South African Companies Unlock Sub-Saharan Africa

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Florentino at the giant South African store she runs in Maputo, Mozambique Henner Frankenfeld/Redux

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With so many roads in Africa leading to Johannesburg, it would be bad news for the whole continent if South Africa fell victim to global financial turmoil. There's no shortage of reasons to worry. Growth in South Africa, which accounts for a third of sub-Saharan Africa's gross domestic product, likely will slow to 3% in 2009 after averaging 5% in recent years. Mining, an important domestic industry, has been hit by the plunge in commodity prices. The rand has been sliding, creating additional price risks in a country with 13% inflation. And the African National Congress, which has dominated the country's politics since the end of whites-only rule in 1994, has split into rival factions.

Yet foreign economists seem to fret more than South Africans. They don't teach sangfroid in business school, but you may learn it growing up in South Africa, a sometimes jarring mélange of well-manicured wealth and chaotic poverty. The suburbs of Johannesburg look like Beverly Hills or Pasadena, except that the security guards are more heavily armed and the posh houses crouch behind concrete walls topped with electric fence. At a mall called Nelson Mandela Square, shoppers pass a bronze statue of the anti-apartheid leader on their way to the Crabtree & Evelyn outlet.

Despite freeways packed with BMWs and Toyotas (TM), Johannesburg provides constant reminders that it is very much an African city. More than 70% of South Africa's 48 million people live on $2 or less a day, and a quarter haven't even completed primary school, the World Bank estimates. Wizened women with unwashed children on their backs beg at intersections. Men stand by highways with signs around their necks advertising their skills, looking for day work. At a McDonald's (MCD), customers munch on Quarter Pounders at outdoor tables, taking little notice of the rats that scurry around the chain's parking lot.

Understanding the twin aspects of South Africa's sophisticated economy and emerging market complexities surely gives its companies an advantage around the continent. "South Africans do well when they go elsewhere because they're not afraid," says software entrepreneur Mark Shuttleworth, a South African based in London.

Neighboring Mozambique is a good place to see how South African companies are remaking business in the region. The capital, Maputo, remains a city where most people live in houses with mud-brick walls and rusty metal roofs, and sidewalks are crammed with vendors selling everything from fresh papaya to bootleg DVDs of High School Musical 3. At a shiny mall next to an abandoned bullfighting arena, a motorized Santa Claus stands at the entrance to South Africa's Shoprite on a warm afternoon, greeting customers stocking up on rice, cornmeal, and fake Christmas trees. Downtown, Durban-based home furnishings retailer Mr Price sells brightly colored bedding, crockery, and furniture.

And on a bumpy road that hugs the coastline, there's a shining South African-owned big box store called Game. Aside from a few local touches—palm trees in the parking lot, signs in Portuguese, and a whole aisle devoted to ceiling fans—the store looks like a discounter in Ohio or Oregon. A mix of expatriates and wealthier locals fill their carts with Frosted Flakes (K), Hannah Montana bedsheets, and Sony (SNE) TVs.

But creating this oasis of consumerism hasn't been easy. Construction was delayed for months while officials held out for bribes. The store's spunky manager, Ana Paula Florentino, refused to pay. "If you give them your finger, they want your hand, and if you give them your hand, they want your arm,"