Doing Business In … South Africa

About 9,000 miles from American shores, Georgia native Mary L. Harris calls the shots. As CEO of J.M. Products SA (Pty) Ltd., with 21 full-time employees and 100 sales and merchandising agents, Harris heads up a company that manufactures and distributes ethnic haircare products in South Africa, Nigeria, Zimbabwe, Namibia, Angola, Ghana, and other African nations.

Harris came to South Africa on a temporary work assignment in 1994, to help turn around the company she was working for. A decade later Harris would own 100% of that business. “The first 10 years  were slow, and it was a hard sell, but I was committed to staying and building this business, bottle by bottle,” Harris recalls.

The haircare industry in the United States is crowded. But in Africa, with its estimated 1 billion residents, not only is demand there, the competitive field is wide open. As a result, J.M. Products’ 2009 sales reached 60.3 million rand, the currency of South Africa (roughly $8.1 million U.S.), and Harris projects 2010 revenues at the Industria, South Africa-based company to reach R72 million (about $9.7 million).

Some 16 years after apartheid, it’s an interesting time to be in South Africa. This month, the country becomes the first African nation to host the 2010 FIFA World Cup. The beautiful country of nearly 50 million people is not without its share of political, social, and economic problems. While about 90% of the country is either black or “coloured” (an inoffensive term for a multiethnic person of some African ancestry but not enough to be considered black under South African law), the vast majority of wealth is still controlled by whites, who make up less than 10% of the population.

“The degree to which economic welfare is still heavily concentrated in a small percentage of the population is a big problem,” says Craig Allen, senior commercial officer for the U.S. Embassy, Commercial Section. With the legacy of apartheid still felt economically across the nation, Allen advises anyone looking to do business in South Africa to be aware of its structure. Black Economic Empowerment laws in place since 2007 give an advantage to black-owned businesses and those that do business with them. The mandates look to strengthen black firms. “Such laws are necessary for bedrock stability, for political stability,” adds Allen.

Racial and economic disparity isn’t the only difficulty plaguing South Africa. The staggering poverty (estimated at more than 50%), unemployment (24%), corruption, violent crime, and HIV-related illnesses (5.7 million South Africans are living with HIV)

are among the problems with which the people and the government struggle.
Despite these serious challenges, there is quite a bit of money to be made in South Africa. The country makes up only about 5% of the continent’s population, yet generates 24% of its gross domestic product; 50% of its electricity and 45% of mineral production; and half its purchasing power. Africa’s second-largest market, South Africa has a stable political and macroeconomic climate and well-developed financial, legal, and energy sectors. Allen points out, “This is a powerful economy with a modern market. It’s a good launching pad for the rest of Africa.”

Christopher Whitfield agrees. “I always wanted to come up with my own business,” the Detroit native says. But rather than launch a venture at home, the former CEO of pharmaceutical giant Eli Lilly’s Southern Africa business,

chose Bryanston, South Africa instead. Now CEO of Batswadi Pharmaceuticals (www.batswadi.com), Whitfield also has interests in a biotechnology firm and clinical research company, ACRO, or African Clinical Research Organization (www.acro.co.za). “I wanted to find ways to allow innovative products that we knew could save lives to come here and be used by South Africans regardless of their socioeconomic status. So we started Batswadi.”

For both Harris and Whitfield, it isn’t just about making money, but about financial empowerment. “Coming from the U.S., I’ve seen it happen all too many times where the money doesn’t get recirculated into the black community,” says Harris. “My staff is 100% black South African, so I’m guaranteed that the money is going to get recirculated into the black community.”

This article originally appeared in the June 2010 issue of Black Enterprise magazine.