**2. Africa rising to global markets**

Since the launch of the New Partnership for African Development (NEPAD) in the early 1990s [9, 10] and the acceptance of the Lagos Plan for regional economic integration in Africa, the actual economic integration of regional economies was less than impressive. OFDI by African economies was delayed as governments struggled to transform their economies. The strongest drive towards globalisation came from South African businesses that sought to enter the world markets after many years of sanctions and isolation which ended in 1990 as the country prepared for its first democratic election in 1994. As illustrated in **Table 1**, OFDI from Africa commenced from low levels of US\$659 million OFDI in 1990 compared to Asia OFDI which already stood at US\$11,024.3 million in 1990. African OFDI showed stronger growth off the low base than the rest of the world: world OFDI grew by 8.36%, Africa by 14.2% and Asia by 16.6% between 1990 and 2013 ([2], Web Annex Table 2).

The strongest growth in African OFDI occurred in East Africa, with 118% growth (coming off a very low base as is reflected in **Table 1**). Central Africa posted 112% growth and Southern Africa 25.1% annual compound growth between 1990 and 2013 (with South Africa leading the growth rate by 27.3%), while West Africa grew only by 7.8% and North Africa by 11.4%. The GFC affected OFDI trends from Africa adversely, but with the exception of North Africa, which grappled with the aftermath of the 'Arab Spring', all the regions in Africa surpassed pre-2007 levels of OFDI by 2013. These developments were supported by the sustained growth of Africa's economy at a rate of 7.1% between 2004 and 2008 and 5.3% between 2008 and 2014 ([2], p. 63; [86]).

**1990** 659.0

2975.7

1533.9

1925.3

9115.5

4974

6659.4

6772.9

11,999.7

12,418.1

Africa North Africa

West Africa

East Africa Central Africa Southern Africa

South Africa Source: UNCTAD WIR [11], p.

**Table 1.**

OFDI, Africa by region and South Africa, 1990–2013 (\$m).

214; [2], Web Annex Table

 2.

27.4

2497.7

270.6

930.3

2965.9

3133.7

75.7

−256.8

2987.6

5619.9

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57.4

2580.5

292.2

954.3

2232.8

5771.0

−210.4

1926.8

5144.3

7970.1

51.2

34.9

33.5

173.6

81.4

148.6

590.4

365.9

222.1

634.1

3.7

38.6

20.4

90.6

110.8

108.9

140.5

174.2

204.7

147.8

411.5

189.2

964.9

418.1

1275

1708.7

1292.3

2730.8

3155.2

2184.9

135.2

132.5

222.9

288.6

5415.4

8751.9

4846.6

1575.3

3273.4

1481.3

**1995**

**2000**

**2005**

**2007**

**2008**

**2010**

**2011**

**2012**

**2013**

An analysis of the composition of African OFDI since 1990 shows a doubling of outward stock as a percentage of gross domestic product. OFDI stock in Africa rose from 4.8% of GDP in 1990 to 8.6% in 2013, but in North Africa, the ratio only rose beyond 2% during the late 2000s to reach 4.4% in 2013 [86].


by 8% since 2012, culminating in 32.2% of total global OFDI by 2013 ([2]: xiv; 6; 39). African OFDI of US\$ 12 billion or 0.9% of global OFDI lagged dismally behind the contribution by developing countries in Asia, Latin America and other transitional economies. Transnational activities commenced in the 1960s as multinational enterprises moved operations to resourcerich, low-cost labour and capital-rich markets [3–7]. The first wave of OFDI during the 1960s and 1970s was motivated by efficiency and market-seeking factors. This wave was dominated by firms from Asia and Latin America. A second wave of OFDI followed in the 1980s, led by strategic asset-seeking enterprises from Hong Kong, Taiwan, Singapore and South Korea (Dunning et al., 1996; [8]: 3s). Since the 1990s, China, Brazil, India, Russia (the so-called BRIC countries), Malaysia, Turkey and South Africa were among the countries that made significant contributions to OFDI growth ([1]: 4). The growing involvement in international investments by more and more African companies follows from slightly more open markets in Africa, a more positive inclination towards private business by African Governments, as well as the sustained economic growth of the continent. This chapter investigates the latecomer challenge presented by African TNCs, their globalisation strategies and the direction of globalisation.

Since the launch of the New Partnership for African Development (NEPAD) in the early 1990s [9, 10] and the acceptance of the Lagos Plan for regional economic integration in Africa, the actual economic integration of regional economies was less than impressive. OFDI by African economies was delayed as governments struggled to transform their economies. The strongest drive towards globalisation came from South African businesses that sought to enter the world markets after many years of sanctions and isolation which ended in 1990 as the country prepared for its first democratic election in 1994. As illustrated in **Table 1**, OFDI from Africa commenced from low levels of US\$659 million OFDI in 1990 compared to Asia OFDI which already stood at US\$11,024.3 million in 1990. African OFDI showed stronger growth off the low base than the rest of the world: world OFDI grew by 8.36%, Africa by 14.2% and Asia by

The strongest growth in African OFDI occurred in East Africa, with 118% growth (coming off a very low base as is reflected in **Table 1**). Central Africa posted 112% growth and Southern Africa 25.1% annual compound growth between 1990 and 2013 (with South Africa leading the growth rate by 27.3%), while West Africa grew only by 7.8% and North Africa by 11.4%. The GFC affected OFDI trends from Africa adversely, but with the exception of North Africa, which grappled with the aftermath of the 'Arab Spring', all the regions in Africa surpassed pre-2007 levels of OFDI by 2013. These developments were supported by the sustained growth of Africa's economy at a rate of 7.1% between 2004 and 2008 and 5.3% between 2008

An analysis of the composition of African OFDI since 1990 shows a doubling of outward stock as a percentage of gross domestic product. OFDI stock in Africa rose from 4.8% of GDP in 1990 to 8.6% in 2013, but in North Africa, the ratio only rose beyond 2% during the late 2000s

**2. Africa rising to global markets**

46 Globalization

16.6% between 1990 and 2013 ([2], Web Annex Table 2).

and 2014 ([2], p. 63; [86]).

to reach 4.4% in 2013 [86].



in M&A since 2009. In West Africa, Nigerian companies were active in expanding their operations, but Ghanaian companies did not engage in such M&A of any significance. Egyptian companies were relatively active between 2007 and 2010, but the only sustained activity was that of South African companies. The level of cross-border M&As of African businesses was nevertheless significantly lower than that of companies in Asia and Southeast Asia. The M&A activity in that region increased from US\$98,606 m in 2007 to US\$10,7915 m by 2013, which

The domination of South African conglomerates is further substantiated by the ranking of South African, and African, companies on the list of the world's top 100 nonfinancial TNCs, ranked by foreign assets in 2013. Only two African corporations are listed on the 2012 ranking list—they are Anglo American Corporation PLC (ranked 43rd in terms of foreign assets, with a TNI of 2), which currently holds a primary listing on the London Stock Exchange and is no longer assigned to South Africa as its home economy, and the other company is SABMiller PLC (ranked 55th in terms of foreign assets, with a TNI of 7), which has the same domicile (the United Kingdom) after acquiring its primary listing in London, although the company originated in South Africa. There are no African companies ranked under the world's top 100 nonfinancial TNCs ([2], web Table 28). Both AAC and SABMiller maintained their ranking among the world's top 100 corporations since 2008 [12, 13] but with substantially reduced TNIs. African companies are better represented on the list of the top 100 nonfinancial TNCs from developing and transitional economies, ranked also by foreign assets, in 2012. There are eight South African companies, one from Egypt and one

**Corporation Home economy Industry**

South Africa Other consumer (furniture and home ware)

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Egypt Construction

TNI = Transnational Index, which is calculated as the average of the following three

31 31 MTN Group Ltd South Africa Telecommunications

49 25 Gold Fields Ltd South Africa Metal and mining products

63 35 Naspers Limited South Africa Other consumer services (Media)

83 41 Med-Clinic Corp Ltd South Africa Other consumer goods (health care) 97 60 Netcare Ltd South Africa Other consumer goods (health care)

98 33 Sappi Ltd South Africa Wood and paper products

ratios: foreign assets to total assets, foreign sales to total sales and foreign employment to total employment.

surpasses the African achievement significantly ([2], p. 214).

from Algeria (**Table 4**).

Source: WIR [2], Web Table 29.\*

**Ranked by TNI\***

43 27 Steinhoff International

67 34 Orascom Construction

Holdings

51 72 Sonatrach Algeria Petroleum 53 74 SASOL Limited South Africa Chemicals

Industries SAE

**Table 4.** African top 100 non-financial TNCs, ranked by foreign assets, 2012.

**Ranked by foreign assets**

**Table 2.** OFDI stock as percentage of gross domestic product, 1990–2013 (%).

In North Africa, Nigeria was most active in OFDI stock acquisition, while in East Africa, Kenya was the leading nation, although Mauritius (13.1% in 2013) and the Seychelles (19.4% in 2013) transacted higher ratios than the rest of the regional economies. In Southern Africa, the OFDI by South African companies was the highest in African OFDI stock acquisition, illustrating the dominance of South African business in OFDI on the continent. The important aspect of the stock acquisitions is the cross-border merger and acquisitions which point towards the business acquisitions outside the home country (**Tables 2** and **3**).

South African businesses have dominated the cross-border M&As throughout the period [84, 85]. North African M&As were higher than South African M&As only in 2008. No M&A activity was recorded of significance in Southern Africa, except for Mauritius, where business sustained M&A activity throughout the period. Moroccan companies became more involved


**Table 3.** Value of cross-border M&As, by region of purchaser, 2007–2013 (US\$m).

in M&A since 2009. In West Africa, Nigerian companies were active in expanding their operations, but Ghanaian companies did not engage in such M&A of any significance. Egyptian companies were relatively active between 2007 and 2010, but the only sustained activity was that of South African companies. The level of cross-border M&As of African businesses was nevertheless significantly lower than that of companies in Asia and Southeast Asia. The M&A activity in that region increased from US\$98,606 m in 2007 to US\$10,7915 m by 2013, which surpasses the African achievement significantly ([2], p. 214).

The domination of South African conglomerates is further substantiated by the ranking of South African, and African, companies on the list of the world's top 100 nonfinancial TNCs, ranked by foreign assets in 2013. Only two African corporations are listed on the 2012 ranking list—they are Anglo American Corporation PLC (ranked 43rd in terms of foreign assets, with a TNI of 2), which currently holds a primary listing on the London Stock Exchange and is no longer assigned to South Africa as its home economy, and the other company is SABMiller PLC (ranked 55th in terms of foreign assets, with a TNI of 7), which has the same domicile (the United Kingdom) after acquiring its primary listing in London, although the company originated in South Africa. There are no African companies ranked under the world's top 100 nonfinancial TNCs ([2], web Table 28). Both AAC and SABMiller maintained their ranking among the world's top 100 corporations since 2008 [12, 13] but with substantially reduced TNIs. African companies are better represented on the list of the top 100 nonfinancial TNCs from developing and transitional economies, ranked also by foreign assets, in 2012. There are eight South African companies, one from Egypt and one from Algeria (**Table 4**).


Source: WIR [2], Web Table 29.\* TNI = Transnational Index, which is calculated as the average of the following three ratios: foreign assets to total assets, foreign sales to total sales and foreign employment to total employment.

**Table 4.** African top 100 non-financial TNCs, ranked by foreign assets, 2012.

In North Africa, Nigeria was most active in OFDI stock acquisition, while in East Africa, Kenya was the leading nation, although Mauritius (13.1% in 2013) and the Seychelles (19.4% in 2013) transacted higher ratios than the rest of the regional economies. In Southern Africa, the OFDI by South African companies was the highest in African OFDI stock acquisition, illustrating the dominance of South African business in OFDI on the continent. The important aspect of the stock acquisitions is the cross-border merger and acquisitions which point towards the

Africa 4.8 6.7 7.2 4.7 8.2 8.6 N Africa 1.1 0.9 1.3 1.4 4.4 4.4 W Africa 3.4 7.9 8.2 2.0 3.1 3.7 Nigeria 3.5 9.7 8.9 0.3 2.2 3.0 C Africa 1.7 2.5 2.8 1.5 2.0 2.7 E Africa 1.0 1.6 1.8 1.8 2.1 2.3 Kenya 0.9 1.0 0.9 0.7 0.9 0.7 Sd Africa 10.8 13.5 16.7 10.3 17.9 19.8 South Africa 13.4 15.4 20.6 12.6 22.9 27.3

**1990 1995 2000 2005 2010 2013**

South African businesses have dominated the cross-border M&As throughout the period [84, 85]. North African M&As were higher than South African M&As only in 2008. No M&A activity was recorded of significance in Southern Africa, except for Mauritius, where business sustained M&A activity throughout the period. Moroccan companies became more involved

Africa 10,356 8266 2577 3792 4393 629 3019 N Africa 1401 4729 1004 1471 17 85 459 Egypt 1448 4678 76 1092 — 16 — Morocco — — 324 — 17 101 147 Other Africa 8955 3537 1573 2322 4376 543 2560 Mauritius 253 136 16 433 173 418 65 Nigeria 196 418 25 — 1 40 241 South Africa 8646 2873 1504 1619 4291 825 2246

**2007 2008 2009 2010 2011 2012 2013**

business acquisitions outside the home country (**Tables 2** and **3**).

**Table 2.** OFDI stock as percentage of gross domestic product, 1990–2013 (%).

Source: WIR [2], Annex Table 3, pp. 213–214; [94–96].

Source: WIR [2], Web Table 8; [94–96].

48 Globalization

**Table 3.** Value of cross-border M&As, by region of purchaser, 2007–2013 (US\$m).

The world ranking of some of these South African corporations is changing consistently. In 2008, Sasol was the highest ranked South African conglomerate on the top 100 ranked list of nonfinancial corporations—at the 22nd position, with a TNI of 31.6% ([12], p. 231). In 2012, the company failed to make the ranking of the top 100 nonfinancial corporations in the world but increased its TNI significantly to 74%. New corporations entered the top 100 non-banking companies in developing countries since 5 years ago, and this list keeps changing. When the largest companies in Africa in 2014 are compared to the top 100 rankings of UNCTAD, South African companies made up 71% of the top 50 companies. Based on market capitalisation in 2014, the largest African company is BHP Billiton, a mining and metals company, followed by SAB Miller, then Sasol, Naspers (the media conglomerate) and MTN. The African Business Magazine listed under the top 10 African companies by market capitalisation, 9 South African and 1 Nigerian companies in 2014 [102]. The top non-South African conglomerate is the Dangote cement group of Nigeria, with a market capitalisation of US\$22.7 billion (www.africabusinessmagazine.com/ sector-reports/africa-top-250-companies) [100]. These are the private conglomerates, but the largest companies on the continent are still SOEs. The African Business Review ranked Sonatrach, an Algerian petroleum company, as the largest with a turnover of US\$58.7 billion, followed by Sonangol, an Angolan petroleum SOE with US\$22.2 billion turnover. The third largest company in Africa by turnover is Sasol, with a turnover of US\$18.3 billion, followed by the MTN Group at US\$17.2 billion [14, 15] (www.theafricareport.com/top-500-companies-in-africa-2013; www.africanbusinessreview.co.za). About 26% of the top 50 conglomerates in Africa conduct their business in finance and insurance; 22% in consumer goods and retailing; 14% in mining; 12% in media and telecoms; 1% each in diversified enterprises, health care and construction, respectively; and 3% in manufacturing. When considering the 'globalisation' of African business, OFDI does not only refer to OFDI outside the African continent, but also OFDI outside the African home market into neighbouring countries or into more distant regions in Africa: the African continent is home to 56 countries and comprises a land mass of 30,221,532 km2 .

internationalisation based on organisational theory [18, 69]. Dunning's OLI model of firm expansion through ownership (O) advantages (firm-specific resources) and location (L) (host country natural resource endowments) allows for the internalisation of those advantages (I) to improve firm efficiency and competitiveness, rather than exploiting those advantages in other markets through arms-length transactions. Dunning [23, 81] identified a set of motives for OFDI. These include market-seeking investments targeted to access to third markets, efficiency-seeking investments to improve efficiency through specialisation, resource-seeking investments seeking natural resources unique to specific foreign locations and strategic assetseeking investments to add to the existing proprietary resources of the firm. Rugman and Sukpanich argued that firm-specific advantages (FSAs) [91, 92], complemented by countryspecific advantages or CSAs [24], which resembled the ownership and location advantages in the OLI model, determined international expansion of firms. Rugman and Verbeke [25] added the advantage of proprietary knowledge as contributing to FSA. Dunning later added alliance capitalism and firm networks that augment ownership advantages by incorporating knowledge shared in networks and alliances [23, 26, 27]. The organisational structure of internationalising firms subsequently changed from the hierarchical mode of integration, based on the transaction cost theories, to new forms of ownership domains created through networks and alliances. Utilising these networks and alliances, firms internationalised their operations by seeking strategic assets to augment their existing proprietary resources. The Dunning followers later on also acknowledged the importance of institutions in strengthening CSAs at

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The 'static' approach to EMTNC internationalisation moved on to an understanding that '… internationalisation becomes a strategy aimed at strengthening the firms themselves thanks to the accumulation of resources previously not available' ([30], p. 5). Internationalisation is explained by firms supplementing existing O by what Matthews [31] called a more dynamic acquisition of capacity and experience to overcome latecomer effects and technology gaps ([32, 33], p. 237; [34], p. 81). Internationalisation now becomes an evolutionary process ([30], p. 5; [31, 35]) in which firms without O to exploit abroad, find resources, internalise them and finally develop linkages or partnerships or networks to leverage against the risks involved in such outward strategies. Matthews thus suggested an LLL framework—Linkage, Leverage and Learning framework. Firms become increasingly integrated in international economic activities through not only asset-exploiting but also by asset-exploring, thus linking OFDI with the EMTNC strategies. Emerging market enterprises establish networks with foreign firms and learn from them (capability enhancement)—which is 'experiential learning' [87, 88]. Firms in the developing country thus acquire knowledge, experience in equipment manufacturing, joint ventures and participation in GVC [89]. Depending on the ability of the emerging market firm to internalise or 'absorb' ('identify, assimilate and exploit') the new skills, technology or resources, the EMTNC is able to venture into the global market [36–38]. Renewed emphasis is hereby placed on country-specific analyses and the Gerschenkron effect, that is, the ability of latecomers to access and take over advanced technologies and catch up

faster through linkages, collaboration and the leveraging of resources [97, 99].

The dominant process model of internationalisation does not explain the entire set of internationalisation strategies of emerging market firms, since the latter are often reactive, incremental

each variable of the OLI hypothesis [28, 29, 91, 92].
