), but with an economy still based on diamonds, cattle, and tourism.

As for South Africa itself, he pointed out that South Africa contributes 40% of African income and 40% of that comes from two neighborhoods in Johannesburg, including Sandton, where our hotel is located; however, the country’s strength is weakening both absolutely and relatively, having, he suggested, lost its political and social way.  Like many business men, he chafed at the use of funds for addressing social needs, describing the state as having more social safety nets than many Scandinavian countries.  At the same time he acknowledged the need to redress the inequalities that mark wealth distribution in the Republic. We’d heard from others as well about some of the problems of the African National Congress, which has ruled South Africa since democracy emerged in 1994, and he, too, thinks the rise of an opposition party (which has taken over the Western Cape) will be a healthy step.

He described South Africa as a relatively difficult place to do business, with exchange controls, an elaborate effort to promote Black Enterprises, and a strong labor force that supports and is supported by the African National Congress (and, in addition, one of our faculty noted that South Africa will start requiring in person visits to a consulate to get a visa, making it more difficult to tour or work as an expatriate in the country) ; as evidence of the erosion of South Africa’s global status, he noted the declining number of companies (from 95% to 80%, he estimated) that base their African operations in South Africa.  Instead, many have located or relocated to the United Arab Emirates.  He thought those governments had shrewdly expanded Emirates and Qatar airlines, which have some of the most extensive routes in the world, world class facilities, and a welcoming government.  He did observe the disadvantages, though, such as that the UAE does not have a rule of law, while South Africa has a well-established judicial system.

Some summary thoughts on my observations about sub-Sahara businesses:

1)      The role of the United States. The African Growth and Opportunities Act, recently renewed by Congress, is generally praised as a positive contribution to the African economies, reducing tariffs on African products imported into the United States.  Ambassador Taylor gave high marks to the US’s anti HIV campaign, too, and it’s obvious, from the visits we’ve had, the embassies are promoting American investments (and non-government) activities.  Still, as Wilcox pointed out, there’s a belief that Americans are the latest exploiters, who simply want to make short-term profits for shareholders.   He noted that US AID gives money—which must be spent in the United States.

2)      There was a copy of the China Daily in the lobby of our hotel today, an indication of the importance of the topic that keeps surfacing: the presence of China.  China has supported a lot of the independence movements in Africa from the beginning, and has continued supporting many African governments and economies with no strings attached.  Chinese build dams and roads and railroads—and mushroom “factories.”  They give grants to send African students to Chinese universities.  However, the relationship is becoming a little frayed. The Chinese are disappointed with some of their “investments,” such as Mugambe in Zimbabwe, and Africans are concerned about the cliquishness of overseas Chinese and the traders who are perceived to be stealing African jobs.

3)      South Africa sometimes thinks of itself as a big brother especially to its neighbors.  If it’s going to be a model, it needs, I think, to behave better.  The Joburg newspaper today had the defense of the president’s $21 million expenses for his house: he needed, it stated, the visitor center to protect his privacy, and the cattle corral to keep the cattle from interfering with the security infrastructure, etc.  If had a big brother like that…. Still, South Africa is further along the development curve than the rest of the continent, and has a hand in lots of business on the continent. It has also played peacemaker on occasion.

4)      As for what we’ve seen overall, the metaphor that comes to mind was at Kafue. That small town in Zambia, on the main North-South highway from Lusaka to Livingstone, had a sign advertising the opening of a mall, with retail space available.  At the time we passed by, we could see that some of the foundation for some of the buildings had been started.  That location is business Africa for me: the foundations have started in some places, but the mall is still a distance away from being built.

 

In 24 hours, most of us will be on an airplane back to the US, with a lot of experiences to share with our classes.

Categories: South Africa - May 2015 | 1 Comment

FDIB-Africa

In May 2015, Associate Professor of Business Administration Fred Hoyt is participating in the Faculty Development in International Business Program in South Africa (Cape Town), Zambia (Lusaka & Vic Falls) and Botswana (Kasane & Chobe).

Categories: South Africa - May 2015 | Leave a comment

Copper is King, but …

Lusaka Airport

Copper May Be King, but Zambia is a Democracy

At the Chamber of Mines in Lusaka

At the Chamber of Mines in Lusaka

Yesterday we visited the Chamber of Mines, a lobbying group for the mining industry, and learned basically that the industry is troubled, despite its importance to the economy. It produces 68% of the country’s exports, 30% of its government revenue, 9% of GDP, almost 4% of investments, and 1.7 h% of employment, according to industry figures.  It’s had a turbulent past, having been nationalized at one point.  Some of the problems are peculiar to Zambia, and align with what we’ve heard before: that landlocked Zambia has borders with 8 African countries (and the borders can produce long delays—it’s 6 weeks to and from Durban, making for high transportation costs; contrast with Chile, where nowhere is far from the Pacific). Some are endemic to industry in general; as a revenue producer, it’s susceptible to being targeted by politicians and the public for contributing more through taxation.  There seems to be little government discussion with the mining industry; one of the executives pointed out that he learned about new taxes only by reading the newspaper.  Taxes have also escalated.  Furthermore,I don’t think mining has a good reputation anywhere (see the latest Grisham novel about West Virginia mines or read the newspapers about Chinese coal mine deaths, for example), and the aging mines here seem vulnerable to political pressure.  When asked why, if conditions are so unfavorable here, there was no move to pull up and pull out, the answers ranged from, “We’ve got too much invested,” to a belief that in the long haul it’s possible, to some ego-based beliefs “we can do it.”  The executives included some Zambians and a few foreigners, one of whom had been in the industry for 35 years, and I’d love to have questioned him about his experiences elsewhere.  As I said, copper may be king, but Zambia is a democracy.

We also visited the University of Lusaka, purportedly the 3 best university in the country.  It’s an unabashedly for profit business that has returned 33% dividends to investors.  Read backward from its $1000 per semester tuition, and you see a university with strict cost controls: 14 full time faculty and over 160 adjuncts and absolutely modest facilities.  Its mission is “To fulfill the ever growing demand for employable human capital in various industries through continuous interaction with” etc. focusing on “tailor made programmes whilst equipping this human capital with cutting edge skills knowledge and information.” If offers doctoral programs in business, but “Other areas of specialization can be given consideration by the University Senate.” Its campus is Spartan (the library had one shelf of business books, mostly texts, and two of law; the classrooms have whiteboards but no visible technology) but has almost 5000 students, mostly from Zambia and Zimbabwe. The University borrowed $200,000 to build the current campus, which it paid off in two years, a mark again of its efficiency.

As I said, it seems to fill a need in a country where—and I haven’t said this earlier—those living under the poverty line comprise 60% of the population.

On to Johannesburg.

Categories: South Africa - May 2015 | Leave a comment