If weathermen predicted economic environments instead of meteorological ones, South Africa’s 2004 forecast would be sunny, but with clouds still remaining. On the sunny side, the country’s economic growth continues to accelerate, with GDP predicted to grow by 2.9 percent this year, and by 3.6 percent in 2005. Huge strides have also been taken to close the gap between the historically privileged white and historically disadvantaged non-white populations, with the introduction of the government’s black economic empowerment (BEE) policies.
On a gloomier note, despite the indisputable progress made since the installation of a democratic government in 1994, the disparity between rich and poor is one of the most extreme in the world, with 60 percent of the country’s black population living below the poverty line. Unemployment remains a major hindrance to economic development, with estimates putting the jobless rate as high as 40 percent.
For South African corporates, the list of problems continues. ‘Over and above the routine issues, the key challenges recently have been the uncertainty around BEE and the various industry-specific charters; the volatility and strength of the rand; and the ongoing adverse impact of the actions of Mugabe on investor sentiment in the region,’ explains Mark Drewell, head of corporate communication at brand management firm Barloworld.
Drewell says many people are yet to fully understand what the government’s BEE scorecard means for companies. ‘The scorecard covers procurement, people development, board representation, social investment and employment equity,’ he says. ‘But most people focus only on equity. Investors, typically, are also currently impressed by bald statements such as, Company x or y is doing well on BEE, whereas the reality is there is little clarity on what constitutes good performance. We are all struggling to move forward on what is a very important issue.’
Nick Williams, managing director at IR consultancy College Hill, agrees that BEE needs to be seen from a broader perspective. ‘Investors need to understand the benefits to the company of BEE transactions, direct and indirect, as well as the advantages of other BEE transformation going on in the business, such as employment equity,’ he comments. ‘Transactions should be seen as commercial and adding value. Not conforming to the spirit of the various empowerment charters is likely to lead to value destruction.’
BEE is one of the many topics that will be discussed in detail at the fourth annual IR Magazine South Africa Conference, held at the Hilton Sandton in Johannesburg on June 30. The conference will also address other key issues affecting business in South Africa, including how to communicate South Africa’s investment issues to international investors, the importance of CSR, and best practices in shareholder communications. The conference will be followed, on July 1, by an ADR workshop sponsored by the Bank of New York.
This is a vital time in the development of investor relations in South Africa and the conference will provide a forum to consider the hurdles that have been cleared, as well as discuss the challenges that lie ahead.
As Williams notes, South African investor relations still has a long way to go. ‘Although IR in the country has markedly improved over the last few years, there are still pockets where the practice is non-existent,’ he says. ‘But then there are also pockets where it is as good as anywhere in the world. On a general level, South African IR is behind best practice in the US and the UK – but it is slowly catching up.’
Drewell says one area holding back the development of IR is the lack of resources – full-scale communication can be high cost, especially for smaller firms. ‘One area that is still developing is live video-streaming webcasts,’ he points out. ‘Bandwidth in South Africa is expensive and not easily accessible due to regulatory constraints and the pricing strategy of the state-controlled telephone monopoly. As a result, live video webcasting is excruciatingly slow and irritating.’
Despite these hindrances, there is recognition in South Africa – and not just in terms of IR – that problems can be overcome, and now is the time to overcome them. There might not be clear skies ahead, but things are definitely getting brighter.
