The total population of South Africa is just over 57 million people (Statistics South Africa, 2019). The population growth rate is 1.55 percent (Statistics South Africa, 2019). The current age structure is as follows: 28.9 percent of the population is between 0-14 years, 65.8 percent of the population is of working age at 15-64 years, and 5.4 percent of the population is aged 65 and over (Statistics South Africa, 2019). The population significantly declines after at 60, since the life expectancy rate is only 61 years for males and 67 years for females (Statistics South Africa, 2019). The middle class within South Africa has been growing. Specifically, the African National Congress announced in 2018 that the black middle class grew from 1.7 to 6 million during the previous five years (Korhonen, 2018). For the urban/rural composition, approximately two-thirds of the South African population lives in urban areas with the remaining one-third in rural regions (Statistics South Africa, 2019). The largest cities are Johannesburg with almost five million people and Cape Town with just over four million (Statistics South Africa, 2019). Based on these demographics, a business endeavor into South Africa should consider the large youth population, the urban environment, and the growing black middle class.
The political climate in South Africa is somewhat stable, although not devoid of scandal. In 2018, President Jacob Zuma resigned after a corruption scandal. Since that time, President Cyril Ramaphosa has been working to restore stability in the government and economy of South Africa, with a primary focus on avoiding credit downgrades and encouraging economic growth. According to the 2019 Index of Economic Freedom, South Africa’s overall score is 58.3, ranked 102 worldwide (Heritage Foundation, 2019). This score, which is slightly below the world average of 60.8, is also a decline of 4.7 points from South Africa’s previous score (Heritage Foundation, 2019). This lowered overall score is primarily due to a drop in its judicial effectiveness score (Heritage Foundation, 2019). South Africa is open to FDI with an FDI inflow of $1.3 billion (Heritage Foundation, 2019). The local currency in South Africa is the South African Rand (ZAR) and this can be converted into U.S. dollars or the Euro. The exchange rate on March 10, 2019 for the ZAR is as follows: 1 ZAR = 0.0693 USD, 1 ZAR = 0.0617 EUR (Statistics South Africa, 2019).
In 2018, the South African economy grew a modest 0.8 percent, but it is expected to grow 1.4 percent in 2019 and even more in 2020 (Statistics South Africa, 2019). The GDP of South Africa in 2018 was $376.68 billion USD with GDP per capita at $6,560 USD (Statistics South Africa, 2019). The consumer inflation rate was at 4.8 percent in 2018, which is down from 5.3 percent in 2017 and 6.3 percent in 2016 (Statistics South Africa, 2019). Perhaps the greatest area of concern within the South African economy is the unemployment rate, which remains above 27 percent (Statistics South Africa, 2019). Unemployment is highest among the youth and black majority of South Africans (Statistics South Africa, 2019).
There is a flourishing trade environment in South Africa. Foreign trade accounted for 58.2 percent of South Africa’s GDP in 2017 with imports of goods and services at 28.4 percent of the GDP and exports of goods and services at 29.8 percent of the GDP (Statistics South Africa, 2019). The primary exports of South Africa include platinum, coal, gold, iron ore, and motor vehicles (Statistics South Africa, 2019). Meanwhile, the primary imports into South African include oil, aircraft, motor vehicles and related parts, farm equipment, and automatic data process machines (Statistics South Africa, 2019). Based on the already active trade environment, there appears to be a potential market for many different products or services.
Cultural Context and Global Management
South Africa has often been referred to as the “rainbow country” due to cultural and religious diversity. Some of the common cultural groups include Zulu, Khoisan, Afrikaner, Hindu, and Tswana, among many others. The richness in cultural diversity provides great and unique experiences for companies intending to expand their business to the region. The issue of global management with relation to cultural contexts of a particular area is something that requires greater consideration by the business operators (Barbarin & Richter, 2013). South Arica is among the leading economies in the African continent; hence, attracts multinational companies. The country has a rich amalgamation of foreign experience such as British and Dutch. The cultural and religious diversity offers a unique and exciting experience that form the foundation for inspiring foreign companies to set shops in the country.
The majority population of South Africa is comprised of blacks. According to the recent statistics, the blacks comprise about 76 percent of the population while the whites make up to about 10% of the population (Deresky, 2017). Since the apartheid era, there has been great mistrust between blacks and whites. This is among the critical issue for consideration by business operators. The lingering mistrust continues to simmer even in recent times where each group advocates for recognition of their rights. Moreover, it is prudent to examine the communication patterns where the black South Africans appear friendly and charismatic in their engagements (Afọlayan, 2004). The whites are largely expressive in their speeches. They also strive to avoid aggressive tendencies. The Afrikaners are known to distinct accent. Their body language is characterized by love for dance and rhythm alongside the verbal utterances although the whites tend to be more restrained.
On Hofstede’s Dimensions, South Africa can be said to be an individualistic society where people are expected to take great care of self and immediate families. Another issue of consideration is the high masculinity score. By and large, society is characterized by competition, achievement, and success. The goals are clearly determined by the interests and needs of the people (George, Corbishley, Khayesi, Haas, & Tihanyi, 2016). The South African society has a relatively low preference for avoiding uncertainties. The culture can also be said to be normative than pragmatic; thus, low long-term orientation. The differences in the manner of speaking are evident between blacks and whites. At the workplace, the white managers strive to speak softly; with good articulation in an educated style (Deresky, 2017).
The religious differences also play out; although each group has the freedom to exercise its faith. The most common faith includes Christianity, Muslim, and Hindu. The general behavior in meetings at the workplace also reflects the differences in culture between different groupings. The back workers are chatty; often failing to strictly adhere to the agenda. Only the most important points are discussed (Afọlayan, 2004). The whites engage in an entrepreneurial style as seen in the manner they aim at exhausting all important options.
The South African whites show great empathy to foreign firms sharing optimism in the success of the country. Their concerns emanate from the differences in cultural interests and needs among the black majority. It is also evident that numerous religious groupings such as Hindu, Christians, and Muslims have found their way in South Africa. Business operators should consider that uniqueness in cultural and religious diversity as well as the influence of cultural differences before making their business decisions.
Afọlayan, F. S. (2004). Culture and customs of South Africa. Westport, Conn: Greenwood Press.
Barbarin, O. A., & Richter, L. M. (2013). Mandela’s children: Growing up in post-apartheid South Africa. Routledge.
Deresky, H. (2017). International management: Managing across borders and cultures, 9th
edition. Hoboken: Pearson Higher Education.
George, G., Corbishley, C., Khayesi, J. N., Haas, M. R., & Tihanyi, L. (2016). Bringing Africa in Promising directions for management research.
Heritage Foundation. (2019). 2019 Index of economic freedom. The Heritage Foundation.
Retrieved from https://www.heritage.org/index/country/southafrica
Korhonen, M. (2018, March 5). Factsheet: Measuring South Africa’s (black) middle class. Africa
Check. Retrieved from https://africacheck.org/factsheets/factsheet-measuring-south-africas-black-middle-class/
Statistics in South Africa. (2019). Statistics in South Africa. Retrieved from http://www.statssa.gov.za