Cape Town, South Africa
January 7, 2017
“I was a prisoner here from 1977 to 1982,” our guide, an elderly black South African man, explained. His charge? “Terrorism,” for educational reform protests outside his high school with a group of fellow students.
We were on Robben Island, an infamous Apartheid prison just across the water from Cape Town, where Nelson Mandela spent 18 years (of his 27 total) in a tiny cell. As we sat along the walls of a former incarceration room, the injustice of the place was palpable.
The first few days in Cape Town have felt like a lifetime, a packed schedule enabling us to see a full spectrum of businesses, cultural sites, shopping areas, restaurants, and natural beauty in this gorgeous beach and mountainside city. But one aspect that has stood out to the 42 of us on the trip is the extreme and inescapable divide between rich and poor, a lasting result of Apartheid, which ended during our lifetimes, in 1994.
South Africa has the highest Gini coefficient (a commonly used measure of income inequality) of any country in the world. Blacks make up over 90% of the country’s poor, and unemployment rates are extremely high—estimated in 2002 at 48% for black South Africans. While significant efforts are underway to close the gap—including Broad-Based Black Economic Empowerment (BBBEE), a government initiative to improve diversity at the highest levels of the workforce—education for the population at large remains a major barrier, given that roughly 25% of 6th graders are illiterate. Most South Africans still live in large “townships” (slums, shantytowns) outside the city, where they were forcefully relocated during Apartheid.
The demographics of the country play out in the way business is done in South Africa. At our visit to South African Brewing (SAB), we were told that the biggest growth opportunity for SAB, recently acquired by Anheuser-Busch, is affordability. For the majority of South African consumers, it takes six hours of work to pay for one Castle beer (typically 15-20 rand, about $1 USD), and over 90% of SAB sales in Cape Town are to that segment of the population. From a go-to-market standpoint, the townships present the largest customer base for the company, and SAB keeps those customers front-of-mind when developing more affordable products that appeal to the broader base.
A similar discussion took place at our visit to e.tv, South Africa’s largest independent, free-to-air television and news channel. The other public news channel in the country is operated by the government, and e.tv is proud of its position promoting free speech throughout the country since it was first established in 1998. As the COO explained, “The ANC [the ruling party] sees us as the mouthpiece of the Democratic Alliance (DA) [the opposition party]. Meanwhile, the DA sees us as the mouthpiece of the ANC.”
While talking about the challenges for services like Netflix to succeed in South Africa, we discussed the limited availability of broadband to the vast majority of the population: 28 million people in South Africa use the internet (about 50% of the population), and of those, only 3% have access to broadband. Netflix launched in the country about a year ago but has yet to gain much traction—it will likely be a marathon, not a sprint.
As we learned at EY, South Africa is often considered from a business standpoint as the gateway to Africa. The African continent is predicted to have some of the highest GDP growth in the world over the next 15 years, around 5% annually, and while South Africa’s is much lower, the country presents an opportunity for many international companies to establish a base on the continent. It is the easiest country in sub-Saharan Africa in which to do business when considering the tax and regulatory framework, and corruption remains low compared to countries in East and West Africa.
Cape Town’s beauty goes without saying, as one of the only major cities in the world with a spectacular mountain right in its center. We spent a day driving down the coast to the Cape of Good Hope, along roads carved into cliffs overlooking the South Atlantic Ocean and to beaches dotted with little African penguins—as well as making a quick stop at Cape Town’s very own e-commerce startup Yuppiechef, widely regarded for its steadfast focus on customer experience. Visits to nearby wineries and estates in Constantia and Stellenbosch offered a glimpse into the best of what life can offer on the Western Cape, including a private tour and tasting at Babylonstoren, which is owned by a CBS alum and Founder/CEO of a major television network in SA. They’re famous for their rosé!
We’re now off to Kruger National Park for two days on safari before continuing to Johannesburg for our last round of museum and company visits. More to learn!
-Kate Canfield ‘17