What does South Africa bring to world’s developed markets?

While it wobbles from time to time and its prospects become as murky as its politics, the story of Africa is still one of the world’s most appealing, along with those of Latin America and Asia. And South African executives understand that their key competitive edge over their peers in this global village is their comprehension of emerging-market economies. But this seems to be the first thing to be forgotten when a pin-striped banker or lawyer walks into an executive boardroom to sell an idea of expansion outside the continent. Over the past five years they’ve been sold on the allure of the world’s developed markets, in the main London for our retailers and eastern Europe for our property players. Given the economic conditions for emerging markets in recent years, it was an easy sell, especially when our bad politics got exposed.

Evidence of just how good business has been for advisers in recent years is the property boom under way in Sandton, where law firms are trying to outdo their rivals with their own New York-inspired building. It’s starting to look more and more like the set from the classic eighties movie, Wall Street.

Miners such as AngloGold Ashanti, under pressure from the US investment community to find a way to “derisk” their business by exiting South Africa, have fallen for their charms and a Goldman Sachs suit in its case. In hindsight it was lucky it failed to sell its restructuring idea to the market, not because of a poor rationale, but cost implications. Due to the miner’s natural evolution, the South African risk has receded. Today South Africa represents only 26% of its revenue.

Retailers that became market darlings when the Chinese commodity boom came to an end, such as Woolworths, had a much easier ride in selling their expansion plans outside South Africa and the continent. It canned troublesome and tedious Nigerian adventures, seeking further expansion into a very mature Australian retail market.

In buying David Jones, 180-year-old Woolworths bought a company steeped in the traditions of big-box retailing. Traditions that I suppose management, while keeping an eye on its South African business thousands of kilometres away, believed it could change. Over the past few weeks there has been ample evidence that the strategy isn’t working.

We are likely to see some shuffling of positions, or even worse, an admission that the threat of online retailing to department chains in Australia has been underestimated. Just last month the retail disruptor-in-chief, Amazon, opened its online showroom in that country.

It’s understandable that Woolworths’s board can’t abandon ship right now. But to turn David Jones around, more money will have to be spent. Just how much more, is the real question.

Which brings me back to that board meeting when this deal was announced all those many years back. Panicked or rather spooked by the fading of the “Africa Rising” narrative, one has to say Woolworths executives made too hasty a decision about the Australian investment. Much like Old Mutual they didn’t ask themselves, what was “new” about what were they bringing to the market when moving into the developed climes of Sydney.

It is something that I’m pretty sure Nando’s asked itself when it embarked on its so far successful northern expansion, and even Discovery, through Vitality.

In mature markets in the West, South African firms have to ask what they bring that the locals can’t offer. Shareholders should question expansion plans into the world’s leading capitals if the executive can’t answer that question. Just what about their expertise, which they have acquired operating in South Africa or on the continent, gives them a competitive advantage in London, Paris or New York.

As Tiger Brands can attest, I am not saying operating on the continent is safer or more lucrative, but there’s loads more parking space. And given the well-known operational difficulties, as much patience.

To turn David Jones around, more money will have to be spent