The Republic of South Africa is one of the most culturally diverse nations in the world, including the Black majority, Whites, Indians, as well as a significant multiracial population. The culture of the country is addressed in detail using the framework of Hofstede’s dimensions of culture. This paper also discusses the importance of history and society in the context of South African culture and draws conclusions relevant to American businesses considering South Africa as a target for expanded business opportunities. An American multinational company’s ability to enter a foreign market successfully often depends on an accurate understanding of the culture of the targeted country, and that is certainly true for South Africa. Obviously, the national culture of the company has a great deal of influence on the ultimate organizational culture. In that regard, it is necessary for the management of any American company to adapt to the culture when doing business in Africa. While such a process can often prove to be a challenge, for American companies willing to be adaptable, it will be beneficial for both parties involved.
The Republic of South Africa is one of the most culturally diverse nations in the world, including the Black majority, Whites, Indians, as well as a significant multiracial population (Statistics South Africa, 2012). More precisely, Irwin reported the population as “Black African (79%), White (Afrikaners and white English) (9%), Colored (9%), and Indian/Asian (3%)” (2011, p. 5). While people outside of the country may view the Black majority as a homogenous group, in reality it consists of at least nine ethnic groups including the Xhosa and Zulu tribes. English is the language most used throughout the country, especially in business, but the country recognizes eleven official languages. Religiously, South Africa is predominantly Christian, with 80% of the population claiming that affiliation (Statistics South Africa, 2012).
There are a variety of cultural, linguistic and religious characteristics displayed by each ethnic group in South Africa. One of the key features of the country is that every ethnic group maintains a strong attachment to their ethnicity, even as they recognize the need to all be viewed as South Africans. The culture of the country is addressed in detail in the following section using the framework of Hofstede’s dimensions of culture. One reassuring element of modern South Africa, however, is observing ethnic and racial groups that have long been rivals working hard toward accepting the reality of majority rule and working toward the future of the country (Irwin, 2011).
Apartheid officially ended in the early 1990s and, beginning in 1994, the African National Congress (ANC) won control of the government. The ANC also works in a coordinated way with the Congress of South African Trade Unions (COSATU) as well as the Communist Party (Luthans, Van Wyck & Walumbwa, 2004). Overall, the South African government currently pursues a free-market agenda, but also needs to satisfy the predominantly left-leaning social agenda promoted by the COSATU (Irwin, 2011). The country has a long way to go to meet the social and infrastructure needs that a growing economy must provide and these issues are addressed in a later section. It must be acknowledged that the previous culture which perpetrated and defended racial oppression created a population that is struggling to overcome divisions along racial and linguistic boundaries (Marais, 2010). Consequently, in South Africa, the culture of the past still casts a shadow over those who are trying to recreate a cohesive national identity (Luthans et al., 2004). This not only creates issues for citizens of the country, but may also give pause to American companies seeking to do business there.
Modern South Africa is still working hard to overcome the stains and scars of its Apartheid history, and this includes addressing the necessary social and political changes in the context of its multicultural heritage (Diederichs, 2008). Perhaps as the result of its lack of tolerance in the past, the country is now leading the way globally in many areas related to a multicultural approach to business, social programs, and the overall practice of governing (Louw & Jackson, 2008). This paper discusses many of these issues in the context of South African culture and draws conclusions relevant to American businesses considering South Africa as a target for expanded business opportunities. An American multinational company’s ability to enter a foreign market successfully often depends on an accurate understanding of the culture of the targeted country, and that is certainly true for South Africa.
An examination of cultural challenges for international business has to include a number of aspects of the local culture, economy, legal system, religious beliefs and education. Successful American transnational firms have a desire to understand local culture since it impacts acceptable, legal, and viable practices and behaviors within a given country. Such an understanding is instrumental in decisions regarding where to locate and about which practices to use. Challenges related to competitive strategy are closely related to those regarding culture and balancing the two is critical for a transnational firm to be competitive. Since Geert Hofstede (1980, 1991) is recognized as one of the leaders in studies of national cultures—as well as the relationship between culture and business—this section provides a more thorough discussion of culture in the context of South Africa.
Hofstede’s extensive research into international culture was not undertaken as a purely academic pursuit, but he specifically wanted to identify ways that national culture impacted business management (Satterlee, 2009). His research identified (initially) four cultural dimensions and revealed how national culture plays a critical role in the development of cultures in organizations—especially businesses. Hofstede found that national culture is based on historic factors that develop over time and are typically not easily changed (Shi & Wang, 2011). Conversely, he determined that the culture of an organization is rarely static and is, in many cases, changeable.
The research done by Hofstede (1980, 1991) is widely considered to be the prototypical interpretation of how business communication is affected by national culture. In the later work, culture was defined by Hofstede (1991) as the “collective programming of the mind which distinguishes the members of one culture from another” (p. 260). Additionally, Hofstede stated that “the dimensions of culture include individualism, power distance, masculinity, and uncertainty avoidance” (Satterlee, 2009, p. 56). Therefore, these four categorizations by Hofstede support a clearer understanding of how members of various cultures reflect different structural and value systems. Later, Hofstede (1991) added a fifth cultural dimension—long-term orientation, based primarily on the elements of Chinese culture.
Individualism/Collectivism. This dimension refers to how the culture prefers to function, as a group or as individuals. More conflict is tolerated and accepted in cultures that are individualistic (Satterlee, 2009). In collectivist cultures, group accord is more important. In high collectivistic cultures, relationships are given a higher value than task accomplishment. Thus, trust between people from these cultures is very important. Hofstede (1980) was among the first to define individualism as a tendency to put a stronger emphasis on personal interests and goals, and collectivism as placing a much stronger emphasis on the interests and goals of ingroup members, and those definitions have remained applicable over time. In addition, there is a much more marked distinction for collectivists between ingroups and outgroups than for individualists (Shi & Wang, 2011).
The cultural aspects of individualism/collectivism are typically used to reflect the unique aspects of how individuals view their interactions with others—either focusing more on their own goals or on the interests of those in a group (Satterlee, 2009). Cultures that are described as individualistic, such as most Western countries (like the UK), have more narrow family structures and are more concerned with self-interest. On the other hand, countries that have a more collectivist culture are much more interested in the success of the group over personal gain and believe in the importance on an extended family structure. Other differences between these two cultures are that collectivists also believe in determinism (the group should determine behavior), while individualists are more concerned with self-determination (each person’s actions are up to them) (Hofstede, 1991).
According to Hofstede’s criteria, the culture of South Africa is classified as highly individualistic. From a practical standpoint, this means that individuals in South Africa are most comfortable working independently and prefer to be self-sufficient, while focusing their efforts primarily on their own families (de Waal & Chipeta, 2013). In most cases, the members of this type of culture also experience a sense of guilt whenever an offense is committed. In the workplace, an individualistic culture creates a system that rewards people based on merit above any other factor and employees and employers believe that continued employment benefits both parties (de Waal & Chipeta, 2013).
Uncertainty avoidance. Another dimension included in Hofstede’s research—uncertainty avoidance—refers to how much ambiguity a society can tolerate (Satterlee, 2009). With high uncertainty avoidance, some cultures are more structured with clear-cut rules, limited change, and higher fear of failure, in addition to limited trust of outsiders. Conversely, with low uncertainty avoidance, there are fewer rules, more flexibility, more ability to accept change, and a greater ability to accept outsiders or difference between people (Shi & Wang, 2011).
South African culture leans toward avoidance of uncertainty, meaning that most people prefer unambiguous rules and codes of behavior and are not comfortable with innovative ideas or concepts (de Waal & Chipeta, 2013). In effect, the culture has created a basic need for rules—regardless of whether these are considered successful or not. The positive side of this cultural element is the development of a society that values hard work and individual motivation. Additionally, South Africans value high-quality work and avoiding the appearance of wasting time (de Waal & Chipeta, 2013).
Power distance. The power distance dimension of culture described by Hofstede relates to the perceived level of equality or inequality that exists in a country (Satterlee, 2009). A culture ranking high on power distance is exemplified by distinct separations between those possessing the wealth and power in society and those who have very little of either. In such a society, a hierarchal system of power has developed and most people simply come to accept they status quo as reality. In contrast, a culture that rates low on power distance places little emphasis on those who are wealthy or powerful and those who are not. In fact, in such a culture, it is accepted that every individual has an equal opportunity for success (Shi & Wang, 2011).
Interestingly, when Hofstede first examined South Africa, Apartheid was still in force and so he identified the country’s culture as a high power distance society (de Waal & Chipeta, 2013). This indicates that most members of society accepted the hierarchal nature of the country, specifically that the White minority ruled the Black majority and little could be done to change that fact. Certainly, the weakness of any system based upon a strict hierarchy (whether a government or a company) is the inability to adapt and the acceptance of inequality (de Waal & Chipeta, 2013).
Masculinity. In the study of national culture, masculinity refers to how a society views what is called the ‘traditional role’ of males in society, such as the male as sole provider and the one who must maintain control and authority, especially in comparison to females (Satterlee, 2009). A country ranking highly on this scale implies that there is a large gap between what is acceptable for men and women in the culture. Specifically, high masculinity reveals a society where males dominate in nearly all aspects of social life, including government, employment and even social relations. Conversely, cultures where the masculinity ranking is low will allow women to have a much broader role in the country and women are treated as equals to men throughout society (Shi & Wang, 2011).
In South Africa, males continue to control nearly all aspects of society, since the country ranks very high in this dimension of culture. Working hard and achievement are natural goals for all men and males are expected to accomplish much more than women—who are often treated as less important than men. Especially in the business world, males dominate and are typically extremely assertive and like to maintain strict controls over subordinates (de Waal & Chipeta, 2013).
Long-term orientation. This fifth cultural dimension added by Hofstede in 1991 directly relates to Confucian Dynamism and was based on his study of the relationships between Chinese business managers and their employees (Shi & Wang, 2011). In particular, this aspect of a country’s culture addresses the level to which a country values (and closely abides by) traditional values or chooses to set out on a new course, unrestricted by historical roles or traditions (Satterlee, 2009). While a culture strong in long-term orientation is considered filled with hard-working and reliable people, it may also be much more difficult for foreign companies to enter, due to a lack of trust in anything foreign or different (Shi & Wang, 2011).
Cultures ranking lower in long-term orientation are viewed as more adaptable and therefore willing to change as times dictate the need (Shi & Wang, 2011). With all five of Hofstede’s cultural dimensions, it must be kept in mind that there can be more than one culture present in any given country - thus, the need to differentiate the individual cultural webs will be greater when approaching business. The rankings simply serve as an attempt to provide a working framework for understanding a nation’s culture, especially in a business context (Satterlee, 2009). In South Africa, there are indications of both ends of the spectrum in regards to long-term orientation, and much of this falls along the racial lines that were established due to the Apartheid culture.
Currently, the country is still dominated by the Euro-centric approach to management, which features hierarchical management structures and a tendency for management to be autocratic—oftentimes to the extreme (de Waal & Chipeta, 2013). This tendency is a remnant of Apartheid, which created a culture and a society that was on one hand in total control, and on the other powerless to create meaningful changes. As a result, racial stratification became the norm, as well as an overall lack of trust toward anyone outside the cultural group (de Waal & Chipeta, 2013).
A significant element of any culture relates to how the society regards education, and in the case of South Africa, one of the legacies of Apartheid is the lack of education among a broad base of the population (Irwin, 2011). The logical result of this under-education is a sizeable portion of working-age individuals who are unqualified for the types of jobs required in a global economy (Louw & Jackson, 2008). In effect, this has created a unique culture inside the country comprised of people unable to function in the typical job markets. Many of these individuals are only able to work in family-owned businesses, which make up a significant portion of South Africa’s undocumented economy. This also places significant pressure on employers, who are often struggling to locate qualified employees to fill positions in their businesses. Furthermore, all employers are now required to meet government-mandated racial quotas (based on A Strategy for Broad-Based Black Economic Empowerment—or B-BBEE—requirements) which causes even greater problems (Irwin, 2011).
The culture for ethnic and racial groups in South Africa is deeply ingrained and that also applies to their views toward gender roles. For the most part, the one thing these groups seem to agree on is that women are not as important in society as men and have no need to seek power (Diederichs, 2008). Nearly all organizations in South Africa are dominated by males, which represents the cultural heritage of the society. As recently as 15 years ago, women were still expected to avoid walking beside their husband, since that was a violation of the role traditionally maintained by a wife. This type of practice even extends to some Afrikaners, whose religious beliefs include a focus on biblical passages that are used to maintain the subjection of women in society (Diederichs, 2008; Wepener, Swart, ter Haar & Barnard, 2010). Across the country, the most liberal groups are made up of Whites who speak English, since these typically accept women as equals and do not submit to traditional cultural views of women or religion.
More than a decade ago it was noted that, while South Africa is moving in the right direction in an attempt to overcome parts of its cultural history, challenges remain to deal with inequalities of class, gender and race that permeated initially by colonialism and later by Apartheid (Kehler, 2001). Goals for gender equity and a more diverse society are simple and begin with a desire to create a system of development which will allow access by all socio-economic groups. A culture that thrived on inequity and oppression is gradually becoming one that hopes to raise the standard of living for all citizens, regardless of race, gender or ethnicity.
Unfortunately, progress is still slow in coming for some groups, including women in South Africa. For a large segment of the population, the ability to benefit from services and opportunities available in the country are based on class, gender and race on far too many occasions. This indicates that the culture of oppression has not been fully eliminated from South African society (Kehler, 2001). The reality for many poor Black women remains an inability to make progress at the same speed as experienced by their Black male counterparts. Combined with the aforementioned lack of educational opportunities, this situation remains troubling in an otherwise progressive nation.
In a recent report, South Africa was listed as “the 5th least corrupt country (out of 33) in the sub-Saharan African region in 2010 (54th out of 178 worldwide)” (Irwin, 2011, p. 9). On the other hand, much of the population of the country still considers bribery, corruption and fraud to be serious issues across multiple levels of society (Wanasika, Howell, Littrell & Dorfman, 2010). More specifically, when members of the public were polled regarding their opinion on whether corruption had increased or decreased over a recent three year period, “24% said it had decreased, 14% felt that it had stayed the same, and 62% said it had increased” (Irwin, 2011, p. 9).
Fraud appears to be an issue that affects businesses in the private sector more than in government agencies. For example, Global Economic Crime Survey reported that “(of senior representatives of 3,037 companies in 55 countries), 62% of South African respondents indicated that they had been impacted by fraud, compared to a global average of 30%” (Irwin, 2011, p. 10). For the most part, fraud in South Africa follows along similar lines that Americans are familiar with, such as submitting fraudulent financial documents and misappropriation of assets. The commission of fraud as most often perpetrated by an internal source, and the occurrence in South Africa was: 62% vs. a global average of 53%. Internally, more fraud was committed by junior staff members than middle or senior management (50% vs. global average of 42%). Externally, 33% of agents/intermediaries in South Africa were found to have committed economic crime – over 50% more than the global average of 20%. (Irwin, 2011, p. 10)
South Africa is undoubtedly undergoing a massive transformation, and part of this change is supported by the nation’s cultural heritage, while the most widely known cultural element of its past—Apartheid—is being relegated to history. Every group inside the country has had to accept radical changes related to power and control both at the governmental and societal levels (Booysen, 2007). Cultural changes are not easily accomplished, nor do they happen at the same pace for all members of any particular group. As a result, many in South Africa are still attempting to determine what race, ethnicity and culture mean in their post-Apartheid nation (Chipkin & Lipietz, 2012). In many ways, people are redefining how culture and identity define their personal role in society (Fatoki & Chiliya, 2012). Admittedly, this can cause problems for individuals who are still attached to the culture of the past.
The culture of a country as well as the culture of specific groups within a country is typically manifested in the culture of the organizations in which people function. This is apparent in the emphasis (or lack of emphasis) placed by management on employee relations and how these relations correspond with societal culture (Louw & Jackson, 2008). In South Africa, the cultural influences that shape the business world come from Western influences—as the result of colonization—as well as African attitudes and beliefs (Marais, 2010). Some organizations in South Africa operate under a somewhat hybrid management system which incorporates cultural elements of both African and Western styles of management. In many cases, the cultural attitudes of company executives is reflected throughout the organization, while some companies are trying to be more adaptive to the culture of their stakeholders (Fatoki & Chiliya, 2012). The influence of the Apartheid years is still felt in some businesses, but changes are steadily being made so that these are now the exception rather than the rule.
Euro-centric. The Euro-centric management style describes a concept of management based on Western sensibilities and attitudes toward business and management and also includes the way managers in the United States typically function (de Waal & Chipeta, 2013). Primarily, this style of management highly values individualism and rewards those who work hard to achieve success—personally and in the context of the workplace. A Euro-centric management style includes the belief that others in the business relationship—such as vendors and employees—should be viewed as adversaries.
In South Africa, a Euro-centric management style is primarily utilized, based on a cultural inclination to prefer hierarchies and autocratic leadership methods (de Waal & Chipeta, 2013). While all outward elements of Apartheid are consciously being eliminated from society, there is little that can be done to remove the subconscious elements that remain ingrained in the psyche of much of the population, including those in the business world. It will undoubtedly take a considerable period of time before some are able to overcome this reality, and some likely never will (de Waal & Chipeta, 2013).
Afro-centric. The Afro-centric style of management is based specifically on African cultural elements which shape the way management operates and treats others both inside and outside the organization (Mkabela, 2005). A primary driving force behind this management style is based on the African concept called “Ubuntu”, which is a value system developed within South African culture (Nussbaum, 2004). According to de Waal and Chipeta (2013), Ubuntu implies that each individual fills an important role in society and that, by identifying and filling that space, each individual contributes to the foundation of society - so, the individual vs. collective culture debate is null. The concept of Ubuntu is beneficial for employees and other stakeholders of an organization, since they are valued by management and share in an environment that far from autocratic. In most cases, Afro-centric managers encourage free and open communication and promote a more informal workplace (Gupta, 2011). Ubuntu stresses collectivism rather than individualism and does not stress the spirit of competition that is favored in Western management styles (Nussbaum, 2004).
New emphasis on human rights. From the outset of Black majority rule in South Africa, the African National Congress (ANC) promised to “canonise human rights in our international relations” and determined that South Africa would play a “central role” in a “worldwide human rights campaign” (Geldenhuys, 2012, p. 32). Additionally, the ANC assured the world that “we shall not be selective nor, indeed, be afraid to raise human rights violations with countries where our own interests might be negatively affected” (Geldenhuys, 2012, p. 32). Learning the lesson from their treatment under White rule, South African Government leaders were committed to establish that “Human rights are the cornerstone of our government policy and we shall not hesitate to carry the message to the far corners of the world” (Geldenhuys, 2012, p. 32). This commitment and the changes it created placed an emphasis on democratic principles at both the governmental and the business level. Protection of human rights became a standard feature of management practices in the new South Africa (Geldenhuys, 2012).
While a commitment to democracy and human rights is the focus of South African foreign policy, it also is at work in domestic society, since improving economic and social conditions for much of the formerly disenfranchised population is a key focus of the government’s efforts (Geldenhuys, 2012). Simply put the culture of the ruling class and the general population is currently in agreement, in contrast to the oppressive environment under Apartheid. Finally, the underlying culture of the majority of South Africans is dominating the country’s progressive movement (Luthans et al., 2004).
Small and family businesses. One legacy of Apartheid in South Africa is the existence of many small businesses which were developed as a result of the country’s limited economy (Irwin, 2011). The working class in the country is rather cohesive and the owners and operators of many businesses are familiar with each other. Many employees in South Africa operate their own small businesses and family members are often operators of multiple business operations. Government jobs and contracts are typically awarded to family members and this may even include assisting a family member to establish their own business to provide some type of service to the government (Fatoki & Chiliya, 2012). While these practices are not viewed unfavorably in South Africa, it is acknowledged that some boundaries must be maintained, which means the development of specific policies to avoid conflicts of interest.
As noted in the introduction, South Africa is a very diverse nation and this requires businesses to ensure that the promotion of diversity and equality is an integral element of operations; especially in light of the history of Apartheid (Irwin, 2011). Even in small businesses, it is necessary to ensure that this concept is upheld. However, it is often difficult to find someone who qualifies for a certain job but also allows the company to meet the government requirements for providing opportunities for those who were discriminated against in the past. Small businesses, which have less revenue and resources to work with, often find it challenging to maintain an independent footing while also complying with government regulations (Marais, 2010). The government is very serious about forcing businesses to provide opportunities for Black workers and this process creates an additional cost for all businesses.
There appears to be a disconnect not only between Western and African management ideas and styles in general but, within South Africa, also between the desire to promote traditional African concepts—such as Ubuntu—and the reality of the business world. Ubuntu, is based on a “Xhosa proverb: Umuntu ungumntu ngabanye abantu: a person is a person through other people” (Louw & Jackson, 2011, p. 12). This is a concept that is Afro-centric in nature and establishes specific methods of dealing with others in the business and management context.
In the United States, human resource management is typically focused on utilizing people in a way that achieves the goals of the organization, without necessarily considering them as individuals with specific needs. Conversely, a more humanistic approach—as represented by Ubuntu—is concerned with the value of each individual and how they create a cohesive whole (Jackson & Schuler, 2011). Any business that is contemplating international operations needs to be aware of the contrasting styles of management that exist in other countries. Therefore, American companies looking to enter South Africa are interested in how businesses function, and are managed, in that country in order to achieve their long-term financial goals (Gupta, 2011). Particularly, a company needs to know if the management style of South African businesses is significantly different from that of American businesses in a similar sector.
The Afro-centric management style is certainly something that many South African companies strive to project. But there is often a divergence between how managers might prefer to act based on culture (such as the concept of Ubuntu) and the actuality of the business operation (Boessenkool & van Rinsum, 2007). An additional factor which may thwart the efforts of African managers to apply a truly ‘African’ approach to management is a lack of historical precedent for such a practice. Indeed, while managers may have a desire to value the individual, the complex reality of operating a business at a high level may limit the ability to apply such values to a culturally diverse workforce. In many ways, American companies have an advantage in this regard since managing multicultural workplaces has been commonplace for much longer than in South Africa. Multiculturalism brings with it a complex set of dynamics and managers must learn to provide equal opportunities for all individuals from all cultures as part of the fundamental operations of the business (Gupta, 2011).
Management in South Africa is still, in many cases, learning how to incorporate its own cultural leanings into a system that also recognizes and values the culture of others within the organization. Much of this effort is directed toward fine-tuning concepts of power and control (Jackson & Schuler, 2011). South African businesses have an obligation legally to comply with established requirements designed to support and promote diversity. Thus, the country faces many additional elements that other countries have long since dealt with, including equity in employment and the proper exercise of power (Fatoki & Chiliya, 2012).
Approaches to managing multiculturalism. The information discussed so far regarding South African culture reveals the many contrasts that exist between the underlying values of society and how management is actually practiced in most cases. This contrast also creates a challenge for many businesses to accurately address the issues of power and hierarchies in management, especially how these relate to managing diversity (Louw & Jackson, 2008). It is impossible to fully appreciate a diverse culture unless time is taken to discuss the types of competencies that are required to properly manage in a multicultural environment (Cheung, van de Vijver & Leong, 2011). While there is still much progress to be made, it is clear that most managers in South Africa understand the need to adapt current practices to be more receptive to diversity and even take lessons from the West where applicable (Louw & Jackson, 2008).
Managing multiculturalism in the workplace is often addressed from two contrasting perspectives: maximalist and minimalist (Louw & Jackson, 2008). The maximalist approach attempts to describe the main elements of a culture, and is represented by the work undertaken by Hofstede (1980, 1991). While he acknowledged that variations exist and his work expressed general concepts rather than hard scientific facts, such a maximalist focus is very valuable for understanding other cultures and, therefore, being able to manage a multicultural workforce and employ ethics for professionals. One of the goals of managers in South Africa is to move toward a more Afro-centric approach to management since that will more accurately represent the cultural values of the majority (Mkabela, 2005; Zoogah, 2008). A minimalist approach views culture as something more internal, or a subconscious part of a person’s identity. While this may be true to some extent, the maximalist approach appears more suited to the needs of South African management.
Stereotypes, which are simply generalized descriptions of groups of people, may be considered negative or positive depending on the context of the assessments. The successful manager of a multicultural workforce avoids negative stereotypes, while utilizing the positive elements in able to more accurately understand the cultures of other groups (Jackson & Schuler, 2011). Multiculturalism, therefore, is a positive tool used to improve relationships in a specific environment (Gelfand, Erez & Aycan, 2007). It is also important for management to allow and encourage the members of all cultures to make positive contributions to the success of the organization (Jackson & Schuler, 2011). Importantly, South African managers must first fully appreciate and value their own culture and be aware of how it influences their decisions and interactions with others of different cultures.
American companies with a desire to engage in business with South African markets need to develop a thorough understanding of that country’s culture and how it affects society as a whole and business operations in particular. Knowledge of the country’s culture can allow a company to more easily integrate its operations with a South African counterpart (such as through a merger or acquisition) or to simply adapt its product or services to the needs of the country’s consumers. Of course, the most important element that must be understood is how the legacy of Apartheid impacts the current business environment (Cheung et al., 2011). Additionally, sensitivity to the country’s colonial past and how that relates to the way business and management operates also needs to be applied in any business dealings (Luthans et al., 2004). In order to provide American companies with a framework for understanding South African culture and its influence on business, the following section provides a SWOT analysis of that country.
National strengths that may affect an American enterprise. South Africa is a highly industrialized nation and also represents the continent’s largest economy (World Data Bank, 2013). The economy is performing well and is “growing by a solid 4.8% in 2012, having achieved an average growth rate of 5.5% over the past ten years” (Lings, 2013). South Africa has a dynamic stock exchange and it also possesses an infrastructure (including an international airport and port facilities) that allows the country to engage in extensive international trade (National Planning Commission, n.d.). The country is also affiliated with numerous trade groups, such as the “AGOA, EU Free Trade Agreement, WTO membership, SADC membership, Motor Industry Development Programme (MIDP); Sound and efficient financial services and ICT sector” (International Trade Centre, n.d.).
National weaknesses that may affect an American enterprise. The government is fairly new and relatively inexperienced in dealing with international relations, including negotiation of new trade agreements. In spite of progress, the country still experiences ethnic and racial divisions which can be problematic. Many South Africans are hardworking, but there is also a lack of creativity and a relatively low production level among many workers. From a global economic standpoint, the country’s currency is unstable. Furthermore, the marginalization of racial and ethnic groups has resulted in the development of a ‘second economy’ which operates outside the South African tax base (Ghosh, 2013). There is a lack of competitive sectors, both from a service and industrial perspective, in part due to shortages of skilled labor.
National opportunities that may affect an American enterprise. There are few restrictions placed on doing business in South Africa and licenses and permits are relatively inexpensive. The number of Foreign Direct Investment (FDI) projects in South Africa has increased rapidly in recent years (Wocke & Sing, 2013). There has been an astounding influx of Chinese investment in African countries. FIFA allowing South Africa to host the World Cup of soccer in 2010 was a signal to the international community that the country was a stable place to conduct business. The banking system in the country (and the services it provides) is considered among the best in the region. The country has also developed initiatives designed to encourage an increase in the number of college graduates, especially in critical fields such as science, math, and information technology (Bilbao-Osorio, Dutta & Lanvin, 2013). Currently, South Africa is one of the largest consumers of IT products and services in the world (Bilbao-Osorio et al., 2013).
National threats that may affect an American enterprise. According to the IMF, “The authorities need to calibrate their policy response in order to maintain price and external stability, mitigate systemic risks, and make progress on structural reforms to remove long-standing barriers to growth and employment” (Ramcharan, 2009). In many ways, the economy of South Africa shares elements of the world’s major economic powers while also exhibiting characteristics of some third-world economies. For example, the inheritance of Apartheid includes half of the population living below poverty level and an unemployment rate of nearly a quarter of the population (24.7%) (Taborda, 2013). The IMF is concerned about these numbers and considers these to be the most critical issues facing South Africa for the future (Ramcharan, 2009).
Studies across national and cultural boundaries confirm the importance of an organization’s ability to adapt its culture to that of society, including operations and human resources (Cheung et al., 2011; de Waal & Chipeta, 2013). One of the lasting legacies of the studies of Hofstede (1980) is the ability of current managers to relate their culture and that of the society they live in to the values of the company they preside over. Multinational companies in particular understand the critical nature of learning how to effectively adapt to the cultural requirements of any country they do business in, since this factor alone increases the ability for a company to perform at a higher level of competency (Gupta, 2011).
Balancing expectations. Since most South African business adopt a Western style of management, it is relatively easy for American companies to adapt to the business environment (Louw & Jackson, 2008). At the same time, it may benefit American companies to promote a more Afro-centric management approach as this may stimulate South African management to feel freer to express their cultural leanings, such as the practice of Ubuntu. This also serves to show the host country that an American company appreciates and values the South African culture (Benjamin, Bhorat & Cheadle, 2010). In general, an American company needs to understand that what they may expect from management styles in South Africa (based on an understanding of Ubuntu, for example) and what is actually practiced may not be the same. However, since the country is slowly moving in that direction, a company does well to be prepared (Nussbaum, 2004).
While the goal of an American business management group entering into negotiations with a South African counterpart is to develop a trusted relationship, this is not always necessary at the early stages of the negotiations. For some managers in South Africa, the primary goal is simply to become acquainted so they can decide if they want to become partners or associates (Benjamin et al., 2010). In other cases, Black South African as well as many Afrikaners highly value the relationship-building process and expect a considerable level of trust between parties prior to entering into any business relationship (Katz, 2008). A deal that promises a quick financial reward is not as attractive to South African businessmen as the deal that promises an ability to accomplish mutual long-term objectives. An additional difference that must be expected in South African business is the contrasting management and business approaches between rural and urban parts of the country (Geldenhuys, 2012).
Understanding characteristics of South African businessmen. South African businessmen are typically very concerned about having a sufficient amount of detailed information prior to committing to any deal. This may seem time consuming to an American businessman, but it is a critical way to build trust between the parties (Katz, 2008). However, in some cases, a South African businessman may be much more interested in obtaining information from the foreign counterpart than providing all the necessary details of his or her operation. Typically though, negotiations will move along smoothly as long as there is an apparent willingness to be transparent and avoid holding back critical information (Irwin, 2011).
Cultural permeates many aspects of business deals in South Africa. For example, British South Africans are not likely to bargain extensively simply to reach an agreement, but may place a straightforward offer on the table and expect it to be either accepted or rejected (Katz, 2008). While some negotiations may follow, the original offer made by these businessmen will rarely be altered much. On the other hand, Afrikaners (who also claim to dislike bargaining) are more than willing to make additional follow-up offers to make sure they obtain the best deal possible. Finally, Black South Africans are the most willing to negotiate and often change the terms of an original proposal significantly in order to close the deal (Katz, 2008).
In South Africa, there are no standard requirements for a written contract. As a result, the parties need to agree on what level of detail is required or expected, since this may range from extremely lengthy and detailed to very basic and straightforward. In either case, it is imperative that any contract specifically identifies what is expected of both entities, leaving no room for interpretation or possible confusion at a later time (Katz, 2008). As a result of their culture, South Africans believe that the commitment of the two parties is what cements an agreement, rather than the simple act of signing a name to a document. This represents a belief in ethical behavior in business dealings, and is something that most successful American companies expect from others and practice domestically (Lumsden & Fatoki, 2013). Of course, regardless of what country an American business is operating in, legal counsel is always required to confirm the wording and terms of the agreement.
It is clearly important for American multinational companies to have an open view of other cultures, such as in South Africa, rather than trying to make all decisions based solely on their own cultural norms. This greater sensitivity to cultural divergence, while not guaranteeing success of joint ventures, acquisitions, or other forms of involvement in non-domestic business ventures, does enhance the possibility of success. Many successful multinational companies (including those in the United States) have learned that incorporating individuals from the targeted country—who are very familiar with the country’s cultural elements—is one step that can be taken to improve the chances of a beneficial business entry into a foreign country. In fact, an expatriate presence in a multinational company may increase the effectiveness of subsidiaries located in the home country of those expatriates.
The strong differences between businessmen and companies from different countries in the behavior of their managers rise in part from national cultural values. At the same time, it is often difficult for outside companies to determine the true influence of culture on multinational firms. The impact of culture was seen in several different areas in South Africa from this review, especially in areas related to Hofstede’s dimensions of culture. This paper revealed that South Africans are individualistic in nature, willing to accept a hierarchical structure in business, place emphasis on competition and performance, and display a need for established rules (which often results in a resistance to innovation). In addition, the cultural concept of Ubuntu, which is the basis for an Afro-centric management style, is valued in the country but not often practiced in business. All of these factors must be taken into consideration by American companies seeking to do business in South Africa, as they may be positive indicators for some companies but negative signs for others.
This analysis also indicates that the values, attitudes and beliefs of the members of a company will play an important part in molding organizational structure. Companies that specialize in production, such as manufacturers, usually have a precisely defined and formalized grouping of activities with a much firmer observance of hierarchy, while other businesses are not as rigid. Obviously, the national culture of the company has a great deal of influence on the ultimate organizational culture. In that regard, it is necessary for the management of any American company to adapt to the culture of their South African counterpart. While such a process can often prove to be a challenge, for American companies willing to be adaptable, it will be beneficial for both parties involved.
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