South Africa's firms trigger backlash in region

When South African firms started moving into Zambia a decade ago, following apartheid's demise, they began to change the face of business in this impoverished nation of 11 million.

Middle-class professionals in Lusaka, Zambia's quiet capital, no longer had to travel to Johannesburg or Harare to buy modern electronic equipment, and poor Zambians living in Lusaka's gritty "compounds" saw prices for bread and other staples become more affordable as South African supermarkets put pressure on local grocers. Modern banking facilities were introduced along with new jobs and concepts like the money-back guarantee.

These days, Shoprite and Pep's retail outlets, Debonair's Pizza, Nando's and MTN cell-phone shops – all South African-owned – dominate Lusaka, doing brisk business just blocks from family-owned shops hawking secondhand clothes and traditional chitenge cloth.

But corporate South Africa's surge into Zambia – a trend mirrored in other cities throughout the region – has also fueled perceptions that South African businesses – with the tacit approval of their government – are intent on a modern-day recolonization of the continent.

"South Africa has now become the most important investor in the rest of the continent," says Stef Coetzee, a professor at the University of Stellenbosch Business School outside Cape Town, South Africa. "One of the dangers that we have is another form of colonialism in Africa. South Africa is small in global terms ... but it's huge in African terms."

South African foreign assets throughout Africa totaled about $5.1 billion in 2004, spanning a wide range of sectors from telecommunications to mining, according to the South African Institute of International Affairs, a Johannesburg-based think tank.

South Africa accounts for about 25 percent of Africa's total GDP and has produced striking trade balances with less developed African economies – a concern to regional leaders.

In Zambia, South Africa has supplanted former colonial power Britain as the country's largest foreign investor. South Africans have poured about $300 million into Zambia since 1993, according to the Zambia Investment Centre. In 2005, Zambia held a trade deficit of more than $600 million with South Africa. Moreover, nearly half of Zambia's imports are South African.

"The concern is that we're going to become an extra province of South Africa in terms of the export relationship," says Bruce Imboela, a development studies professor at the University of Zambia.

While many here resent what they see as South Africa's economic hegemony, South African business – and the tax revenue it brings – is hard to resist for many cash-strapped African governments, like that of Zambian President Levy Mwanawasa, who is seeking reelection this Thursday and has seen the behavior of foreign investors (mainly Chinese) emerge as a controversial campaign issue.

Mr. Mwanawasa, who has pursued free-trade and anticorruption policies, is being challenged by populist leader Michael Sata, who complains that foreign investment isn't doing much to benefit the people of Zambia. In a country where unemployment is about 50 percent and more than 60 percent live on less than a dollar a day, Mr. Sata's protectionist stance resonates. And although he has focused blame on Chinese investment during his campaign, the arguments can extend to the burgeoning trade from South African firms.

Robert Chiwala, marketing manager at a Lusaka water-pump company, notes that South Africans have spurred local businesses to become more innovative – but often crowd out Zambian products in favor of South African imports. "It was nice having stuff on the shelves. Lots of stuff – variety. But at the same time, when our local goods were not being accepted on the shelves, we felt the pinch," Mr. Chiwala says, noting that some of his countrymen "feel abused, in some instances."

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