Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, May 8, 1994 TAG: 9405070007
SECTION: BUSINESS PAGE: F1 EDITION: METRO
SOURCE: BY STEVE KAUFMAN KNIGHT-RIDDER NEWSPAPERS
DATELINE: SAN JOSE, CALIF. LENGTH: Long
Nobody expects economic miracles in South Africa overnight. As fighting in Johannesburg between African National Congress guards and Zulu tribesmen has illustrated vividly, the nation is still awash in instability. Nonetheless, South Africa's potential as a regional economic power, coupled with huge pent-up demand following five years of U.S. boycotts, is too alluring for U.S. companies and investors to ignore.
The nation has 40 million people, and it's the hub of sub-Saharan Africa, population 120 million. After a prolonged recession, its economy this year is expected to rival growth in the United States. South Africa is big in mining and financial services, has a sophisticated network of roads and telecommunications and boasts a per capita income of $2,600, tops among the world's developing nations.
Last year, 20 major U.S. companies made direct investments in South Africa, the most since 1986. Two of the three U.S. companies with the biggest presence in South Africa broke into the market last quarter. They were Sara Lee Corp., which re-entered South Africa with the acquisition of Kiwi Brands Ltd. and its subsidiaries and their 4,703 employees, and CPC International, which acquired Tongaat Consumer Foods Corp. and its 2,000 employees.
Most high-technology companies haven't moved so quickly, generally because they have to start from scratch. But high-tech companies are well aware of the promise for growth in South African information technology. According to International Data Corp., that market has grown to $2.4 billion last year and will rise to $3.9 billion by 1997. So Silicon Valley companies have begun to establish sales and marketing and service operations there.
Some examples:
Apple Computer Inc. of Cupertino, Calif., and Silicon Graphics Inc. of Mountain View, Calif., are well along in plans to open Johannesburg-area subsidiaries within months. Apple said it already is recruiting local sales and marketing personnel. Silicon Graphics plans to open an office by year's end initially employing a dozen people.
Apple likes the allure of South Africa's vast mining industry. ``That gives the country a very sound economic base,'' Frank O'Mahony, an Apple spokesman, said.
Silicon Graphics sees the country's longtime capitalistic orientation as a plus when contrasted with newly emerging capitalistic systems in Eastern Europe and Russia.
``South Africa already understands how to do commerce,'' said Ken Coleman, Silicon Graphics' senior vice president of administration. Over time, Coleman added, major South African customers are likely to include mining companies, TV production companies and manufacturers.
Lotus Development Corp. established a subsidiary in Johannesburg in October 1991, becoming the first U.S. technology company to enter or re-enter South Africa after President Bush lifted the 1986 ban on new investment there in July 1991.
The giant software producer, based in Cambridge, Mass., has 30 employees in South Africa, up from 20 a year ago, and its presence seems to reflect the company's emphasis on social responsibility as much as its quest for new business. Lotus said it spends $350,000 annually to train community-based organizations in the use of Lotus technology and also sponsors internships for young black students in marketing and sales.
``By opening an office in South Africa, we can be an agent of change,'' said Rebecca Seel, a Lotus spokeswoman.
The company said it's already doing ``millions of dollars in sales,'' double the revenues only 18 months ago. Major customers include local banks and insurance companies and multinational companies, such as Coopers & Lybrand, one of the largest U.S. accounting firms.
Digital Equipment Corp. opened a sales and service subsidiary in the Johannesburg suburb of Sandton last July. It now has 30 employees, up from two then, and said the number may climb to 200 within three years.
Like Lotus, DEC also sponsors socially responsible programs, such as Project Reach, a youth development program aimed at helping disadvantaged black youngsters stay in high school and college.
Microsoft Corp. established a sales support and training subsidiary in Johannesburg in January 1993 to supplement relationships with three distributors serving nearly 600 systems ``resellers.''
The subsidiary has 35 employees. John Lack, a Microsoft marketing director, would not divulge sales figures but said they have increased 500 percent in two years. Microsoft sees prospects in the South African market because it has been ``starved'' for technology, Lack said, and the prospects are made more appealing by the promise of democracy.
``As South Africa's disadvantaged majority becomes part of the economic mainstream, the potential for technology growth will be tremendous,'' Lack said.
No U.S. company in South Africa expects its experience in the next few years to be easy. Lotus Development had to persuade white employees not to bring handguns to work, and it still must cope with a bureaucracy that takes months to install a telephone.
Still, technology companies are becoming more committed to their South African expansion.
``We're in South Africa to stay,'' said Microsoft's Lack.
by CNB