The Insider View: Johannesburg
Published: 05 Apr 2016
Johannesburg is the business hub of South Africa and, as such, its fortunes reflect the nation’s general economic conditions. So says Andrés Merino ACMA, CGMA, senior lecturer in management accounting and finance at the
University of the Witwatersrand (Wits), who observes that GDP grew by a mere 0.7 per cent in the first three quarters of 2015.
“The whole country has been adversely affected by unrest in the extractive industry, with widespread strikes in gold, platinum and coal mines. Added to this is the poor global economic outlook, which has had an adverse impact on the price of such commodities,” he says. “The country has also experienced electricity shortages and is starting to feel the effects of a deepening drought.”
But Merino adds that the well-regulated Johannesburg Stock Exchange (JSE) continues to attract new listings. “The JSE is based in Sandton, a northern suburb that has become the commercial heart of the city. Many
companies choose to base the HQs of their African operations here. There is a high-speed rail service linking Sandton to the airport and, in recent years, a large number of skyscrapers have been built in the area.”
Alfred Ramosedi FCMA, CGMA, head of the retail arm of African Bank, says that Johannesburg is a “cosmopolitan society. Whatever you need is here. It has some of the best schools and universities in the world. The government has been investing a lot in rejuvenating the city – most areas have improved and the nightlife is great.”
Moreno agrees that, for those who earn a reasonable wage, Johannesburg is an excellent place to live. “The northern suburbs are pleasant, there are many open spaces in which to relax and the city is well connected to the rest of the country,” he says. “But those who can afford it spend a large amount of money on security – there are parts of the city that are
notoriously dangerous. Unfortunately, there are unacceptably high levels of poverty and crime in some areas of Greater Johannesburg.”
Renee Horne, a senior lecturer in the faculty of economics, management science and information systems at Wits University, offers
five tips for doing deals in the city:
– Networking is essential, with word-of-mouth referrals being the best route to introducing your company, product or brand. Without such endorsements, you’ll need to attend corporate events and work hard to build contacts.
– Be patient, as Jo’burgers generally need to get to know you before they will trust you enough to commit to a deal.
– When someone says that they will get back to you or do a task “now now”, this does not necessarily mean that the matter will be attended to immediately. In fact, it may take days, weeks or even months.
– Innovation is appreciated. Exciting new ideas are usually a big win.
– Be wary of sharing your business plan with just anybody.
Ramosedi agrees that networking is key in Johannesburg. “With Africa opening up, a lot of people are coming to the city hoping to use it as
a springboard into the rest of the continent. There are many opportunities – you simply have to know how to network to find the right partners to unlock value,” he says.
Kevin Eidelman ACMA, CGMA, group financial manager at home-builder Calgro M3 Holdings, differs from Horn with his view of the pace of business in Johannesburg. He argues that “deals can be done very quickly. If you have an idea and/or a business model that is flexible and can therefore be adapted to Johannesburg’s fast-changing environment, and if you offer a
product or service that provides real value, you will make it here.”
Johannesburg is a cosmopolitan city that brings together people from all manner of backgrounds, observes Ramosedi, who says that newcomers need to be “smart, hard-working and sensitive to cultural differences” in order to thrive in the workplace. “Because the city is the commercial hub of Africa and it houses leading-edge financial systems, you’re also
expected to stay abreast of change here.”
Eidelman has noticed that the management style is becoming markedly less formal in a number of industries. “Depending on the sector, the approach can be very casual here. Companies are increasingly allowing casual dress on Fridays, for example,” he says. “In some places, it would not be uncommon for the CEO to come to work in jeans.”
The prevailing organisational culture does not differ markedly from that of any other city in the developed world, according to Merino, but there is one key distinguishing feature affecting corporate life in South Africa: the so-called transformation laws. A whole raft of legislation has been enacted since 1994 to address the imbalances created under the apartheid regime and increase the economic participation of the country’s black population.
Compliance with these laws places a material administrative burden on big companies, says Merino, who notes: “From an economic point of view, their major impact has been the rapid creation of black-owned investment groups that tend to gain minority shareholdings in large corporations. But most black South Africans have failed to benefit from this or from the requirement that big businesses support black- owned small enterprises. The consensus is that racial inequality is in fact worsening. This has led to social unrest and the proliferation of political parties with Communist leanings calling for radical economic changes, including the expropriation of mines and the
nationalisation of banks. The government is currently reviewing the legislation.”
From his studies, Moreno has identified another key structural problem: many young South Africans are entering the workforce poorly prepared for the demands of corporate life, which has led to underperformance and
“At Wits University we are conducting research to identify effective ways to help graduates acquire key skills as they make the transition into the corporate world,” he says.“We are also trying to identify effective support
mechanisms to enable people to complete their degrees – only about 15 per cent of university students in South Africa actually graduate. This
is mostly down to our poor secondary education system, which does not prepare students well for the rigours of university. The programmes
we are developing are designed to help school-leavers adapt to university life – and adopt the discourse of the accounting discipline necessary to succeed in the business world.”