Anglo Chief Hits Raw Nerve With South Africa Comments

Published by MAC on 2004-09-13

Anglo Chief Hits Raw Nerve with South Africa Comments

By John Reed, Financial Times

September 13 2004

Anglo American, like other big companies that have expanded beyond South Africa, likes to stress its loyalty to its roots. "You've got to love this place - we do," the London-listed global resources group declares in an advertising slogan it uses in its largest country of operation.

But in a sharply worded attack on Anglo American and Tony Trahar, its chief executive, Thabo Mbeki on Friday claimed the opposite. The South African president accused Mr Trahar of "bad-mouthing" his country in comments the chief executive made in an interview with the FT. "It has been difficult to understand why important business people would continue to hold and communicate negative views about our country," Mr Mbeki said.

The polemic, published on the website of the ruling African National Congress, accused Anglo and other internationally oriented companies of sitting on "unusually high cash or liquid reserves" rather than investing in South Africa.

"Is [Anglo] now saying that democratic South Africa presents the business world and our country with higher political risk that did apartheid South Africa?" he asked.

The contretemps high lights the delicate relationship between South Africa's black-led government and its white-dominated big companies 10 years after the end of apartheid. It also underscores the global expansion of the country's biggest companies.

Some have moved their primary listings abroad, which has been viewed as triumphant or treacherous by South Africans of different political persuasions.

Tony Leon, leader of the Democratic Alliance, a conservative opposition party, on Saturday called President Mbeki's scolding of the mining group "angry, intemperate and resentful". But a spokesman for the South African Communist party (SACP) was quoted in South Africa's Sunday Independent yesterday saying that the state "should discipline private capital".

Anglo was quick to say that it remained committed to South Africa and had "full confidence in the country's political leadership."

In a statement on Friday, the company said it had no uninvested surplus cash balances, and had reinvested in South Africa over R100bn since 1999, when it shifted its primary listing to London. "We look forward to meeting with the government to confirm our shared understanding of these issues," Anglo American said.

President Mbeki's attack came in response to remarks by Mr Trahar in an FT article published last week. "I think the South African political risk issue is starting to diminish - although I am not saying it has gone," he said, commenting on Anglo's commitment to its large Johannesburg office.

How South Africa is perceived abroad remains a highly sensitive and racially fraught topic. "There's a belief in the black elite that white people have two different stories about South Africa - one for foreigners and one for their local counterparts," said Reg Rumney of BusinessMap Foundation, a Johannesburg think-tank.

Anglo has weathered political storms since the apartheid era. With the lifting of sanctions and South Africa's opening to world markets, the company shed non-core units and expanded abroad, moving its primary listing to London in 1999 in search of cheaper capital.

Today it has business on five continents, and gets less than 30 per cent of its earnings from South Africa. Other companies that have joined Anglo in expanding aggressively abroad range from SABMiller, the brewing group, to Old Mutual and Investec, financial groups.

Globalisation also prompted new economic reckoning in the traditionally leftist ANC. When the party took power a decade ago, tough economic realities required it to court business and drop some cherished policies, including nationalisation of key assets. Now in its third term, it has had to balance economic uplifting of its mostly poor and black supporters with market-friendly policies.

But big business remains unpopular with many in the ruling camp. Foreign direct investment has reached barely half a percentage point of GDP per year since the end of apartheid. In pursuing ambitious economic targets in his second and final term, the president has not hesitated to hit back at perceived critics.