Introduction: A new regional moment¹

The end of official apartheid in South Africa in 1994 opened up a new regional moment and space, where the "definition of the possible" for Southern Africa changed and South Africa was reintegrated into the region (Simon 2001). 

South Africa’s democratic transition conferred a new respectability on the region's policies and projects, catapulting South Africa from pariah to regional liberator. While President Thabo Mbeki declared his "African Renaissance" in the early 1990s, many Southern African countries deepened economic liberalisation and privatisation and released state enterprises for sale to mainly private, foreign investors (BusinessMap SA 2000, 2001, 2003, 2004; Soderbaum 2002; Daniel, Habib and Southall 2003; Miller 2005; UNCTAD World Report 2005). Restless South African retail businesses that were increasingly constrained by an oversupplied domestic market with limited profit margins were keen to explore new possibilities for accumulation in neighbouring countries and the rest of Africa.

"Restless South African retail businesses that were increasingly constrained by an oversupplied domestic market with limited profit margins were keen to explore new possibilities for accumulation in neighbouring countries and the rest of Africa."

The expansion of South African multinationals into other parts of Africa provided opportunities for new regional solidarities. In the retailing sector, for example, the appearance of large scale investments via shopping malls and food retailing chains encouraged different forms of consumption and raised a new set of positive expectations about South Africa’s regional development role. However, the process of regional re-engagement also led to many unintended and unanticipated outcomes.

Regional retail patterns

The history of cross-border retailing goes back to the frontier activities of European traders from the 19th century. For more than a century, colonial traders and wholesalers generated profits through an African expansion in tradable food and goods that both widened spheres of capitalist accumulation and intensified patterns of local exploitation.

Like other less-developed regions, retailing in Southern Africa is extremely diversified, ranging from informal street traders to small outlets with low turnover to larger shopping complexes (Findlay, Paddison and Dawson 1990). Limited purchasing power, low outreach and poor infrastructure are some of the common factors that have restricted retailing growth and produced the clustering of retail infrastructure, typically in terms of an urban-rural divide. In poor countries like Zambia, post-independence nationalisation of most foreign businesses, including retail, failed to restructure the stark geography of retail development, which had been typically racialised on white-black divides under colonial constraints. Nationalised production hampered commodity production and distribution, reducing much of the retail sector to a stuttering system of tatty commodities (Ariyo and Afeikhena 1999).

In apartheid South Africa, lucrative central business district operations were reserved for European and white South African companies that targeted white consumers. In the mid-1960s, South African retailers studied the Canadian model and saw the benefits of drawing a large number of consumers to the same place, where they became a critical shopping mass. The target areas of new shopping centres were white suburbs. White suburban shopping centres became centres for new accumulation in the 1970s, and soon profit-hunting financial institutions fuelled the rapid development of mega-shopping malls. Meanwhile retail accumulation in the black townships was stunted, and the growing underdevelopment of these areas restricted their market capacity. The poverty of black township residents and the lack of infrastructure development made these areas less attractive to retail property developers.

Successive phases of retail development in South Africa have agglomerated resources, infrastructure, technical know-how and capital for reinvestment within powerful corporate entities. Further consolidation of the industry over the past few years – for example, Shoprite’s acquisition of OK – has narrowed competition to three large players: Shoprite, Pick 'n Pay and Spar (part of Tiger Foods). This narrowing of competition has been a key factor pushing retailers into the region.

"About four times more is exported from South Africa to other parts of the continent than is imported... (This) surge of South African capital into Africa was an unanticipated outcome of a democratic South Africa."

Since democratic elections in 1994, the economic expansion of South African retailing and wholesale multinationals into Africa has increased significantly. About four times more is exported from South Africa to other parts of the continent than is imported. South African investment has increased from R9bn to R30bn between 1997 and 2002. While many observers expected stronger economic links between South Africa and Africa as one consequence of democratic transition, the surge of South African capital into Africa was an unanticipated outcome of a democratic South Africa.

In the last decade, new shopping malls have been opened in at least 15 African cities where none previously existed. While shopping malls and department stores are not a new phenomenon in Africa, the new shopping centres have extended the reach of such malls in the continent. In the midst of Africa’s economic and social decline, the shopping mall materialises with all the glitz of a Manhattan mall - marble-tiled entrances, bright neon lights, wide aisles and thousands of new commodities from which to choose. These malls follow the contours of uneven regional development, creating sites of "lumpy capitalism" where dynamism and change co-exist with stagnation (Cooper, 2000).

In the investment-starved countries of the region, the significance of new capital is  enormous in social terms. New ventures often represent the only sites of formal sector job opportunities and careers, albeit limited, against the background of persistent formal sector employment decline. For consumers, new "bricks and mortar" retail investments represent for many a substantial transformation, bringing in a consumer-friendly environment and expanded consumer choices. Evidence suggests that comparatively small investments are having a disproportionately qualitative impact.

South African companies have a high level of social visibility, particularly in the retail and services sectors, and contribute to changing consumption patterns and social imagination – even for those who are unable to afford newly available products.

"In the investment-starved countries of the region... South African companies have a high level of social visibility, particularly in the retail and services sectors, and contribute to changing consumption patterns and social imagination – even for those who are unable to afford newly available products."

Shoprite in Africa

The Shoprite company grew from a small chain of supermarkets in the Cape area of South Africa in the 1960s. Shoprite’s philosophy was to operate a chain of no-frills supermarkets where customers could pay the lowest prices for their basic food and household requirements. The company expanded rapidly. More recently, however, Shoprite found itself losing market share to large competitors like Pick 'n Pay and Spar. With a strategy of supplying  a customer base in the broad middle to lower end of the market  and with previous presence on the ground in Southern Africa through an associated retail clothing chain, Shoprite was in an excellent position to expand into the wider African market. Armed with surplus capital, Shoprite joined several other large South African retailers – including Game, Steers, Debonairs, Engen, ProFurn, the J.D. Group and Wimpy – and shifted its investment focus into the region. In 1999 alone, R70 million was earmarked for retail investment in Africa, reaching as far as Egypt. (www.shoprite.co.za).

The Shoprite group of companies is now Africa’s largest food retailer, operating 827 outlets in 17 countries across the continent, the Indian Ocean islands and southern Asia, with a reported turnover of R16, 621 billion for the 26 weeks ended December 2005. Shoprite has stores in Angola, Botswana, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Swaziland, Zambia and Zimbabwe in Southern Africa. In East Africa it has stores in Tanzania and Uganda, in North Africa in Egypt and in West Africa in Ghana. It has also opened a store in Mumbai, India, its first foreign operation beyond Africa.

Shoprite models its cross-border investments on its shopping centre developments in South Africa, featuring a Shoprite supermarket as the anchor store. These shopping malls change  local consumption and urban environments dramatically. Locally-owned internet stores and music outlets often make up part of this cluster. In a number of cases, the Shoprite Group establishes partnerships with a local group.

The expanding African market is absorbing surplus capital in South Africa, surplus labour in the host countries, and commodity surpluses from South Africa, expanding the manufacture of goods inside South Africa. South African companies are benefiting from regional economies of scale, rather than just national economies. Regional distribution chains centralised in South Africa also expand the number of outlets supplied by South Africa. This marks a crucial step in South Africa’s global expansion. But at what cost – and for whom?

Shoprite’s Zambia shopping spree

Shoprite’s expansion plan into Zambia started in 1995 with the purchase of six buildings in a privatization deal.² By 1996, a full chain of state-owned retail stores were under Shoprite control. The first refurbished Shoprite retail store opened in Cairo Road, Lusaka. A further two stores opened later that year in Ndola and Kitwe. Then, in a short time, four stores were opened in Kabwe, Chingola, Mufulira and Livingstone and between 1997 and 1999 a further six stores opened.

Shoprite Zambia currently operates 18 retail supermarkets (trading as "Africa Supermarkets") together with seven Hungry Lion outlets, Shoprite’s fast food initiative. Freshmark, the company’s distributor of fresh fruit and vegetables, also operates depots in Lusaka and Kitwe. With 39 percent of the domestic retail market (Zambia Investment Centre), it is the largest retailer in the Zambian market, ahead of other South African retailers such as Ackermans, Smart Centre and Kafko, Pep Stores and Africa Retail Properties.

The Manda Hill Complex in Lusaka is Shoprite’s centrepiece Zambian investment. The mall cost US$20m and covers 22 260 sq m, of which more than 20 percent is taken up by the Shoprite store. Eighty percent of the complex’s financing came through Shoprite, in tandem with a 20 percent Zambian junior partner, leveraged on anchor store installations by Shoprite and South Africa-based Game (a general merchandising retail multinational). In total the complex hosts 56 stores, most of them Zambian-owned and managed.

The impact of Shoprite in Zambia has been as diverse as the various urban and rural settings in which it is situated. A highly ambiguous set of responses from local consumers, workers and business-people has emerged. Many consumers have welcomed the availability of a greater variety of higher quality goods, as well as the presence of more modern and efficient shopping facilities. Local informal market retailers and rural traders have drawn heavily on Shoprite as a wholesale supplier, and at least one Lusaka store has been converted mostly into a wholesale operation in response. At the same time, much of the product line in Shoprite stores is beyond the purchasing power of the urban poor, and informal sector producers have often experienced displacement in local markets for basic foodstuffs.

"The impact of Shoprite in Zambia has been as diverse as the various urban and rural settings in which it is situated. A highly ambiguous set of responses from local consumers, workers and business-people has emerged."

The potential for rising tension and hostility by consumers and producers has necessitated sensitivity by Shoprite Zambia managers to local needs and interests. Many have seen mounting pressures on Shoprite as being congruent with the company’s own official development strategy, which recognises the need for engagement with local suppliers and communities. As Shoprite’s Mission Statement proclaims:

Management’s goal is to provide all communities in Africa with food and household items in a first-world shopping environment, at the lowest prices. At the same time the Group, inextricably linked to Africa, contributes to the nurturing of stable economies and the social upliftment of its people.

Shoprite’s policy is to establish and support local supply chains. The commercial rationale is that this helps stimulate the local economy and improve Shoprite’s ability to meet specific local demands. Local supply can also reduce the in-store cost price, eliminating additional overheads such as transport, tariff and exchange-related costs. At the same time, the company’s policies emphasise the importance of supporting broad-based local economic empowerment. In practice, however, the highly centralised form of sourcing and distribution within the chain, along with weaknesses on the part of local producers in Zambia, have undermined the "fit" between foreign retailer and local suppliers.

Shoprite Zambia’s distribution is centrally organised from a mammoth 200,000 sq metre supply operation in Brackenfell, outside Cape Town. Individual outlets in Zambia are directly supplied through a system which includes web-based ordering over its intranet and the shipment of containers to specific stores. The company has eschewed the development of a trans-shipping warehouse in Lusaka in order to avoid high fuel and handling costs. Marketing manuals, human resources information, catalogues for the purchasing and marketing of goods, training schedules, internal job openings, etc., are distributed on the intranet. Stock-taking, ordering and buying are highly computerised.

The centralised form of sourcing directly affects the regional supply chain. In Zambia, in 2001, Shoprite estimated that about 65 percent of its products originated in South Africa, with some perishable items coming from Zimbabwe. In contrast, Zambian sourcing of inputs was constrained by these goods’ perceived lower quality and quantity, and the unpredictability of local supply chains. Packaging standards were also a problem for local suppliers. Local producers often used packages that were insufficiently durable, and they had low capacity to meet the Shoprite’s weighting, quality and bar-coding needs.

Case study: resistance and partnership in Chipata

In 1998, an academic at the University of Zambia sent students from the Department of Philosophy and Applied Business Ethics to conduct research in the rural town of Chipata, adjacent to Malawi and Mozambique in Zambia’s Eastern Province. Their mission was to investigate poverty among local villagers. When students interviewed farmers, they picked up on bitter complaints about Shoprite from local farmers. These farmers warned that they would burn down the company that had robbed them of their livelihoods. Shoprite had stolen their market, they alleged. Vegetables that they had regularly sold at the local town market were now being supplied from South Africa at the local Shoprite supermarket, opened in 1998. Because the Shoprite supermarket had a better distribution system and a nicer store, the farmers could not compete with this multinational. Previous sources of cash income through the sale of vegetables at the market were now disrupted and, as a result, villagers couldn’t pay for the things they needed. Their only solution was to threaten to obliterate this new supermarket that was redirecting resources away from the local farming community.

In a pre-emptive move, however, a collaborative initiative was set up in which the villagers would supply Shoprite with five agreed-upon vegetables: cabbage, green beans, onions, tomatoes and lettuce. This initiative took place under an arrangement called the Luangeni Partnership Forum. The threat of direct action was thus redirected into a joint economic initiative with Shoprite.

Background

There are eight administrative districts in the Eastern Province of Zambia. Chipata is the largest with a population of 367 539. It is 567 km from Lusaka. Access to finance is expensive and the province has a generally poor business environment. While there are few commercial farms, smallholder farmers have generated significant agribusiness, including tobacco and cotton. Estimates for annual farm incomes from the sale of cotton are more than US$15m. It is also estimated that 50 to 60 percent  of Zambia’s cotton and tobacco exports come from Eastern Province. Tourism (four national parks) and gemstone mining are the other two important sectors in the province’s economy. One of the country’s largest transporters, Sable Transport Ltd., is also based in Eastern Province.

The Eastern Province Chamber of Commerce and Industry (EPCCI) argues that goods imported from Lusaka or other countries could be produced locally. The institutional vacuum left after liberalisation also left no market infrastructure. Many intermediary functions that could aggregate and organize supplies and improve prices and productivity for producers have thus been reduced through the effects of liberalisation. Branding, promotion and certification would allow for profitable marketing of a range of agricultural products in the province, contends the proposed business plan of the EPCCI (Webber et al, 2003: p10). Key development in the province, however, would need to be addressed, namely, road infrastructure, power supply, irrigation infrastructure and communications services. So far Zamtel and Celtel have launched cellular phone services in Chipata, ZESCO has started erection of poles for more electricity supply lines, two dams have been rehabilitated and the government has released funds for repair to certain sections of the Great East Road.

The Luangeni Partnership Forum

The Luangeni Partnership Forum was formed to act as a broker between the village farmers and Shoprite. The steering committee for the Forum included two non-governmental organisations (Society for Family Health and World Vision), the Department of Agriculture and local farmers.

Initially, Shoprite management aimed to provide villagers with a local market for their produce. It had a spare venue for marketing fresh produce next to the store. Villagers were given access to this venue on Fridays and Saturdays. However, local farmers were unhappy with the situation and wanted a better link to the company. It was suggested that a relationship between Freshmark and local farmers might be the answer. Support was then given to local farmers in the form of farming methods and the provision of seeds and fertilizers. Although improvements occurred, there were still several hurdles to overcome:

• Shoprite introduced scanning in Chipata in 2004. Scanning is centralised with fixed prices. Farmer’s prices change, however, and when computers register this variance it creates administrative problems.
• Farmers were unable to compete with the prices and packaging of Shoprite.
• Farmers were unhappy with an arrangement where all the risk is put onto them for poor quality produce and produce that is returned when it is not sold.  

Local managers indicated that they continued to train villagers by explaining to them what the company’s requirements were. They also made provisions for the cleaning, processing and packaging of produce. A workshop between the key stakeholders was also attempted to address the issue of quality produce.

"Local managers indicated that they continued to train villagers by explaining to them what the company’s requirements were... Despite some positive results, the Luangeni Partnership Forum was characterised by conflict and power struggles..."

Despite some positive results, the Luangeni Partnership Forum was characterised by conflict and power struggles and showed some of the typical problems of NGO development initiatives. These include leadership problems and lack of sustainability so that when the funds are removed the initiatives struggle to survive.

Over time, half of the initial 92 farmers in the cooperative dropped out because of a lack of resources. In a follow-up research visit in January 2007, the numbers in the cooperative had grown again to 60 active members and 90 members altogether. The villagers expressed a desire that the Partnership Forum be resuscitated with the key problems identified earlier being addressed.

While the Luangeni Partnership Forum appeared a promising initiative for social dialogue, the lack of political support by key institutional actors such as the government resulted in its struggling for survival. The company’s immediate interests took precedence over the long-term goal of community sustainability. No additional resources are being given to make sure this initiative is sustainable.

Lessons Learned

Local informants including the manager and the agricultural extension officer credited the students and the academics with this initiative; however, senior Shoprite management claimed it as their own. This rival claim for ownership of the Partnership Forum is indicative of the importance to Shoprite of demonstrating a commitment to fostering the development of local suppliers. Although a stalemate was reached, due in part to incompatibilities between the highly organised and efficient culture of multinationals and the more time-consuming methods of communication amongst local villagers, the initiative is a good example of the potential for a system of free trade labels. It demonstrates some of the dynamics and challenges encountered by the company and local communities in building partnerships.

While Shoprite's management in Zambia emphasises the need for efficiency at the level of retailing, the company’s policy statement emphasises the importance of supporting broad-based local economic empowerment. If such support only benefits organised and urban black elites and does not assist the development of local farmers, then the company’s policy objectives are not being attained in relation to less developed communities.

Conclusion  

Strong South African multinationals such as Shoprite need to make a political and practical commitment to local farmers to assist them with effective supply of goods to the company. This assistance needs to come from both national and head office levels of Shoprite.

Resources have to be designated for training and development of local communities to improve the efficiency of production amongst the villagers. Local farmers, for example, need to be accommodated in Shoprite’s inventory system and local managers trained in this aspect. While Shoprite demonstrates in some instances (such as the Luangeni Partnership Forum) that the company can respond to local initiatives, rhetorical support for local suppliers needs to go together with the necessary resources. Good communication mechanisms need to be encouraged in building relationships with local communities. This may include the involvement of government and non-governmental organizations to restore support for local farmers removed by neo-liberal economic restructuring.

The new regional imaginaries that emerge out of the new shopping malls introduce new possibilities and contradictions. Growing regional contradictions are evident in the disputes between the multinational South African retail company, Shoprite, and its foreign workplaces (Miller, 2005). If the relations between South African companies, on the one hand, and host country workers or consumers, on the other hand, are fractious, this will undermine South Africa’s proclaimed leadership role in post-Apartheid Southern Africa.

"Charges of ‘Yankees of Africa’ and South African ‘sub-imperialism’ point to an unanticipated fault-line of political struggle in Southern Africa – a new tension between democratic South Africa and the countries and working classes who were to benefit from this political unity at the regional level."

Charges of "Yankees of Africa" and South African "sub-imperialism" point to an unanticipated fault-line of political struggle in Southern Africa – a new tension between democratic South Africa and the countries and working classes who were to benefit from this political unity at the regional level. A new imprint has been left on the continent: one that potentially reproduces the global relations of Empire at the regional level. If South Africa is perceived by other Southern African countries as the primary beneficiary of post-apartheid regional economic development, with deepened regional inequality as the outcome of South Africa’s expansion, new regional resistance become both possible and likely. New cases of local resistance, such as that in Chipata, point to new regional claims in the demands of local communities, where South Africa becomes the focal point for new regional demands.

Notes:

1. This is a shortened version of an article that will appear in a forthcoming issue of Labour, Capital and Society.

2. The Zambian government established a privatisation agency to oversee the sale of state-owned enterprises (SOEs). The Zambia Privatisation Agency (ZPA) was established under the Privatisation Act of 1992. The ZPA carried out the privatisation of dairy boards, parks, milling factories, sawmill assets, hotels and wholesalers. By the end of 2003, 258 out of 282 parastatals had been privatised. As part of this privatisation process, the national state wholesale stores were sold off in a deal with South Africa’s Shoprite Holdings in 1996.

(Dr Darlene Miller is a Senior Lecturer at Rhodes University in Grahamstown, South Africa.)

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"While the structural adjustment programme in Zambia that underpinned the dairy and retail privatisations has been widely criticized ... the case of the dairy sector raises important questions around strategies for engaging FDI."

Are there ways of “disciplining” FDI to ensure local production and consumption benefits – even in poorly resourced countries like Zambia? Can foreign investment be channelled to fuel local development? Are local accountability and inclusion consistent with commercial viability? In each case, the Zambia dairy sector raises new and perhaps unexpected answers to old questions.

Zambia’s Dairy Sector

National dairy sectors are typically organised around integrated primary production, milk processing and commodity retailing chains. In Zambia, commercial components of the industry have been in place since the 1920s, when a small group of white settler farmers introduced dairy cows to the country. A modest dairy industry was established by independence in 1964. Following independence, the departure of many white dairy producers and new primary production development schemes instituted by the Zambian government, the sector was substantially restructured. The results were distinctly mixed.

A decline in commercial milk production from the mid-1960s into the 1970s coincided with increases in dairy consumption, especially in the growing urban centres of Lusaka, Livingstone and Copperbelt towns like Kitwe and Ndola.  Government responded by establishing parastatal dairy operations on former white settler owned farms.  Production on these farms, heavily subsidised by the state, began in the late 1960s. Within a decade they were supplying over 30 percent of processed milk. However production bottlenecks limited further expansion, and the country remained dependent on imports to meet local consumption needs.

Meanwhile, the government launched various donor-backed schemes to increase milk production through encouragement of smallholder farming. A Dairy Settlement Scheme saw the identification of land in peri-urban areas suitable for dairy cows and the training of farmers in dairy husbandry and management. A Rural Milk Production Scheme, supported by the World Food Programme, involved the identification of smallholder farmers, who were provided with cows on loan and support in marketing milk; and the Smallholder Dairy Development Project, a World Bank funded initiative, aimed at establishing 1800 farmers with soft loans for the purchase of animals and equipment, producing milk for the government’s own Dairy Produce Board (DPB).

These schemes were largely unsuccessful from the 1970s, and very little of the total milk processed in Zambia today originates from these initiatives. The reasons for failure were characteristic of such approaches: insufficient extension work around dairy cattle management, a complete absence of financial management support to individual beneficiaries, and continuing dependence on external inputs like manufactured feed (which exposed farmers to volatile swings in exchange rates), all contributed to stagnation in the smallholder sector. Meanwhile the DPB, which controlled milk processing from the mid 1960s and had several processing plants across the country, was afflicted by financial and management problems. Distribution chains, too, were inefficient and often unprofitable. Growing demand moved ahead of local production and supply chains.

"(Government dairy) schemes were largely unsuccessful from the 1970s... Growing demand moved ahead of local production and supply chains."

Restructuring through Privatisation

In the 1990s, Zambia’s embarkation on a wide-ranging structural adjustment programme had a dramatic impact on the dairy sector. Central links in the parastatals commodity chain, including the DPB and the dominant state-owned national supermarket chain, were earmarked for restructuring and privatisation. The prospect of a sudden influx of dairy sector FDI amid the loosening of import controls on commodities raised fears by some that local production would be effectively marginalised, a new case of “deindustrialisation” by adjustment. The reality would be less bleak and more ambiguous, with some positive signs – however unexpected – of local development in the sector.

The cornerstone of the parastatal dairy sector, the DPB, was privatised in the mid 1990s when its majority stake was sold to South African-based Bonnita for US$800,000. Zambian commercial farmers were guaranteed 28 percent of the shares in the new company, and Bonnita committed to retaining the DPB’s 130 employees.  In the late 1990s, Bonnita South Africa was itself bought by Parmalat, the Italian dairy multinational, making Parmalat the new direct investor in Zambia via South Africa.

Parmalat remains the dominant player and now processes almost 50 percent of the raw milk produced in Zambia by commercial farmers and smallholders. There are at least 30 other smaller processing plants that are involved in a range of fresh and processed dairy products, with several of these linked to local dairy cattle farms. One, the Livingstone-based Finta Dairy, has processing capacity to match Parmalat’s but its production output is far lower, with its efforts focused on capital intensive long-life milk products – much of which relies on imported powdered milk inputs.

In the same period as the DPB deal, government privatised its national grocery chain, selling its 17 store network in 1996 to South Africa’s multinational supermarket corporation, Shoprite. As a parastatal, the chain had been poorly managed and resourced, and its shops were mostly uncompetitive and loss-making. As a result, Shoprite was able to negotiate substantial concessions during the privatisation process, including tax holidays and customs waivers, which benefited the new owner over competitors – including the South African franchised Spar chain (currently has 4 stores but plans for 30), the local Melissa network and many independent grocers (see Table below). In the context of experiences in other countries, where the influx of multinational retail businesses had led to restructuring and decimation of local food commodity chains, there was considerable anxiety about the impact of the Shoprite privatisation on domestic dairy farmers, processors and competing retail businesses.

New Dynamics Emerge

The arrival of Parmalat and Shoprite as dominant players in two key components of the dairy commodity chain, processing and retail, fundamentally changed the Zambian dairy industry – but without shaping it entirely to the interests of the new market leaders. Confronted by international and domestic production constraints, local competition, and rising local demands for linkages with local production and distribution networks, the FDI ventures were forced to engage with the complex changing realities of the local business terrain.

One reality involves the sources of local primary production. Parmalat, the country’s largest milk processor, receives 70% of its raw milk from large commercial farmers. But it also processes milk from approximately 400 smallholder farmers who are organised into cooperatives, or who supply the processor individually. Indeed the number of larger commercial farmers has remained static or has declined since the early 1990s, while the amount of milk produced and processed by smallholders has been increasing. Faced with rising demand, the dairy processing sector – including smaller local players in Zambia – now sees a revitalised smallholder producer sector as the only viable way of increasing raw milk production in the medium term. Instead of marginalisation of small-scale dairy producers, Zambia has seen a different dynamic: in the case of Parmalat, the company (in cooperation with the Zambian government) is consolidating sourcing strategies from smallholders by investing in infrastructure to assist them in improving the volumes and quality of raw milk.  Support is also being provided for the transportation and collection of raw milk, which historically has been a serious problem for smallholders.

"Instead of marginalisation of small-scale dairy producers, Zambia has seen a different dynamic: ... investing in infrastructure to assist them in improving the volumes and quality of raw milk."

Further down the production chain, Parmalat’s linkage strategies have led to improvements in the quality and variety of dairy products overall, with positive effects on local processors and the growth of the industry. A range of small scale operations making a variety of dairy products, including butter, cheese, yoghurt and long life milk have survived by improving production standards and better matching the needs of a growing local market. Fresh products like milk and yoghurt, which have a shorter shelf life and are more costly to transport, have provided clear advantages to locally based processors. While Zambian retailers and dairy processors continue to source cheese, butter and other processed products from South Africa and further afield, this practice is currently the subject of intense debate within the national Dairy Processors’ Association. The association has been increasingly successful in limiting dairy imports particularly when they can be sourced locally.

The changing terrain of retailing has also had important knock-on effects in the dairy industry. There are four main retailing channels for dairy products in Zambia:  large and medium supermarket chains, smaller retail shops mostly in urban compounds and smaller towns, Parmalat-owned metal shipping containers in urban compounds, and informal vendors.  Additionally many processors sell to wholesalers who in turn sell to smaller retail shops and informal vendors around the country.  

Shoprite, the country’s largest retailer, sources many dairy products locally— fresh milk, yoghurt, and some cheese and butter (though it also continues to import processed items from South Africa, Ireland and Denmark). However most of its locally sourced goods come from large scale processors, including Parmalat and Finta. Shoprite also has a “strategic partnership” with Zambeef (a medium-sized local producer) to run its in-store butcheries, and it stocks Zambeef’s butter and fresh milk.  Importantly, the partnership ensures that Shoprite does not compete directly with Zambeef’s own network of retail shops.

For the most part, local smaller processors have been excluded from Shoprite’s supply chain by the latter’s high sourcing standards for product volumes, reliability, and quality. Shoprite generally requires processors to supply all of its branches, and small-scale processors generally cannot meet these volume requirements; nor do they have the transport infrastructure to deliver to all branches, or the capacity to meet the extended credit cycle which Shoprite often expects of suppliers. In addition, Shoprite also insists on standards of quality, packaging and presentation that are uneconomic for smaller processors. For example, having invested heavily in refrigeration capacity, the chain demands ten-day shelf life of its fresh milk, where smaller processors may have only one-day shelf lives. High standards around weight packaging and labelling, including automatic bar coding and sell/buy date information, also pose challenges for small scale suppliers.

Other dairy retailers, like South African franchised Spar and the Zambian-owned Melissa chain,  have been more accessible to smaller processors. Evidence suggests that the growth of dairy retail competition is forcing Shoprite to be more flexible in its product sourcing, and rethink strategic links with suppliers. Spar stores do not buy dairy products centrally, and evidence suggests that this has enabled Spar to source from some smaller milk and cheese processors who could not meet Shoprite’s volume or quality standards. The Melissa chain sources from large and small local and international suppliers depending on price.  While it has short term and sometimes erratic sourcing arrangements with suppliers, it too serves as an alternative client in a growing market. So do smaller independent retail stores, often located in compounds and small towns where consumer markets are competitive, highly price sensitive and not easily reached by the bigger chains and stores. Parmalat also has its own distribution networks of metal shipping containers in compounds.  The company appoints agents who sell the milk, and Parmalat owns the containers.  The agents are paid by commission on the amount of milk sold. Smaller processors who focus mainly on producing the least capital intensive products, like yoghurt and sachets of milk, often use mobile vendors to sell their products on the street in compounds.

Sub-imperialism or Something Else?

While it is clear that recent South African investments have inspired new dynamics in the Zambian dairy sector, their implication for national development, local businesses and ordinary Zambian consumers is open to debate. But the argument that larger commodity-focused FDI brings with it destructive “sub-imperial” strategies for displacing local producers – a view associated with sub-imperialism – does not adequately explain Zambian dairy dynamics. Instead, the last decade demonstrates not only the complexity of production restructuring in practice, but also the opportunities for host countries to discipline incoming foreign investors. While the dairy sector has specific dynamics that facilitate constructive interaction with external companies, the Zambian case also provides broader lessons about the “politics of the possible” for holding FDI accountable by local states.

"While the dairy sector has specific dynamics that facilitate constructive interaction with external companies, the Zambian case also provides broader lessons about the ‘politics of the possible’ for holding FDI accountable by local states."

In Zambia, the peculiarities of dairy production have afforded special leverage to local players. The bulkiness and perishability of raw milk products like fresh milk and yoghurt means that these products are not normally traded internationally or even regionally, and are instead locally produced and sourced. At the same time, several dairy products including butter, cheese and long life milk, are more easily transported over distance, and also can be manufactured using milk powder – which is a globally traded commodity. Ironically, this currently works in Zambian producers’ favour: a global shortage of milk powder has pushed up its costs to uncompetitive levels in the Zambian milk market. Nonetheless, internationally traded processed products remain heavily subsidised in places like the European Union. Meanwhile, international health and hygiene standards associated with raw milk production and processing enable a degree of local market protection, under the banner of consumer protection.

This evolving mix of production factors presents opportunities for a range of interests and agents in the Zambian dairy chain, which continues to change. There is growing evidence that the simple categorisation of capital as either “foreign” or “local” provides little help in predicting the actual behaviour of companies in Zambia. Indeed, the way in which companies identify themselves has changed over time, partly because some agents have become increasingly “embedded” in the Zambian political economy, for both “push” and “pull” reasons. This especially, adds new complexity to any efforts to identify a company as being a sub-imperial agent; and raises important questions about the scale at which sub-imperialism as a concept can be used.  The experiences of Parmalat and Shoprite both point to important lessons involving FDI, market discipline and local accountability.

Embedding as Good Business Practice: Parmalat

By engaging with foreign producers in the different contexts of a changing local market, Zambian dairy producers have developed increasing capacity and skill to defend local interests while consolidating local commodity chains.

At first glance, Parmalat and its strategies could be interpreted as sub-imperialist.  It is a subsidiary of a South African branch of a large multinational corporation, and continues to import processed dairy products from South Africa. Although it imports mostly processed products, it occasionally brings in products at higher cost that can be produced locally for less using local suppliers of raw milk. 

That said, many of Parmalat’s market strategies suggest a perceived need to demonstrate a commitment to the Zambian political economy by making concessions to local interests.  For instance, in negotiations with the Dairy Processors Association, Parmalat came under strong pressure to discontinue imports of dairy products that could be sourced locally. It responded by restricting these imports, agreeing informally to bring in only products that could not be produced locally, such as speciality cheeses and flavoured butters.  Parmalat also agreed to upgrade its Zambian UHT plant in order to boost local production and reduce the need for imports. Significantly, no legal compulsion was put in place to force Parmalat’s shifts; it did so voluntarily and in the spirit of growing the local dairy sector.

At the same time, it seems clear that Parmalat recognised the political leverage and production gains that came with its local embeddedness. Support to the local small scale sector both lends the company a developmental image and makes economic sense in a period of high international prices for powdered milk. In addition, the overall shortage of raw milk due to increasing domestic consumption means that Parmalat has had to move beyond its traditional supply base of large-scale commercial farmers. Within the company, there is another strong motive for nurturing linkages with the domestic industry: by the original privatisation deal, 33 percent of the company is held by local farmers and employees.

Ironically, Parmalat’s local linkage strategies contrast with those of Finta, Zambia’s leading locally owned dairy processor. Finta sources all of its raw processing material from Brazil. Moreover, its partnership with South Africa’s Clover company sees Finta serving as a key conduit for South Africa dairy products into the local market. The location of company ownership, therefore, is not a reliable guide to market practice.

"Ironically, Parmalat’s local linkage strategies contrast with those of Finta, Zambia’s leading locally owned dairy processor. Finta sources all of its raw processing material from Brazil."

The situation with retailers is equally complex.  Locally-owned Melissa, which runs a chain of retail outlets, appears to have no specific commitment to local dairy processors and seeks out international products, particularly when they are cheaper. But while Shoprite was initially not strongly supportive of Zambian dairy suppliers, there is evidence that local pressure for higher levels of local sourcing has resulted in strategy changes. The Zambeef partnership is one example; the allotment of greater shelf space to local ice cream producers following lobbying from the Dairy Producers Association is another. The arrival of retailer Spar also added to pressure on Shoprite, as Spar franchise stores tend to source locally with lower-end competitive products. As a result, the proportion of locally sourced dairy products at Shoprite is higher than the chain’s average 30 percent share of Zambian-sourced foodstuffs.

Trade regulations have also been used by Zambian dairy producers to protect their market from predatory pricing and competition by external producers, including Kenyan dairy companies. In the latter case, the Dairy Producers Association responded to cheap imports by mobilising government to apply World Trade Organisation sanitary and phytosanitary standards to block Kenyan milk imports. Illegal imports from Zimbabwe have also been targeted in the past.

New Dynamics, New Questions

International dairy commodity chains are complex, globally-linked and highly dynamic. Since the buy-in by South African capital in the 1990s, it has become increasingly clear that this also applies to the Zambian case, where expansion of production, processing and retailing capacity has led to dynamic changes in a commodity chain that had been in decline for nearly 25 years. But the question is: to whose benefit have these changes been, and at what cost to local development priorities? Here, perhaps the Zambian case provides food for thought and lessons for future strategies in engaging regional FDI.

The transformation of the dairy sector cannot be adequately explained by straightforward arguments associated with sub-imperialism. That perspective typically points to FDI’s displacement of local capital and impoverishment of invaded labour markets, and its objective of expanded repatriation of profit. In less nuanced versions, notions of sub-imperialism also entail  unidirectional swamping or subordination of host country political-economic sovereignty. 

The experience of dairy FDI into Zambia suggests a much more dynamic and ambiguous form of foreign-local interaction. While processor and retailer FDI has established South African companies as local industry leaders, the terms of engagement with local components of the commodity chain have helped to discipline the activities of these companies and ensure the emergence of positive participation in the sector. The Parmalat and Shoprite ventures have improved the national supply and quality of dairy products, and created new opportunities for small and medium sized dairy primary producers, processors and retailers. Zambia has become less dependent than ever on powdered milk and dairy imports, while expanding production capacity to record levels for a growing consumer market.

One key factor in extracting higher local participation in the re-energised sector involves the specificity of the dairy industry; another relates to the political strategy of local player interests. 

Unlike most processed foods – for which Zambia remains overwhelmingly dependent on imports – important dairy products like fresh milk and yoghurt can only be competitively produced locally. In the context of currently high costs for powdered milk in global markets, this has forced Zambian processors to pursue strategies to increase local raw milk production for a range of production needs. The challenge now for Zambian primary producer networks is to lock large-scale processors and retailers into local commodity chains, to ensure longer-term growth, coherence and stability in the sector.

More broadly, the “embedding” of foreign companies is actively being pursued by a range of local players, with some success. Political lobbying by dairy industry interests backed by government has created strong pressures on foreign companies to demonstrate their commitment to the Zambian economy through constructive interaction and market concessions. This kind of creative engagement has identified the commercial gains behind local embedding, not just the political benefits associated with good corporate citizenship. And there is now evidence that pressures for embedding are reaching beyond foreign businesses, to include Zambian-based enterprises that have traditionally sourced commodities outside the country.

"There is now evidence that pressures for embedding are reaching beyond foreign businesses, to include Zambian-based enterprises that have traditionally sourced commodities outside the country."

This final potential twist in the commodity chain – the prospect that local capital may be disciplined according to the same ethical standards applied to foreign investors – raises additional critical questions about the evolving repercussions of South African FDI in Zambia. If FDI has provoked engagement and resistance from local business interests, it has perhaps helped to reopen wider debates about the accountability, responsibility and social embeddedness of national capital, too.

The defeat of apartheid in 1994 liberated not only South Africa’s internal political processes but also its economic relations with neighbouring countries in SADC (the Southern African Development Community). A key outcome was the surge of South African capital northward after years of dampened large scale investment because of legal sanction and more informal regulation. By the early 2000s, South African mining and industrial corporations, financial institutions and even some medium-sized enterprises, had emerged to become significant players in SADC Foreign Direct Investment (FDI).

Since then, the region’s foundational economic structures have been reshaped by South African-led regional economic "integration" against the backdrop of globalisation, neoliberal reforms and the local policy rendering of the Washington Consensus, the New Partnership for Africa’s Development (Nepad). Yet the precise direction and implications of this process remain unclear for either South Africa, the investment-receiving or "host" countries or the economic coherence of the SADC bloc as a whole.

"South Africa’s economic expansion is sometimes portrayed as a one-way process... But evidence increasingly suggests that penetration of the region is highly contested by host countries... elements of both ‘sub-imperialism’ and local subversion are at play."

South Africa’s economic expansion is sometimes portrayed as a one-way process, where local environments and communities are passive recipients of South African-led interventions. But evidence increasingly suggests that penetration of the region is highly contested by host countries, and sometimes actively and effectively resisted at local level. In other words, elements of both "sub-imperialism" and local subversion are at play.

In this context, easy characterisations of all-encompassing regional re-colonisation by the powerhouses of Gauteng (the industrial and financial heartland of South Africa) capture neither the diversity of FDI experiences, nor the lessons for strategic engagement and policy making which flow from them. From protests over flawed privatisations on the Zambian Copperbelt, to the defensive posturing of ruling party "indigenisation" policies in Zimbabwe, to consumer and local producer resistance to the imposition of South African commodities on regional markets – communities, workers, businesses and government officials are developing mechanisms to discipline incoming capital and engage it around issues of local benefit and accountability.

The success and extent of these efforts vary widely, and reflect the diverse configuration of power and weakness in business and regulatory spheres. In all cases, the disruptive, destabilizing  impact of new capital flows is clear, as is the recognised need within host countries to respond to the changing terrain. The growing presence of China as a trade and investment partner in Africa, and the rapidly diminishing credibility of neoliberal development models – especially in the face of emerging southern alternatives that draw on the experiences, capital, skills and markets of China, India and Brazil – are changing the scope of the "politics of the possible" in the field of investment and business. Traditional forms of cross border economic engagement – both in the region and in South Africa – will be challenged in the period ahead. Is this cause for a new round of "Afro-pessimism", or will it generate something more constructive and strategically viable?

"Traditional forms of cross border economic engagement will be challenged in the period ahead. Is this cause for a new round of ‘Afro-pessimism’, or will it generate something more constructive and strategically viable?"

1994: Incentives and opportunities emerge

A potent mix of factors led to the explosive growth of northward investment after 1994. While the end of apartheid political and economic isolation brought down important barriers to capital flows, higher home production costs and stagnant profit margins in a saturated domestic market provided incentives for producers and traders to move cross border. The neoliberalised and deregulated consumer and labour markets found in SADC, though smaller in size and diversity than their South African counterpart, offered the promise of lower competition and higher returns – ranging from 30-60% said some reports, compared to typical South African rates of 14-20%.¹ Marginal production costs founded on appalling wage and benefits packages were also a strong “pull” factor. In the regional agricultural sector, for example, sugar producing companies like Illovo and Tongaat Hulett identified low-cost production opportunities and moved rapidly to clinch privatisation deals.

Foreign currency and follow-on investment also emerged as important factors. Regional profits could be realised in foreign currency, and flexible repatriation conditions often meant these could be retained outside South Africa. For retailers and service providers, this presented the opportunity of transforming substantial Rand-denominated production costs into US dollar income, at healthy profit rates, while retaining flexibility over the investment parking of that income. According to some observers in the region, it also enabled South African business to flog uncompetitive, poor quality or otherwise surplus goods and services in regional markets at unrealistically high prices, to the detriment of regional consumers.

At the same time, the introduction of lease-hire schemes into poorer urban and peri-urban areas across the region wrenched open new and profitable markets for low-end consumer goods. Here, highly skewed regional consumer credit schemes, in tandem with high inventories of devalued goods in South Africa, were key. Lusaka, seen by many South African businesses as a typical regional city, became a testing ground of sorts: the first new big South African-modeled malls, retail chains, food and entertainment franchises were established there, and their performance was monitored closely and used to extrapolate operational models for elsewhere.

Regional governments also played a role in creating space for the South African invasion. Pressured by the World Bank, IMF, donors and, increasingly, by a neoliberalising South African state, SADC governments led restructuring in the form of privatisation, reformed investment regulations and finance markets. They opened new large terrains to private sector speculation that had previously been closed by parastatal-dominated monopolies. Opportunities emerged in areas such as mining, banking and insurance, telecommunications, agriculture and dairy, transport (railways, airlines and ports), and utilities.

"Pressured by the World Bank, IMF, donors and, increasingly, by a neoliberalising South African state, SADC governments led restructuring in the form of privatisation, reformed investment regulations and finance markets."

The South African government also directly facilitated capital outflows to the region. In March 1997 it initiated the relaxation of exchange controls for investments into the region and further offshore, with preferential terms given for the former. Regional investment limits were increased in subsequent years as other financial restrictions and tax disincentives were diminished. By 2004, South African firms were allowed to invest up to R 2 billion per project in Africa (half that for outside Africa), dramatically up from a lowly R 50 million in 1997.²

The ANC government was clearly responding to a shifting reality on the ground encountered by its own transnational corporations: a significant number of South African transnationals were becoming increasingly dependent on offshore assets and income for their overall viability. By 2002, mining house AngloGold Ashanti and telecommunications player MTN each derived more than half of their group worth from their African activities.³ Other companies showed similar levels of exposure to – and gain from – the region.

Meanwhile, a regional peace dividend also surfaced in the business sector. This was especially important for mining, where the cessation of conflict in Mozambique and Namibia enabled the launching of exploration using modern techniques. There was also new and substantial exploration in Tanzania, Zambia and Zimbabwe fuelled by liberalised investment regimes and rising commodity prices. Telecoms, transport and energy distribution reconstruction also benefited.

An old player resurfaces

Although South African capital has been active in neighbouring countries since the first scramble for Africa in the late 1800s, its offshore investment since the transition to majority rule reflects a number of critically new features. Even as the bulk of South African offshore FDI has drifted away from Africa towards developed countries – in 2005 the EU took 76% of South Africa’s outgoing FDI, Africa only 8.8%⁴ – the market share of South African FDI into Africa has risen, with the sector and country spread of new investments expanding rapidly. The significance of recent intra-regional FDI for host countries is underlined by the relative scarcity of new or follow-on FDI overall. While there is emerging evidence that Asian and, to a lesser extent European and US investors, are developing an interest in African non-petroleum resources, new FDI expressions of interest remain limited to a few sectors. It is likely that South African investments will continue to count among the largest in the region for the medium term.

"By the late 1990s South Africa had emerged as the dominant source of the SADC’s FDI, overtaking established leaders Germany, the UK, US and Japan."

By the late 1990s South Africa had emerged as the dominant source of the SADC’s FDI, overtaking established leaders Germany, the UK, US and Japan. According to the BusinessMap Foundation, an independent investment tracking think tank, 25% of all dollar-denominated FDI into SADC in the decade after 1994 came from South Africa, reaching nearly 40% in some years.⁵ Over this period South Africans became the top ranking foreign investors in seven neighbouring countries, taking second place in one country, and third place in three (see Table 1).

At the same time, South African companies pressed further north, sometimes using SADC as a regional platform for expansion. In the late 1990s the number of companies operating offshore in Africa doubled. This invasion was spearheaded by larger companies: according to one survey, 34 of the top companies listed on the Johannesburg Stock Exchange made 232 investments in 27 African countries in the first decade after apartheid.⁶

South African private investors were joined by public companies and government-controlled development agencies, and soon consolidated a significant presence continent-wide in a range of key industrial, financial, agricultural and services sectors. By 2004, some estimated South Africa had become the second-largest source of FDI in the whole of the continent, anchored by neighbourhood operations that continued to absorb 80% of the country’s offshore African investments.⁷ Loan finance and portfolio (stock market) investment into the region also rose. (See table in Appendix.)

In SADC, South African companies moved steadily beyond traditional sectors like mining and minerals processing. While the latter still accounted for the largest overall investments, there was significant new FDI into banking, telecoms, retail, tourism and other areas.

The major South African banks each opened or substantially expanded operations in the region, partly in response to the extended cross border activities of larger South African corporates, and typically in competition with established international regional players Barclays and Standard Chartered. By the early 2000s most SADC countries were host to at least one South African retailing or merchant bank, and follow-on investments were in progress.

Telecoms FDI into the region was even more explosive, fuelled by rapid sector deregulation, woefully inadequate fixed line infrastructures, very high unmet demand and ease of installation. A massive regional investment programme led by junior South African player MTN was followed by local market competitor Vodacom. Strategic partnerships with international and regional players saw South African telecom companies spread their operating footprint as far as the huge and lucrative West African market and beyond into the Middle East. By 2006, telecoms surged temporarily into the lead position among South African FDI into the continent, reaching about R 17 billion overall, on the back of continuing consumer demand and comparatively high rates of profit from non-South African sources.

Retail and tourism brands – from supermarkets and clothing stores; to electronic goods distributors, cinema complexes and fast food franchises; to hotel chains, safari companies and airlines – have increasingly served as icons of South African business expansion on the ground in SADC. While their widespread presence is not matched by their overall FDI dollar value, their market significance and impact have been profound. New retail and tourism ventures have often displaced (and sometimes absorbed) the activities of local market players, while providing vertically structured commodity chains for South African producers into the region. The upmarket Woolworths franchise represented one example of this combined effect: its local franchisees paid in foreign currency for licensing rights and standard branding fixtures, and were compelled to purchase the bulk of retail stock directly from Woolworth’s South African inventory catalogue. In this way risk was transferred into the region and South African supply chains were privileged. (See Table 2 for further examples.)

Multi-country investments in several sectors afforded transnationals a competitive edge in single country markets, in terms not only of production and marketing economies of scale but also of brand recognition, transportability of clients and intra-firm management of assets. For  example, the South African transnationals could boast a scope and reach of services beyond the reach of single-country players, in the coordination of mobile phone network connectivity, cross-border banking access or inter-country transferable insurance schemes. Standard Bank’s local presence in 17 African countries, including 10 SADC neighbours, provided clear advantages that were replicated by many other firms.

Trade imbalances between South Africa and the region also helped consolidate this competitive advantage. This imbalance was 9:1 in South Africa’s favour by the early 2000s (and 5:1 with Africa overall).⁸ This skewed trade pattern was strengthened by the regional expansion of vertically-integrated South African retailing chains that competed directly with local retailers and producers. Shoprite, for example, reportedly contributed R 2 billion to South African exports by the early 2000s through its sourcing of retail inputs from its home base.⁹

In some instances – such as the Mozal aluminium plant outside Maputo, Mozambique – it is likely that increased FDI helped to deepen the existing trade imbalance by fuelling higher levels of capital and consumable imports needed to service the new investment.¹⁰

Sub-imperialism or subverted power?

With the settling-in of new FDI in the late 1990s, new questions surfaced about its longer term impact on local economic sovereignty and business development. Many saw recent investments as predatory, displacing existing local enterprises and production through a mix of aggressive and unfair intra-firm trade, pressurized merger and acquisition bids, politically-leveraged access to large scale privatisations and cheap financing from South Africa, and skills poaching.¹¹ The unemployment effects, service disruptions and costs, national revenue shortfalls and diminished local accountability of FDI operators became glaringly apparent, and the subject of increasing public scrutiny.

"With the settling-in of new FDI in the late 1990s, new questions surfaced about its longer term impact on local economic sovereignty and business development. Many saw recent investments as predatory ..."

In South Africa and SADC there is wide-ranging debate among government, business, labour and local communities about the aims, benefits and long term implications of the changing patterns of regional investment. There is similar diversity in the kinds of practical local level responses to that FDI which has taken root. Both are changing the context and to some extent the terms, of South Africa’s evolving economic relationship with the region.

One view situates South African FDI within the broader dynamics of neoliberal globalisation, and sees the northward push by Pretoria and South African capital as part of the recolonisation of SADC and the continent by western dominated interests.¹² Here, South Africa acts as an active proxy for international capital, multilateral financial institutions and governments, helping to soften legal and political resistance to foreign capital, and open up access to extractive resources, business and consumer markets. The ANC government’s championing of Nepad, its own trade pact with the EU and growing role within multilateral institutions – along side its skewed bilateral trade and investment deals with neighbouring states, for example – are cited as evidence of a new sub-imperialism, orchestrated from Pretoria for the benefit of South African and international capital.

In this view, new FDI is seen mostly as negative: parasitic, opportunistic, displacing of local capacity and employment, and resulting in profits going to South Africa or overseas, rather than to host country markets. And the "African Renaissance" – heralded by the ANC government in the late 1990s and enthusiastically endorsed by northward-looking South African corporations – becomes an ideological excuse for white business’ return to its former colonial-era stomping grounds.

Others portray northward FDI in less negative – although not unambiguously positive – terms for both sides of the border.¹³ They cite the relative neglect of African consumer and services markets by non-African FDI, the perilous state of capital-starved regional infrastructure, and the benefits of investments that are more exposed to regional consumer, economic and political leverage due to their local regional roots. The shared conclusion is that growing interdependence, however uneven, among key southern African regional economies is likely, even if the political implications for regional integration are less certain.

But parallel to these debates, local businesses, labour, communities and policy makers are developing new ways of dealing with – and "disciplining" – incoming capital. While the power of new FDI in the region is displayed in national accounts, diminished workforces and in the changing street-level profile of commercial districts, malls and products, the residual power of host country interests is also increasingly evident. Just as some kinds of FDI disrupted local business and labour markets over the past 15 years, local communities and business stakeholders are finding new ways to engage with, contain and place other sorts of demands on foreign companies. A process of critical and reflective engagement is under way.

"But parallel to these debates, local businesses, labour, communities and policy makers are developing new ways of dealing with – and ‘disciplining’ – incoming capital."

At ground level across the region, the mediated presence of FDI is becoming a fact of life. The unilateral power of intra-regional FDI is being challenged, raising important questions about the potential for and future shape of SADC, as an integrated economic region. Witness Zambia: it was among the first countries in the region to decisively (if disastrously) implement neoliberal reforms leading to large scale privatisations in which South African firms featured prominently. But it has also been an incubator for multiple forms of resistance aimed at changing the terms of local engagement with FDI, and challenging, more broadly, neoliberalism’s established models of local development.  

Zambia: Privatisation and popular responses

Privatisation began in earnest in Zambia in the mid 1990s, with key components of the parastatals sector put on the bloc for sale. In all, more than 250 enterprises representing more than 85% of the Zambian economy were sold. These included not only the state-run mining sector, but also agricultural operations, transport and electricity grids, national retail chains, banks, hotels and game parks. South African investors would play a central role in the bidding, amid widespread allegations of corruption and bribery, insider trading and mounting pressure for a quickening of sales by the IMF, World Bank and other donors.¹⁴

The profoundly negative impacts of privatisation soon followed: spiralling unemployment and reduced security of employment, asset stripping, declining production, and increasingly secretive policy making and implementation by government.

The disaggregation and subsequent sale of the massive state-owned Zambia Consolidated Copper Mines (ZCCM) was the centrepiece of government’s privatisation programme in the late 1990s. However, it was not long before protests from local communities surfaced around the terms of sale – including the shedding of social assets and responsibilities like pension benefits, housing, health care and schools by the new mine owners. While this kind of resistance was repressed, sometimes violently, by the state, a new culture of civic resistance and demands for accountability slowly took root.

Today, there is widespread popular debate in the civic movement, trade unions and political parties about the consequences of the 1990s neoliberal reforms and the mistakes associated with privatisation. There have also been practically-oriented forms of resistance that have resulted in creeping concessions from foreign investors to Zambian businesses, workers and communities. The privatisation of the national grocery chain and its takeover by South Africa’s Shoprite is one such example; Zambia’s privatised dairy sector, in which the new South African owners came under pressure to demonstrate local responsibility and "embeddedness", is another example—both of which will be examined in more detail in the articles of this series.

"Today, there is widespread popular debate in the civic movement, trade unions and political parties about the consequences of the 1990s neoliberal reforms and the mistakes associated with privatisation."

While Zambia’s recent experience of FDI has been characterized by the familiar negative features of diminished control and unfulfilled expectations, current popular and business responses – and increasingly, political party ones as well – reflect a concern with finding strategic ways forward. In particular, there is growing recognition of the vulnerability of foreign enterprises to local business, consumer and political pressure, and of the need for increased assertive engagement of foreign investors leading to the enabling of local stakeholders. There are strains of resurgent nationalist, anti-globalisation sentiments in all this, replete with political energy as well as alternatives that are perhaps too-narrowly focused. But it is also clear that there has been no easy sealing of any sub-imperial compact in the post-privatisation era.

Old models, new environments and emerging questions

In recent years, the unmistakeable decline in the credibility of neoliberal development models in the Global South has been exacerbated by the growing presence of China and India as alternative trade and investment partners in Africa. This represents something of a double-edged sword: while southern alternatives for foreign development capital are now more readily accessible, it is not clear that they will be more transparent, accountable and socially responsible than recent waves of FDI; nor is it certain that their impact on local trade and investment patterns will be any less disruptive and destabilizing.

"While southern alternatives for foreign development capital are now more readily accessible, it is not clear that they will be more transparent, accountable and socially responsible than recent waves of FDI."

Indeed, some suggest that the growth of Chinese trade and investment involvement in the region’s resource and industrial sectors could profoundly undermine the fragile coherence established under the current domination of South Africa, without putting in place a regionally-grounded alternative. Beyond the extractive sectors and basic processing, the fear is that there will be little regional FDI under a future trade-dominated economic regime.

All the more reason, then, to pay close attention to the experiences and positions emerging from production places, labour markets and communities of the region, as they seek to redefine the rights and limits of foreign investment on new terms. Is it possible to democratically "embed" foreign and local capital within national economies? What role might the state have in this process, and what rules of engagement should be considered at the regional level? In various ways, these are the sorts of questions that are now being posed by SADC citizens, businesses, civil society and governments, in response to the post-apartheid FDI tsunami.

Notes:

1. Naidu and Lutchman (2004),  p. 12.

2. UNCTAD (2005), pp. 16-17.

3. UNCTAD (2005),  p. 14.

4. UNCTAD (2005), p. 4. 

5. BusinessMap (2005).

6. UNCTAD (2005), p.5, citing figures from the South Africa Institute of International Affairs and "Africa Inc.", published in Who Owns Whom 2005, Dun and Bradstreet, 2005.

7. Naidu and Lutchman (2004), p.13.

8. Daniel, Lutchman and Naidu (2005),  p. 545.

9. Naidu and Lutchman (2004), p. 14.

10. Castel-Branco (2004).

11. See Daniel, Naidoo  and Naidu (2003); BusinessMap (1999); and BusinessMap (2000).

12. See for example, Bond (2004), Bond and Kapuya (2006).

13. See a series of studies carried out under the auspices of the South African Institute for International Affairs, including Games (2004); and annual reviews by South Africa’s Human Sciences Research Council, published in the State of the Nation series.

14. Larmer (2005), p.30.

(Richard Saunders teaches in the Political Science Department at York University in Toronto, Canada. He is the author of Never the Same Again: Zimbabwe’s Growth towards Democracy, 1980–2000 (2000) and Dancing Out of Tune: A History of the Media in Zimbabwe (1999).)

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