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An article by Ian Kilbride published in the Business Day.
Brand South Africa is tarnished and in trouble, but corporate South Africa can play a vital role in its rehabilitation.
Corporate diplomacy is not about companies being nice. Nor is it a luxury. It’s also important to set out what corporate diplomacy is not. It is not about spin, lobbying, advertising or public relations. Nor is it about philanthropy or social responsibility, although these can be elements. Rather, it is about companies scanning ahead, mapping their environment, evaluating risks and developing business models that establish and cultivate authentic and sustainable relationships with external stakeholders. These stakeholders can be governments and politicians, regulators, media, NGOs and of course customers. Moreover, its successful execution can and should result in competitive advantage for the company.
The era of globalisation, consumer activism and social media are three key elements that have fundamentally altered the operating environment of corporations globally. But the particular need for local companies to engage in corporate diplomacy is made all the greater due, in part, to the recent self-harm inflicted on South Africa’s national brand internationally.
The global good will extended to South Africa by the international community in the post-apartheid period, while sometimes motivated by national self-interest and strategic competition, has translated into a positive ‘country of origin’ effect that has been beneficial to the country’s trade, investment and tourism sectors. More specifically, South Africa has enjoyed a generally positive country of origin ‘halo effect’, meaning that international consumers have developed a generally favourable perception of the country, its offerings, goods and services. These are often vaguely informed stereotypes, however, and such perceptions are highly fluid, both positive and negative. While difficult to build, national brand equity can be eroded rapidly, particularly when a state’s behaviour is viewed as rogue, unreliable, misaligned, or duplicitous.
South Africa is somewhat fortunate in that its major exports are commodity-based, carry little national or corporate brand attachment and are thus, relatively immune to the liability of foreignness. International consumers of platinum, iron ore, coal and gold seek quality, quantity and reliability of supply, rather than country of origin considerations. Nonetheless, a diminishing national brand, combined with questions relating to South African producer reliability are burgeoning concerns among the country’s trading partners and consumer markets. Indeed, international sanctions imposed on Russia have demonstrated the relative ease with which commodities can be replaced or sourced from other suppliers, highlighting the brutally competitive nature of a globalised economy for resource price takers.
International consumers are far less agnostic towards the country of origin when it comes to goods and services. While the comprehensive sanctions and boycotts of South African exports during the apartheid years are a distant memory, consumer activism has emerged as a major force impacting the production and supply chains of diamonds, clothing and apparel, food and tobacco, and hi-tech goods, to name but a few. A negative downgrading of South Africa’s country of origin perception among its major consumer markets would leave its manufactured goods exporters highly vulnerable, unless alternative consumer markets are identified, opened and exploited.
Less well researched and understood is the country-of-origin effect on the services sector. With the folding of De Beers under the Anglo-American stable, South Africa lacks any leading global brand. This is not the case for South African companies operating in the rest of Africa, however. The continent has proved a significant (if somewhat challenging) market for South African retailers, banks and insurers as well as the now ubiquitous mobile phone companies. Despite local concerns of South African companies crowding out local businesses, the value added to numerous local economies in Africa by the entry and investment of South African retailers, banks and telephony is demonstrable. The danger then for South African corporates operating across the continent is the reputational knock-on effect of a significant downgrade in the trust in and affinity for, Brand South Africa.
Indeed, not only is it in the interests of companies to engage in corporate diplomacy, but on a national scale, it is well-positioned to do so. While the results of the 2023 Edelman Trust Barometer map a significant decline in local confidence in South Africa’s future, business emerges as a highly trusted institution. In fact, trust in South African business is one of the highest globally, enjoying a double-digit advantage over government’s score. Business’s credibility is high too. In fact, it ranks as more reliable than the media as a trustworthy source of information. Business CEOs and co-workers are viewed as more trusted than either scientists or members of one’s local community. Perhaps most remarkable in the survey, among all sectors of society, business ranks in the highest quadrant with respect to competence and ethics. Stakeholders surveyed express a desire to see business become more involved in societal issues, with trust in business directly correlated with public understandings and perceptions of businesses engagement with societal issues.
There is, of course, a risk that government will view the conduct of corporate diplomacy as an overtly political act. But a distinction needs to be drawn between corporates engaging in party political support or acting in a manner hostile to the government of the day and companies actively engaging with key stakeholders in an effort to secure a social, economic and political licence to operate locally and internationally against the backdrop of a declining national brand.
Chairman, Spirit Invest
Chairman, Spirit Foundation
Honorary Professor Stellenbosch Business School