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How to cite this thesis

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Trade Follows the Flag: The case of MTN in South Africa’s foreign economic policy

Odilile Patricia Lindiwe Ayodele

Thesis submitted in fulfillment of the requirements of the degree: Doctor Litterarum et Philosophiae (D.Litt. et Phil) in Politics

Department of Politics Faculty of Humanities University of Johannesburg

Supervisor: Professor C Landsberg SARChI Chair: African Diplomacy and Foreign Policy

Co-Supervisor: Professor M Qobo Institute for Pan-African Thought and Conversation

ABSTRACT

South Africa’s relationship with the African continent, in the post-apartheid era, has been the subject of a growing body of research focusing on the nature of these relationships. Its corporate presence is felt almost everywhere from Khartoum to Maseru, and in various economic sectors.

It has been established that South African companies are well placed to invest on the rest of the continent, as they have access to capital, infrastructure and technology. Their efforts are further spurred on by the ideology of ‘African Renaissance’, the principles espoused in NEPAD and the moral capital that South Africa gained at the end of apartheid.

This thesis considers the role that South Africa’s African corporate expansion, in the area of mobile telephony, plays in shoring up its projections of leadership status on the continent. Hegemonic stability is used as the theoretical framework underpinning this research.

The mobile telephony sector is mushrooming across the continent, thanks in no small part to the weakening of fixed line telephony services within the last two decades. Consequently, South African mobile telephony multinational companies are well placed to fill the gap, with the added advantage of being identifiably ‘African’.

Analysis of the relationship between mobile telephony multinationals and the South African government underscores its complexities. As much as mobile telephony corporations have been given implicit support by the State to spread their wings on the continent, there is no concrete framework to legislate their behaviour beyond South Africa’s borders. Therein lies the dilemma for South Africa; on the one hand the State needs the private sector to give expression to its vision for the continent, but at the same time the State has no real control over the actions of these companies.

This interpretive research is primarily qualitative relying on a mixture of primary and secondary data as well as some interviews. Furthermore, the thesis considers South Africa’s current regulatory frameworks for its multinationals.

ACKNOWLEDGEMENTS

This thesis is a culmination of years of research with many stops and starts in between. Upon completion of this document, I am still as committed and as passionate about the subject matter as I was at the start. I believe South Africa, and the continent as a whole is at an inflection point and it is important that African scholars take the lead in charting a new course in academic discourse focused on Africa.

A big thank you goes to the National Research Foundation for their generous funding of this research. I would also like to give heartfelt thanks to my supervisor, Professor Landsberg, for his endorsement, ‘bullying’ tactics and ensuring that everything that I needed from office space to funding was at my disposal. To Professor Qobo: thank you for agreeing to join the project and sharpen my focus.

I must mention here my gratitude to Dr Lesley Masters for her very helpful workshops and open door. The assistance from Mrs Zelda Geldenhuys from the UJ library will always be remembered and greatly appreciated. Not forgetting all the SARChI team members, past and present.

I would like to thank my husband, Ayo who not only was my north star but my sounding board. Ẹ se, to my daughters who had to put up with my divided attention for so long. Siyabonga, to all my family and friends who supported me on this journey. Most importantly, I would like to thank God for getting me this far.

TABLE OF CONTENTS

Declaration on plagiarism ...... 2

Abstract ...... 3

Acknowledgements ...... 4

Table of Contents ...... 5

List of Figures ...... 9

Acronyms ...... 10

Chapter One: INTRODUCTION ...... 14

Research Problem ...... 15 1.1 R e s e a r c h Question and Hypothesis ...... 16 1.2 Rationale ...... 17 1.3 Survey of Literature ...... 17 1.4 Methodology ...... 23 1.5 Research Design ...... 26 1.6 Analysis of Data ...... 27 1.7 Outline of Chapters ...... 28 1.8 Ethical Considerations ...... 29

Chapter Two: REGIONAL HEGEMONIC STABILITY ...... 30 2.1 What is Hegemony? ...... 33 2.1.1 Power as a component of hegemony ...... 34 2.1.2 Capacity ...... 39 2.2 The Embedding of Multinational Corporations: A Hegemonic Girdle ? . 42 2.2.1 Multinational Corporations as actors ...... 43 2.2.2 The Multinational Corporation’s Role as a chargé d'affaire ...... 45 2.3 Can you have hegemony without a hegemon? ...... 48 2.4 Regional Hegemony and Power ...... 49 2.4.1 What is a region? ...... 49 2.4.2 Types of Regional Power ...... 53 2.5 Dimensions of Regional Hegemony ...... 54 2.5.1 Can South Africa be called a Regional Hegemon? ...... 57 2.5.1.1 Does South Africa have the characteristics of a hegemon? ...... 58 2.5.1.2 Dimensions of regional hegemony ...... 64

2.6 Conclusion ...... 67

Chapter Three: SOUTH AFRICAN CORPORATE EXPANSION IN SUB- SAHARAN AFRICA- HISTORICAL CONTEXT ...... 69

The Birth of South Africa’s Corporate Sector ...... 70 3.1.1 Charter Companies: The Original Multinationals ...... 70 3.2 South Africa’s Foreign Policy towards Africa ...... 74 3.2.1 South African Foreign Policy towards Africa before the advent of democracy ... 77 3.2.2 South Africa: a Western state in Africa? ...... 78 3.2.3 South Africa’s homeland policy ...... 80 3.2.4 South Africa and the rest of Africa ...... 82 3.2.5 South Africa’s attempts to carve out a new role ...... 84 3.3 Telephony in South Africa ...... 86 3.3.1 the history of South African telephony ...... 87 3.3.2 Mobile Telephony ...... 89 3.4 Conclusion ...... 91

Chapter four: SOUTH AFRICAN CORPORATE EXPANSION IN SUB- SAHARAN AFRICA IN THE DEMOCRATIC DISPENSATION ...... 94 4.1 South African Foreign Policy towards sub-saharan Africa Post-1994 .... 95 4.2 Internal cogs of South Africa’s Foreign Policy Machinery: where are the loci of foreign policy decision-making? ...... 97 4.3 Foreign Policy approaches under post-1994 administrations ...... 98 4.3.1 Nelson Rolihlahla Mandela (1994 -1999) ...... 98 4.3.2 Thabo Mvuyelwa Mbeki (1999- 2008) ...... 101 4.3.3 Kgalema Petrus Motlanthe (September 2008 - May 2009) ...... 104 4.3.4 Jacob Gegleyihlekisa Zuma (assumed office in May 2009) ...... 105 4.3.5 Challenges faced by the post-1994 administrations ...... 109 4.4 External Levers of South African Foreign Policy Machinery ...... 111 4.4.1 South African intra- African trade and investment in context ...... 111

4.4.1.1 SHOULD SOUTH AFRICA REGULATE SOUTH AFRICAN MULTINATIONALS OUTSIDE THE COUNTRY’S BORDERS? ...... 115 4.4.2 The relationship between the South African government and business ...... 118 4.4.3 Attempts to coordinate state, business and labour: the first corporatist arrangement ...... 120 4.4.4 Macro-Economic growth strategies ...... 122 4.5 Entrenching South Africa’s Hegemony/Leadership ...... 124

4.5.1 Regional Integration ...... 125 4.5.1.1 MNC investment regime and reduction in sovereignty ...... 126 4.5.1.2 MNCs and entrenching patronage networks ...... 129 4.6 South African Regional Hegemony: Quo Vadis? ...... 130 4.7 Conclusion ...... 133

Chapter Five: MOBILE TELEPHONY: THE INTERSECTION BETWEEN ATTEMPTED CORPORATISM AND HEGEMONIC STABILITY ...... 137 5.1 The birth of South Africa’s mobile telephony: the intersection between politics and commerce ...... 141 5.1.1 Bridging the Digital Divide and Growth of Telecommunications in sub-Saharan Africa 144 5.1.2 Regulation of the Internet ...... 148 5.2 The developmental and consumer applications of mobile telephony ... 151 5.3 Mobile Telephony MNCs and the question of South Africa’s Hegemony 156 5.3.1 Foreign MNCs with base operations in South Africa ...... 157 5.3.2 Who serves whom? ...... 159 5.4 The Institutional Landscape of South Africa’s Telecoms Sector ...... 162 5.5 Conclusion ...... 167

Chapter six: MTN CASE STUDY ...... 169 6.1 History of MTN ...... 170 6.1.1 MTN’s African operations in context ...... 174 6.1.2 Corporate Identity: a political torque? ...... 175 6.1.3 Private Enterprise and the ever hanging cloud of political patronage: corruption or relationship building? ...... 181 6.1.4 Hegemonic Stability via The Political Economy ...... 189 6.1.5 Response to South Africa’s Hegemony: Resistance to MTN...... 194 6.2 Conclusion ...... 198

Chapter Seven: EVALUATION ...... 200 7.1 Research Framework ...... 200 7.2 Hegemony and Hegemonic Stability Theory ...... 203 7.3 Problem Relevance ...... 204 7.4 Regimes and institutions that foster the proliferation of mobile telephony ...... 206

7.4.1 New Partnership for African Development (NEPAD) ...... 207 7.4.1.1 Sub-regime within NEPAD ...... 211 7.4.2 Mobile Telephony MNCs ...... 212 7.5 Extra-regionalism: Hegemony or influence ...... 215 7.6 New Definition for Regional Hegemony ...... 217 7.7 A New Framework: Regional Hegemonic Stability Theory ...... 222 7.8 Conclusion ...... 223

Chapter Eight: CONCLUSION ...... 225 8.1 What is the relevance of this research to the already established literature and theoretical disciplines? ...... 226 8.2 What are the implications of this study and what contribution does it make to knowledge? ...... 227 8.3 Additional Considerations ...... 228 8.4 Conclusion ...... 229

Annexure A: SECTION 2 OF GTLD-MOU (GENERIC TOP LEVEL DOMAIN NAME-MEMORANDUM OF UNDERSTANDING) ...... 231 annexure B: MTN HISTORY TIME LINE ...... 232

Annexure C: MTN Group Structure ...... 233

Bibliography ...... 234

LIST OF FIGURES

FIGURE 1:KEY SOUTH AFRICAN MACRO-ECONOMIC STRATEGIES POST-1994 ...... 123

FIGURE 2: MTN/M-CELL OWNERSHIP STRUCTURE AT 31 MARCH 2001 ...... 172

FIGURE 3: MTN GROUP FOUNDING TIMLINE...... 232

FIGURE 4: MTN GROUP STRUCTURE AS OF 1 JANUARY 2016 ...... 233

ACRONYMS

AAF-SAP Africa Alternative Framework to Structural Adjustment Programme for Socio-Economic Recovery and Transformation AHI Afrikaanse Handels Instituut ANC African National Congress APPER Africa’s Priority Programme for Economic Recovery APRM African Peer Review Mechanism ARF African Renaissance Fund ARPA Advanced Research Projects Agency ASEAN Association of Southeast Asian Nations AsgiSA Accelerated Shared Growth and Investment ASSOCOM Associated Chambers of Commerce ATU African Telecommunications Union AU African Union

BEE Black Economic Empowerment BBBEE Broad-Based Black Economic Empowerment BITS Bi-lateral Investment Treaties BRICS Brazil, Russia, India, China and South Africa BSAC British South Africa Company BUSA Business Unity South Africa

CAMEF Conference of African Ministers of Economy and Finance CAR Central African Republic CCR Centre for Conflict Resolution CELAC Collecting and Exchange of Local Agricultural Content (Uganda) CIS Common Wealth of Independent States CMA Common Monetary Area COM Chamber of Mines COMESA Common Market for Eastern and Southern Africa CONESTEL Collectif de opérateur nationaux exploitant dans le secteur des télécommunications CONSAS Constellation of Southern African States COSATU Congress of South African Trade Unions CSD Commission on Sustainable Development CSI Corporate Social Investment CSIR Council for Scientific and Industrial Research (South Africa) CSO Civil Society Organisation CSR Corporate Social Responsibility

DBSA Development Bank of South Africa DDG Deputy Director-General DEIC Dutch East India Company DFA Department of Foreign Affairs DG Director-General 10

DIRCO Department of International Relations and Cooperation DNS Domain Name System DRC Democratic Republic of the Congo DTPS Department of Posts and Telecommunications

EAC East Africa Community ECA Electronic Communications Act ECT Electronic Communications and Transactions Act ECOSOCC Economic, Social and Cultural Council ECSC European Coal and Steel Community EPA Economic Partnership Agreement ERT European Roundtable of Industrialists ESCOM Electricity Supply Commission ESKOM - merger between ESCOM and EVKOM EU European Union EVKOM Elektrisiteitsvoorsieningskommissie

FCI Federated Chamber of Industry FDI Foreign Direct Investment FEDUSA Federation of Unions in South Africa FOCAC Forum for China-Africa Cooperation

G8 Group of Eight G20 Group of Twenty G77 Group of Seventy-seven (plus China) GDP Gross Domestic Product GEAR Growth, Employment and Redistribution Strategy GPE Global Political Economy GSM Global System for Mobile Communications GSMA Global System for Mobile Communications Association GTB Guaranty Trust Bank gTLD-MoU Generic Top Level Domain Name-Memorandum of Understanding HST Hegemonic Stability Theory IBSA India, Brazil, South Africa Dialogue Forum

ICASA Independent Communications Authority of South Africa ICSID International Centre for Settlement of Investment Disputes ICT Information and Communications Techology IFC International Finance Corporation ICTS International Cooperation Trade Security IDC Industrial Development Corporation IGD Institute for Global Dialogue IOR-ARC Indian Ocean Rim Association for Regional Cooperation IP Internet Protocol IPE International Political Economy IPOB Indigenous People of Biafra IR International Relations ISCOR Iron and Steel Corporation 11

ISP Internet Service Provider ITU International Telecommunications Union

JCC Joint Commission of Cooperation JSE Johannesburg Stock Exchange

MAP Millennium Action Plan MDGs Millennium Development Goals MENA Middle East and North Africa MISS Minimum Information Security Standards MNC Multinational Corporation MNO Mobile Network Operator MTBPS Medium Term Budget Policy Statement MTN Mobile Telephone Network

NAASP New Africa-Asia Strategic Partnership NACTU National Council of Trade Unions NAI New Africa Investments NAIL New Africa Investment Limited NAM Non-Aligned Movement NCC Nigerian Communications Commission NDP National Development Plan NEDLAC National Economic Development and Labour Council NEF National Empowerment Fund NEPAD New Partnership for Africa’s Development NGO Non-Governmental Organisation NGP New Growth Path NMC National Manpower Commission

OAU Organisation of African Unity OECD Organisation for Economic Cooperation and Development

PAP Pan-African Parliament PIC Public Investment Corporation PICI Presidential Infrastructure Champion Initiative PPP Public-Private Partnership

R2P Responsibility to Protect RDP Reconstruction and Development Programme R-HST Regional Hegemonic Stability Theory RISDP Regional Indicative Strategic Development Plan RPF Rwanda Patriotic Front

SACOIR South African Council on International Relations SACP South African Communist Party

SACU Southern African Customs Union SADC Southern African Development Community SADCC Southern African Development Coordination Conference SADPA South African Development Partnership Agency SAIIA South African Institute of International Affairs SANDF South African National Defence Force SAPT South African Posts and Telecommunications SARS South African Revenue Service SATRA South African Telecommunications Regulatory Authority SBC Small Business Corporation SBR State Business Relations SCFA Sub-Council on Foreign Affairs SENS Stock Exchange News Service SMS Short Message Service SOAWR Solidarity with African Women’s Rights SOE State Owned Enterprise

TCC Transnational Capitalist Class TCP Transmission Control Protocol TEC Transitional Executive Council TICAD Tokyo International Conference on African Development TRIPS Trade-Related Aspects of Intellectual Property Rights TÜSĺAD Turkish Industry and Business Association

UN United Nations UNCAC United Nations Convention Against Corruption UNDP United Nations Development Programme UNESCO United Nations Educational, Scientific and Cultural Organization UNIDO United Nations Industrial Development Organization UNSG United Nations Secretary General UNASUR Unión de Naciones Suramericanas (the Union of South American Nations) US United States UNSC United Nations Security Council

VOIP Voice Over Internet Protocol

WBCSD World Business Council for Sustainable Development WTO World Trade Organization

CHAPTER ONE: INTRODUCTION

In the 21st century, technology, including telecommunications, has the potential to change a country’s political landscape drastically; therefore, being in control of such technology certainly has consequences. In South Africa, telecommunications companies are pursuing expansion on the continent, and this presents a two- pronged dilemma for the state: Firstly, it highlights the difficulties entailed in the regulatory framework governing the relationship between the South African government and these corporations, especially as they operate across the border. Arguably, a comprehensive regulatory framework is needed to take into account this reality; and secondly, it raises questions regarding whether or not South African multinational corporations’ African expansion efforts are in line with the government’s national policy preferences and foreign policy objectives, in particular, its Africa- focused policy agenda.

South African multinational companies have taken advantage of the changing political landscape, such as the end of the Cold War and apartheid, to make an imprint on the African market. According to the African Economic Outlook, “South Africa is the most vital source of intra-African FDI and the second largest developing country investor in Africa after China” (Sources of FDI 2011). The main sectors that have been driving the South African economy are also the same areas that have been at the forefront of the South African investment push into Africa. These sectors include mining; construction; manufacturing; financial services; tourism; retail; and telecommunications.

It is widely accepted that even though Africa’s telecommunications sector is the least developed in the world, it is also the fastest growing. The availability of telephony in Africa, particularly mobile telephony, has grown exponentially. Research undertaken by Swedish technology company Ericsson, found that in 2015 total mobile telephony penetration in sub-Saharan Africa was approximately 80%; in 2000 this penetration rate was 50% (Ericsson 2015). Even more interesting is the growth of Internet users on the continent; helped in part by mobile telephony technology. Ericsson’s research 14 found that, in sub-Saharan Africa, the most popular way to connect to the Internet is via mobile broadband. They found that in Nigeria, for example, approximately 83% of mobile subscribers use their mobile phones to access the Internet exclusively (Ibid). Internet penetration, however, is far from universal in sub-Saharan Africa but research illustrates that mobile broadband is the most common mode of access. For instance, the International Telecommunications Union (ITU) estimates that, in 2015, African mobile broadband penetration was at just over 17% of the population which stands in stark contrast to fixed broadband penetration of less than 1% over the same period (International Telecommunications Union 2015).

RESEARCH PROBLEM

Waverman, Meschi and Fuss (2005) contend that the impact of telecommunications penetration in developing countries is under-researched notwithstanding the influence that information and communication technology (ICT) has in the world economy. With the weakening of state telecom monopolies and the growth in the mobile markets the implications, and opportunities, are unparalleled. South African industry is uniquely placed to take advantage of these opportunities given the country’s formidable technological infrastructure, access to capital and human resources. Waverman et al, point out that mobile phones are playing the same role that fixed lines “played in the richer economies in the 1970s and 1980s... countries with under-developed fixed-line networks have achieved rapid mobile telephony growth with much less investment than fixed-line networks would have needed” (Waverman, Meschi & Fuss Ibid:11).

This thesis seeks to analyse South Africa’s corporate expansion, in the area of mobile telephony. The thesis will also consider whether or not corporate interests shape South African foreign policy. The theory of hegemonic stability serves as the bedrock for all inquiries within this thesis. MTN group will be used as a case study as it has been prolific in its expansion efforts on the continent. The title of this study makes use of the term ‘foreign economic policy’ which is used to refer to the economic dimension of foreign policy.

1.1 R E S E A R C H QUESTION AND HYPOTHESIS

The genesis of MTN coincided with the ushering in of a new democratic government in South Africa. Internationally, South Africa stopped being viewed as a ‘pariah’ state and became a force with a lot of moral capital.

On the domestic front, the transitional government agreed to issue licenses for this new communications technology, in spite of internal contestation, because there was a realisation that there were not enough resources to ensure that communication technology was distributed widely. The nature of apartheid meant many black people were not included in plans for access to communication and hence got left behind. It is recognised that the ability to communicate is a pathway to development. Access to markets and resources are made easier through telecommunications. Economic research undertaken by Waverman, Meschi and Fuss (2005) illustrates that there is a direct correlation between economic growth and telecommunication penetration, particularly mobile telephony. The willingness of South Africa’s transitional government to embrace mobile telephony was significant because it signalled that government was willing to engage with the private sector to meet the State’s development mandate.

Internationally and regionally, South Africa capitalised on its moral capital and positioned itself in a place of prominence. Upon recognising that its future is inextricably linked to that of the continent, it pushed for regional integration and the renewal of Africa’s fortunes under the banner of the ‘African Renaissance’ and the New Partnership for Africa’s Development (NEPAD) programme. With time it became increasingly apparent that South African companies would be the economic hands and feet of this integration drive for the simple reason that they had access to capital and technology.

The query and hypothesis guiding this research are that: the interests of South African business actors, in particular, the mobile telephony multinational corporations, are embedded in the economic dimension of South Africa’s foreign

16 policy. In examining this query, South Africa’s contested regional hegemonic status is interrogated.

1.2 RATIONALE

There is a growing body of literature that examines South Africa’s growing corporate presence on the continent with a particular focus on whether this represents partnership or hegemony. There is research on business as a development and poverty reduction tool. However, there is little research into the political and social implications of such corporate expansion. This thesis intends gleaning from and contributing to, current literature from the fields of politics and international relations. Likewise, this research aims to augment existing academic research on South African corporate expansion from a social science perspective; serving as a resource for policy-makers and academics.

1.3 SURVEY OF LITERATURE

The theoretical framework guiding this argument is hegemonic stability theory (HST). One of the original proponents of the key components of this theory is Charles Kindleberger (1973) in his seminal work - The World in Depression - he, in essence, argued that international economic stability was to a degree dependent on a dominant state (hegemon). In other words, a hegemon can be defined as a state that has a significant hold over other states in the international system. The location of hegemony, in this study, is the political economy. Moreover, he (Kindleberger 1981) differentiates between the key concepts of dominance and leadership. Dirk Nabers’ (2010) study on power, leadership and hegemony identifies the connection between leadership and hegemony as one of “co-constitution”. Nabers argues that the foundation of leadership in international politics is hegemony whereas hegemony has to be supported via leadership. This allows the possibility that these concepts, though similar, are very different regarding their analysis of hegemony.

In the field of international relations and political science, we look to theorists such as Gilpin (1981) and Milner (1998). HST is a multi-disciplinary theory that has roots 17 emanating from both the neoliberal and neorealist camps. Where Kindleberger may have identified the components that now make up the theory, it is neorealist Gilpin (Op Cit.) who gave the theory its name. Realists, such as Krasner (2009) and Olson (1965), believe that the presence of a dominant state is necessary for the maintenance of world stability. In contrast to a more aggressive view of neorealists, neoliberal theorists, for instance, Ikenberry (2001), envisage the character of a hegemon as being benevolent.

Part of the challenge raised by utilising HST in its traditional form, is that it does not explain the area of regional hegemony. A review article by Acharya (2007) is referred to in the discussion on regional power. Lowenthal’s (2006) examination of the relationship between the United States (US) and its Latin American neighbours provides an attractive model of regional hegemony. Other works on hegemony that will guide this study include research by Miriam Prys (2008) and Jean Comaroff and John L Comaroff (1992).

HST is often linked to the development and maintenance of regimes. Krasner defines a regime as “sets of implicit or explicit principles, norms, rules, and decision- making procedures around which actors’ expectations converge in a given area of international relations" (Krasner 1983:2). In other words, a regime relates to rules and norms around an issue area whereas institutions, as well as organisations, enforce regimes.

A neoliberal approach to HST would posit that the creation of regimes is the ambit of a hegemon. Certainly, according to this approach, a hegemon is needed for the creation and maintenance of regimes and institutions. Expressly, a hegemon is needed for various countries to agree to cooperate and for the preservation of the regime. From another perspective, regimes and institutions may be considered a public good provided by the hegemon. The challenge posed by utilising this approach is that theorists such as Keohane have argued that the very existence of regimes and institutions remove the need for a hegemon.

Keohane (1984) proposed that the international system is capable of continuing to exist, even after the decline of the hegemon that created the system in the first place. Clearly, he is suggesting that there can be hegemony (in the visage of

18 international institutions or regimes) without a hegemon. Thus analysis should focus on the mechanism of hegemony rather than the State (or group of states) that created it.

The challenge with Keohane and Krasner’s arguments is that not enough weight is given to the value of the hegemon after the creation of the systems of cooperation. Traditional HST appears to confirm the thesis of a singular hegemony. However, there is nothing historically, or contemporarily, that precludes a collective of states acting as a hegemon as argued by Clark (2011) or affecting the international system through the development of a regime or several regimes, i.e. the international economic regime or the international communications regime.

Prys and Robel (2011) confirm that there are various conceptual approaches to HST and the impact of international regimes and institutions on hegemony is viewed differently according to the approach taken. When re-conceptualisation of HST includes neo-Gramscian viewpoints, it changes the view of the role of institutions. The authors look towards Robel’s ‘Hegemonic Stability reversed argument’ which essentially argues that: international institutions need a hegemon for the institution to function, and the hegemon needs to shore up its hegemony (Prys & Robel 2011:267). In such an argument institutions and regimes are both a public good, for the countries within the system, and they are also tools to entrench hegemony.

Overall, there are two versions of HST: the public goods version which assumes overall benefits of free trade and stability; and, a security version that does not presuppose an interest in free trade. An open free trade system causes asymmetrical gains. If the gain "threatens the security of powerful States" open trade would be restricted (Webb, Gilpin, & Krasner 1989:184).

The glue that joins any concept of hegemony, or even hegemonic stability, is hegemonic authority or leadership. Without the ability to influence other states’ behaviour, the legitimacy of hegemony is questionable. As much as a state can be a hegemon, its hegemony is confirmed by it having followers or other countries willing to accede to its leadership. Lobell, Jesse and Williams (2015), find in their study on strategies that secondary and tertiary states, following or agreeing to a regional or

19 global hegemon, is more reflective of domestic factors and to a lesser extent systemic factors (Lobell, Jesse & Williams 2015:151).

Kindleberger (1986) puts forward regionalisation as evidence of hegemonic decline. However, departing from Kindleberger’s thesis, it may be argued that the new world order is not unipolar, as it was pre-World War II, or even bi-polar as it was during the Cold War. The world is increasingly regionalised owing to globalisation. This state of affairs, however, does not negate the necessity of an overall hegemon but rather it changes the dynamics of hegemony. In his discussion on leadership and ultimately hegemony, Nabers puts forward the idea that:

“Power and the ability of regional powers to transform their material capabilities into leadership will thus depend on an actor’s ability to present his particular worldview as compatible with the communal aims” (Nabers 2010:938).

Naber's ideation is not too far removed from Pederson’s (2002) theory of cooperative hegemony which contends that studying the "interests and strategies" of the dominant regional state (or states) in the region gives a better understanding of the drivers of regionalist behaviour. Essentially, it looks at why regional powers promote regional institutionalism that a number of other theorists, including Kindleberger, would argue dilutes its level of influence.

Another theory of hegemony that has gained traction, especially for regional hegemony is Burges’ (2008) concept of consensual hegemony. He was referring mostly to using this concept to explain Brazil’s leadership in Latin America. Brazil, similar to South Africa, has historical and structural reasons to shy away from bold assertions of hegemony. Consensual hegemony, according to Burges is not a clear strategy followed by the State but rather a way to explain its behaviour. It explains how hegemons use soft power rather than coercion to get other states to follow their lead. Reflecting on his concept, Burges (2015) agrees that consensual hegemony does have its limitations and at some point, a more aggressive form of leadership has to be provided or else the risk of leadership decline is increased. Consensual hegemony is akin to a “credibility building phase”, and subsequently, something more concrete has to be brought forward (Ibid: 203).

Prys utilises a different concept of regional hegemony that considers the influence of external actors. She uses her new framework to analyse South Africa’s foreign policy in neighbouring Zimbabwe and its foreign policy objectives in the region (Prys 2008). Maxi Schoeman theorises that South Africa does not fully play the role of hegemon in Africa because of factors such as the domestic climate; the racial perceptions of South Africa’s neighbours owing to the foreign policy history of the apartheid government; and, the challenges of integration (Schoeman 2007:104). Arguing in favour of describing South Africa as a pivotal state, as opposed to a hegemon, are analysts such as Chris Landsberg and Edwin S Cochran. Landsberg (2004) argues that although South Africa does play an instrumental political and economic role on the continent, it does not have the capability, and indeed is unwilling, to step into the role of hegemon. Cochran (2000) reveals that the US views South Africa as sub- Saharan Africa’s pivotal state. Nevertheless, the question of whether South Africa is a hegemon versus a pivotal state is still open ended; there are substantial arguments to be made on both sides. Moreover, current research on South African hegemony seldom considers South Africa’s corporate expansion role.

The near-simultaneous ending of the Cold War, as well as the end of apartheid, opened the way for South African corporations’ expansion on the African continent. Daniel, Naidoo and Naidu argue that South African firms were well placed to take advantage of the out-dated infrastructure on the continent in the 1990s as global interest at the time was focused on the Eastern European market (Daniel, Naidu, & Naidoo 2003). The work of Alden & Soko (2005) weighs South Africa’s growing role on the continent, and it further examines its economic ties in Africa.

The South African Institute of International Affairs’ (SAIIA) three-year study on the experience of South African companies, on the rest of the continent, highlights the challenges in various sectors as well as possible solutions (Games 2003). Emanating from the same project is Neuma Grobbelaar’s (2004) report considering South Africa’s economic role in Mozambique. This report is useful in extrapolating some of South Africa’s investment practices in other African countries. Analysis from the South Africa Foundation Occasional Paper on South Africa’s business practices in Africa (Whitehouse & Associates 2004) is considered.

Concerning comprehensive analysis on the impact of South African companies on their host nations, Miller, Saunders, & Oloyede (2008) contend that the role played by South African multinationals is that of possible instruments of regional integration. The discussion by Miller et al highlights the fact that the citizens of host countries do not necessarily view the presence of these multinationals as benign.

Closer to the area that this thesis is concerned with is the article by Sánchez (2008) that considers the challenges faced by multinationals expanding into Africa in the field of telephony. Her study examines how South Africa’s transformation agenda has affected how multinationals operate within the country as well as in foreign operations (Sánchez Ibid:105). However, her study is from the perspective of Swedish mobile phone manufacturer, Ericsson, rather than that of networks operators. Debatably, the influence of network operators needs interrogation because they are the key component of ICT expansion and furthermore, they have the power to cut off communication access and transmit information. Charles-Iyoha’s (2008) study for the Emerging Powers in Africa Initiative analysed the practices of Chinese and South African multinationals in Nigeria. In the same volume, Albert & Ighalo (2008) examine the manner in which Chinese and South African enterprises employ the practice of the ‘responsibility to protect’ (R2P) and corporate social responsibility (CSR) in Nigeria. There is a growing discourse with regards to R2P and what is expected of the private sector concerning how their socio-political interactions, with both its host community and states, intersect with their business operations (United Nations General Assembly 2007; Alleblas 2015; Seyle & Forrer 2016; and Seyle 2016). Albert & Ighalo’s contribution to this discourse examines practices specifically in the mobile telephony sector. Regarding MTN, the authors conclude that even though MTN does on the surface contribute to CSR and is mindful of its R2P expectations, their motives are primarily profit driven. MTN’s Nigeria operation stands in contrast with Chinese enterprises who do not appear to invest in CSR or R2P (Albert & Ighalo Ibid).

1.4 METHODOLOGY

This interpretive research study contributes to the debates on South Africa’s African corporate expansion as well as the discussion on South Africa’s position as a regional hegemon. As illustrated in the literature review above, there is little research exploring the idea that the actions of a particular South African multinational contributes to South Africa’s position as a regional hegemon and bolster’s South Africa’s hegemony. The research focuses on the extent to which particular South African multinationals benefit from the foreign policy positions of the state, and within this exploration; the nexus between corporate expansion and hegemony is interrogated. A single case study is utilised to facilitate in-depth analysis.

A methodology is a “systematically structured or codified way to test theories” (Sprinz & Wolinsky-Nahmias 2004:4). The research study makes use of a disciplined interpretive and descriptive case study, employing qualitative methods, owing to the disciplinary location of the study. The research is rooted in international relations and international politics, and the research epistemology that underpins it is interpretative. Karen Mingst defines international relations as “the study of interactions among the various actors that participate in international politics, including State, international organizations, nongovernmental organizations, subnational entities like bureaucracies and local governments, and individuals” (Mingst 2008:2). As the study concerns itself with the behaviour of a dominant state, as well as multinational corporations in the context of the Southern African region as well as the African continent, the study is more appropriately placed in the domain of International Political Economy (IPE) which is a sub-set of international relations. IPE, or even Global Political Economy (GPE) as it is also known, concerns itself with the study of the nexus between international relations and economics.

The ontological position of the interpretive paradigm is that knowledge is contextual and socially constructed which allows for various realties as opposed to a single reality (Walsham 1993:5; Denzin 2010:271; and, della Porta & Keating 2008:26). In other words, unlike in quantitative studies, which have singular answers, interpretive research allows for multiple understandings of the same issue. Scholars such as

Geertz (1973:29) argue that the scientific method, which is used in quantitative studies, is not suitable for qualitative research topics. The value of the interpretive approach is that it provides the researcher with the ability to ask ‘how’ and ‘why’ a phenomenon takes place and ultimately provides greater insight into the issue being researched (Deetz 1996; and, della Porta & Keating Ibid).

Interpretivist scholarship is not new to international relations (IR) but rather has a rich history dating back to the foundation of the discipline (Lynch 2015:227). Interpretivism in IR goes beyond merely explaining events or trends (Lamont 2015:14) but rather seeks to understand how an occurrence transforms society. For this research study, the purpose of this research is to understand how South African mobile telephony MNCs benefit from South Africa’s foreign policy positions. A consequence of that inquiry is that a narrative emerges explaining if/how the presence of mobile telephony MNCs in Africa influence South Africa’s foreign policy position; proving clear causation is not achievable. As highlighted by della Porta and Keating, interpretivist research is not focused on the causal relationships but rather on “understanding the motivations that lie behind human behaviour” (della Porta & Keating 2008:26). Interpretive gaps are dealt with by using various methods to tackle causality queries (Lynch 2015:228). This research utilises process tracing which offers: “analysis of evidence on processes, sequences, and conjunctures of events with a case, for the purposes of either developing or testing hypothesis about causal mechanisms that might causally explain the case” (Bennett & Checkel 2012:10).

As previously mentioned, the research relies on a single case study. A case study is most aptly described as “a research strategy” built on the comprehensive inquiry into a single or more phenomena in order to investigate a pattern or system (Venneson 2008:226). Case study research is suitable for research where: the researcher has no control of external behavioural events; the observable fact being investigated is in existence; and “how” and “why” questions are being addressed (Yin 1994). The benefit of a single case study, as opposed to multiple cases, is it allows for a wide- ranging account of the case subject (Bennett & Elman 2010: 505-506; Stake 2005).

The approach taken in the research had originally been post-behaviouralist as defined by David Easton (1953). He contends that:

“[I]f the choice of a theoretical approach on the grounds of scientific adequacy alone is still indeterminate, this gives us the opportunity to import other criteria for assessment between alternative modes of analysis. Because of the urgent requirement for meeting the unusual social crises of our day, it does not seem artificial to inquire into the relative potential of any proposed theoretical approach for assisting in the solution of social problems” (Easton 1953:370). The core of the post-behaviourlist approach is a focus on social issues - both past and present. Post-behaviouralism builds upon behaviourlism and as such considers the behaviour of political actors. The reason that the approach taken in this thesis was altered was that the focus of the research had changed. Vodacom is no longer used as a case study because it was bought by UK’s Vodafone. The details of the decision to modify the focus of this research are described in chapter seven of this thesis.

This research initially made use of two case studies, for comparative purposes, but the research design was altered to accommodate only one case study. Case study research, particularly the single case study, is not without its detractors. Gerring reasons, "case studies are more useful for forming descriptive inferences" (2004:346). This is not to say that Gerring is completely against the use of case studies but he feels that they are often misunderstood and therefore misused in response to the possible arguments that case studies contain a bias. Flyvberg, argues that “...the question of subjectivism and bias toward verification applies to all methods, not just to the case study and other qualitative methods” (Flyvberg 2006:235). In spite of these valid critiques of the case study method, this study makes use of this method as it allows for the subject matter to be explored contextually. This researcher specifically utilises a ‘disciplined interpretive case study’ as it “interprets or explains an event by applying a known theory to the new terrain” (Odell 2001:163).

Data gathering and analysis of this study incorporates data triangulation to ensure the cogency of the data and also to capture the nuances in the subject matter. Guion (2002) appositely describes data triangulation as the method of utilising various sources of information for the purpose of ensuring the validity of the study. This research is qualitative with data drawn from secondary sources such as newspapers, journal articles, books, World Bank development reports, government reports as well as company reports. Any quantitative data in the thesis is drawn from 25 these qualitative sources and therefore has already been statistically analysed. Interviews with academics, analysts as well as the head of MTN’s group corporate affairs bolster the data.

This researcher gives more weight to company reports, ministerial and parliamentary statements, as well as official policy and legislation owing to their legal significance. The most important interview was that of MTN, which served as a way to triangulate MTN’s position concerning the subject matter researched. The format of the interviews was semi-structured to allow “respondents to answer questions on their own terms” (May 1993:93).

1.5 RESEARCH DESIGN

King, Keohane, and Verba argue that the primary purpose of designing research in political science is to provide a prototype that is built not only to test the hypothesis put forward, but rule out other possible alternatives and thus providing a valid causal inference. They describe “inference” as being “...the process of using the facts we know to learn about the facts we do not know” (King, Keohane & Verba 1994:46). Following the model provided above, it is clear that it is important to establish the relationship of the observed phenomenon and the controlled value. The central hypothesis of the thesis is that: the interests of South African business actors, in particular the mobile telephony MNCs, are embedded in the economic dimension of South Africa’s foreign policy. In this case, the observed phenomenon is South Africa’s foreign policy.

The controlled value is the presence, or ‘interests’, of South African corporations in other sub-Saharan countries. The term ‘presence’ relates to South African Foreign Direct Investment (FDI) in a host economy. The thesis will concentrate on the period post-1994. Therefore, the units of analysis in the study will be data on capital flows as well as South African policy documents and company statements.

1.6 ANALYSIS OF DATA

Preliminary analysis of the data appears to support the perception that there is a causal relationship between South Africa’s accelerated corporate expansion and changes in South Africa’s foreign policy objectives. However, on further investigation, it appears that the relationship between government and business is not sufficiently cohesive despite great South African corporate investment on the African continent. This brings up many questions to be considered about state- business relations such as: whether or not the private sector should be working with approval from the government; in light of its foreign policy objectives, should the South African government seek to work in partnership with the private sector?; and, what is the nature of the relationship between government and the private sector?

Although the presence of South African corporations is not always considered benign, in many instances there are positive trade-offs for the host economy such as providing access to new technology and services as well as the development of new infrastructure. Scholars, such as Murphy and Carmody (2015), caution against overenthusiasm with regards to ICT and its developmental effects on African economies. Their research points to the fact that mobile telephony still has not dismantled traditional challenges for African businesses, particularly SMEs, when accessing finance and competing with firms from developed countries (Murphy & Carmody 2015: 129; 131-132). It does appear that the international and regional policy instruments that South Africa has chosen to be involved with encourage the corporate push into the rest of Africa.

There has been no direct evidence that the external control of the telecommunications sector poses a danger to the host economy. However, this thesis will highlight the potential risk of external control as well as illustrate the power of telecommunications, particularly mobile telephony, as a political and governance tool.

The limitations of this research are:

1. A dearth of research in state-business relations in the area of mobile telephony;

2. Difficulty in securing interviews with company representatives and politicians; 3. Possible changes in South Africa’s foreign policy directives during the life- span of this research project; and, 4. Possible bias, and omissions, in company reports.

1.7 OUTLINE OF CHAPTERS

The study is divided into eight chapters.

Chapters one and two, respectively, are dedicated to concept building. Chapter one covers the aim of the study; literature review; a methodology; as well as defining all the variables in the thesis. Chapter two constructs the theoretical framework of hegemonic stability.

Chapters three to five, provide the context for the case study chapter. Chapter three provides an assessment of South Africa’s corporate expansion in sub-Saharan Africa prior to democracy, and chapter four provides an appraisal of South African corporate expansion after 1994 as well as giving a brief overview of inter-African trade. This chapter considers South Africa’s foreign policy concerning its corporate interests. Chapter five examines the growth of mobile telephony in sub-Saharan Africa. This chapter discusses the growth of telecommunications technology on the continent and the use of this technology as a governance tool. The use of mobile technology as an instrument of grassroots mobilisation will also be considered. Moreover, this chapter discusses the ‘digital divide’ and how it affects Africa.

Chapter six is the case study chapter considering the MTN group. The case study analyses the corporate operations of these companies concerning the study’s research question.

Chapter seven evaluates the research and provides a new theoretical framework for future analysis. Chapter eight, the final chapter, will conclude the thesis.

1.8 ETHICAL CONSIDERATIONS

As the data analysed, and utilised, in this research is based on information in the public domain and there are no human test subjects, there are no ethical considerations of which to take cognisance.

CHAPTER TWO: REGIONAL HEGEMONIC STABILITY

South Africa’s role in its immediate neighbourhood, as well as on the rest of the continent, has been the subject of discourse among analysts and theorists alike. Although sub-Saharan Africa has been struggling with a number of political and economic challenges, the African Development Bank contends that the number of successful coups on the continent has decreased since the 1960s (2015). Arguably, this can be attributed to improving governance standards and access to technology. However, the role that South Africa plays, despite its own challenges, cannot be disregarded. South Africa is often characterised as a lynchpin for the stability of the sub-Saharan political economy. This can be attributed to both the country’s historical position and its strong economy. According to the International Monetary Fund’s 2015 World Economic Outlook, South Africa dropped from being the largest economy, in terms of Gross Domestic Product (GDP), on the continent to the second largest economy, being outshone by Nigeria (International Monetary Fund 2015). The World Economic Forum found that South Africa remains the second most competitive country on the continent, beaten only by Mauritius (Schwaub 2015). In spite of its drop in rankings, South Africa’s economy is strong relative to other African economies as it is not as heavily dependent on commodities, which means that diminished demand for commodities does not cause tremendous damage to South Africa’s economy.

Moreover, this study delves into the underlying query of whether or not South Africa has been acting as regional hegemon. Indeed, there is a further question as to whether the South African government has been actively attempting to set the norms and values of both the region and the continent.

This chapter investigates HST from a perspective that departs from traditional typology. The basic premise behind HST is that the international system needs a hegemon to play the role of a stabilising force, and without it there would be anarchy. However, arguably, the international system in the post-Cold War era cannot be described as being strictly unipolar or even strictly bipolar. In the 21st century,

30 regions, as well as the quest for deeper regional integration, have become increasingly important within the policy and the academic community.

Hegemony is a highly controversial concept, even more so the theory of hegemonic stability. The root of the controversy lies in the multi-disciplinary normative conceptualisation of hegemony. A major drawback with HST is its departure from conventional hegemony discourse. A brief recapitulation of the traditional understanding of hegemony in international relations, reminds us that hegemony, according to Gilpin (1981), is a state of affairs in the international system wherein a single state leads or dominates the entire system. For Gilpin, viewing it through the lens of international trade, hegemony is interest-based. In other words because of the lopsided benefits accrued by the hegemon, it is willing to sustain the costs of maintaining the system. Nevertheless, in order for HST to appropriately examine the world in the era of globalisation, or even from the perspective of a post-Washington consensus era, it is crucial that HST be broadened to accommodate a regional perspective. The broadening of the theory would not only be reflective of the current world system but it would comfortably remove the theory out of its traditional rooting in the study of financial crises and the post-World War II international system.

In short, this chapter explores HST by beginning with a discussion on hegemony and regional hegemony. Without establishing the existence of a hegemon or hegemony, there can be no discussion on hegemonic stability.

The scope of hegemony can be widened to accommodate more than just political economy by referring to scholars such as Gramsci and Cox. Gramsci posits that hegemony is the process through which the dominant class transposes its interests and values on all members of society or, subordinate classes. Neo-Gramscian scholar, Robert Cox describes hegemony at an international level: “…as a social structure, an economic structure, and a political structure; and it cannot be simply one of these things it must be all three. World hegemony, furthermore, is expressed in universal norms, institutions and mechanisms which lay down general rules of behavior for States and for those forces of civil society that act across national boundaries- rules which support the dominant mode of production” (Cox 1983:172) Basically, what Cox has done is to remove the state-centric ideation of hegemony and locate it in the transnational institutions. HST on the other hand points to state-

31 centrism. Crucially, in Cox’s comprehensive treatment of the three-level world system, there is an emphasis on how the production structure defines the political nature of power in the State (Cox 1987).

Advocates of HST argue that a hegemon is needed for stability, particularly economic stability (Kindleberger 1973; Krasner 1976; Gilpin 1987). A hegemon is considered as a facilitator, and instigator of cooperation. Baccini et al, in their 2011 presentation to the International Political Economy Society, pinpointed the circumstances under which hegemony advances cooperation, and found that even a regional hegemon is capable of orchestrating cooperation when: secondary states and tertiary states in their area of purview engage in intra-industry trade with the hegemon lessening their exposure to the possibility of exploitation; or the hegemon has democratic political institutions which illustrates a commitment not to engage in exploitative behaviours (Baccini, Poast, & Urpelainen 2011).

Although the framework of this thesis is based on HST, it leans towards a neo- Gramscian understanding of the concept of hegemony as HST theorists have not yet developed an account of the nexus of society and state. Prys and Robel demonstrate that within the neo-Gramscian conceptual approach, hegemony is conditioned on ‘structural power’ (Prys & Robel 2011). There will be further discussion on structural power as defined by Susan Strange (1988).

The hegemon is able to exercise its power through control of the institutions and value systems in turn providing stability to the system (Prys & Robel Ibid). The outcomes and normative connotations of hegemony, in the context of HST, are explored in the proceeding section on hegemony. However, the forthcoming discussion is prefaced to point out the idea that hegemony must be shored up by institutions and the development of the normative values of the system of cooperation; in other words the development of regimes. In the case of South Africa, it will be shown that regional hegemony has to be conceptualised differently.

This chapter demonstrates that HST could be broadened to accommodate regional hegemony. In considering whether or not South Africa actually plays the role of hegemon, the concept is dissected and issues of power, leadership and influence

32 are examined. These considerations are important because it begs the question as to whether having all three automatically makes a state a hegemon.

A recurrent theme that can be observed throughout this thesis is the embedded nature of corporations in South African hegemony. Karl Polyani’s (1944) thesis that the economy and social relations are interlinked is considered. From an international political economy perspective, it is argued that MNCs are embedded in political and economic statecraft and as such influence domestic and foreign policy; the focus will be on the latter. This does not necessarily mean that states are at the behest of MNCs but rather considers them as an integral part of society that implies that there is almost an obligate symbiosis, as the society and state need each other for survival.

Exploring the role of MNCs is important because the international system has not yet shifted from the position that sovereign states establish the parameters for cooperation. This topic will be discussed throughout this thesis. The evaluation will borrow from studies on new regionalism that argue that non-state actors are able to deepen state-to-state integration.

2.1 WHAT IS HEGEMONY?

HST assumes the existence of a hegemon or hegemony. But the very concept of hegemony is highly controversial and the existence of this form of power in modern times is the subject of intense debate. In modern society concepts like power, control, and leadership have been crucial. Moreover, all three terms have the components of hegemony. A common understanding of a hegemon may be garnered from the Merriam Webster dictionary’s definition:

 “preponderant influence or authority over others: domination

 the social, cultural, ideological, or economic influence exerted by a dominant group” (Merriam-Webster Dictionary).

The narrative of hegemony is interlinked with that of modern relations between nation states with its origin most often attributed to ancient Greece. The Greek word for hegemony, hêgemonía had numerous meanings that ranged from guide to

33 political supremacy (Wilkinson 2008:122). Various attempts have been made to define the term hegemony in modern political science and international relations: it is a term that many are loath to use interchangeably with ‘empire’ although the descriptors are similar.

A hegemon can be described as a state in a position of primacy in comparison to other states; as the Spartans were at the end of the Peloponnesian war. Academics such as Niall Ferguson, argue that we should consider using the word empire in particular when analysing the behaviour of powerful countries like the United States of America in comparison to previous superpowers such as the United Kingdom. Ferguson (2003) contends that comparing hegemonies does not provide a balanced view because it misses other aspects of power projection and control. Hegemony, according to him, is more concerned with economic power whereas empire encompasses cultural and military reach.

2.1.1 POWER AS A COMPONENT OF HEGEMONY

Power, and the ability to influence others, is an integral part of hegemony. Power connotes capacity, influence and strength. Charles Kindleberger describes power as being “... strength plus the capacity to use it effectively” (Kindleberger 1970:65). Susan Strange puts forward a conception of power that considers the mechanism of power, as elucidated by Christopher May (2008) that considers the “how” and the “what” of the functioning of power. Strange delineates two separate kinds of power: relational and structural (Strange 1988). Relational power is described as the ability to influence another party or state “to do something that they would not otherwise do” (Ibid:24). Joseph Nye provides an additional feature to relational power: “the ability to affect others’ preferences so that they want what you want and you need not command them to change” (Nye 2011:11). This means that a state with relational power is able to shape another state’s actions but according to Nye, also means the ability to shape another state’s values – often unknowingly. In the South African case, it can be argued that South Africa has actively pursued relational power by taking the lead on shaping already existing pan-African sentiments through ideals such as the ‘African Renaissance’. These ideals will be explored in chapters three 34 and four of this thesis. Regarding the corporate sector, chapters five and six, illustrate that the operations of South African corporations actually modify the corporate culture in their host economies including introducing South African based corporate governance standards.

Structural power, however, is expressed as “the power to shape and determine the structures of the global political economy...” (Ibid). A definition of a structure, from the Cambridge dictionary, defines it as being “the way in which the parts of a system or object are arranged or organized” (Cambridge Advanced Learner’s Dictionary & Thesaurus nd). Principally, in the international political economy, a structure refers to how the system of interaction between states, and non-state actors, is organised. Avery Goldstein articulates that a structure can be uncovered by pinpointing “how the principal actors stand in relation to one another as a consequence of organizational practices and institutional culture” (Goldstein 1991:28). Nienke de Deugd and Herman Hoen, alternately, explain structural power as being “the power of actor A to influence the environment in which actor B operates” (de Deugd & Hoen 2010:81). Understanding both relative and structural power is important for deeper exploration of HST and its use as a tool for interpretation of state actions.

For Strange, there are four sources of international structural power: security, production, finance and knowledge (Strange 1988:29). Strange does not depart from realist interpretations of security: power is derived from military strength (Ibid). The production structure considers the control of the means of production (Ibid). The financial structure considers the “control of credit” (Ibid:30). A basic definition of credit is “the provision of money, goods, or services with the expectation of future payment” (Merriam-Webster nd). Christopher May explains that power in this structure is derived from the ability to “create” or “control” credit in the international system (May 1996). The final structure is knowledge: “whoever is able to develop or acquire and to deny the access of others to a kind of knowledge respected and sought by others; and whoever can control the channels by which it is communicated to those given access to it” (Strange Ibid:30). Strange does not give a higher status to any of the structures.

In the 21st century, non-state actors, particularly multinationals, have the ability to

35 marshal not only technology (knowledge) but also capital (finance). Moreover, they are also able to control physical resources and labour but not yet at the same level as states. Khanna investigated the world’s top 25 MNCs, describing these companies as “metanationals” owing to their sheer material capacity and apparent ability to transcend borders (Khanna 2016). For instance, the retailer Walmart garnered revenue of approximately US$486 billion in 2015 and had 2.2 million employees worldwide, which according to David Francis is larger than the population of Slovenia (Francis D. 2016). It exemplifies the level of structural power that MNCs are able to garner, which means that the influence of MNCs cannot be ignored in the examination of the prevailing structure of the international system. It is possible to envision that MNCs originating from the developing world would have a higher level of influence in their host economies as their operations have implications for tax income and the provision of much needed goods and services. Chapter five, and to a lesser extent chapter four, will examine the level of participation of corporate actors in South African foreign policy machinery.

Understandably, there is profound conceptual tension concerning the location of structural power; does power still remain in the purview of the State or are non-state actors able to claim this power? This tension is evident in a number of the discussions within this thesis particularly in the discussion of the embedded nature of corporate interests in South African statecraft that is explored in more depth in chapters four and five. Woodley (2015:1) contends that contemporary international relations are shaped by capital. Moreover, he argues that power resides not only with the hegemon but is shared with regional and non-state actors. His thesis is that states are effectively being remodelled into “administrative instruments” of multinationals (Ibid:18). This means that structural power no longer lies solely with states. Culpepper deftly deals with the conceptual tensions concerning structural power. Firstly, he notes that the enactment of “policies that are congruent with the interests of business not because these governments defer to structural power, but because the preferences of their constituents are satisfied by such policy change” (Culpepper 2015:395). In other words, business benefits from policies enacted to suit a state’s citizens and/or national interests. This argument ties in closely with the central argument made within this thesis. In chapter five, the thesis considers the

36 intersection between corporatism and hegemonic stability.

A corporatist state is one that directs its industrial relations alongside the business sector and labour. Particularly, in the early years of South Africa’s democratic transition, there appears to have been attempts to move towards being a corporatist state. This move was most evident in the telecommunications sector with the introduction of mobile telephony. At a domestic level, the State relaxed its monopoly on telecommunications in order to allow the introduction of new players into this space. This relaxation, however, was not with the intention to enrich the private sector, but rather to meet development goals for improving access to telecommunications services to under-served communities. At an international and regional level, it is evident that a number of foreign policy choices made it easier for mobile telephony companies to expand on the continent. These choices are further explored in chapters five and six (the case study on MTN). Culpepper’s argument does not detract from arguments supporting South Africa’s status as a provider of hegemonic stability to the continent. Rather, it illustrates that the embedded nature of certain corporations actually strengthens South Africa’s hegemonic standing. The means by which MNCs bolster South Africa’s hegemony are discussed later in this chapter.

Culpepper makes the important point that businesses too are able to gain a level of structural power and “gain influence over politics without necessarily trying to, because of the way they are built into the process of economic growth (Ibid:405). This thesis takes the approach that the power gained by non-state actors, particularly MNCs, does not displace the State. This is illustrated in chapter four’s examination of the relationship between South Africa’s foreign policy and South African corporate interests as well as in the MTN case study.

Russett contends that a state’s influence can be garnered through the “building of a community: a sense of kinship, common loyalties and values, a feeling of belonging together” (Russett 1974:259). Ikenberry (2001) uses the term “Stakeholder Hegemony”. He noted that the US (United States of America), after World War II, cemented its hegemony by creating “Stakeholder Hegemony”. What this meant is that the foreign states had a stake in sustaining the system. This was done through

37 developing a regime of rules-based institutions such as: the United Nations, the International Monetary Fund, World Bank, and North Atlantic Treaty Organization. In practical terms this meant that the US’s ability to work autonomously was constrained but in the larger scheme of things these institutions cemented US power.

Judge (2001/2002) argues that; although the perception is the opposite, the US actually has less of an international presence than it did during the Cold War. In fact its economic stature has decreased and there has been a demographic decline. America’s real power lies in its cultural/social hegemony. Cultural hegemony is related to soft power but is not synonymous (Nye 2011:19). Joseph Nye defines soft power as “the ability to affect others to obtain preferred outcomes by the co-optive means of framing the agenda, persuasion, and positive attraction” (Ibid). Both cultural hegemony and soft power, in addition to the show of material wealth, need to be managed effectively because cultural dominance can be easily misinterpreted. Russett et al point out that it may be interpreted as “cultural imperialism” and thus work as fuel for radicals and terrorists (Op Cit:109).

Nye expounded on his theories on power to create the concept of smart power in order “to counter the misperception that soft power alone can produce effective foreign policy” (Nye J S 2009:160). Nye developed smart power as an approach to US foreign policy rather than a singular strategy. The smart power approach is one that “underscores the necessity of a strong military, but also invests heavily in alliances, partnerships, and institutions at all levels to expand American influence and establish the legitimacy of American action” (Nye & Armitage, How America Can Become a Smarter Power 2007:5). The smart power approach can be applicable to a regional hegemon’s foreign policy actions. Nye further describes the approach as the adaptation of resources into influence through “well-designed strategies and skilful leadership” (Nye 2011: 10).

Thabang Malope points to a crucial issue in the application of smart power: “contextual intelligence” (Malope 2016:33). Matthew Kutz provides a rounded definition of contextual intelligence: “the ability to quickly and intuitively recognize and diagnose the dynamic contextual variables inherent in an event or circumstance and results in intentional adjustment of behavior in order to exert appropriate 38 influence in that context” (Kutz 2008). Malope frames contextual intelligence, from the perspective of political leadership, as being the ability to understand what type of power needs to be used in each situation. In his 2011 book, The Future of Power, Nye uses the example of Singapore’s smart power foreign policy actions (Nye 2011:210). Singapore simultaneously invested heavily in its military to discourage would-be aggressors while also investing in diplomatic pursuits in the Association of South East Asian Nations (Ibid).

The application of the correct power approach is important, particularly for a country in a position of dominance. Kindleberger appropriately highlights that “For the haves to gobble up the have-nots is dangerous, for it exposes them to concerted opposition. After a certain stage, power is used to support the status quo, to minimize visibility, exposure, and opposition” (Kindleberger 1970:57). Thus, to effectively exercise power, a dominant state or a hegemon has to work in concert with others. Indeed it may be argued that expressions of power, both hard and soft, have the most reach when operated within a regime or community. Particularly in the area of political economy, working within multilateral institutions has the most benefit for the hegemon.

2.1.2 CAPACITY

Michael Doyle describes a hegemon as a state that has the capacity to direct the international system as well as the behaviour of the system’s constituents (1986: Chapter 1). Russett, Starr and Kinsella recognise that “[t]he menu of policy choices available to a State is affected by its own capabilities as well as those of the other entities with which it interacts” (Russett, Starr and Kinsella 2010:105). To put it differently, a state seeking hegemony that does not have the capacity to punish or reward cannot claim to be a hegemonic authority. But, this raises the question of whether or not there is any state today that has full capacity to be a hegemon. Few would argue against the super power status of the US, yet its capacity, financially and militarily, is constrained by domestic pressures. Arguably, it continues to maintain hegemonic authority.

Perhaps, a different method of conceptualising capacity should be considered. Peter Evans (1997) cites the caution offered by JP Nettl in the 1960s; he warned of the “eclipse” of the State. Evans on the other hand, does not believe that the apparent collapse of state authority should be necessarily prevented because this collapse is an inaccurate reading, as the reliance on the State actually increases and international trade increases (Ibid: 67). He points out plainly that: “As an economy produces more ideas, authoritative enforcement of property rights becomes both more difficult and more critical to profitability. In a global economy this requires an active, competent State that is able to secure the compliance of other States with its rules” (Ibid: 77). In other words, increased economic integration in a fast-developing world requires a dominant state to secure the rights of private actors and individuals. Compliance to a system of cooperation is by our estimation, the purview of a hegemon.

Robinson points out that the modern state’s capacity, in the traditional sense, is hampered by the involvement of domestic and international actors. For instance, the provision of public services, in many instances was the erstwhile purview of the State but rather states now increasingly contract with the private sector and non-state actors to provide these goods (Robinson 2008:565). Linda Weis does not concern herself with state capacity in a traditional sense but rather transformative capacity; the ability to be up-to-the-minute in leading “the process of industrial change” (Weis 1998:4). Weis hits the nail on the head with this conceptualisation of capacity. The world is constantly changing and industrialisation is the engine fuelling the transformation. A state that is able to manage this process effectively puts itself in a position of power (Weis 1998; Kappel 2010).

There is an open-ended debate as to whether or not hegemony can exist in a vacuum. A hegemon, to a degree, needs to work in partnership with, or at least with the acquiescence of, other entities. One of the fathers of the study of hegemony, Antonio Gramsci, claimed that hegemony (or hegemonic authority) is established through consent (Gramsci 1971:366). This consent is basically gained through participation in a regime. Stephen Krasner defines a regime as “sets of implicit or explicit principles, norms, rules and decision-making procedures around which actor expectations converge in a given issue area” (Krasner 1982:186). For the participants of the regime the benefit is stability and the reduction of transaction 40 costs (Keohane 1984). For the creator of the regime, the benefit is co-opting others into accepting your authority and setting the norms and values by which other states have to operate. A further benefit of developing a regime is that the regime bolsters the regime creator’s capabilities.

Ferguson (2004) puts forth quite a compelling argument for viewing the US as an empire albeit a “dysfunctional” one. However, the arguments against the use of ‘empire’ are equally compelling owing primarily to the fact that society is structured very differently today than it was during the Imperial dynasties of the United Kingdom, for example.

The concept of hegemony regularly crops up in analysis of South Africa and its role on the continent: analysts, as well as technocrats, diverge in their views on the nature of South Africa’s power status. One of the main academic oppositions to South Africa’s supposed hegemony is the argument that the country does not have the capacity or capability to maintain hegemony. Bertil Odén (2001) counters this opposition by arguing that South Africa does have the necessary ability to provide regional public goods in many areas. He also argues that although domestic capacity may be constrained, South Africa is certainly economically and technically stronger than the rest of the countries in SADC and has developed a form of economic interdependence that can be seen in sectors such as mining and telecommunications.

He correctly argues that this level of “interdependence, in combination with South African hegemony, may in fact facilitate a balanced regional development through investments and technology transfer” (Odén 2001:179). Following Odén’s arguments as well as proponents of concepts such as cooperative hegemony (Pederson 2002) and consensual hegemony (Burges 2008; 2015), we can actually visualise a model where South African hegemony, despite objections around capacity and will, can actually exist with the help of institutions and the private sector.

Since the creation of South Africa – as a nation and previously a colony - there has been a constant battle for importance in world politics. On the one hand the country was meant to be a tool, or outpost, of its imperial masters. On the other hand, the

41 apparent ambitions of its successive leaders have been geared towards garnering influence and power. A question that is not often addressed is the role of South African MNCs in supporting South Africa’s hegemony.

2.2 THE EMBEDDING OF MULTINATIONAL CORPORATIONS: A HEGEMONIC GIRDLE ?

There appears to be dichotomy between the view of MNCs as a funnel for the agenda of the hegemon and the view of MNCs imposing their own supranational agenda. Put differently, the prevalent understanding of the role of MNCs in the political economy is either as an independent political actor or as a tool of the State. The discussion on structural power, earlier in this chapter, provides us with a more nuanced interpretation of the role of MNCs.

The raison d’être of both government and MNCs is to provide a good or benefit. The government is supposed to provide public goods such as security and water. In economics, a public good is described as being non-rival and non-excludable, which means people who pay for the good as well as people who do not pay for the good both enjoy the good.

Paul Johnson uses national defence as an illustration: “you cannot defend the vulnerable border regions of a country from the ravages of foreign invaders without also simultaneously defending everyone else who lives within the borders” (Johnson nd). The MNC, on the other hand, provides private goods for profit such as mobile phones and insurance. Many times the goods provided by an MNC (or even a large corporation) and the government intersect (Robinson nd).

The private provision of goods and services also intersects with the overall provision or benefit that a state may want to provide. For instance a state may decide that wide-scale access to tools of communication is an essential part of its vision. Therefore, it works towards gearing up its infrastructure through the public and private sector. However, this service is not necessarily provided for free. Arguably, this is exactly the state of affairs in the mobile telephony sector as is shown in chapters five and six. 42

The following sub-section deliberates on the supposition that MNCs act as a support, or girdle, to hegemony: first, it explores the view of MNCs as actors in the political economy; second, the role of MNCs as part of a powerful state’s diplomatic arsenal.

2.2.1 MULTINATIONAL CORPORATIONS AS ACTORS

Neo-Gramiscian and Marxist theorists have explored the idea of MNCs as actors in the international political economy. The concept that has gained the most traction posits MNCs as a Transnational Capital Class (TCC); explicitly, hegemons. This discussion is important to highlight some of the prevailing viewpoints on the role of MNCs in the political economy.

Leslie Sklair has written extensively on the topic of globalisation and the power of the TCC. Sklair (2000; 2002) delineates four interconnected segments of the TCC: owners and controllers of major corporations; global bureaucrats and politicians; globalising professionals; and consumerist elites. Sklair (2002) contends that power in the global system, through capitalist globalisation, is ever more in the control of a TCC. It is argued that, rather than use outright methods, the TCC, use their influence on a regional and global level subtly.

The example of the European Roundtable of Industrialists (ERT) is put forward as a model of the modus operandi of the TCC. One of the derivatives of the ERT was the European Centre for Infrastructure, which is credited with getting the European Commission to establish the European Networks, “a program of 150 environmentally sensitive infrastructure projects”, effectively by-passing oversight by the European Parliament (Sklair 2002: 145-146).

Sklair (2000) argues that the TCC, outside of its increasingly transnational business operations, is a driver of globalisation in these aspects: the economic interest of the members of the TCC are coupled owing to the mobility of capital and their furthering of a global agenda; the TCC control various levels of domestic, national and global politics via “global competitive and consumerist rhetoric and practice”.

TCCs have outward global outlooks. There has been a push towards “export promotion strategies in most developing countries since the 1980s (Ibid). These have been driven by members of the TCC working through government agencies, political parties, elite opinion organizations, and the media”; TCCs have similar socio-economic lifestyles which are steeped in exclusivity and opulence; lastly, the members of the TCC “seek to project images of themselves as citizens of the world as well as of their places and/or countries of birth” (Ibid). Sklair’s contentions on TCCs particularly regarding labour, recall Robert Cox’s forewarnings in the 1970s. Cox (1976) noted that the emergence of MNCs has had a transformative effect on the global economy particularly that of labour which is vulnerable to the ravages of recession and industrial growth in the prevailing global political economy.

Returning to the concept of TCC, Chimni reasoned that the prevailing international political system which is Western dominated has created a situation whereby “the third world counterparts essentially act as ‘transmission belts and filtering devices for the imposition of the transnational agenda’” (Quoted in Acharya U 2013:942).

Acharya, Cox and Sklair are highly suspicious of globalisation, because of its capitalist nature that puts the heads of MNCs in politically superior positions. However, it may be argued that although their viewpoints have some degree of validity, it misses out on the reality that no system has been developed that can erase centuries of systematic inequality. The colonial, as well as post-colonial, history of Africa, and indeed the rest of the developing world, has meant that it has been gravely underdeveloped and the world system is not set up in a manner that provides an opportunity for a country to leapfrog its developmental challenges.

Ozge Yaka provides another example of MNCs, or the TCC, influencing national interests. Yaka considers EU membership as a Turkish hegemonic project, and argues that TÜSĺAD (Turkish Industry and Business Association) is a good example of the TCC influencing the national interest (Yaka 2015). Thus, it may be argued that the influence of MNCs, as part of larger TCCs, goes further than mere profit seeking but rather works towards reconfiguring national and global concerns to suit their interests. Upendra Acharya argued, on the other hand, that there was an alliance between corporations and states “to promote the hegemon’s influence and 44 market access until corporations attained or even exceeded the power wielded by their native States” (Acharya U 2013:948-949). The approach taken by this thesis is not as cautious as Yaka and Acharya but does recognise the potential for the abuse of relationships. In the South African case, even though some MNCs are embedded in the State, the potential of MNCs dominating the decision-making of the State is hampered by the prevailing political ideology in the country. This is further explored in chapters four and five.

It is argued in the thesis that MNCs are embedded in South Africa’s statecraft. As such, it is important to draw attention to the potential diplomatic role that MNCs can play at the behest of the State. There are historical examples from South Africa, and the rest of the world, that illustrate that MNCs have been used to promote the foreign policy agenda of the State.

2.2.2 THE MULTINATIONAL CORPORATION’S ROLE AS A CHARGÉ D'AFFAIRE

The idea of a corporate entity acting as a diplomat is not a new idea or concept. The genesis of the MNCs and governments are inextricably linked. This is not to say that this relationship has concluded but rather it has evolved. The terms, economic diplomacy and commercial diplomacy, are often treated as fungible even though they are related but not the same thing.

Procassini defines commercial diplomacy as: “the application of the tools of diplomacy to the removal of barriers to trade and investment, and to the resolution of policy conflicts arising from the globalization of the world economy” (Procassini 2000 Online) Therefore commercial diplomacy is the practice of trade and investment promotion using diplomatic tools. Logically, the emphasis would be on the role of governments, even though private actors would have a role to play. Economic diplomacy, on the other hand, encompasses commercial diplomacy. Vickers and Ajulu define economic diplomacy in the South African context, as being:

“... policies and activities that promote trade, FDI, tourism, and technology transfers to South Africa, and positively position the country in the world through imaging,

45 branding, marketing and public diplomacy (domestic and international)” (Vickers & Ajulu 2008:5). According to Van Bergeijk and Moons economic diplomacy focuses on:

• “open markets and the opening of markets to stimulate cross border economic activities (imports, exports, FDI); • the use of bilateral relationships to assist domestic companies which encounter difficulties abroad; • improving the functioning of international markets in; • increasing economic security by the promotion of (and compliance with) international rules and agreements” (Van Bergeijk & Moons 2011). In essence, economic diplomacy relates to the diplomatic practice that promotes intra-state economic activities as well as the attempt to instrumentalise the relationship between the State and business. It must be recognised, however, that the leading partner in the State-business relationship, particularly in South Africa, is the source of controversy (see Bond 2004; Bond & Kapuya 2006).

In the practices of economic diplomacy and commercial diplomacy, there are similarities between MNCs and states that can assist in both parties having common ground on which to partner. Two of the key areas of similarity include: First, governments and companies both have various stakeholders that they have to account to. In the case of governments, it is primarily its citizens or electorate as well as regional and international communities. In the case of firms, they have to answer to their shareholders as well as their customers and even to appropriate regulatory bodies. Second, governments and MNCs have to partake in public relations; in the case of government it is called public diplomacy. Interestingly, it may be argued that MNCs are also a cog in the public diplomacy machinery of their home country. Guided by Stopford and Strange (1991), Jade Miller (2009) remarks that in the case of state-firm relations in the US: “…the State must be aware of how the State–firm diplomacy between its own corporations and foreign governments reflects upon its own image and reputation. Domestically, if a U.S. firm behaves poorly (as in the Enron scandal), it will reflect negatively upon that corporation, and perhaps even the whole industry. But if a U.S. firm behaves poorly in its relations with or operations in a foreign State, the U.S. government can be injured, or, at the very least, undermined. While MNCs frequently present themselves as global as opposed to singularly national citizens, their actions still are tied closely to their home nation” (Miller 2009:286).

In essence, what Miller is pointing out is that the operations of a local firm abroad reflect positively or negatively on their home state with real consequences for foreign relations. In furthering their public policy agendas states may choose to engage with private actors. Pigman and Deos provide three ways that government and private actors may collaborate: 1) high impact private arenas such as the World Economic Forum, 2) Public-Private Partnerships in brand building, and 3) private actors engaging public diplomacy while acting on behalf of government (Pigman and Deos 2008:900).

As for South Africa using its corporate sector to pursue hegemony, Alden and Soko observe that although, on the surface, it does appear that South Africa is pursuing a hegemonic agenda on the continent, the only place it can claim hegemony is within the Southern African Customs Union (SACU) (Alden & Soko 2005: 368). Soko and Belchin propose that, in spite of the extensive South African corporate involvement in Zimbabwe, the derided policy of quiet diplomacy was based on ideology and politics. The authors further contend that South Africa does not have the ‘commercial diplomacy apparatus’ needed to fully engage in high level economic diplomacy (Soko & Belchin 2009:42); and South African corporate expansion is as a result of its own efforts and not as a tool of Pretoria (Ibid:43).

MNCs are significant players in the arena of political economy and as such cannot be ignored. Werner Feld acknowledges that the sheer “power” of MNCs affects developing and developed countries but “the problems perceived by the governmental leaders of the two types of countries differ in substance and intensity” (Feld 1980:2). He wisely notes the lopsidedness of power relations between MNCs and developing nations and the concern that this may influence policy (Ibid:3). South Africa’s lack of powerful economic diplomacy machinery does not subtract from the diplomatic efforts that it has made in paving the way for even more South African companies to expand on the continent than was possible during apartheid. This theme is further explored in chapters three and four. South Africa’s future success relies on stabilising its domestic political environment and harnessing the benefits that it gains from the prolific expansion and relative success of South African multinationals.

2.3 CAN YOU HAVE HEGEMONY WITHOUT A HEGEMON?

A query that is not often addressed in much of the current discourse is whether hegemony can exist without a hegemon. If this line of inquiry is followed, it could explain how South Africa’s hegemony in the region is being supported by the structural power of South African corporations outside of the continent. It is clear that South Africa on its own does not necessarily meet all the material conditions to maintain its hegemony, however, its symbolic role including its corporate presence, gives it a considerable measure of influence. Steve Gruzd maintains that South Africa is perceived as a hegemon although it often attempts to subvert this perception to the detriment of its own interest (Gruzd, Interview at SAIIA Johannesburg office 2016).

The neo-marxist view put forward by scholars such as Patrick Bond (2004) would argue that South Africa’s ‘symbolic hegemony’ is a perfect conduit for powerful forces in the private sector to attach to, to meet their own agendas. It is almost as if a parallel foreign policy is taking place in their interactions with the rest of the continent, and the South African hegemony could be likened to a ‘conveyer belt’1 for multinational ideals and concerns. However, this thesis argues that the true state of affairs is more complex.

As previously discussed, and will be demonstrated in the subsequent chapters, MNCs in key sectors have a relationship with government as well as with key political players that shapes the country’s foreign relations to a limited extent. However, it must be reiterated, this does not mean that MNCs directly dictate policy to the State. Lyle White explains that business, politics and diplomacy are interlinked particularly in Africa. He concedes however, that the South African foreign services do not necessarily keep up to the pace at which business operates resulting in DIRCO only being informed of the activities of a South African company in another country “when things go wrong” (White, Interview held at GIBS Illovo Campus 2016).

1 see Chimni.

It points to business relationships with DIRCO being shallow in a number of instances. This is important to note because in the mobile telephony sector, as illustrated by the MTN case (chapter six) a deep-rooted state-business relationship actually can have mutual benefits.

A major challenge with case for South Africa’s hegemony and provision to hegemonic stability is the fact that the theory of hegemonic stability does not cater for the possibility of regional hegemony. The proceeding section will examine regional hegemony, and the concept of region, to expand the application of HST.

2.4 REGIONAL HEGEMONY AND POWER

As illustrated previously, hegemony and power are inextricably linked concepts. This is even more evident in the case of regional powers. The existence of regional powers is not a concept often disputed; however, whether or not these regional powers can be described as hegemons is highly contested to the point that the term regional hegemony does not have a set definition. This discussion is very important especially as it pertains to the possibility of expanding the parameters of traditional HST.

The idea that the concentration of power is becoming increasingly regionalised is gaining momentum (Acharya 2007; Flemes 2007; Buzan and Waever 2003). However, the very concept of regional power is controversial (Lemke 2010; Hurrell 2010). The first critical question has to be: ‘what constitutes a region?’ Once this query has been satisfied, the next question is: ‘what should this concentration of power be interpreted as in international politics?’

2.4.1 WHAT IS A REGION?

The components that constitute a region are diverse. Often, political and social commonalities are offered as pointers to region-hood. Furthermore, terms like cooperation and integration are used to illustrate a unity of purpose that, in many

49 ways is largely illusory. At any given time there may be parallels, most often geography and a shared history, which push states to operate interdependently.

This picture, however, is not as simple as it seems. Andrew Hurrell correctly indicates that defining a region is complicated because the borders of a region are pieced together according to the issue at hand; “All regions are socially constructed and hence politically contested” (Hurrell 2010:15). For instance, in Southern Africa there is a shared history of colonialism by European empires (but that could be said for the entire continent), and in later years, a shared concern about the strength of apartheid South Africa. This history, and the consequences thereof, will be discussed in detail in the next chapter.

The make-up of Southern Africa is not universally established. The United Nations Statistics Division classifies Southern Africa as being made up of five states: Botswana, Lesotho, Namibia, South Africa, and Swaziland (United Nations Statistics Division 2013). SACU comprises of the same number of states. However, SADC comprises of 15 states: Angola, Botswana, Democratic Republic of the Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe (SADC Overview nd). Many of the states within SADC geographically belong to other territories, and also have a very different colonial history. For instance the colonial history of the Lusophone and Francophone states, in comparison to the Anglophone states, has created different nuances in their social-political histories and societies.

Arguably, the glue that will keep a regional territory together may be common institutions; but this does not complete the full picture of what a region is. Hurrell notes that regional cooperation may take the form of formal and informal structures with set systems of engagement (Hurrel1995: 336). The fact is that there are regular consultations in an attempt to ensure that policy-making within the region is synchronous.

As Lisa Martin points out, the aftermath of the Cold War amplified the value of institutions (Martin 1999:79). The largest benefit of institutionalising state relations rises above the hurdles of collective action such as free-riding (Ibid: 81). Yet, having

50 strong institutions and solid regimes in place does not necessarily cause states to work in unison; the dominant state may decide to manipulate the institutional mechanisms to serve its own ends and smaller states may decide to ally with parties outside the formal institution to serve their own ends.

Werner J Feld and Gavin Boyd ascertain that a regional territory is composed of more than regional organisation (Feld and Boyd1980:3). Given this context, the question is how any state finds its way to leadership when it is a struggle to find a reason to collaborate in the first place; why would a state even want to be a regional power player? Hurrell postulates that a state may want to be at the forefront of regional politics because it has global ambitions: “the extra-regional status that may come from being a successful regional power or the provider of a stable regional order; the role as representative of the region and of its interests and values; or the power aggregation that may follow from the successful creation of a supportive regional coalition” (Hurrel 2010:22).

For less powerful states being part of a regional institution may be a way to curb the powers of a stronger state (Feld and Boyd Op Cit:5) and to enjoy the private and public goods that the dominant state provides. Security is a common area of collaboration. This was made even more apparent during the Cold War and in its aftermath. Hurrell observes that regional security arrangements, in the post-Cold War era, are more focused on internal threats than on superpower agendas (Hurrell 2006:546).

Robert Kappel describes the different ways that regional powers can influence neighbouring states: first, “through leveraging developmental aid”; second, “the strategic granting of contracts to foreign companies”; and third, “the exercise of pressure on international organizations so that ‘friendly governments’ can ‘receive good deals” (Kappel 2010:12). He developed five criteria pertaining to the “economics of regional power” (Ibid:15-16): 1. Economic Dynamic: their relatively large population, GDP and technological leadership can characterise a regional power. Thus, these characteristics are attractive to foreign direct investors and the technological leadership ensures that they are always ahead of other states.

2. Geography: Its physical location ensures that intra-trade, and direct investment, conditions remain favourable. Regional trade and integration drive the regional power’s growth. 3. Vertical Networks: Globalisation has given increased significance to global value chains. The top businesses, from a regional power, are able to become key players within a value chain. Furthermore, businesses at the forefront of technological development are able to shape the governance within these chains. 4. Regional Integration: Regional powers take a leading role in regional organisations. 5. Relational Power: Regional powers are conferred with decision-making capabilities not only due to their economic prowess but also their capacity to network effectively with their “cooperation partners”.

A number of Kappel’s critera can be easily applied to South Africa in relation to its neighbours within Southern Africa - and to a lesser extent, in varying degrees, to its neighbours on the rest of the continent.

Daniel Flemes notes that, much like international power players, regional powers are instrumental in creating regional governance structures. “The leader’s regional influence will depend on its ability to determine the cooperation agenda, which can be achieved either through a cooperative or unilateral hegemonial way of leadership or one of cooperative hegemony” (Flemes 2007:15). South Africa has been at the forefront of many regional institutions including SACU and SADC but has shied away from openly declaring its primacy.

As observed by Kindleberger, “A country’s political and social cohesion contributes not only to its economic power; it enables that power to be mobilized for national purposes abroad and at home” (Kindleberger 1970: 67). In order for South Africa to comfortably inhabit its leadership role it has to stabilise its own socio-political environment. Yet, Flemes and Lemke (2010:13) argue that South Africa still remains one of the promising cases for analysing consensus building by regional powers.

2.4.2 TYPES OF REGIONAL POWER

Several labels are attached to regional power: pivotal state; middle power; emerging power and regional hegemony. Jeffrey Taliaferro defines a pivotal state as: “... one which, by virtue of its geography, relative capabilities, and/or revisionist aspirations, could become the principal source of inter-State or intra-State conflict within a region” (Taliaferro 2012:82).

Chase, Hill and Kennedy (1996:37) propose population size, geo-strategic positioning and economic impact as indicators of a pivotal state – which would be of interest to the hegemon. In other words, a pivotal state can be described, as a regional power that has the ability to profoundly affect its region yet is not a hegemon but can assist the hegemon in furthering its aims. Under this description there is no room for regional hegemony. Cochran (2000) describes South Africa’s role as being that of a pivotal state during the Clinton administration. Landsberg (2004) also describes South Africa as being a pivotal state. Its desire to play that role could be further bolstered by the South African Minister of Finance, Pravin Gordhan’s, 2013 Budget speech in which he stated that South Africa’s position as “gateway to Africa” would be supported by the relaxing of cross-border financial regulations which would include foreign companies that use South Africa as a headquarters base in their expansion to other African countries. This created the impression that rather than being in a position of dominant leadership, South Africa is aligned towards becoming a launch pad for companies going on to the rest of the continent.

Another label for South Africa’s position is that of a middle power or emerging power (Schoeman 2007). Bernard Wood quotes Canadian diplomat RG Riddell’s succinct definition of a middle power: “The Middle Powers are those which by reason of their size, their material resources their willingness and ability to accept responsibility, their influence and stability are close to being great powers” (Wood 1987:4).

Landsberg paints a picture of a nation that has been thrust, and indeed revels in, its leadership position on the continent but is decidedly “anti-hegemonic” (2006:3). But

53 the thesis takes the view that both middle power and pivotal state are insufficient descriptions of the role South Africa plays in its immediate neighbourhood.

The connotations related to hegemony, especially in the context of South Africa, have been decidedly negative. However, there is no reason that a hegemon has to be either benevolent or exploitative. South Africa has long dominated negotiations in SACU and SADC, and one would assume has considerable sway, but its failure in neighbouring Zimbabwe would seem to have put paid to that notion. Nonetheless, even for the current global hegemon, the US, the expression of power when wielding considerable material carrots and sticks does not always play out according to plan. Ikenberry (1989) observes that the US did not succeed through the use of multilateralism in organising Europe in the way it wanted to.

So the question would be, in regional spaces, are the regional hegemons accepted? Arguably the answer is yes. An example that may be pointed to is Brazil; in the year 2000 Brazil took the reins of the South American integration process with little challenge from within the region. It hosted a meeting of 12 South American leaders that eventually led to the establishment of UNASUR. The Unión de Naciones Suramericanas (the Union of South American Nations), UNASUR, saw the amalgamation of existing regional customs unions. Augusto Varas observes that acceptance of Brazil’s leadership is contested by states like Mexico; he does contend however that Brazil plays the role of regional hegemon (Varas 2008). The next sub-section delves further into the debate on regional hegemony and whether South Africa fills the role as a regional hegemon and provider of hegemonic stability.

2.5 DIMENSIONS OF REGIONAL HEGEMONY

The previous discussion on regions and types of regional power illustrate that regional hegemony is not the same as international hegemony. Therefore, the discussion requires that a regional hegemon be regarded differently. Augmenting the attributes of a hegemon detailed earlier in this chapter, the analysis going forward will incorporate the dimensions of regional hegemony proposed by Miriam

Prys (2008; 2010). These dimensions include: “perception”; “projection” and “provision”. Prys contends that these dimensions, as well as material wealth, are needed to constitute hegemony (Prys 2008:8): 1. Perception relates to acceptance of its position as regional hegemon. Prys surmises that “indicators for levels of acceptance” may be garnered from: the reception of assistance by its neighbours in preference to assistance from extra-regional actors; increasing pressure to take on more responsibility in the region; and, cultural magnetism (Ibid:10). 2. Projection of values and interests are noted as a crucial characteristic. Prys “proposes to assess hegemonic projection by focusing on the specific activities of the hegemon that promote its own vision and values for the region, such as the establishment of institutions and agenda-setting within those institutions; mediation of conflicts; and financial assistance and, if relevant, the conditions attached to it. A more immediate form of value projection is the direct construction of a similar political system in the secondary States” (Ibid). 3. Provision suggests the provision of some form of public goods. Prys reasons that public good provision should be assessed separated from projection and perception; the hegemon might be reluctantly providing these goods owing to pressure from other actors such as extra-regional actors (Ibid:11).

It is clear that ascension to regional hegemony does not happen in isolation. Indeed there are many internal and external factors at play; the most important external factor is the current hegemon. In the early 21st century this role is filled by the US. For instance, Erickson (2004) cites, and agrees with, Michael Hickok’s 2000 identification of Turkey as a potential regional hegemon influencing the Middle East, the Caucasus and the Balkans. He notes the economic and demographic prowess of Turkey but also notes that eventual rise to hegemony is affected by actions, or inactions, by the US.

South Africa’s hegemony will be further interrogated within the following sub-section of this chapter. A number of scholars have recognised that Pretoria has long desired to play a leadership role. Alden and Schoeman pithily note “South African history is

55 marked by a drive to fulfil an ambition predicated on its ‘manifest destiny’ as Africa’s leader” (Alden and Schoeman 2015:241). Since the ‘dawn of democracy’ the behaviour of Pretoria has been emboldened owing to its various successes and less fear exhibited after its losses.

One of the many criticisms against South Africa is its apparent lack of consistency in its foreign policy behaviour, especially in its region. Since 1993 when Nelson Mandela declared that Human Rights would be the cornerstone of South Africa’s foreign affairs, successive policy documents have reiterated this declaration. However, as pointed out by a number of scholars and observers, South Africa’s voting behaviour in the UN and its dealings do not always appear in line with this ideal.

It must be kept in mind that there are multiple stresses on South Africa’s foreign policy machinery; there is ongoing tension between the interests of the ruling party, its regional relations and the interests of the State. Add to that, Pretoria’s often perplexing positioning of itself as a moral authority. Furthermore, regarding its leadership, it has struggled to successfully convince other countries to behave in a way that is in line with its ideals. In spite of all these challenges, for whatever reason South Africa continues to be put in leadership positions by the international community - and not necessarily states on the African continent. Perhaps, it is because, as put forward by Greg Mills, it is seen by the developed world as having the ability to be “a stabilizing force” for the rest of the continent (Mills 2002:7).

The description of Pretoria’s power status as hegemony or its ability to operate as a hegemon is admittedly contentious. In terms of ideational leadership, successive South African leaders have been purveyors of ideas and thematic drivers such as ‘African Renaissance’ and African development institutions. Its influence has been far reaching owing to its efforts, the success of South African commercial entities on the continent, and the ‘symbolic’ leadership role that has been placed on it by the Western nations.

Alden and Schoeman (2015), note that in international fora, Pretoria has managed to

56 secure leadership positions under the auspices of representing Africa. This has been possible despite three key limitations, according to the authors: first, South Africa does not have the material capacity to assert its dominance; second, its inability to convert its strengths, economically and otherwise, into tangible foreign and economic policy advances; and last, its lack of success in influencing the conduct of its neighbouring states (Alden & Schoeman 2015: 240).

Herein lies the ‘paradox’ of South Africa’s supposed hegemony: it is constrained in its dealings within the region because its leadership is not necessarily obtained from a position of traditional power. In addition to shedding its apartheid era image, it has had to adopt strategies that would bring other countries to its point of view, and arguably employ kid-gloves, rather than attempting to enforce its will. South African foreign policy strategies, smart power by Joseph Nye’s definition (2011), are as a result of this contradiction in terms (Alden & Schoeman Ibid: 241).

2.5.1 CAN SOUTH AFRICA BE CALLED A REGIONAL HEGEMON?

South Africa has had many successes since the advent of the democratic dispensation. These include the repayment of apartheid financial debt, the steering of bodies such as the African Union (AU), and the establishment of NEPAD. Truthfully, South Africa cannot comfortably don the regalia of a hegemon. In fact, on the basis of the state of affairs in contemporary domestic politics, it can be argued to be a hegemon in decline.

South Africa has three different identities: one as a hegemon in Southern Africa; the other as a wishful but unsuccessful hegemon on the continent. Because of its inability to entrench its hegemony it is increasingly operating as an extra-regional hegemon; and, its last identity is that of de facto African representative in the international ecosystem. How this representation is characterised has not been labelled in this research but it could possibly be characterised as symbolic hegemony (Alden & Schoeman 2015), or even middle-power. Nevertheless, this thesis suggests that it may be able to take on its actual and emblematic hegemonic role hand-in-hand with big corporations in South Africa.

The private sector has the capability to channel investments for causes such as economic development as well as human rights (Paterson & Virk 2014:18). However, cognisance should be taken of the fact that business does not replace government. But herein lies the dilemma for developing countries, such as South Africa: in order to progress past its developmental trajectory, there has to be some level of agreement to accede some of its state responsibility. Such accession, even when it is to private organisations, is not without great risk to reputation and sovereignty. No country wants to be perceived or treated as a “transmission belt” (Chimni Op Cit). The challenge lies in ensuring that the relationship is one with the State firmly in the driver’s seat and not as an instrument of another state or even a multinational corporation (MNC).

In order to further unpack South Africa’s regional hegemony, a few basic issues that were covered in the earlier chapters will be revisited. The foundations of the ultimate inquiry are multi-faceted: first, what constitutes hegemony; second, does South Africa fulfil the role of a hegemon; and third, does the stability of the regional system require the existence of a hegemonic power. It was shown in an earlier chapter that in order to achieve hegemony, following the reasoning of theorists such as Kindlebeger and Gilpin - a state has to have the commitment, capacity and the will to do so. Each of these attributes will briefly be examined. Furthermore, the examination will include the dimensions of regional hegemony, as conceptualised by Prys.

2.5.1.1 Does South Africa have the characteristics of a hegemon?

The three characteristics of hegemony as defined by Gilpin and Kindlberger are: commitment, capacity and will. Even though South Africa has argued to the contrary, its behaviour has not always tallied up with its official stance.

I. Commitment Two definitions of the word ‘commitment’ from the Oxford dictionary online are: “The state or quality of being dedicated to a cause, activity, etc.” and “A pledge or undertaking” (Oxford University Press 2014).

The notion that a hegemon has to be committed to the system 2 comes from Kindleberger. His various works, most notably in ‘The World in Depression, 1929- 1939’ (Kindleberger 1973) puts forward the idea that the international economy needs a single stabilising country as the system as a whole is prone to instability. He envisioned a solitary “stabilizer” (Ibid: 105) although that stabiliser did not necessarily have to be a country but could be an assembly of regimes (Ibid: 308). The milieu that guided Kindleberger’s thought process must be understood. Kindleberger was an economist observing the world economic system and his 1973 book focuses on an economically disordered period between World Wars I and II that he blames for the Great Depression. He reasons that it was created by the lack of a dominant economy. South Africa’s commitment to the system from a regional and continental perspective will be considered.

South Africa has been a reluctant sheriff3, since the ushering in of the democratic dispensation, and has been keen to shed its image of a coercive/aggressive hegemon as the old regime was seen to be. Indeed, it appeared keen to unlink itself from anything that appeared to suggest that it had sub-imperial ambitions. However, from the very beginning, the ANC-led South African government has illustrated high levels of commitment to Africa and Southern Africa. Furthermore, it appears as if it chose to take the lead in African and Southern African affairs.

One of the principles underpinning South Africa’s foreign policy is “[a] commitment to promote the African Agenda in world affairs”. Also noteworthy, it was South Africa that took the lead in framing the African Agenda. DIRCO’s 2008-2009 annual report boldly states that “[t]he consolidation of the African Agenda remains the principal focus of South Africa’s foreign policy” (DIRCO Ibid:43). In his 2007 opinion piece in South Africa’s Mail & Guardian, Chris Landsberg opined that the African Agenda, which is in line with Mbeki’s concept of African Renaissance, is aimed at integrating

2 The System refers to the international environment in which States engage with one another 3 Term refers to a reluctant leader. First used by Richard Haas in reference to the US role in post- Cold War world. See Richard N. Haas (1997), THE RELUCTANT SHERIFF : The United States After the Cold War. New York: Brookings Institution Press

59 the continent into the global economy. He warns, however, that although South Africa has pushed for multilateralism, its key roles in pan-African institutions such as the AU are a source of discontent for a number of countries who are uncomfortable with South Africa’s “giantism” (Landsbergb 2007).

The very idea of Africa integrating into the global economy, which is further pushed by NEPAD, has brought about criticisms from the political left of South Africa pursuing a neo-liberal agenda at the behest of Western powers. One of the most vocal critics has been Patrick Bond (2004) who has accused South Africa of pursuing a sub-imperial agenda.

Despite criticisms, and doubts surrounding Pretoria’s intentions, the ruling ANC government has been rooted in the idea of an African Agenda. The first time this was elucidated was in the ANC’s foreign policy document - Foreign Policy Perspective In A Democratic South Africa (1994). Since then this principle, as well as other Africanist ideals, have been repeated in policy documents emanating from DIRCO (Formerly known as the Department of Foreign Affairs). The department has illustrated in its foreign policy documentation, as well as its strategic planning, that it is committed to the promotion of the African agenda in several of its priorities. Indeed, in its strategic plan for 2013- 2018, the department highlighted the following objectives:  Enhanced African Agenda and Sustainable Development

 Strengthen Political and Economic Integration of SADC

 Strengthen South-South Relations

 Strengthen Relations with Strategic Formations of the North

 Participate in the Global System of Governance

 Strengthen Political and Economic Relations (Department of International Relations 2013: 6)

Pretoria’s endorsement of the African Agenda goes beyond economics and governance, but includes security aspects as well. Verhoeven et al, contend that understanding Pretoria's view on the concept of the Responsibility to Protect has to

include analysis of South Africa’s post-1994 identity that is steeped in pan- Africanism and, the desire to pursue its African version of intervention in the form of ‘African solutions to African Problems’.

However, Pretoria at times subverts this agenda through its actions. One of the examples put forward by Verhoeven et al is the narrative of South Africa unilaterally sending paratroopers to the Central African Republic (CAR) in 2013 (Verhoeven, Murthy, & Oliveira 2014). South Africa’s engagement in CAR dates back to 2007, when the two nations signed a Memorandum of Understanding on 11 February. In March of the same year South African Defence Force troops were deployed under Operation Vimbezela - an operation meant to train troops loyal to the then president François Bozizé. In 2013, the SANDF deployed additional troops to CAR without the appropriate support, which resulted in devastating casualties on the South African side. Many questions and accusations were levelled at President Zuma and the ANC that personal interests were behind the troop deployments. Hengari’s analysis of the disastrous exercise in CAR, framed it as a failure of South African foreign policy due to the lack of “democratic transparency and Institutional accountability” (Hengari 2013 Online).

The lack of transparency about its operations was also evident in the near haziness of South African government objectives in the Democratic Republic of Congo (DRC). Closer to its own home, failures in Zimbabwe and Lesotho have underscored the fact that South Africa’s foreign policy machinery is not yet running smoothly.

II. Capacity

Capacity refers to the social or material capability to wield proverbial carrots or sticks in order to maintain the integrity of the system. South Africa is undoubtedly economically strong, and is still leading in infrastructure. Yet, its political power is not backed up by military power; instead it is backed up by its projected authority. South Africa’s military capabilities are limited owing to its ageing infrastructure and its inability to further commit itself on the continent. Even though it has become an important peacekeeping provider on the continent, for UN peacekeeping, the

61 numbers of peacekeepers it contributes, 2165 troops, is low compared to countries such as Rwanda that contribute significantly more, 5685 troops in 2015 (UN online).

Despite South Africa’s commitments, the 2014 SANDF review lamented the decline of the force’s financial capacity and the obsolete operating systems. South Africa’s military might was well known during the old regime. In the post-apartheid era, the cutting of defence spending in favour of social spending is understandable… only if the country is not attempting to take on such a large leadership role. The chairperson’s overview of the South African Defence Review stated that: ”[t]here must be either a greater budget allocation or, a significantly scaled-down level of ambition and commitment which is aligned to the current budget allocation” (South African Defence Review 2014: para 36:ix). The level of engagement within the UN, and its contribution to the accelerated operationalisation of the African Standby Force does not tally with the country’s actual capacity.

South Africa’s economic strength and relative stability ensure that it is a power to be reckoned with. There are many contenders for African leadership on the continent, for instance Nigeria, Angola, Kenya and Egypt.

Nigeria, in 2014 controversially, but temporarily, surpassed South Africa in GDP (The Economist, 2015) and has traditionally been a strong leader in the West African region. Although its governance record is improving, and it has a vibrant innovative citizenry, the chance of the country being able to take the helm on the continent is very slim. Thanks to its ongoing battle with various insurgent groups, the most prolific being Boko Haram, Nigeria’s internal security woes preclude it from taking the reins on the continent. To add further to its troubles is that the country is still heavily reliant on oil. The oil price drop of 2014/2015 has had devastating effects on its economy.

Angola is another economy that is commodity driven but it is still trying to overcome its legacy of a close to three-decades war, the aftermath of which has left a deeply unequal society. Its large oil reserves have created a dual economy (IRIN 2009), which has created a small elite of very wealthy people in a sea of poverty. In fact Luanda was once considered the most expensive city in the world (Vanham 2015).

All these facts, including that there are separatist movements in the country, are precursors for a return to civil war. Another major challenge Angola faces in trying to take charge of Africa is its relationship with its former colonial master Portugal (Gatinois 2014). Africans are still trying to shake off the vestiges of colonialism, and deal with the societal consequences thereof. It would be hard to follow the leadership of a country that is perceived to be acting as a colonial outpost.

Kenya’s economy and technological capabilities are rapidly overtaking South Africa; in many instances it has already overtaken South Africa (Kohli 2015). However, bouts of internal strife as well as the constant threat of terrorism have basically pushed Kenya out of the leadership race.

Lastly, there is Egypt. It has a unique geographic position of straddling two continents; one of which is Africa. It was highly influential, and a very strong leader within its region. Since 2011, however, in the wake of the ‘Arab Spring’, the level of its influence outside of its region has waned.

A constant thread for African hegemonic contenders is that that internal strife has affected their ability to project power and assume authority of the region. Alden and le Pere (2009) agree with theorists such as Cox who recognise that economic and military power is insufficient to ensure acceptance of authority. They point to the fact that authority is actually situated in the consent to lead; often under the ambit of collective institutions. Alden and le Pere highlight the fact that it is the international community that fosters “recognition of this regional dominance amongst otherwise recalcitrant neighbouring States” (Alden and le Pere 2000:2).

Of course, upon initial review, this gives the impression that South Africa is indeed not acting as a hegemon but rather perhaps as a subaltern. Even more critical is its inability to coercively convince others to act according to its will. Providing an alternate interpretation, it is maintained that the reason that South Africa is engaging in so many international institutions, such as BRICS and G77, as well as joining many institutions, is that it is positioning itself as the de facto leader of Africa. Also what is not often discussed is the embedded nature of some corporations.

Thus, it could be argued that South Africa is creating a situation in which the continent’s future is linked to South Africa. Not following South Africa’s lead, or at least not engaging in regional institutions and regimes created or maintained by South Africa, means that you will be out in the cold internationally: no country can operate completely independently. South Africa’s real capacity lies in its ability to maintain and create systems. This ability is both political and financial; South Africa bears much of the costs of the AU and NEPAD. It has also been able to leverage its past successes into an increasing number of leadership positions. This leads to the next factor: will.

III. Will Does South Africa have the will to enforce the rules of the system? Despite contestations of its hegemonic status, Pretoria has illustrated in many areas, including its planning, that it is willing to take the lead in Southern African and African affairs. For instance, in the DIRCO 2013-2018 strategic plan, there are 13 goals and objectives across its various programmes and sub-programmes that deal further with its high level objectives.

The characteristics of hegemony were developed with a global hegemon in mind and not a regional hegemon. As much as they help shape our understanding of what a hegemon is, in order to understand regional hegemony various aspects of regional hegemony have to be explored.

2.5.1.2 Dimensions of regional hegemony

Using Prys’ 2008 and 2010 models, three dimensions of regional hegemony are clear. First perception: South Africa owing to its size is under pressure to take on more responsibility in its immediate region and on the continent. Of course there are elements of self-interest involved. David Zounmenou points out that domestic concerns as well as ensuring stability on the continent, inform South Africa’s political engagement on the continent (Zounmenou, Interview held at the ISS Pretoria Office 2014). He notes that over the years “resources have become strategically important in South African foreign policy” (Ibid). In other words before engaging, or even committing troops, the question appears to be asked “what is in it for us” (Ibid).

The second dimension is projection: through framing the ‘African agenda’ as well as taking the lead in various pan-African and regional institutions, South Africa is projecting its own value system. Upon further analysis of the role of mobile telephony companies, there is some evidence that the South African value system, including its corporate value system, is being exported to other countries. Gwinyayi Dzineza, also points out that Pretoria has been very keen “to export its own version of peace building to the rest of the continent… Government of National Unity at all times even though it might not be suitable for a specific context” (Dzineza, Interview held at the ISS Pretoria Office 2014). He further adds that during the advent of Jacob Zuma’s administration, there has been continual use of the line “South Africa is open for business” (Ibid). This is evidenced by the fact that President Zuma made his first official trips to Angola and Equatorial Guinea, both being countries that do not have the greatest democratic records, but are highly lucrative business destinations (Ibid). Under the auspices of NEPAD, companies, mostly South African, have signed on to the codes of good business practice such as: business covenant on corporate governance; business declaration on corporate responsibility; business covenant on the elimination of corruption and bribery; and, the business declaration on accounting and audit practices.

Melber argues that the expansion of South Africa’s private sector mirrors the expansion of trade, and the finance minister’s efforts to alter the structure of the global economy under the World Trade Organization to one that is geared in the favour of developing nations (Melber 2004:5). These two factors give some level of credence to the argument that South Africa’s regional role is based on its value to extra-regional actors. Even if that line of thought is followed, it does not detract from our argument that South Africa is shaping the culture and values of other countries through institutions, regimes, and the endorsement of MNCs.

The third dimension as framed by Prys (2008) is provision: she argues that the regional hegemon provides some form of regional public goods even though it may do so at the behest of extra-regional actors and primarily for its own benefit, According to Marco Ferroni regional public goods “…include the knowledge, the regimes, and the standards and rules that are required to address cross-border 65 problems or to engender desirable cross-border externalities; the institutions that monitor and enforce the rules and regimes; and the benefits that arise and are shared indiscriminately among countries” (Ferroni 2004:2). According to Ferroni, regional development banks are instrumental players in the financing of regional public goods (Ibid).

Examples of regional public goods in Southern Africa are: regional infrastructure such as the planned North-South Africa corridor which would link eight Southern African countries with more than 10000 km of road networks; regional wildlife conservation efforts such as wildlife relocation agreements and peace parks such as the Great Limpopo Transfrontier Park and the Ai-Ai/Richtersveld Transfrontier Park; and regional water projects such as the establishment of the Orange-Senqu River Commission for shared watercourses through the revised SADC Protocol on Shared Watercourses. This regional water project has ensured that water has not become a source of conflict even though it is a vital resource.

Each of these projects is beneficial to South Africa, as well as South African MNCs and South African based foreign MNCs. Concurrently, these projects also foster deeper regional integration driven by South Africa which speaks to its further projecting its regional hegemony in addition to the provision of public goods.

In the rest of Africa, the provision of regional or continental public goods is closely linked to the South African government; for instance, the provision of financing for continental public goods through state-owned financial institutions such as the Industrial Development Corporation (IDC) and the Development Bank of Southern Africa (DBSA).

The Africa Research Institute’s 2009 publication, ‘Going Public: How Africa’s integration can work for the poor’, view of regional goods (which is inclusive of continental public goods) encompassed benefits such as development corridors, and shared regional standards to name a few (Senghor 2009). Arguably, South African MNCs, both in telephony and the rest of the ICT sector at large, have been at the forefront of providing regional goods for the development and upgrading of ICT infrastructure on the continent. The difficulty with defining these goods as strictly regional relates to the fact that these goods are sold, but, at the same time, they

66 provide much needed infrastructure that is used as a potential springboard for development.

2.6 CONCLUSION

The purpose of this chapter was to flesh out concepts in order to build a structure for the proceeding analysis of South Africa’s regional hegemony. It serves as a conceptual foundation and anchor.

It has been established that to be a hegemon, or to have hegemonic authority, means that you have to be willing to provide public goods, be leading in technological innovation and be willing to solve problems. According to Russet et al (2010), hegemonic authority also necessitates the ability to dole out carrots or sticks when necessary. Nevertheless, we also established that the international system is no longer fashioned according to uni- or bi-polar concerns. Instead, thanks in a large part to globalisation, the world is in fact multipolar. There is arguably still one hegemon, and that is the US. It is equally argued that the US is a hegemon in decline, but that has not been proven in either direction.

The truth is; no state power is capable of punishing, or rewarding, members of the international system on its own. Ipso facto, the international system that was developed in the post-World War II period somewhat took that capacity away from individual states, and laid it in the hands of multilateral institutions. Although it must be remembered that for a multilateral institution to exist, there has to be a hegemon who not only pushes for its creation but also manages the cost of the regime. In order to have a hegemony or hegemonic authority, other states have to be willing to follow. Gramsci (1971) posits that participation alludes to consent.

A question that is never really cleared up is whether hegemony can continue to exist in the absence of a hegemon. Keohane (1984) appears to agree with the contention by proposing that although a hegemon may create a regime, the regime may continue even though the hegemon that created it has declined. This thesis proposes a completely different idea: hegemony may exist despite the weakness or 67 lack of material capacity of the hegemon. The hegemon’s hegemony may be entrenched for various reasons such as symbolism (as argued by Schoeman and Alden 2015).

When it comes to regional hegemony there is serious discomfort with the term. In fact, there is not an agreed upon definition, or framework on regional hegemony. Many traditional scholars take the view that there can only be one hegemon. This research takes a contrary view based on a definition proposed by Prys (2008; 2010). In her model, a regional hegemon has three attributes: Perception- Is its position accepted? Projection- Is it the one setting the norms and values for the region? Does it establish institutions? and Provision- Does it provide some form of public goods?

This thesis departs from traditional HST on a number of points: First, it locates itself regionally. In this case, it argues that the presence of a regional hegemon ensures stability; second, it expands on the meaning of capacity and hegemony. The notion of regional hegemony is relatively new in academic discourses. Furthermore the concept of capacity is expanded.

CHAPTER THREE: SOUTH AFRICAN CORPORATE EXPANSION IN SUB-SAHARAN AFRICA- HISTORICAL CONTEXT

South Africa’s position on the continent has always been intertwined with that of capital. Understanding the history of capital in South Africa’s formation is important because it provides context for how contemporary capital is embedded in modern day statecraft. This chapter provides historical context to the role that big corporations, particularly multinationals, have had in South Africa’s foreign and domestic policy machinery. It traces the historical developments, and factors that ultimately shaped the relationship of mobile telephony with the State. This, however, does not ignore long-standing ideological tensions that exist in state-business relations.

The question that this chapter seeks to explore is whether South African corporations have been as effective role players in South Africa’s foreign policy as they have proven to be in domestic policy processes. An important argument that cannot be ignored is that human resource and capital maximisation interests of large corporates were an integral part of the reason that apartheid was created, and ultimately, was weakened. This is indicative of the importance of big business to the State.

This discussion will also explore the basis on which the telecommunications sector became embedded in the State. It serves as bedrock for the discussion on the influence of mobile telephony multinationals in chapter five.

The ensuing examination has two sections: the first considers the birth of South Africa’s corporate sector; and the second, considers the way the post-colonial South African business community instrumentalised South Africa’s foreign policy on the continent, and vice versa. The first section begins with an exploration of South Africa’s historical role on the continent, and the role of capital in financing the State. Then it deliberates on South Africa’s African foreign policy prior to the dawn of democracy. Within this argument, South Africa’s international position and its

69 homeland policy is explored. The second section reflects on the history of South Africa’s telecommunications industry; and the way that companies born of this industry developed a degree of structural power, is discussed. The role of multinationals in statecraft and foreign policy is also examined, and the chapter concludes with an analysis of state-business relations in foreign policy development and implementation.

3.1 THE BIRTH OF SOUTH AFRICA’S CORPORATE SECTOR

Certainly, European history and South African history intersect, primarily because of imperialism and colonialism. In the 16th century, mercantilism4 was pervasive, and thus, colonies were constantly being sought to fortify empires. Colonies existed purely as sources of materials and wealth, and were never meant to be self- governing. However, the story is incomplete without the consideration of private capital. Even during the time of imperialism, colonising states could not afford their expansionary efforts on their own. This is where the needs of corporates and the State merged; and the line demarcating who was truly in charge became obscured.

3.1.1 CHARTER COMPANIES: THE ORIGINAL MULTINATIONALS

Imperialism saw the development of charter companies such as the Dutch East India Company (DEIC) and the British South Africa Company (BSAC); charter companies were the original MNCs. A charter can be described as:

“... a written instrument by which the State confers certain privileges on corporate bodies, either to protect them in the exercise of their lawful avocations at home, or else to encourage and sustain them in their more hazardous ventures abroad “(Cawston & Keane 1896:1).

4 The theory of mercantilism posits that world’s wealth is finite and it is in a States interest to accumulate as much of it as possible. Wealth is seen as the key to power.

They were companies created by an association of investors whose raison d’être was exploration, trade or colonisation; they were often under the benefaction of one state. The relationship between charter companies and their home nation was tit-for- tat; the charter company was given permission to trade and explore and in return the company would develop and administer a territory on behalf of the home nation. Simply, charter companies gave physical expression to the home nation’s hegemony. Further, it may be argued that charter companies were the original MNCs. Authors like Ann Carlos (1988), recognise that this contention is controversial. However, Carlos and Stephen Nicholas have effectively made a case for charter companies as the genesis for contemporary multinationals. They point out that 16th and 17th century trading companies, such as the English East India Company and DEIC, “traded goods and services across national boundaries and had a geographical reach rivalling today's largest multinational firms” (Carlos & Nicholas 1988:398).

The discoveries of gold in Zimbabwe, Zambia and Malawi in 1886 bolstered the soon to be created BSAC, which in turn shored up Cecil John Rhodes’ own influence. The manner in which the Ndebele king, Lobengula, was swindled out of the mining rights in Matabele Land has been widely chronicled. It is understood that under the Rudd concession Lonbengula gave up his tribe’s rights in exchange for “£100 a month, 1,000 rifles, 100,000 rounds of ammunition, and an armed steamer on the Zambesi River” (Russell 2010:33). This became a model of how Rhodes would deal with native groups. He reportedly wrote to Queen Victoria bemoaning the tactics undertaken to secure the rights, however, Queen Victoria wrote back basically telling him that the white people would continue to extract the gold, but his people and their property would remain secure (Ibid:34). After securing the rights to gold in Matabele Land, Rhodes made quick work of setting up the charter company - the BSAC, which Patrick Bond describes as being indicative of “a structural switch from informal control of trade, to trade with rule. British imperialists assumed that competition for control of Africa would continue beyond the 1885 Berlin conference which partitioned Africa, and that only BSAC-style ‘imperialism on the cheap’, as it was termed, would ensure geographical dominance over the interior of the continent in the face of hostile German, Portuguese, and Boer forces” (Bond 2006:94).

Thus, what we see from the BSAC example in Southern Africa is a company being used to further the aims of the State and entrench cultural, political and economic hegemony in the region. It may be argued that the hegemony of South Africa, as an entity, in the region was gestated in the belly of its mines. It is in the growth of these extractive industries that we see a shift in the power of charter companies to the power of mining corporations. This was also around the time that ‘virgin’ territories were few and far between. Thus capital garnered from the control of the Kimberley diamond mines is what made Cecil John Rhodes so powerful; and useful to the crown. He was the leading partner in De Beers that was the leading supplier of diamonds in the late 19th century, approximately 90% of the world’s supply (Russell 2010:32). Rhodes also developed the Consolidated Gold Fields of South Africa that had him involved in gold mining in the Transvaal5.

Antoinette Handley explains that in development of the business class in South Africa, over the period between 1870 and 1989, the economic power and political power centred on race and ethnicity. Handley notes that the constant struggle between Afrikaner nationalism and perceived British imperialism was interjected by the struggle for control of the extractive industries (Handley 2006). The second Anglo-Boer War of 1899 to 1902 was primarily about control of these industries. This is demonstrative of the fact that state-business relations have always been fraught with tensions; however, it does not detract from the fact that there has been a level of symbiosis or partnership.

In South Africa, The labour needs of the growing mining industry, as well as the burgeoning commercial agriculture, caused a situation whereby blacks were left landless and there was a growing population of poor whites (Handley, Op Cit: 35). There was a strong leaning towards protectionism; although the business community found itself divided on the issue. On one side of the fence, the import-export sector supported the free trade stance of the mining sector, on the other side was the agriculture sector which sided with protectionism (Ibid:39). Although the 1920s and

5 Now called Gauteng under the democratic dispensation.

30s were marked by increased state involvement, Handley warns that the extent of state involvement should not be exaggerated (Ibid). It is evident that the two state- owned enterprises, which drove much of South Africa’s industrialisation process, the Electricity Supply Commission (Escom6) and the Iron and Steel Corporation (Iscor), were largely independent and were not reliant on state funding though they were state supervised (Ibid: 39-40). The IDC was created in the same vein, with no access to public funding but with the intention “to fund the establishment of private, not State, corporations in partnership with private businessmen” (Nancy Clark, Manufacturing Apartheid quoted in Handley Ibid:40).

In the 1940s, as an expression of its power and extension of its reach, the State established a number of enterprises that were linked to the regime. These included: Sasol which manufactured and marketed fuel from coal; Safmarine which was a shipping enterprise; Foskor which dealt in phosphates; and Alusaf which dealt with aluminium production (Ibid:41). Iscor and Escom began to operate as monopolies in their respective industries (Ibid:42).

What apartheid did domestically, was ensure that the black population was socially and politically, forced into servicing white capital by providing cheap labour without any chance of contestation for the ownership of sources of capital. What is also clear is that there was a shift in the balance of power on two fronts: firstly, from British control to Afrikaner nationalists’ control; and, secondly, the State was using industry as an expression of hegemony and not the other way around: akin to the way imperialism made use of the charter companies. Yet, it must be noted that charter companies, somewhat similar to future multinationals, also influenced the State. Archie Mafeje (1988) decried the fact that the interests of the financiers of the State, or Big Capital, have always been paramount since the era of imperialism. He skilfully illustrates that the social stratification in the country was shaped to meet ever evolving labour needs. However, he concedes that labour considerations are a mere

6 It became know by known by the acronym Eskom in 1986 after the combination of the acronyms ESCOM and EVKOM- the Afrikaans name (Elektrisiteits Voorsienings Kommissie) of the power utility

73 piece of a larger socialisation puzzle that is interspersed with the rise of Afrikaner nationalism and battles against British capital.

The reality is that South Africa was not unlike its imperialist predecessors, in the sense that it did not have the capacity to be a true hegemon in the region without capital, which in turn wanted access to resources and securing of its interests. The South African regime went a step further by establishing its own companies such as Eskom, the IDC, and Iscor. This could be seen as a way in which the country ensured its influence over resources.

3.2 SOUTH AFRICA’S FOREIGN POLICY TOWARDS AFRICA

Prior to the advent of democracy South Africa’s foreign policy was shaped not only by economic concerns but also by its attempts to pinpoint its identity. Prior to the advent of true democracy in 1994, the literature illustrates that there was a struggle with whether or not South Africa was an extension of its colonial sires, or was it an independent “white” state within Africa. Responding to the (in)famous winds of change speech to the South African parliament in which the UK prime minister Harry Macmillan essentially warned of the end of imperialism, Hendrik Verwoerd declared:

“We call ourselves European, but actually we represent the white men of Africa. They are the people not only in the Union but through major portions of Africa who brought civilisation here, who made the present developments of black nationalists possible. By bringing them education, by showing them this way of life, by bringing in industrial development, by bringing in the ideals with which western civilisation has developed itself” (Boddy-Evansb, Hendrik Verwoerd's response to Harold Macmillan's "Winds of Change" Speech).

This strong response brings two major factors to the fore: it indicates that by the 1960s, the ruling class in South Africa had a bipolar character as Europeans but also as the sovereigns of the rest of the continent. Adekeye Adebajo bluntly comments that “...patronising thinking was very much a feature of South African political thought from Cecil Rhodes to F.W. De Klerk” (Adebajo 2010:105). Indeed, the State’s perception of the rest of Africa was not only informed by its identity politics but also its racial policies. Foreign policy and domestic policy are interwoven cords that make

74 up the fabric of a state’s overall policy. As such, there were intersections between the agenda of the State and that of the ruling political party. Moreover, the role big business played in the development of both foreign and domestic policy cannot be ignored.

The countries immediately surrounding South Africa were, basically, seen as an extension of its territory - another source of cheap labour and raw materials. The words of imperialist and businessman, Cecil John Rhodes, best embody the general sentiment at the time: “we must find new lands from which we can easily obtain raw materials and at the same time exploit the cheap slave labour that is available from the natives of the colonies. The colonies would also provide a dumping ground for the surplus goods produced in our factories” (Nau 2014: 456).

As the State developed, the intention was to expand its sphere of influence to include African countries outside Southern Africa. Adebajo believes that South Africa’s contemporary view of region as its personal backyard stems from the colonial era. Cecil John Rhodes was reported to have described the continent outside of South Africa’s borders as part of its “natural hinterland” (Adebajo Op Cit: 104). One of South Africa’s own MNCs was the mining powerhouse De Beers founded by Rhodes. Patrick Bond contends that “the consolidation of settler colonialism was feasible in large part thanks to the 1880-90s entrepreneurship and geopolitical leadership of Rhodes” (Bond 17-19 December 2004:10). Bond further argues that:

“Rhodes’s two main vehicles were the British army, which invented the concentration camp and in the process killed an estimated 14 000 black people and 25 000 Afrikaner women and children during the 1899-1902 Anglo-Boer South African War, and the British South Africa Company (BSAC), a for-profit firm which in 1890 began systematically imposing settler colonialism across the region” (Bond and Kapuya 2006:27). Consequently, South Africa’s cultural hegemony, which was internal, later matured into regional hegemony in its immediate neighbourhood, and was entrenched through violence and cultural domination.

John Siko contends that after 1948, more specifically after World War II, South African corporations were more domestically focused (Siko 2014:135). In the post- World War era, South African firms started looking at opportunities outside South Africa’s borders with the assistance of groups such as the FCI (Ibid:136). Siko found that rather than obstruct South African business, the 1950s fight for decolonisation by African countries was a mere disturbance, partly owing to support from the South African government (Ibid). South African companies traded vigorously in Rhodesia, colonial Mozambique, Angola and even francophone Africa (Ibid:136-137). At the height of the anti-apartheid movement between 1984 and 1988, African trade with South Africa actually grew from “6.5 to 10 per cent” (Ibid:137). In order to demonstrate the level of government involvement, Siko refers to the recollections of the Former Deputy Foreign Minister (1986-1989), Kobus Meiring, who made several clandestine trips across the continent to assist South African businesses to expand (Ibid). These efforts were clearly successful as “by 1990 South African firms ‘were quietly doing business with almost every country on the continent’“(Ibid). Another example, from South Africa, of the involvement of the private sector in helping the State achieve its political aims, is the case of Malawi and the Lilongwe Capital Project. Pretoria directly intervened in the building of Malawi’s capital as a way to make political inroads in Africa in the 1960s.

In 1966 the Malawi Development Corporation signed an agreement with the Johannesburg based planning and design company, Imex (Pfister 2005:42). Imex only came into being a month prior to the signing of the agreement with the main shareholders who were: Anglo American, the IDC, Union Acceptances Ltd, and Anglo American Private Merchant Bank (Ibid). The agreement reportedly had a note stating that the agreement was “expressly tied to the condition that maximum use was made of South African contractors” (Ibid). The main company that won the contract was the Roberts Constructions Co7 (Ibid). Pfister explained that the benefit of South African involvement was that the Department of Foreign Affairs was assisted in fulfilling its “political ambitions” and for Roberts and Co, it landed a

7 This company merged with Murray & Stewart and became Murray & Roberts in 1967.

“profitable and risk free order” (Ibid: 43). Although, as conceded by Pfister, Pretoria only received marginal benefit from this political and financial investment as Malawi was not a significant political player on the African continent but it did abstain from voting on the Lusaka Manifesto at the UN General Assembly8 (Ibid).

It is clear that the relationship between the State and capital is interwoven but complex. Indeed, piggybacking on Clark’s (2009) idea that there are different types of hegemonies including a ‘collective’ hegemony, this thesis posits that the hegemony of the South African State during this apartheid period was possible in a large part, because of the embedding of South African multinationals within the State.

When considering the sometimes hidden, embedded nature of the private sector in the State foreign policy machinery, it is important to consider the context in which this occurred. Put differently, what were the original ingredients in the casserole of South African regional hegemony?

3.2.1 SOUTH AFRICAN FOREIGN POLICY TOWARDS AFRICA BEFORE THE ADVENT OF DEMOCRACY

Parallels can be drawn between the foreign policy aspirations of the pre-democracy administrations and post-democracy. The most striking similarities are the State’s aspirations towards regional integration as well as leadership in the continent’s rise to prominence. Colonial concerns ensured that South Africa became a sphere of influence in the region and beyond; the State revelled in its inherited dominance.

Early on, the State recognised that its continued economic importance, as well as strategic importance, was linked to its external expansion. In terms of South Africa’s

8 The Lusaka Manifesto on Southern Africa was voted for by the UN General Assembly , resolution 2505 (XXIV) ,on the 16 April 1969. It spoke against white supremacy and oppression in Southern Africa.

77 immediate neighbours in Southern Africa, they were co-opted into a dependent relationship to serve the interests of their colonial masters; in essence, no different from “Bantustans” (Nolutshungu Op Cit:161). As noted by Nolutshungu, “every government since 1910” recognised that the potential of South Africa’s economic supremacy was inextricably coupled to its expansion into Africa (Ibid:162). Organised business was also very influential in recognising the economic opportunities that existed on the continent (Adebajo Op Cit:104). The key architect of “grand” apartheid, Hendrik Verwoerd, asserted South Africa’s ownership of the continent’s potential (Adebajo 2010:104-105).

Prior to inclusive democratic elections in 1994, owing to its peculiar history, South Africa’s foreign policy could be described as having three branches. The first policy was that of the State with the West; the second policy was between the State and its black African inhabitants who it did not view as citizens of the country; the last policy traces its lineage to the second and the first policies - its relations with African neighbours.

3.2.2 SOUTH AFRICA: A WESTERN STATE IN AFRICA?

Roland Henwood (1997) refers to the key features of South Africa’s pre-1977 foreign policy as put forward by GC Olivier: I. It was pro-Western and anti-communist. International trade was used to fight isolation and sanctions II. It strived for regional cooperation and “South Africa as part of the African continent (with a permanent white population)” III. It believed in avoiding intruding on the internal affairs of the others to ensure a likewise response. Furthermore, using external justification to enhance South Africa’s image overseas.

Reflecting the shared values it had with the West, which stemmed from its similar histories of imperialism, much of the country’s trading partners were Western nations (Adebajo Op cit:104). South Africa had fashioned itself around its identity as a bastion of white power in the “frontier” lands. However, the move towards

78 decolonisation on the continent, as well as potential new players in the field caused the government to react by becoming more repressive (Nolutshungu Op Cit: 162). The possibility of colonialism no longer being the status quo in Africa, understandably made South Africa nervous.

South Africa’s power, privilege, and significance, was rooted in the fact that it was under the protection of imperialist powers (Ibid). Decolonisation represented a crisis for the State on both a domestic and international level (Ibid: 163). Feeding off the hysteria of the Cold War era, apartheid leaders used the threat of the spread of communism in Africa to ensure support from the American government (Ibid). In the period after World War II, South Africa formed a relationship with European empires to bring “development to the rest of Africa” (Ibid: 105). In an apparent move towards regional integration, DF Malan, in 1948 put forward an African Charter (Ibid); his intentions however were not altruistic. The African Charter envisioned dual points of command: “colonial powers and those powers with possessions on the continent” (Ngoma 2005:82). It, unashamedly, sought to cement Euro-Christian9 hegemony in the region as well as to forestall the spread of communism (Ibid).

Ngoma describes the African Charter, as well as other initiatives such as the Constellation of Southern African States (CONSAS) as South Africa’s first stabs at building a regional security apparatus intended to entrench white supremacy (with South Africa at the helm) in the region. Ngoma’s argument is remarkable, not only in the context of the current part of the discussion, but also in view of Pretoria’s attempts at developing a regional security apparatus in the democratic era.

South Africa’s foreign policy underwent a metamorphosis from 1976 onwards owing to a number of domestic and international pressures. The primary stages of this transmutation dates back to the Sharpeville massacre in 1960. This event was a key turning point in South Africa’s relations with the West - as well as the rest of Africa. The massacre of 69 people by the police was as a result of the violent police response to the, by all accounts, peaceful protest, by black marchers, against the

9 This term was used by Adekeye Adebajo

79 use of a passbook. Even Western powers were uneasy about the situation in South Africa, which was largely ignored till then, but which was palpable. Less than a month prior to the Sharpeville massacre, The UK Prime Minister, Harry Macmillan addressed the South African parliament, and ominously warned them that: “The wind of change is blowing through this continent, and whether we like it or not, this growth of national consciousness is a political fact. We must all accept it as a fact, and our national policies must take account of it” (Boddy-Evansa, Harold Macmillan's "Winds of Change" Speech online). This speech has come to be seen as the recognition of the end of imperialism in Africa as well as “the harbinger of an African nationalism sweeping irresistibly from the north” (Fleshman 2010:28). Being a South African ally was no longer fashionable.

3.2.3 SOUTH AFRICA’S HOMELAND POLICY

As nationalism spread across Africa in the 1940s and 1950s, Pretoria became increasingly repressive in its tactics towards its own population. GC Olivier was of the opinion that the changing external dynamics led to vast support, from both English and Afrikaans speaking white South Africans, for Hendrik Verwoerd; his solution to the problem was to re-engineer the State (Olivier 1982:274). This period saw the legislation of racism in the country. The apartheid administration leapfrogged off older racist legislation, such as the 1913 Native Land Act, and put in place a number of pieces of legislation to formalise, and intensify, racial prejudice that had in fact begun in the 17th century: legislation such as the Bantu Homelands Constitution Act 21 of 1971 and the Bantu Affairs Administration Act 45 of 1971.

The South African State after 1948 was repressive, as it had developed a system that pushed black Africans into being an integral part of the functioning of the State but not seen as members of the State. This state of affairs was almost reminiscent of the Roman citizenship laws where different classes of people had varying categorisations within the State; in the case of South Africa, black Africans were never intended to be able to attain citizenship. Basically, black Africans were seen as foreigners within South Africa.

The government managed to succeed in bringing about this state of affairs by creating the homeland system; also called Bantustans. Ten states within the State were created for the purpose of creating ‘self-governing’ ethnic holdings. The spatial development of these holdings meant that there was always a dependence on the larger South Africa. As Schrire noted, the homelands were dependent on their ties to South Africa for employment and access to products. Conversely, the core economy, South Africa, was dependent on the homelands to provide labour (Schrire 1982:136).

The National Party government perpetuated the narrative that these homelands were in fact the traditional tribal lands of black Africans. Under Verwoerd, the idea of separate development, or apartheid, was conceptualised. DF Malan promulgated the Bantu Authorities Act in 1951 to establish the various ethnic reserves for the country’s black population. In 1959 the Promotion of Bantu Self-government Act was passed in which the actual plan for apartheid was detailed. Ultimately, the Act created the following African reserves: Transkei (1963); Ciskei (1972); Le bowa (1972); Venda (1972); Bophuthatswana (1972); KwaZulu (1973); Gazankulu (1973); Qwaqwa (1974); KwaNdebele (1977); and KaNgwane (1984). Four of these states were later proclaimed independent states. These were the so-called TBVC States - Transkei (1976), Bophuthatswana (1977), Venda (1979) and Ciskei (1981).

In 1970 the citizenship rights of black South Africans were removed through the Black Homelands Citizenship Act. Robert Schrire describes the basic rationale, on the part of the State, as follows: “Each individual black, irrespective of culture, birthplace or residence remains an immutable component of one these ethnic nations. The aim of the policy is, in its simplest terms to disentangle South Africa’s multiracial society which past economic and social forces have created” (Schrire 1982:114).

Schrire argues, however, that these homelands did not tally with the persistent narrative of being traditional homelands but, to be more precise, were “the areas of black occupation that remained after the military and political defeats of various African communities and kingdoms” (Ibid:115). He further argues that the 1913 Land Act and the 1936 Natives Representation Act were intended to segregate white and black people to serve “the needs of white farmers and industrialists for black labour”

(Ibid). Naturally, these homelands persisted because of the appearance of a black ruling class that benefited from maintaining the status quo.

Diplomatically, the only country to ever fully recognise these homelands was South Africa itself, yet it is not convincing that the country ever truly intended these states to be truly independent. The homelands becoming autonomous nation-states, in the true sense, would have diminished South Africa’s power and diluted its hegemony.

The South African government’s military intervention in Bophuthatswana’s military coup in the 1980s, was indicative of Pretoria’s willingness to make use of state resources to secure, not only its interests but that of capital; Pretoria reinstated Lucas Mangope, a mere 15 hours after he was expelled on 11 February 1988 (Battersby 1988). Not only did the weight of South Africa’s security forces bear down on Bophuthatswana but President PW Botha; the Defence Minister Magnus A Malan; Law and Order Minister Adriaan J Vlok; and Foreign Minister Roelof F Botha, flew to the homeland’s capital that same day (Ibid).

It has been widely reported that six months prior, there had been similar coups in the Transkei but the response was not comparable. This was probably due to the fact that Bophuthatswana was home to the Sun City Entertainment complex as well as considerable platinum reserves. Pretoria again intervened in 1990 following civil unrest in the homeland on 8 March 1988 (Wren 1990).

3.2.4 SOUTH AFRICA AND THE REST OF AFRICA

The State had hegemonic tendencies that could be described as malevolent towards countries that were not so far from its borders. The establishment of SACU may be considered evidence of its malign intent. Instead of being a tool to integrate regional economies, it was an institutional apparatus that sought to deal with the economic integration of separate political dependencies (McCarthy 2008:14). This meant that

82 the countries within the Southern African region became an easy market for South Africa’s goods as well as easy access to resources - human as well as commodities. “In the most hegemonic of CUs10, SACU, South Africa simply decided trade policy and compensated the smaller countries for the costs it imposed on them”(Schiff and Winters quoted in McCarthy 2008:16).

The growing internal and external opposition to its policy of apartheid marked the relationship between South Africa and the rest of the continent. The country found itself being increasingly isolated, but maintained a stranglehold on the region through SACU.

The front-line states, Southern African states opposing apartheid, were formed in 1970 to harmonise their responses. These states were Angola, Botswana, Lesotho, Malawi, Mozambique, Swaziland, Tanzania, Zambia and Zimbabwe. They found it difficult to pursue their agenda as they were all economically dependent on South Africa. This led to the formation of the South African Development Coordination Conference (SADCC) on 1 April 1980 to counterbalance this economic strength. “The formation of SADCC added to the isolation of South Africa from the international community when more European countries, including the United States increased their support for the SADCC” (Front-Line States nd). Even though Pretoria found itself increasingly isolated as the opposition to apartheid grew, there were apparent attempts to diplomatically engage with the rest of the continent: for instance, JG Strydom was one of the first heads of state to congratulate Sudan on gaining its independence and in 1957 there was a diplomatic representative at Ghana’s independence celebration (Adebayo Op Cit:104).

According to Adebajo, racism in the country, as well as the African governments’ anti-apartheid stance was the main reason that these burgeoning relationships with newly independent African nations could not be deepened and leveraged (Ibid). Khadiagala observes that the foreign policies in the region were often “tools of managing a hostile regional environment” (Khadiagala 2001:132). In other words, African countries’ diplomatic actions had an element of hegemonic response

10 Customs Unions

83 strategies embedded in them. Among the options available to them the dominant strategy, especially as the fight against apartheid intensified, was balancing. Balancing meant that states joined together politically, economically and/or militarily to counter the hegemonic threat. With the development of SADCC and the creation of various coalitions at the time, they were able to lessen South Africa’s power to a degree and ultimately bring apartheid to an end.

3.2.5 SOUTH AFRICA’S ATTEMPTS TO CARVE OUT A NEW ROLE

The integration of the ‘new’ South Africa into the sub-region as well as ensuring its survival was a subject of great debate by other African countries. Understandably, it elicited concern from statesmen on the continent. For instance, at the African Leadership Forum held in Namibia in 1991, wearing the cap of chairman, former Nigerian president, Olusegun Obasanjo, noted that:

“In economic and social terms, South Africa is weak and unwell. The situation is likely to get worse before it can get better as a result of the transition and the uncertainty of the interim situation. With the demise of apartheid and the correction of gross misstructure and the underperformance of the economy, the social malaise brought about by the policy of apartheid will remain for some time. Deliberate efforts will have to be made to deal with the social problems of the “new” South Africa. It is now being recognized by all concerned in South Africa that the problem is not that of changing the captain of the boat but changing the engine and reorganising the crew. That reorganization may inevitably lead to a change of the captain but, all in all, fears will have to be allayed and expectations will have to be moderated” (Obasanjo, Chairman's Summary: Conference on the Challenge of Post Apartheid South africa to Southern Africa in particular and Africa in General, 8-10 September 1991). Lesotho’s King Moshoeshoe II elucidated the fear of many countries in the front-line states about the potential danger that Southern Africa will “... continue to be subordinated to South Africa” (Moshoshoe, 8-10 September 1991).

Sanusha Naidu describes a few of the factors at play at the time that South Africa undertook its political transition: first, the international political economy and global architecture was changing; second, as a result of the change the relationship between “countries of the Third World and the Cold War architects” also underwent a metamorphosis; and third, these changes impacted “the political architecture on a

84 domestic level” (Naidu, Skype Interview 2016). In other words, because of the political shifts that had taken place at the global level, the political environment had become very different. This meant, in practical terms, that the near simultaneous ending of the Cold War as well as the end of apartheid opened the way for South African corporations’ expansion on the African continent. Ultimately, South Africa’s reintegration into the international system resulted in an increasing economic shadow over the continent and the sub-region that fuelled fears of the new South Africa’s hegemony.

South Africa’s attempt to create a role on the continent, as well as on the global stage, has always been a matter of much contention. Among technocrats and academics alike, there was widespread recognition that the success of the new South Africa was vital to the continent. Consequently, in academic circles, a debate raged on what direction South Africa’s foreign policy should follow. In the post- apartheid era, relations with the rest of the continent have been undeniably shaky. Robert Davies provided the most notable foreign policy scenarios. His three options were:  “South Africa first”: It was envisioned that economic interests would trump all others notwithstanding the potential harm it causes to the region.

 “integration under South African hegemony”: This approach would see South Africa initialising cooperation and integration initiatives that are fashioned towards advancing its national interests and ambition of regional hegemony.

 “non-hegemonic regional cooperation and integration”: Under this approach - it was envisioned that South African corporates would expend capital, and forgo maximum profit accumulation temporarily, for the benefit of regional developmental objectives (Davies 1992:67).

The direction that Pretoria has followed, or should follow, is still highly contested. The part of the debate that is most robust surrounds the questions of whether or not South Africa is a regional hegemon. The inquiry of South Africa’s regional hegemony has two levels: in its immediate neighbourhood and on the continent (barring North Africa). There can be little contestation to South Africa’s primacy in its immediate neighbourhood, more specifically SADC but the picture on the rest of the continent is

85 not as clear. What is clear is that during apartheid, the business sector did have a role to play and were not only neutral observers.

3.3 TELEPHONY IN SOUTH AFRICA

The previous section provided a brief overview of how MNCs became embedded in the South African statecraft; and to an extent in foreign policy. It is evident that during the apartheid era, South African corporations had a very contentious relationship with the State and many of them had minimal interactions with “the commercial or economic sections of embassies abroad” (Siko Ibid:146). In practical terms what this meant was that South African corporations did not have much of a role in influencing foreign policy but the State was not shy about using its ‘homegrown’ MNCs as an expression of its power. This became more acute during the dying days of apartheid. This was evidenced by the November 1979 Carlton Hotel Conference held by then Prime Minister PW Botha to which more than 300 businessmen, including black businessmen, were invited. The purpose of the meeting was for Botha to request that businesses be more active in Southern Africa under CONSAS. Deon Geldenhuys noted that Botha had realised that it was crucial to “harness the resources of the private enterprise in its pursuit of his constellation ideal” (Geldenyhuys 1981:9). The result of the conference was the creation of the DBSA and the Small Business Corporation (SBC) (Siko Ibid:144).

All of this is important in understanding how telecommunications, in particular telephony, became a tool in the arsenal of South Africa’s hegemony. Mobile telephony, in particular, only emerged in the heat of South Africa’s negotiations towards democratic reform. Indeed, the telecommunications industry as a whole has always been at the coalface of South Africa’s political skirmishes; and eventual reformation.

3.3.1 THE HISTORY OF SOUTH AFRICAN TELEPHONY

Colonialism brought telecommunications, in the form of telegraphy, to the African continent in the 1870s. The BSAC built telegraph and railway lines linking its African colonies (Dhliwayo 2013). The purpose of this technology was to simplify communication between colonial administrators (Ibid).

Telephony was introduced to South Africa in 1891, soon after the invention of the telephone in 1878 (Ibid). Even after the end of colonialism on the continent, intra- African telecommunications was a challenge. One of the regional organisations that sprung up to deal with this challenge was the African Postal and Telecommunications Union in 1935 (Mays 2015). The problem with this union was that it only served Southern Africa (including the former Zaire) and was financed and administrated in Pretoria thus falling victim to the struggle against South Africa’s domestic, and regional, hegemony.

South Africa’s telecommunications services during apartheid were highly racialised, with little to no services provided to the black African population. During the era of apartheid, telecommunications as well as postal services fell under the ambit of South African Posts and Telecommunications (SAPT). SAPT was originally a monopoly (Horwitzb 2001:75).

During South Africa’s history as a Union, the SAPT was controlled by the British Treasury and revenue and spending went through the Exchequer; it was linked to the parliamentary budgetary cycle. In 1968, seven years after South Africa became a Republic, this state of affairs changed when South Africa began to control SAPT’s financing although it was still marginally dependent on Treasury for its credit facilities (Ibid:76,75). However, SAPT functioned in a manner that reflected the political ideology of the State. Its teledensity, as well as infrastructure development was unbalanced in a manner that was prejudicial to black Africans (Ibid:76). Moreover, 87 similar to South African parastatals at the time, the SAPT was a “repository for white labor” (Ibid:36). This state of affairs shifted the same time the political climate in the country was shifting (Ibid:93).

Further evidence that SAPT was reflective of the political ideology of the State was the manner in which it actualised South Africa’s industrial policy. South Africa’s SAPT built the country’s “sophisticated telephone infrastructure” but it helped develop its electronics industry as well as becoming a permanent market for its goods (Ibid:75).

Communication through telephony was long recognised as a way to foster socio- economic development in South Africa. Robert Horwtiz argues for the significance of the communications sector, which is inclusive of telephony, “as a window to understanding the South African transition to democracy and the political struggles of its consolidation” (Horwitz Ibid:18). Horwitz recalls that, telecommunications in particular, was the pioneer in taking “its consultative Green and White Papers to legislation” and sparked public discourse over the possibility of privatisation of public entities (Ibid:18-19).

In the 1980s, the National Party began the process of separating telecommunications from direct ministerial control and creating a state-owned enterprise that performed similar to a private enterprise (Ibid:39). In 1991 Telkom SA limited (Telkom) was registered as a public liability company under the South African Companies Act, 61 of 1973 as amended. The government subsequently transferred its telecommunications operations to Telkom. 1991 marked the official transition to a full participatory democracy 11 with peace talks between FW de Klerk, Nelson Mandela and Mangosuthu Buthelezi. The move towards liberalisation or commercialisation of telecommunications was against a backdrop of deeper tensions within the ANC alliance, about the economic path of the new South Africa.

11 “Participatory democracy, it is suggested, is a form of representative democracy in which citizens are actively involved in the decision-making processes of government” (Parliament Online, n.d).

3.3.2 MOBILE TELEPHONY

The introduction of mobile telephony came within the framework of the economic and political transitions that were occurring in the country in the 1980s and early 1990s. The decision was made that two digital Mobile Network Operators (MNOs) would be licensed (Horwitz Ibid:200). The cost of increasing infrastructure for fixed telephony was prohibitive when the option for cellular communication was mooted. In fact, cellular phones had been available in the country since 1986 but, according to Knott- Craig, “the monopolistic way it was managed, every phone cost about R15000 and there were about 15000 users registered over an 8-year period” (Knott-Craig 2012:32).

The decision to proceed with the licensing was based on a report by the consultants Coopers and Lybrand, who suggested that “Telkom should be allowed to participate in one of these network-operating franchises, the Report suggested, either on its own or as part of a consortium - but only through a fully separate subsidiary” (Horwitz Ibid:198). According to Horwitz, in April 1993 the front line between the government and the ANC became the issue of MNO licenses as the government released the tender without consultation or supporting legislation (Ibid: 200). Ter Oosthuizen was appointed to administer the process much to the chagrin of the ANC, COSATU and the Cellular Telephone Consultative Forum (Ibid).

Long-time industry insider, Alan Knott-Craig12, notes that mobile telephony came about almost as a fluke because neither the ANC nor the National Party fully appreciated the true implications of mobile telephony (Knott-Craig 2012). What was clear was that both the ANC and the National Party had grasped that the relatively low cost of mobile telephony was fertile ground for political point scoring. Horwitz

12 He has been the CEO of Vodacom (1996 – 2008) and Cell C (2012 – 2014)

89 refers to an account of a National Party government official wanting to reap the political benefits of mobile telephony before the ANC as a reason for going ahead with the licensing process outside of the agreed upon mechanisms (Horwitz Ibid:20). Muller reports that the ANC contested the issuing of cellular licenses to private companies (Muller 2014). This was probably because COSATU was a member of the tripartite alliance and that meant they would have felt uncomfortable about job instability in Telkom owing to competition. Mandela and FW De Klerk settled, through one-and-one discussions, the long battle over various aspects of the mobile telephony regime, including whether or not to adopt the GSM standard (Ibid). Two mobile licenses were initially awarded: MTN (Mobile Telephone Network) Holdings and Vodacom.

A condition of the MNO tender application was that contenders were required to: “specify the extent to which their choice of technology would lead to high volumes and low costs, how their technology choices would support South African industry, and how they would provide a service to poor communities. The license required a certain percentage of phones earmarked for underserved communities” (Horwitz Ibid:201).

Vodacom was the first South African mobile operator to come online in the early 1990s and it has the biggest market share in the country. The company originated as a partnership between Telkom and United Kingdom based Vodafone. Part of the vision that informed bringing mobile telephony into the country was providing services to the previously underserved and vulnerable. The ability to communicate represented an opportunity for financial and social progression. In the early 1990s, Vodacom’s initial license terms were reviewed to include clauses requiring Vodacom to provide “22 000 phones to previously underserved areas within 5 years” (Coetzer 2008). One of the ways that Vodacom was able to reach poor communities was to provide phones that are available to rent within a shop owned by entrepreneurs. In fact, according to Carney (2008 Online), in 2004 over 50% of the traffic on the Vodacom network came from “4,400 entrepreneur-owned phone shops where customers rent access to phones by the minute”.

A concession born out of the multi-party negotiations was that the second license, would be reserved for black economic empowerment and shareholding (Horwitz Op Cit:202). Horwitz succinctly contends that:

“the MTN license award set the pattern in post-apartheid business deals and in the general character of black economic empowerment. State contracts and tenders can only seem to be won if the tenderer includes a so-called empowerment partner, most often consisting of a small group of black businessmen whose stake may be underwritten by established white corporations” (Ibid:203).

The level of structural and relational power possessed by MNOs is born of their history and development capacity. Chapters five and six, will explore in further detail whether the post-1994 government had leveraged its MNOs, in the same manner that the pre-1994 government had leveraged a number of its MNCs, to widen its grip on the rest of the continent.

3.4 CONCLUSION

It was contended at the beginning of this chapter that South African corporations, particularly those that are multinational in scope, influenced South Africa’s foreign and domestic policies both in terms of implementation and in development. This suggests that corporations have always been embedded in the State apparatus. While this chapter does not offer irrefutable linear association between the State and business, it does illustrate that there has always been a relationship, and the interests of big business is considered in its grand foreign policy planning. Furthermore, we argue that, historically, business has been used as a tool to promote and entrench the agenda of the State.

South Africa’s crisis of identity, as illustrated, has existed since its creation. The country has vacillated from presenting itself as: an extension of its colonial sires; a white country in Africa; or a part of the African continent. Social stratification, further 91 intensified by racial politics, meant that South Africa’s domestic cultural hegemony ultimately fed into its pursuit of hegemony in its immediate region. This cultural hegemony came into play in the 19th century and was later normalised, and legalised, through apartheid. As explained by Chandhoke (1986:297), the purpose of racialising power stratifications within South African society was to “legitimate power hierarchisation”. Furthermore, South Africa’s self-perception coupled with racial politics shaped its approach to foreign relations with the rest of the continent. The needs, and role, of capital has been an important part of the racial power hierarchies (Ibid).

The rise of charter companies such as BSAC was instrumental in South Africa’s early political economy, in particular its role in the wider global political economy. However, the powers given to charter companies were the first illustrations of a private entity operating to promote the ideals of its home country while making a profit. These companies provided state functions, had military as well as naval power, and basically operated in the same way as a state in the colonies they were mandated to establish. It may be argued that charter companies were the archetype of what would become the modern multinational or transnational corporation. The first version of an MNC in South Africa was Cecil John Rhodes’ De Beers. South Africa’s perception of the continent as its domain was coloured not only by its economic needs but to continue its importance to Western nations. Hendrik Verwoerd stated categorically that South Africa owned Africa’s potential. This assertion is important to note because this was a case where South Africa was clearly staking its claim in its periphery and beyond.

This claim of ownership explains the motivations behind attempts at regional integration and DF Malan’s 1948 African Charter. We view this in the context of South Africa’s post-World War II positioning, as the driver of development in Africa. In essence, South Africa garnered its international political legitimacy as a harbinger of European values and norms. However, we cannot ignore that South Africa’s international legitimacy was part of the manner in which it ensured its survival. Furthermore, South Africa’s burgeoning extractive industry and agrarian powerhouses; which had become quite powerful, and regional integration, under South African hegemony; meant that access to labour and resources had minimal

92 complications. Ironically, attempts at integration ultimately failed because of racist policies and South Africa’s malevolent expression of its hegemony.

South Africa’s foreign policy towards Africa, outside of the Southern African region, became increasingly aggressive in response to the wave of African nationalism that was spreading across the continent. As the internal and external battle against apartheid heated up, corporations started to put pressure on the State because, simply put, the agenda of the State was affecting their bottom line. This is paradoxical because the policy and norm creation was made for the benefit of corporations.

The use of an institution for economic integration can be seen in the development of institutions like SACU. The challenge with SACU, however, is that it was not created for the benefit of all members but rather entrenched the economic dependence on South Africa. This raises important questions about the nature of contemporary South Africa. Even though it has shied away from being identified as a hegemon because of its past, there are still clear dependencies on the South African economy by design and default.

Finally, this chapter also provided an overview of the history of mobile telephony in South Africa. The purpose of this overview was to provide an understanding of the relationship between the State and MNOs. The next chapter continues our examination into the role of multinationals and large private corporations in the setting, and promoting of South Africa’s foreign policy agenda. There are still dependencies in South Africa’s economy and moreover, South Africa has been responsible for the creation and maintenance of a number of institutions and regimes. Part of the inquiry will be into whose interests are served by South Africa’s foreign policy.

CHAPTER FOUR: SOUTH AFRICAN CORPORATE EXPANSION IN SUB-SAHARAN AFRICA IN THE DEMOCRATIC DISPENSATION

South Africa’s history is inextricably linked to that of big businesses; the saga of conglomerates born out of the extractives industry highlights a long-standing trend of the embedded relationship of capital and the State. This chapter explores the relationship between business and the State in the post-1994 era. It focuses on the relationship dynamics between the State and private corporations as well as considering the implications of South African companies’ expansion on the continent.

This chapter illustrates that even though the relationship between MNCs and South African corporations is complex and tension-filled, there are benefits that South Africa can derive from the relationship such as being able to project the country’s soft power on the continent. Using a modified version of HST as the framework- the effect of the State-business relationship in South Africa’s Africa foreign policy will be examined. The objective is to demonstrate that MNCs support South Africa’s hegemony on the continent. In essence, the proceeding discussion dissects whether South African private companies, MNCs in particular, are bolstering South Africa’s continental leadership position and if the interests of large corporations are implanted into the economic dimension of South Africa’s foreign policy.

The analysis does not reflect on State Owned Entities (SOEs), such as Eskom and Telkom, and their possible role in the promotion of the State’s agenda on the continent. SOEs are not probed in this thesis because it is beyond the scope of the project. A public company's mandate is very different from a private company; for instance, an SOE may pursue commercial interests but is used by the State to provide public goods or stimulate economic development (Cuervo-Cazurra, Inkpen, Musacchio & Ramaswamy 2014). A private company would have to be co-opted by its home state into providing public goods or advancing the agenda of the State as its primary objective is making a profit for its shareholders. The scope is limited to probing the relationship between the State and private enterprises and whether South Africa does, in fact, play the role of a regional hegemon. The query is

94 significant because if the State does, in fact, play a hegemonic role, then the additional question should be asked- ‘who is calling the shots?’

South Africa does not have the material resources to act as a regional hegemon in the traditional sense (see chapter two of this study). However, the presence and proliferation of South African MNCs gives South Africa the ability to project its power across its borders. Moreover, the presence of South African MNCs changes the corporate and economic culture in their host countries, as discussed in chapters five and six, companies such as MTN lean heavily towards South African norms for corporate governance and indigenisation operations in the host country. It must be noted that the telecommunications sector, particularly mobile telephony, operates slightly differently from other sectors regarding its relationship with the State. The nuanced nature of this sector’s influence will be explored in subsequent chapters. This chapter, however, provides a broad overview of possible corporate influence.

4.1 SOUTH AFRICAN FOREIGN POLICY TOWARDS SUB-SAHARAN AFRICA POST-1994

The ushering in of South Africa’s democratic dispensation has meant that there has been a shift in not only its domestic climate but also a shift in the way it relates to its neighbours. Chapter four details the manner in which South Africa’s domestic climate affected its foreign policy orientation. In addition, the chapter illustrates the manner in which the interests of MNCs were built into the economic dimension of South Africa’s domestic and foreign policy.

The drivers of the ‘new’ South African foreign policy, as well as its character and democratic dispensation have been the subject of robust debate in policy and academic circles. The key issue in contention is South Africa’s role on the African continent, particularly in light of the ever-growing South African corporate footprint. At face value, it appears that South Africa has positioned itself as the de facto political and economic leader of the continent. This is evidenced by its role in efforts to bring peace in troubled spots on the continent including: the DRC, Côte d’Ivoire,

Burundi and Lesotho, among others. Its overarching political presence is felt in the dominance of South African driven initiatives such as NEPAD and the African Renaissance. The mushrooming of South African brands across the continent is a constant reminder of South Africa’s influence or soft power (as defined in chapter two).

Nevertheless, within the ruling ANC, there is a clear appreciation of the challenge posed by being viewed as a hegemon. The International Relations discussion document leading up to the ANC’s 2012 policy conference highlights this concern (ANC 2012). Landsberg, describing foreign policy under the Zuma administration, explains that South Africa’s foreign policy is ideologically driven and its concept of ‘national interest’ informed by its pan-African ideology, which does not depart from the ideology of Zuma’s predecessor Thabo Mbeki. He elucidates, contrary to South Africa’s behaviour, that “…for the South African government, cooperation and non- hegemonism are vital ingredients in the promotion of the State’s national interest” (Landsberg 2014:157). This research (more specifically in chapter two) illustrates that across the various administrations South Africa has publicly positioned itself as non-hegemonic but its behaviour in Southern Africa and sub-Saharan Africa is contrary to its public declarations.

The intersecting values of self-interest and pan-Africanism have to be kept in mind in the process of unpacking South Africa’s foreign policy vis-à-vis its corporate expansion on the continent. In an interview with Lesley Masters, she highlighted that there is an inherent tension between the foreign policy of the State and the international exchanges of MNCs, which are based on “bottom lines”. Moreover, big businesses often go ahead with their expansion efforts without consulting DIRCO (Masters, Interview held at the University of Johannesburg 2016). Thus, it creates a scenario with the impression that South African multinationals and the South African State are operating parallel processes in relations with the rest of the continent. State-driven initiatives and relations, for instance the role it plays in NEPAD, SADC and the advocacy for the finalisation of a continental free trade agreement, create a receptive political environment for big businesses to expand on the continent, even though there is not sufficient material support for businesses during expansion. As

Qobo explains, “South African businesses thrive in spite of government” (Qobo, Interview held at the University of Johannesburg 2016).

Assessing South Africa’s foreign policy decision-making vis-à-vis corporate actors, particularly in the telephony space, necessitates an understanding of the internal and external drivers of foreign policy in South Africa’s democratic dispensation.

4.2 INTERNAL COGS OF SOUTH AFRICA’S FOREIGN POLICY MACHINERY: WHERE ARE THE LOCI OF FOREIGN POLICY DECISION-MAKING?

A cog in a machine refers to a gear (or teeth-like structures) on a wheel that causes other wheels or components of the machine to move when it engages with other gears. In contrast to the idiomatic interpretation of a cog as being insignificant, cogs are indispensable components of a machine and are needed for the machine’s functioning. The cogs of South Africa’s foreign policy machinery are located in both its administrative arrangements as well as its ideological leanings. These are coloured by the country’s history and identity. The domestic culture during apartheid shaped its foreign policy posturing, and decision-making; as chapter three illustrates. The end of apartheid, as well as simultaneous seismic shifts in the global system, meant South Africa’s foreign policy had to be fundamentally redrafted. Gerrit Olivier and Deon Geldenhuys explained it best when they asserted that:

“For symbolic and political reasons, the South African foreign policy continuum, which existed since autonomy from British rule, had to come to an end with the accession of the new ANC-dominated Government of National Unity (GNU) in 1994. The old regime’s foreign policy and culture had to make way for political legitimacy defined by the ANC’s vastly different political philosophy, external experience, constituency, and priorities” (Olivier & Geldenhuys 1997:365-366).

South Africa’s 1996 Constitution places the President at the centre of foreign policy- making. Section 84, subsection 2 (h) and (i), charges the President with the responsibility of receiving heads of foreign diplomatic missions as well as appointing the heads of South Africa’s missions. Moreover, Section 85, which details the President’s executive authority, may be interpreted to mean that the responsibility of entering international agreements lies with the president. The Minister of

International Relations and Cooperation is responsible for the formulation and execution of South Africa’s foreign policy (Constitution of the Republic of South Africa 1996). It is important to keep this in mind when examining the economic dimension of South Africa’s foreign policy developments; particularly, regarding South African MNCs. John Siko maintains that in terms of their ability to influence foreign policy, MNCs have not had a greater influence in the post-1994 period. However, the relationship has been more engaged than under the old regime (Siko 2014). What this means in practical terms, is that the interests of South African MNCs are embedded in the economic dimension of South Africa’s foreign policy as hypothesised in chapter one.

4.3 FOREIGN POLICY APPROACHES UNDER POST-1994 ADMINISTRATIONS

South Africa’s foreign policy approach post-1994 is marked by both continuity and change. Successive democratic administrations have orientated South Africa’s foreign policy around its relationship towards Africa and by divorcing South Africa from its apartheid image. However, the focus of each democratic president has not been uniform which has implications for South Africa’s foreign policy.

The engagement style of each president’s administration has implications for South Africa’s continental and regional leadership, and the ability for South Africa to shape norms and values. Moreover, for MNCs, particularly in mobile telephony, the approach and ideological leanings of the different presidents affects their ability to conduct business with ease. For instance, MTN’s 2015 fine, issued by the Nigerian Communications Commission can be viewed as political posturing against South Africa. At the time the fine was issued, the relations between South Africa and Nigeria were at their lowest point (Games 2015; Maake 2015).

4.3.1 NELSON ROLIHLAHLA MANDELA (1994 -1999)

Nelson Mandela was the first democratic president of South Africa from 1994 to 1999. Mandela’s administration was focused on internal reform and creating a new South African identity not just on the continent, but also in the world. His inauguration launched the country back into the global community. Garth le Pere argues that the reformation of South Africa’s international standing was greatly facilitated by Mandela’s “international reputation” (le Pere 2013:20). The common narrative posited Mandela as a beacon of reconciliation and forgiveness (Zondi 2013:1). The ‘new’ South Africa had high expectations to meet at the dawn of its new democracy. The international community’s expectations for Nelson Mandela and his ANC government were virtually messianic: South Africa was expected to be a beacon to the rest of Africa - it had to be the bastion of freedom and human rights; healer of past divisions; and economic superstar (Waldemeir 1997; Vale & Taylor 1999; Hamill & Lee 2001). The irony of this expectation is two-fold: firstly, the pre-democracy state already appeared to have a messianic complex and secondly, the post- democracy state appeared to have inherited the same complex. Nevertheless, it is undeniable - the end of apartheid opened doors that were previously closed. For instance, the country was able to return to the UN and the Commonwealth. It also became a member of the very organisations that pushed against the apartheid government – the Organisation of African Unity and the Non-Alignment Movement.

At the same time, the ‘new’ South Africa was dealing with the ‘old’ South Africa’s debt and economic stagnation. Mills (1997) ruminated over the State’s apparent lack of strategic direction as it crafted its post-1994 foreign policy on a broad list of ideals. This ultimately led to a conundrum in which South Africa both wanted to help out its neighbours but wanted to avoid being overtly dominant; simply put, Pretoria wanted to lead from the rear. Timothy Shaw points out that during the transition period, the State was faced “...by two interrelated 'regional' challenges: one internal, the other external” (Shaw 1994:252). Shaw explicated that these challenges were related to development planning and beneficiary allocation. He noted that the incorporation of the former homelands into the new South Africa would change regional dynamics both structurally and socially.

The task of establishing the Department of Foreign Affairs (DFA) was daunting. Lesley Masters calls attention to the fact that six different entities with vastly different 99

“training” and views had to be amalgamated: “the existing department, the ANC, the former Bantustans or the TVBC (Transkei, Venda, Bophuthatswana and Ciskei) states” (Masters 2012:27). The inherent tensions between these different entities made the task doubly difficult. Matthew Graham points to the influence of the Sub- Council on Foreign Affairs (SCFA) of the Transitional Executive Council (TEC), in assisting it to build the new DFA and the post-1994 policy direction. Aziz Pahad, who was to become the deputy minister, was on the SCFA and thus understood how the department functioned and the people who would answer to him (Graham 2011).

Throughout Mandela’s tenure, South Africa’s foreign policy direction was characterised by ambiguity (Alden & le Pere 2004; Marthoz 2012; Brooks Spectre 2013 ;Graham 2015). Arguably, this related to the fact that the government was still grappling with the country’s transition, and the developments in the global political economy. During this period, foreign policy direction was extracted from speeches, discussion documents, and so forth.

Mandela’s foreign policy focus was overtly centred on human rights promotion on the continent as well as furthering democratic ideals. However, to assume that the economic dimension was ignored in favour of ideals would be incorrect. Speaking in 1991 to a group of businessmen at the HJ Heinz Company Foundation, Nelson Mandela pointed out the role that the private sector would play in the democratic South Africa:

“Without the involvement of the private investor, the South African economy will not grow and will, therefore, not be able to address the needs that confront the masses of our people. Equally we are aware that the investor will not invest unless he or she is assured of the security of their investment. This and other things have to be guaranteed to ensure that the necessary levels of investor confidence are attained” (Mandela N. 1991). In the immediate post-1994 period, under Nelson Mandela, the State appeared to have a decidedly closer relationship with the business community. Nattrass and Seekings, contend that Mandela “both before and after his election as president in 1994, cultivated close relationships with top local businessmen, and met regularly with leading businessmen in the ‘Brenthurst Group’ (named after Harry Oppenheimer’s house where meetings were held)” (Nattrass & Seekings 2010:8). Even the foreign policy apparatus of the country acknowledged the need for private 100 sector involvement in meeting the country’s goals. Tshaba Tjemolane et al, recall that former Minister of Foreign Affairs, Alfred Nzo, had underscored South Africa’s desire to advance the regional and continental economy as part of its overall strategy. The intention was to involve the corporate sector in meeting the country’s goals (Tjemolane, Neethling , & Schoeman 2012).

Mandela’s warm relationship with the business community had implications for the strengthening of the private sector, specifically the nascent mobile telephony industry. Mandela, himself, was passionate about telecommunications technology and bridging the digital divide (discussed in further detail in chapter five). Speaking at the opening of the Telecom conference in Geneva in 1995, Mandela praised the ITU and gave an indication that the State saw telecommunications discourse as part of the public policy and not just a private concern: “Given the fundamental impact of telecommunications on society and the immense historical imbalances, telecommunications issues must become part of general public debate on development policies. Telecommunications cannot be simply treated as one commercial sector of the economy, to be left to the forces of the free market” (Mandela 1995).

This was given expression during the licensing of the first two mobile telephony operators: MTN and Vodacom. MTN was essentially the vehicle created to enable black South Africans to enter the corporate side of the telecommunications space, and Vodacom was used as the vehicle to increase telecommunications access to the poor. Part of the vision that informed bringing mobile telephony into the country was providing services to the previously underserved and vulnerable. During his tenure, mobile telephony companies blossomed and MTN was the first to expand beyond South Africa’s borders as is detailed in chapter six.

4.3.2 THABO MVUYELWA MBEKI (1999- 2008)

Thabo Mbeki was the second democratic president. His presidency was characterised by the continuation of the drive to reposition South Africa in the global system. Mbeki was viewed as more “disciplined” about South Africa’s international engagements in comparison to Mandela’s off-the-cuff approach (Masters Ibid:22). He has been characterised as having a tighter rein on South Africa’s foreign policy

101 architecture and he had a strong group of advisors and consultative groups that surrounded him (Ibid). He led the charge in the development of the concept of ‘African Renaissance’ and the creation of NEPAD and the APRM as well as the transformation of the Organisation of African Unity (OAU). Mbeki’s relationships with Nigeria’s former president Obasanjo, Algeria’s president Abdulaziz Bouteflika and Mozambique’s Joaquim Chissano provided sufficient support for the radical transformation of Africa’s political landscape in which Mbeki was instrumental. To this end, South Africa hosted the summit in which the OAU was formally concluded in July 2002 (Landsberg 2004:193; Stuurman 2004). Mbeki, alongside Obasanjo, were also the key advocates for the APRM in 2003, although South Africa’s critical response to its review in 2005/2006 undermined the process by undercutting its credibility among other African countries (Mail & Guardian 2007; and Du Plessis 2016). Regarding NEPAD, Mbeki worked to encourage Regional Communities, such as ECOWAS and SADC, to align their operations with NEPAD (Carbone 2002; Landsberg 2004:196-198; and Olivier 2003).

There are a number of debates as to whether regional hegemony in fact exists and if South Africa can comfortably be described as a hegemon in light of its structural and political challenges (Habib 2003; Schoeman 2000; Schoeman 2007; Landsberg 2003; Prys 2008; Prys 2009). Elizabeth Sidiropolous has argued that Africa, particularly Southern Africa, needs a regional hegemon such as South Africa because of the substantial role it plays in institution building on the continent (Sidiropolous 2008:107-120). Institution building, as well as the setting of norms and values, is a key indicator of hegemony and an integral part of hegemonic stability. Whether or not South Africa has the capability, or willingness, to take on this role is a matter that is discussed in chapter two of this thesis.

It may be argued that by taking the lead in maintaining pan-African institutions, South Africa is throwing its hat in the ring as a de facto leader, and even perhaps as a regional hegemon. In Southern Africa, South Africa has had an integral part in funding SACU (O'Riordan 2015) and SADC. On the continent, South Africa has taken considerable financial responsibility for the pan-African Parliament, the NEPAD programme and for the AU. Alden and Schoeman contend that South Africa’s foray into peacekeeping and peace building on the continent, had to do with 102 its endeavours in fostering “a new continental system, based on its vision of an African renaissance” (Alden & Schoeman 2015:245).

Alden and Schoeman single out President Mbeki’s increasing engagements in international fora such as the G8, the development of NEPAD, the creation of the AU, among others, as the beginning of the “process of institutionalizing” South Africa’s leadership (Alden & Schoeman Ibid:247). South African corporate expansion “cohered with Mbeki’s vision” (Ibid). This is not to say that there are no challengers to South Africa’s hegemony but by participating in the institutions it drives, implies that at some level there is consent to South Africa’s position.

John Siko’s research points out the amount of effort that the post-1994 government expended in attempting to support the expansion of the South African corporate sector. Although there was no apparent bankrolling of expansion, as was done under President Botha in the 1970s, there has been increased expansion of economic capabilities of the embassies to assist firms. Furthermore, foreign exchange regulations have been relaxed to facilitate African investment (Siko Op Cit:148). Individual interviews with Qobo, Gruzd and White allude to the fact that the enhanced capacities of the embassies do not make a difference to expansion efforts of corporations (Qobo 2016; Gruzd 2016; and White 2016). The main reason for this lies in the fact that operations of the private sector move at a lot faster pace than embassies or DIRCO that are burdened by bureaucracy. Corporations are leading the charge in terms of finding new markets on the continent, partly because of the slow-moving domestic market (Qobo Ibid; Wroblewska 2014; Sunday Times 2016; Griffen Advisors 2016). Additionally, corporates are more likely to approach their local embassy only if they run into trouble (White Ibid). In this respect, it does not appear that the corporates, particularly, MNCs, have a stronger influence on government than they did on the previous regime.

However, as can be seen in mobile telephony, the involvement of government in ‘opening’ the proverbial door for business can go beyond simply intervening when there is a problem. For instance, as is discussed in chapter six, Mbeki assisted MTN in eventually obtaining its license to operate in Nigeria after a number of failed attempts. This was possible because South Africa and Nigeria’s relationship at the

103 time was very cordial. Mbeki had a longstanding relationship with Olusegun Obansanjo and his successor Umaru Musa Yar’Adua that dates back to the 1970s when Mbeki was in exile in Nigeria (Ebegbulem 2013).

4.3.3 KGALEMA PETRUS MOTLANTHE (SEPTEMBER 2008 - MAY 2009)

Kgalema Motlanthe, took the reins of the country for a limited space of time: between 2008 and 2009, when Mbeki resigned as president of the Republic. His short tenure did not see any major foreign policy deviations from the path set by Mbeki.

During his tenure, the Minister of Communications, Ivy Matsepe-Casaburri, passed away suddenly. Matsepe-Casaburri had held this post since 1999 and was instrumental in crafting South Africa’s drive towards universal digital inclusion (Matsepe-Casaburri 2008).

The notable events over the course of Motlanthe’s tenure were the signing of the Technology Innovation Agency Bill in 2008 (ITNews Africa 2008) as well as leading South Africa’s delegation to the G20, which was held to discuss the 2008 global financial crisis (Allafrica 2008). The Technology Innovation Agency was created to enhance South Africa’s innovation outputs across sectors (Technology Innovation Agency Act). This agency has the potential to boost South Africa’s competitiveness in the telecommunications sector by financially supporting technological innovation and providing capacity building forums along the innovation value chain; thus far it has not met its potential owing to administrative and financial constraints (Wild 2013). The major issues with the agency, stemmed from the fact that it changed its chief executive officer six times in six years (Wild 2016) which signals a problem with governance of the agency; as well as claims of financial irregularities that held up funding to projects (Odendaal 2014).

Motlanthe’s trip to the G20 was significant - as South Africa was the only representative from Africa in attendance. He used the opportunity to put forward a ‘continental agenda’ as requested in a meeting of African finance ministers in Tunis (Motlanthe 2008). 104

4.3.4 JACOB GEGLEYIHLEKISA ZUMA (ASSUMED OFFICE IN MAY 2009)

Jacob Zuma became the president of the Republic in 2009. Zuma stayed on much of the course set forth by Mbeki. He, however, made a number of substantive changes. The most important was the change of the DFA to DIRCO to illustrate the focus on the importance of partnerships in South Africa’s foreign engagements. Masters notes a greater role for the ANC in South Africa’s foreign and domestic policy activities, under Zuma in comparison to previous administrations (Ibid:26).

Administratively, the President remains the centre of foreign policy but the Constitution of the Republic is the overall authority. Parliament is responsible for the accession and ratification of international agreements. It is also responsible for oversight on the work of DIRCO; the main body in charge is the parliamentary portfolio committee on international relations and cooperation. Speaking at the 2015 workshop, Towards a Participatory Foreign Policy, the chairperson of the portfolio committee on International Relations and Cooperation, Hon. Siphosezwe Masango, highlighted the fact that its oversight function is constitutionally mandated (Masango 2015).

DIRCO, led by the Minister of International Relations and Cooperation is the primary body responsible for the articulation and execution of South Africa’s foreign policy. The judiciary is responsible for ensuring that the State operates within the laws and Constitution of the Republic. This role was confirmed in the al-Bashir case when the South African Supreme Court of Appeal ruled against the State and admonished them for not arresting Sudanese president al-Bashir, in line with a warrant of the International Criminal Court, when he was in South Africa in 2015 (Bateman 2016).

Discussions at the 2012 Institute for Global Dialogue (IGD) roundtable, highlighted that Zuma’s ascendency to the presidency was couched with a “promise to make the ANC the locus of day-to-day foreign policy decision-making”. However, as observed at the meeting, there appears to be a disconnection between the ANC’s International Relations Rapid Task Team, Cabinet, and the decisions of the President. This was evidenced by the surprising position taken by South Africa at the UN Security 105

Council in 2011 about Libya (Nganje 2012:12-13). South Africa unexpectedly voted in favour of Resolution 1973 which authorised military action in Libya; this vote was contrary to the ANC position that the Libyan issue should be dealt with by the AU.

At the same IGD roundtable, former minister, Essop Pahad, drew attention to the reality that the ANC is only able to influence South Africa’s foreign policy orientation fractionally; its direction and implementation is the forte of the State (Ibid:11). Pahad further pointed out that a significant portion of ANC reasoning has been shaped by communism and the Soviet Union. Resultantly, its leaning towards international solidarity movements is informed by the extensive support it received during South Africa’s liberation struggle (Nganje 2012:10).

In an article juxtaposing the 2011 Draft White Paper on South Africa’s Foreign Policy and the 2012 ANC policy document on International Relations, Mzukisi Qobo (2012), draws out the apparent, and at times contradictory, thought process that roots South Africa’s current international relations posture. Qobo highlights three major weaknesses in the White Paper: first, there is no substantive exploration of South Africa’s developmental profile even though the document claims that its foreign policy is responsive to South Africa’s developmental needs; second, the document does not pinpoint prioritised state to state relationships. This is important, as elucidated by Qobo, because the cost of maintaining relationships, at a similar standard, with every single country is prohibitively expensive; third, there is a failure to underscore the significance of the various multilateral relationships in which South Africa is involved. Moreover, he remarks that, “the White Paper misses a reconceptualization of multilateralism in a world that is no longer pivoted by a unipolar arrangement, but rather characterised by multipolarity” (Qobo 2012:4-5).

His assessment of the ANC policy document points to a governing party that is bogged down by its history and ideological leanings. For instance, Qobo provides the example that the ANC document “castigates the G20 as a Western tool” but seems to have amnesia of the fact that South Africa contributed to its formation (Ibid:5). Indeed, much of the discussion document is fashioned towards the promotion of anti- Western ideology and the formation of relationships to counter perceived Western domination. This orientation, on the part of the South African government as well as 106 the ANC, corroborates the reality that Qobo underscores: “They seem to believe, rather wrongly, that the world is formatted along the old structures of North and South rather than in a more diffused manner with a great deal of shared interests across such divides” (Ibid). One of the examples he provides is that of the 2012 decision by Russia to support a US candidate for the World Bank in opposition to the BRICS position to endorse a developing country candidate (Ibid).

What is clear is that South Africa, as well as the ANC, is still shaped by its history and identity politics both racial and in terms of its place in the global system. Consideration of the identity politics at play is important in providing a possible interpretation of the nuanced tensions in South Africa’s foreign policy towards the continent in particular. In her opening address at the Brand South Africa seminar held at the University of Johannesburg in 2016, the Brand SA general manager for Africa and the Middle East - Sindiswa Mququ, highlighted the ongoing friction that South Africans have with trying to reconcile the identity issues derived from South Africa’s homeland system, as discussed in chapter three, as well as its new identity as not only a unified country but one that is indeed part of the wider continent (Mququ 2016). This has implications for the manner in which South Africa formulates, as well as expresses, its African foreign policy. Through various multilateral institutions, as well as policy statements, the State asserts its ‘Africanness’ that stands in contrast to the previous regime. Moreover, it has been involved in peace building across the continent, including in South Sudan.

South Africa sets the norms and values for Africa’s renaissance, as argued throughout this thesis, although it does not want to be seen as a coercive or aggressive hegemon. Both mobile telephony MNOs born out of South Africa’s transition, MTN and Vodacom, appear to operate in a manner that is in line with the pillars of South Africa’s Africa focused foreign policy and ‘African Renaissance’ agenda. A fundamental element of this agenda is African driven growth and development. In the case of mobile telephony MNOs, they are not only providing much needed mobile telephony infrastructure but they are also contributing quite heavily towards economic growth in their host countries; for instance, the 2015 Mobile Economy report illustrates that MNOs have contributed US$31 billion to the sub-Saharan African economy in 2014 (GSMA 2015:44) this number increased to 107

US$38 billion in 2015 (GSMA 2016:30). In 2015, MTN Nigeria contributed 4.5% to Nigeria’s GDP (Tijani 2016).

This brings up fundamental questions about the role of business in promoting the foreign policy agenda of the State. As much as it appears to be following the developmental objectives of the State, there has to be inquiry as to what the motivation is, and also, what level of influence they derive from their considerable investment. Discourse on MNC’s effect on sovereignty is not a new one: with many theorists and economists such as Gilpin (1975) and Strange (1992) weighing in on the matter. Vernon noted clearly that MNCs could serve as extra territorial vehicles “through which the power of one sovereign State is projected into the territory of another” (Vernon 1977:177). Though this argument is salient in the 21st century, the complicated nature and duality of an MNC means that it may have the market and political strength to be an influencer of state dynamics in both its home country and in its host country. Vernon’s argument goes to the heart of the criticisms of South Africa’s corporate presence on the continent. However, as will be seen in chapters five and six, there is no evidence of South Africa’s direct involvement in host state dynamics concerning politics. On the other hand, what can be seen is: South Africa’s values being projected through South African corporations.

Another debate in foreign policy literature surrounds the drivers of South Africa’s foreign policy (Landsberg 2010; Schoeman 2007). It is unclear whether or not the drivers are political, economic, human rights considerations, or an amalgamation of these considerations. On all these matters, South Africa’s actions have left more questions than it has answers. Analysts such as Maxi Schoeman have previously argued that South Africa cannot claim the role of hegemon because of factors such as: the domestic climate; the racial perceptions of South Africa’s neighbours owing to the foreign policy history of the apartheid government; and, the challenges of integration (Schoeman 2007:104). Regarding integration, Schoeman contends that the significant difficulty in successfully integrating African countries relates to the plurality of allegiances that African countries have, specifically: “the global setting within which South Africa and other African countries have to manage their policies with each other and harmonise attempts at closer integration” (Ibid). In other words,

108 pooling resources and agreeing on integration frameworks is complicated by the number of overlapping regional economic groupings that African countries are involved in. For instance, Tanzania is a member of the East African Community as well as SADC but it is not a member the Common Market for Eastern and Southern Africa (COMESA) like other East African countries.

Under former President Thabo Mbeki, Pretoria undertook an unashamedly Africa- focused foreign policy. This prioritisation of the continent has largely continued in the administration of current President Jacob Zuma (Landsberg 2010). However, le Pere (2017: 17) warns that foreign policy under Zuma is becoming less shaped by “norms and values” and is increasingly shaped by “unprincipled pragmatism”. There is some credence in this warning considering some developments in recent times, one of which was South Africa’s failed attempt to withdraw from the international criminal court. In 2016, South Africa began the process of withdrawing from the ICC, an institution to which it was a founding member, in the aftermath of its decision not to execute an ICC arrest warrant for Sudanese president, Omar al-Bashir in 2015 when he attended an AU conference in South Africa (Reuters 2016). As underscored by le Pere, there is a “school of thought” that sees South Africa’s intention to withdraw from the ICC as a betrayal of South Africa’s stated commitment to multilateral governance (le Pere Ibid:18-19). Arguably the nature of the attempt to withdraw from the ICC was emblematic of leadership that has lost respect not only for international law but also domestic law. In 2017, South Africa’s North Gauteng High Court found that the executive acted illegally by not acquiring parliamentary approval before it signalled its intention to withdraw from the ICC (Allison 2017).

4.3.5 CHALLENGES FACED BY THE POST-1994 ADMINISTRATIONS

One of the constraints of the State relates to human resources. Despite its economic prowess, in relation to its neighbours, “...South Africa remains one of the most under- represented countries in African and International multilateral forums, and this has 109 serious implications for the country’s core national interests and foreign policy goals”(Landsberg Op Cit: 61). However, it has been recognised that it has managed to secure positions at key forums such as the UN Security Council, the AU and the Group of 77 13 among others. These positions give weight to its projection as a regional hegemon or at the very least as a representative of the continent.

Hegemons derive their capacity, or perception thereof, from their internal strength. It may be argued that this is an area in which South Africa is sorely lacking. Service delivery has proven to be a sticking point domestically; images of often violent service delivery protests have become commonplace in South Africa. Citing a survey conducted by TNS Research Surveys in its 2009/2010 South Africa Survey, the South African Institute for Race Relations noted that “more than half of South Africans, living in metropolitan areas, were dissatisfied with the state of social services in the country” (South African Institute for Race Relations 2011:33). The South African Institute for Race Relations noted that there has been a 96% increase in social protests since 2010 (Steytler & Mackay 2015). Though, their statistics have been disputed (Demian 2015), it cannot be denied that there is a growing unease about the apparent slow pace of transformation and delivery of basic services.

Hemson et al, contend that “[t]he overarching achievements of post-apartheid transformation in South Africa rest on the State’s ability to deliver basic functions and extend effective systems and social programmes in response to people’s needs” (Hemson, Carter, & Karuri-Sebina 2009:151). In essence, the failure to deliver equates to, as proposed by the authors, lack of state capacity. This key failure to provide basic services has found expression in, as well as intersecting with, increasing xenophobia. For instance, on Valentine’s Day 2012, shops owned by foreign nationals in Mayosi, Mpumalanga, were attacked in the ensuing chaos of the aftermath of a violent service delivery protest (Gold 2012). However, these internal weaknesses have not yet, and are unlikely to, affect South Africa’s role as a regional hegemon. The involvement of South Africa in strategic multilateral institutions, such

13 bloc of developing countries at the United Nations that attempts to improve their joint negotiation capacity in order to promote their interests

110 as G77 and BRICS, and its ability to export its values as well as having a beleaguered but resilient diversified economy, illustrates that it still has a considerable amount of structural and relational power left.

4.4 EXTERNAL LEVERS OF SOUTH AFRICAN FOREIGN POLICY MACHINERY

Arguably, there are several external levers that direct South Africa’s foreign policy machinery: civil society; markets and ratings agencies; and, capital (big businesses and MNCs). The focus of the subsequent section will be on capital, particularly on MNCs as it relates to the research focus of this thesis.

This inquiry begins with an overview of South Africa’s post-1994 intra-African trade and investment. This overview will give further context to the analysis of the potential role that MNCs play in advancing South Africa’s agenda or vice versa. It also provides a context for the arguments detailing South Africa’s role in the stability of the continent.

4.4.1 SOUTH AFRICAN INTRA- AFRICAN TRADE AND INVESTMENT IN CONTEXT

One of the key areas that South Africa draws its structural power from is its advanced economy, access to technology and its ability to dominate African trade partnerships. As discussed in chapter two, structural power is a combination of both hard and soft power. An appropriate definition is the one provided by Haviland et al: “Power that organizes and orchestrates the systemic interaction within and among societies, directing economic and political forces on the one hand and ideological forces that shape public ideas, values and beliefs on the other" (Haviland, Prins, Walrath & McBride 2011:657).

As with pre-1994 governments, economic security and trade are central concerns for democratic South Africa. Contrasting with the malevolently hegemonic apartheid state, the post-apartheid state has chosen to cooperate with its neighbours through multilateral bodies and not explicitly demonstrate its dominance. The main trading

111 bodies that South Africa is engaged in are: SADC; SACU and the Common Monetary Area (CMA). Indeed, in the post-1994 period, it appears that corporate South Africa has taken a keen interest in trade and investment opportunities on the rest of the continent. Black and Swatuk (1997) question whether or not South Africa’s corporate interest on the continent is truly a new concept. They remind us that mining concerns, such as Anglo American, have had interests throughout the region and white South African farmers also have a formidable presence. The discussion in chapter three, responds to Black and Swatuk’s query in the affirmative that South African corporate concerns in Africa predate the democratic transition. However, the transition allowed for intensified investment as the environment became friendlier.

In a paper presented at the SARPN conference on Stability, Poverty Reduction and South African Trade and Investment in Southern Africa – Naidu & Lutchman (29-30 March 2004) examine South Africa’s corporate engagement on the continent post- 1994. They highlight the fact that the country has become one of the largest sources of foreign direct investment in Africa. The main attraction for corporations has been that the rate of return on investment has been proven to be considerably higher than is possible at home.

According to the African Economic Outlook (2011: 48), “South Africa is the most vital source of intra-African FDI and the second most important developing country investor in Africa after China”. South Africa’s African foreign direct investment amounted to US$1.6 billion in 2009 (Sources of FDI 2011). In 2014, South African corporates were the second largest investors on the continent, although reflecting the challenging economic environment, the African investment projects fell from “24.5% in 2013 to 19.2% in 2014” (Ernst & Young 2015:19).

Several factors precipitated South African corporations’ aggressive expansion into Africa. These factors already mentioned previously, include: the end of the Cold War, globalisation, the end of apartheid and South Africa’s political transition to democracy. The consequence of these factors was that South African companies with the expertise, and excess capital built up during the period of isolation, were able to meet infrastructure deficits present on the rest of the continent. Globalisation, 112 as well as the end of the Cold War, meant that South African corporations were able to take advantage of the altered change of political and social affairs to seize new markets all over the world. Today, companies like SABMiller have a presence in places like China and the US including a number of countries on the African continent. Certainly, the transition from apartheid to democracy has materially benefited South Africa as can be seen in the export statistics early in South Africa’s democracy: In 1992 South African exports to sub-Saharan Africa stood at ZAR5 billion and increased to ZAR44.5 billion by 2002 (Daniel, Lutchman, Naidu 2004:344). During the same period, numerous South African companies invested heavily on the continent (Ibid:345).

Daniel, Naidoo and Naidu argue that South African firms were well placed to take advantage of the archaic infrastructure on the continent in the 1990s as global interest at the time was focused on the Eastern European market and “South African corporates had a surplus of investible capital available and were keen to take advantage of the weakness of the economies to the north of it” (Daniel, Naidu, & Naidoo 2003). In the case of telephony, as discussed in chapters one and five, sub- Saharan Africa had a serious infrastructure deficit for fixed line telephony. South Africa was already ahead of the curve with mobile telephony in particular, having been rolled out in the country in the 1990s. The cost of building additional fixed infrastructure in Africa in the 1990s was prohibitive. Vincent Miller notes that mobile telephony infrastructure is more cost effective regarding technology, installation, as well as return on investment (Miller V 2011:10).

Investment on the African continent grew from ZAR8 million in 1996 to ZAR26 billion in 2001 (Daniel, Lutchman, & Naidu 2004). Carlene Van Der Westhuizen, draws attention to the fact that South Africa experienced significant growth; from 1995– 2005, the annual economic growth rate was roughly 3.4% (Van Der Westhuizen 2012:3). Another interesting development has been the parallel drive of state-owned entities into the rest of Africa. Organisations such as Transnet, Eskom, IDC and DBSA have been increasingly involved in activities on the rest of the continent. For instance, DBSA has invested in energy projects in Nigeria and Zambia (Advertising Supplement 2014). It may be argued that this is falling in line with the hegemonic ambitions of Pretoria.

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Burgeoning South African mobile telephony MNOs were handed a trifecta: telephony technology that was cheaper to disseminate than fixed line technology; access to capital for investment; and access to technology.

South Africa through its foreign policy instruments, as discussed earlier, and through its treasury, has worked to make it more attractive for South African MNCs to invest outside of the country. It has done this through initiatives such as the Gateway Initiative. In 2011, National Treasury announced the introduction of Bills to largely expand on the Gateway to Africa initiatives initiated in 2010. These Bills remove the risk of double taxation by South African MNCs operating abroad (National Treasury 2011). This means that South African MNCs do not have to pay tax more than once on the same income. In his 2012 Budget Speech, Finance Minister Pravin Gordhan outlined the priorities for the financial year. Some of these were:  Increased infrastructure investment  Increased investment in technology

He noted the increasing importance of emerging market multinationals and highlighted a desire to turn the county into a “gateway for investment into, and development of, Africa”. Minister Gordhan clearly states that:

“...if we are to succeed in putting our economy on a more rapid and inclusive growth path to 2030, we need to effectively direct and manage the levers of change – levers that activate both public and private sector energies and capabilities” (Gordhan, 2012).

Improving infrastructure would not only improve the economy domestically but it would also reduce the bottlenecks to regional integration, which is of great importance to the State. In the lead up to the tabling of the Medium-term Budget Policy Statement (MTBPS), Treasury announced that it would not repeal the foreign tax credits for fees on services provided by South African companies that operate in African markets. Instead they have been given a tax deduction (Ensor 2015). The 2015 MTBPS projected that the 2015 growth of the South African economy would only be 1.5% and 1.7% in 2016 (Nene 2015). This gives impetus for South Africa to integrate even more with other African, and other developing economies, to buffer against further economic pressures. 114

The reality is that South African MNCs, including mobile telephony MNOs, need to expand across the continent to ensure their survival. Similarly, the State needs its MNCs to expand not only to ensure that it receives a portion of the income, or tax credits, but also as a way to project its relevance on the continent. This contributes to South Africa’s structural power and improves South Africa’s credibility in leading the continent. More so, what this illustrates is that movements by DIRCO, and the Treasury, ensure that the interests of South African MNCs are supported. This highlights that South Africa understands that its political standing on the continent and its domestic continuity, is partly linked to the success of its private sector.

4.4.1.1 SHOULD SOUTH AFRICA REGULATE SOUTH AFRICAN MULTINATIONALS OUTSIDE THE COUNTRY’S BORDERS?

Obviously, there are questions regarding appropriate regulatory structures governing the relationship between the government and South African business. Pretoria has made it clear that its national and foreign policy agendas are linked inextricably to the African continent. The upward trajectory of South African corporations on the continent is in line with the foreign policy vision. Yet, Pretoria has no real jurisdiction over the behaviour of these companies, many of who independently set up shop outside South Africa’s borders.

Alden and Soko maintain that African expansion efforts by corporate South Africa (multinationals and smaller enterprises) cannot be fully credited to the State. They point out that decision-making is conducted independent of the State and real assistance is rarely required from government such as the Department of Trade and Industry or local embassies (Alden & Soko 2005:368-369). Indeed, South Africa has struggled with the behaviour of a number of multinationals. One of the many challenges is the illegal withholding of local tax payments. Reuters reported that the South African Revenue Service (SARS), in May 2012, briefed parliament’s finance committee on revenue losses caused by the “increase in the use of cross-border structuring and transfer pricing manipulations by businesses to unfairly and illegally reduce their local tax liabilities" (Reuters 2012). Illegally withholding tax flies against the purpose of the policies that the State has put in place to aid the private sector’s 115 cross border activities. MTN has been accused of aggressive tax avoidance in South Africa (Lourie 2015). Although Chris Maroleng, MTN’s Group Executive of Corporate Affairs, denied that the company did anything illegal pointing out that many other multinationals also engage in the same practices to reduce tax within the ambit of current legislation (Maroleng, Interview at MTN Innovation Centre 2016). This question of withholding of revenue indicates the need for some form of code of conduct about the relationship between South African MNCs and the State. If South Africa has gone through the effort of easing restrictions for MNCs, so that they are more willing to expand beyond its borders, the country has to ensure that it is able to benefit.

South African MNCs are often painted with the same brush as other multinationals, South African corporations have not done enough to change the perception of them being rent-seeking and exploitative. Miller, Saunders and Oloyede (2008) contend that the role played by South African multinationals is that of possible instruments of regional integration. Companies in the mobile telephony space can very easily play this role as apart from providing telephony services, they also provide other services such as mobile remittances which are easing financial transfers between countries. This is discussed in detail in chapter five.

The 2010/2011 South African MNCs in Africa Trends report, from the perspective of organised labour, highlights poor labour practices of South African multinationals and corporate governance in host countries. The report suggests that South African MNCs are not different from developed country MNCs. “The real effects that South African capital has on the South African and the regional economy are experienced daily as job losses, low wages, authoritarian management styles, bad working conditions and monopolistic tendencies. Questions and concerns are being raised again about the role of South African capital and while South African investment is welcome throughout the region, it is not without its ambiguities” (Global Unions:10).

In sum, the report contends that: although there are benefits for host economies, South African capital is not friendly to its host economy in terms of labour. The 2013, 2014 report by the Labour Research Services, confirms that since 1994, there have been some improvements for workers in host economies but in the main, the workers’ situation is still precarious (Taal 2014). These reports may be accused of

116 being biased as they are commissioned by labour federations, but they underscore the fact that not all sectors are happy with the quality of South Africa’s investment in African host countries. Organised labour, particularly in South Africa, is an influential force, owing to their relationship with the ruling ANC, and their opinion on how capital is being channelled should not be ignored.

Another important issue is how South African MNCs affect their local environments. Hudson (2007) reveals that there are two sides to South Africa’s economic expansion - on the one hand MNCs are considered to be displacing local business, but on the other hand they are promoting the development of industry (Hudson 2007: 136). She uses the example of SABMiller’s 1997 acquisition of 69% of Ghana’s Accra brewery. The company’s involvement led to the modernisation of Accra Brewery (Ibid). The question has to be - whose responsibility is it to ensure adequate developmental initiatives and the nature of corporate investment? Is it the home country where the capital originates that has to set the terms of the dimensions of investment, or is it the host country that should set the terms? Ultimately, the responsibility of ensuring that developmental objectives are met has to lay with the host state, unless it is willing to completely abandon its autonomy to external forces.

The approach of many South African companies is partnership, or localisation, of their operations. Research by Luiz and Stephan found that the most popular method for companies to expand is through joint ventures with majority shareholding. They note that “Mergers and Acquisitions were the most preferred entry channels due to the company having the most say over the use of the capital invested as well as having management control, thereby setting policy and direction. It also allows the company to gain access to resources in-country immediately …” (Luiz and Stephan 2012:625). In MTN’s case, although it moved into a country partnering with a local company, it was not in fact tapping into much of an existing mobile infrastructure. It basically built up infrastructure in areas that did not have any.

An illustration of partnership at work is the IDC actively pursuing involvement in the development of hotels in the rest of Africa. These partnering companies would be from both South Africa and the host country (Rees 2012). Another view of South

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African capital comes from Frywell Shaba Ghirwa who asserts that in Zambia, South African companies operating within the country are viewed as foreign although there are positive spinoffs in terms of “wealth and job creation, foreign exchange generation and hence balance of payments, technology transfers and hence sector modernisation”(Ghirwa 2004). MTN’s method of internationalisation on the continent has been a way to overcome the "liability of foreignness" which refers to the additional costs of operating a business outside of a company’s home country (Barnard 2010). These costs can include actual operating expenses in a foreign environment, cultural communication problems caused by not understanding the business climate, and additional regulatory burdens owing to being a foreign company in a host environment (Ibid). Research by Luiz & Stephan (2012) underscores that South African telephony firms have been successful in sub- Saharan countries because they have an innate understanding of the African, and developing country, context. They use the example of MTN which has been able to expand throughout sub-Saharan Africa and now has a presence in North Africa and the Middle East owing to using its operational experience of working in developing nations (Ibid:634). Research conducted by Brand SA (2014) found that companies such as Stanbic have chosen to take on such a local identity and that there is a high level of identification as being local. Undoubtedly, Stanbic’s approach is a good illustration of South African strategy at play.

MNCs have been able to ride on South Africa’s political success and translate it into economic success. Although there are benefits for the host country to be derived from South African investment on the continent, it is clear that the effect of this investment on the development of the host country has not been appropriately examined. Therefore, it stands to reason that a degree of regulation is necessary. If the operations of MNCs have an impact on the perception or power projection of their home country, there should be a level of regulation or at the very least coordination.

4.4.2 THE RELATIONSHIP BETWEEN THE SOUTH AFRICAN GOVERNMENT AND BUSINESS

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There has been criticism that government structures fail to adequately support business ventures especially regarding its expansion on the continent (Alden & Soko 2005). While there is some credence to this argument, however, in mobile telephony the situation is slightly different. In the case of MTN, there has been support from the State particularly DIRCO. The expansion of South Africa’s initial MNOs did not happen in isolation but rather within a very specific geopolitical context, as is explored in chapter five.

The relationship between the business community and the State has always been fraught with complications. Historically, big businesses, particularly multinationals, have been accused not only of benefiting from the apartheid system but also of doing little to change the situation. In the dying days of apartheid, big business started to be more vocal about the need for a non-racial South Africa as is evidenced by the creation of the Consultative Business Movement in 1988 that was made up of 50 white business leaders (Nel & Grealy 1989). Whether or not their motivations were altruistic is another matter. The reality for the business community was that apartheid had affected profit making not only owing to its international isolation but also in terms of access to human resources and a large population that was not appropriately skilled owing to poor education (Gumede 2005:82-3). In 1950 the FCI issued a public statement calling for the development of an urban black workforce that the State viewed with suspicion particularly as it went against the rationale of apartheid (Handley 2008: 47).

As demonstrated in this chapter, the shrinking South African market has necessitated that the business community expand beyond South Africa’s borders. For South Africa, there was also a realisation that helping to facilitate expansion was necessary. Speaking on the issue of the increase of South African capital investment on the continent, the former Director-General of the Department of Foreign Affairs, Jackie Selebi, was reported as being very positive about these investments as it would have positive results for South Africa as well as the continent (Siko Op Cit:148). Africa-directed capital investment from South African investors, 20 years into South Africa’s democracy, has not only yielded positive results for most investors in terms of profit, it has also cemented South Africa’s position as de facto leader of the continent. 119

4.4.3 ATTEMPTS TO COORDINATE STATE, BUSINESS AND LABOUR: THE FIRST CORPORATIST ARRANGEMENT

One of the key criticisms of South Africa’s State-Business Relations (SBR) is the apparent lack of successful coordinating forums. On the surface, there are few institutions to facilitate dialogue between the corporate world and the governments such as former president Mbeki’s business working group and the lobby group, Business Leadership South Africa. However, the effectiveness of these institutions can be called into question because there is little evidence of collective ability to impact policy. Moreover, engagment with state-business fora, which had gained prominence during the Mbeki administration, had begun to taper off under the Zuma administration (Spicer 2016:13). This incidently occurred almost simultaneously with the internal erosion of groups such as Business Unity South Africa (BUSA) (Ibid: 14). The most destructive was the withdrawal from BUSA of 14 black professional groups, under the banner of the black business council. The bone of contention was the lack of economic transformation in the country (Black Business Summit 2011). According to Spicer, the State has put its weight behing “exclusively black organisations” with these organisations occupying a more important role in Zuma’s international business delegations (Spicer 2016:14) even though originally BUSA in partnership with the Department of Trade and Industry, used to act as the coordinator of these business delegations (Grant 2011:6).

The complicating factors in SBR have been: race, competing socio-political ideologies within the ruling party and, most importantly, the political strength of organised labour. COSATU is in the tripartite-alliance with the ruling party and the South African Communist Party (SACP). As such, they have the power to deal with their grievances at party-level. An example of this power play is the pressure put on the ANC by COSATU on a contentious highway-tolling project in Gauteng. The project was temporarily suspended while alternatives were being investigated.

The key institution for coordinating SBR is the National Economic, Development and Labour Council (NEDLAC). However, analysts such as DW te Velde argue that the

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State weakened the institution by side-lining it by engaging on policy issues with business and labour outside NEDLAC (te Velde & Leftwich 2010:18; Ensor 2014).

“Organised business, in turn, had little incentive to engage with the State over its macro-economic management, and became increasingly sceptical of Nedlac as a forum for dealing with other policy issues. Collective action by business was undermined further by the fact that the established corporations and the emerging ‘empowered’ black business elite could pursue their individual agendas more successfully through direct engagement with government”(Nattrass & Seekings 2010:4). Nattrass and Seekings (Ibid) bemoan the government’s apparent disjointed policy positions; even though its labour policies are pro-organised labour and conversely the policies coming out of Treasury can be construed as pro-business.

This mechanism was formed in 1995 as a formal institution for government to engage with organised labour, organised business and civil society on issues related to socio-economic policy (NEDLAC online). More specifically its constituencies are:

 The Government: Departments of Labour; Treasury; Public Works; and, Trade and Industry.

 Organised Labour: Congress of South African Trade Unions (COSATU), Federation of Unions in South Africa (FEDUSA) and the National Council of Trade Unions (NACTU).

 Organised Business: BUSA (MTN South Africa is a member of BUSA)  Civil society groupings such as the Women’s National Coalition; the South African National Civics Organisation; the South African Youth Council; Disabled People of South Africa; The South African National Apex Cooperatives; and the Financial Sector Campaign Coalition.

Lauded as an example of cooperative governance, Edigheji highlights the fact that the precursors to NEDLAC were the National Economic Forum and the restructuring of the National Manpower Commission (NMC). They were the ways that COSATU hampered the ability of the failing apartheid regime from “unilaterally imposing social and economic policy” (Edigheji 2003:77). For instance, through the pressure of a wave of collective industrial action in the late 1980s, COSATU managed to secure a space on the NMC (which was originally a whites only labour formation). The purpose of the NMC was to advise the State on labour affairs (Bendix, 2010:244). 121

Soon after their inclusion in 1991, there was a push by both organised business and labour to have input in economic reform which saw the birth of the NEF after a devasting two-day general strike in the manufacturing sector called by COSATU (Houston, Libenberg & Dichaba 2001:35). The strike began as a protest against value added tax but the formation of the NEF became a key demand (Ibid). COSATU envisioned the NEF as a “bargaining forum” that parliament would be compelled to ratify (Skålnes 1997:163). Edigheji notes that “...the origin of consultative decision-making in the South African context was not about strengthening governance capacity but about reducing State capacity” (Ibid). This discussion is important as it goes to the heart of SBR and corporate expansion. It demonstrates that the relationship between the State and organised business is as complicated under the ANC-led government as it was under the old regime. However, in spite of these complications and the failure to create a corporatist arrangement, the interests of the private sector, as is seen with Treasury and DIRCO policy initiatives, is still embedded in South Africa’s statecraft. A possible reason for this is that the State recognises that the corporate sector can still be used as a tool for the State, particularly for meeting its development agenda. In the case of MTN, as well as Vodacom and Cell C later on, their licensing is linked to provision of services to the marginalised sectors of the community. Chapter five will further explore South Africa’s attempts at building a corporatist state.

4.4.4 MACRO-ECONOMIC GROWTH STRATEGIES

Arguably, the State rendered NEDLAC toothless by sidestepping it in the key area of macro-economic strategy; this is evidenced by the introduction of the Growth, Employment and Redistribution strategy (GEAR).

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Reconstruction Accelerated and and Growth and Shared Growth- New Growth Development Redistribution South Africa Path (2011) Programme strategy (1996) (2005) (1994)

FIGURE 1:KEY SOUTH AFRICAN MACRO-ECONOMIC STRATEGIES POST-1994 (AUTHOR’S OWN GRAPHIC REPRESENTATION)

GEAR (1996) could be described as a self-imposed structural adjustment programme. It came into effect to improve socio-economic development in the country, much like the 1994 Reconstruction and Development Programme (RDP) but substantially differed from it in its ideological leanings. The RDP concentrated on addressing the socio-economic challenges plaguing the country at the time by focusing on basic social needs such as housing, education, services, health and land. GEAR went a step further in addressing these socio-economic challenges by favouring an approach that was more technocratic and less socialist leaning than GEAR, therefore less intimidating to the business community. The result was a focus on decreasing overall government spending and improving conditions for international trade such as the reduction of import controls.

Edigheji contends that the RDP did not garner consensus within the tripartite alliance by those who preferred a neo-liberal approach, such as business, even though the public pronouncements were the opposite (Ibid:93). He points to the fact that NEDLAC became “an ideological battle ground for contesting the nature and

123 direction of social and economic policy” (Ibid:94). Evidently, it was not surprising that there was “recognition from all the stakeholders at NEDLAC that there was no way that the government would have successfully secured a buy-in on GEAR from the trade unions” (Ibid: 94).

The strategic framework that succeeded GEAR was the Accelerated and Shared Growth Initiative for South Africa (AsgiSA)14. This plan was created with the intention to shore up the weak areas of the economy and increase participation of the majority of the citizenry by increasing government spending on infrastructure. The areas that were made a priority were business, process outsourcing, and tourism. The foci were: investment in infrastructure; targeting economic sectors with growth potential; developing and harnessing skills; strengthening small businesses; overhauling public administration; and creating a positive environment for macro-economic growth.

The New Growth Path (NGP) was introduced in 2010. It aims to create five million jobs and reduce unemployment to 15% by the year 2020. At the centre of the policy is the burning issue of job creation. Also key to this policy is the building of an integrated African economy and partnerships.

The common thread among the economic growth programmes between 1996 and 2011 has been a neoliberal ideological leaning with increasing free movement of capital. Harnessing the corporate sector would be very important not only as a means of the State projecting its power on the rest of the continent but also shoring up its capacity to do so.

4.5 ENTRENCHING SOUTH AFRICA’S HEGEMONY/LEADERSHIP

According to Lesetja Kganyago, the government’s view is that Africa-directed investments by the private sector are “consistent” with the principles espoused in the NEPAD document (Kganyago 2008:148-149). South Africa, through NEPAD

14 http://www.info.gov.za/asgisa

124 primarily, is able to set the norms and values, on neo-liberal market ideology that facilitate further investment.

4.5.1 REGIONAL INTEGRATION

In 2008, the global financial crisis highlighted the need for African countries to scale- up their efforts at increasing intra-African trade. The 2011 African Economic Outlook report notes that although Africa managed to weather the shocks caused by the 2008 global financial crisis, it was not immune to some of the resultant negative consequences (ADB, OECD, UNDP & UNECA 2011: 46). These consequences include the 20% drop in investment inflows in 2009 (Ibid). This can be attributed to the fact that there continues to be a heavy reliance on Northern investors; FDI inflows from developed countries accounted for 72% of the FDI between 2000 and 2008 (Ibid:48).

At a 2002 conference on globalisation, Anglo American’s CEO at the time, AJ Trahar, grumbled about the contentious state-business relationship in South Africa. He noted that the perception of “…government’s definition of a partnership as one where government proposes and disposes on an issue and pauses merely to solicit funds from the private sector when it has concluded its preparations. On the other side of the fence some sectors of government perceive business to be somewhat fragmented and distracted by global priorities, if not sometimes pessimistic and disinterested in the future of the country, the region and the continent” (Trahar 2002:6).

However, many companies, piggybacking on South Africa’s foreign policy engagements, have been able to access markets on the continent that were previously impenetrable to them. In the case of mobile telephony, although British Vodafone bought a controlling interest in Vodacom, it has kept Vodacom’s South African brand identity. There is definite brand awareness of Vodacom being a South African company; even though the truth of this has changed. Luiz and Stephan contend that Vodafone kept the Vodacom brand because of the “strong brand recognition” as well as the fact that it was able to tap into “existing company’s

125 resources, local knowledge is immediately available and distribution outlets for products and services are in place” ( Luiz and Stephan 2012:626).

Having headquarters in Gauteng brings the additional benefit of being closer to the headquarters and regional offices of a number of international bodies and the seat of government. Moreover, programmes such as NEPAD and the resultant increasing African integration, creates more avenues for South African based firms. Most of South Africa’s ICT firms are based in Gauteng (Akinboade and Lalthapersad-Pillay 2009). It may be- argued, that foreign firms based in South Africa, particularly those deriving benefits from having a brand identity as a South African firm, may also be able to accrue similar benefits.

Darlene Miller (2003) bemoans the fact that a number of South African companies did not hesitate to use the opportunity to shroud their expansion efforts with the ideology of African Renaissance. Perhaps, one could argue that their political- economic philosophy is one that is growing across Africa with influential business people such as Mo Ibrahim and Tony Elumelu linking good governance, democracy and liberal economics. Tony Elumelu suggested, “Africa’s renaissance lies in the confluence of the right business and political action” (The Tony Elumelu Foundation). The challenge with that ideology, especially from those who reject globalisation and capitalism as the most appropriate ideology for the global political economy, is that it puts power squarely in the hands of an elite group or business class. Cox (1976) and Robinson (2010) among others, write extensively on this matter.

4.5.1.1 MNC investment regime and reduction in sovereignty

FDI has been touted as a means to achieve much needed development for developing countries. However, this need can be used to induce African governments to prevent fully autonomous decisions about their territory. Henisz and Zelner note that investors have the highest amount of bargaining power before they invest because of the need for capital and/or technology (Henisz & Zelner 2005: 362). This bargaining power puts host economies in developing nations in a precarious position.

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Emerging markets have been quite attractive commercially and politically for investors from developed nations as well as South Africa. From a commercial point of view, there has been a move by MNCs towards further consolidation: there is definitely strength in numbers. Economies of scale due to the magnitude and number of operations gives companies better positioning in the market and increased strength for regulations (Luiz and Stephan 2012: 627). The consolidation of operations means that the bargaining power as well as sovereignty of individual states is put at risk. The dependence on the services or even their investment means that states may have to pander to the will of the MNC. Because MNCs have increased their bargaining power and their “regulatory arbitrage15” they are very influential. Even more risky is the fact that an MNC can resist host country regulations by simply threatening to move elsewhere, which has serious implications for the balance sheet of a developing state (Bezuidenhout & Kleynhans 2015:102).

Upendra Acharya views globalisation as a foundation for hegemony. Acharya contends that regimes, which are aligned to Western ideals, do not have an adequate compliance mechanism. In other words there are no ‘sticks’ with which to punish non-compliance. However, non-hegemonic powers are pushed into complying when faced with economic or political pressure. The investor regime, espoused in the treaties that set up the International Centre for Settlement of Investment Disputes (ICSID), has been labelled as “a bill of rights for foreign investors” as part of a legal framework that obliges non-hegemonic countries to be accountable to corporations (Ibid: 952-953).

The current investment regime can be argued to be taking away state autonomy. For instance, the ICSID, which arbitrates disputes, allows for investors, mostly large MNCs, to take states to court if they feel a law or state of affairs disenfranchises them. However, it is considerably more complicated and more difficult for states to

15 Arbitrage relates to the system of making a profit from the price difference between two or more markets. Simultaneous deals are made in the competing markets to allow for the capitalization of the imbalance.

127 use the same channels to sanction errant corporations because of the way the legal instruments are worded and applied. By implication this means that in the area of public policy-making, the purview of states, an external body is able to hamper a sovereign state’s ability to legislate for the public good. Furthermore, avoiding signing or ratifying to the regime does not mean that action through the regime can be avoided. The ICSID’s additional facility allows investors to haul non-member states before it in cases of a dispute (ICSID).

South Africa, one of the few countries not to sign on with the ICSID, was brought before it in 2007. The claimants were the Foresti and Conti families as well as a Luxembourg based holding company, Finstone (ICSID, 2007). The claimants used bilateral agreements that the Italian and Belgian governments signed in the 1990s under Nelson Mandela’s presidency as the legitimacy for their claim. In other words, they were able to get the ICSID to apply through the back door mechanism provided by this additional facility.

What does this mean for South African companies operating on the continent?

First, because South Africa is not a member of the ICSID, companies from South Africa would not be allowed to use these measures due to the terms of jurisdiction set in article 25(2) which states that:

“(2) "National of another Contracting State" means: (a) any natural person who had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration as well as on the date on which the request was registered pursuant to paragraph (3) of Article 28 or paragraph (3) of Article 36, but does not include any person who on either date also had the nationality of the Contracting State party to the dispute; and

(b) any juridical person which had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration and any juridical person which had the nationality of the Contracting State party to the dispute on that date and which, because of foreign control, the parties have agreed should be treated as a national of another Contracting State for the purposes of this Convention” (ICSID 1965). 128

This effectively means that there has to be a state, or agency, as one part of the dispute and the other party of the dispute must be an investor (either a natural or juridical person) from another contracting state. Not being hosted by a country that is not a contracting state makes it difficult for South African MNCs to use this particular mechanism to settle disputes, even though there are many others available.

Additionally, by removing itself from the current investment regime and creating its own, it is serving as a model for other African governments. If South Africa is successful in its endeavours, then it can be expected that many other African countries will follow suit. Yet again, South Africa has put itself at the forefront of the battle to alter the world order in favour of the global South. This lines up with the visions espoused by NEPAD and the AU.

Particularly concerning investment, Africa needs a leader to lead the way, and develop new norms and values for investments and sustainable development. African governments in particular have struggled to marshal investments for development purposes. Part of the challenge is the disconnection between states and national, sub-regional and regional bodies. There is not enough capacity, or will, to coordinate the negotiation of these agreements. This ultimately weakens the bargaining position of these states (Naidu & Vickers 2014:17).

4.5.1.2 MNCs and entrenching patronage networks

The dark underbelly of FDI is the accusation that MNCs entrench existing political patronage networks that in turn fuel corruption.

The relationship between the ruling party, the ANC, and MTN dates back to the company’s genesis as discussed in chapter six. However, the Turkcell debacle did raise a number of red flags even though, ultimately, MTN was cleared of wrong- doing in this case. Nazir Patel, the MTN finance chief, resigned in the wake of accusations that he diverted money to the Iranian government. Furthermore, Chris Kilowan the former head of MTN in Iran, testified that the company had lavished gifts

129 on Iranian ministers and the former South African ambassador to Iran, Yusuf Saloojee (Marais & Rose 2013).

Such facts might just be circumstantial but they do raise questions about the nature of the relationship between the State and MTN; where does lobbying of government, which is permissible, cross the line into patronage? And, it can also be used as a starting point in examining the political relationships of the senior leaders in other multinationals.

4.6 SOUTH AFRICAN REGIONAL HEGEMONY: QUO VADIS?

It may be argued that the reason South Africa is able to punch above its weight is because it does indeed provide stability through its economic prowess, the institutions it champions, as well as its symbolic identity. South Africa is one the strongest economic players domestically in sub-Saharan Africa, in spite of various challengers to this position. One of these challengers to Pretoria’s economic prowess has been Nigeria - with the IMF stating its economy had surpassed that of South Africa in 2015 (Economist Op Cit). However, within the same year, Nigeria’s currency took a nosedive thanks to falling oil prices (Ibukun, Potelwa, & Onu 2016) and the unstable security outlook. Two challengers to South Africa’s prowess in Southern Africa are Angola and Botswana. Both countries are blessed with an abundance of natural resources but have been unable to translate that into real influence in the region. In the case of Botswana, even though it is politically stable, it does not have the numbers in terms of human resources to entrench the power that its natural resource wealth affords it. Indeed much of its technical know-how and infrastructure comes from South Africa.

Angola, on the other hand, has had some level of influence politically, thanks to its economic capability. The challenges with Angola are its massive levels of inequality and evidence of entrenched patrimonialism that are the precursors for a return to armed conflict. Another dampening of its leadership credibility in Southern Africa is its close ties to its former colonial master Portugal. For a continent that fought, and

130 continues to fight, to break the shackles of colonialism, it is untenable to follow the lead of a state that is still closely linked to its colonial leaders.

Post-1994, South Africa has championed a number of institutions and programmes continentally. These include but are not limited to the transformation of the OAU into the AU; the development of continental peace forces; NEPAD; and most recently, the increased push for the actualisation of Agenda 2063. Although there have been arguments, which may or may not have an element of merit, it does not take away from the fact that these are African driven institutions and initiatives. Furthermore, South Africa has taken up much of the burden when it comes to hosting and funding external donors such as the EU and China.

The transition from apartheid to an inclusive democracy was hailed as a miracle. It was expected that there would be a full-scale war but the negotiated settlement ensured that the street violence was subdued and a historic election took place. Although this negotiated settlement had some deep flaws, it was held up as a symbol of what is possible for other conflict-ridden countries. Indeed, Pretoria uses its history as part of its moral authority to legitimise its peace building and arbitrator roles on the continent. Added to this is the mythology of Nelson Mandela, who has been elevated to the role of saviour of the nation, father of South Africa, and to some extent messiah for Africa. South Africa has leveraged all this symbolism to its benefit in terms of its leadership on the continent.

What is clear is that in the period between Mandela’s administration and Zuma’s administration, there has been recognition that South Africa has to do more if it wants to lead the region and continent. Nations that have taken on a leadership role, such as the US, contribute a considerable amount of foreign aid (Tarnoff and Lawson 2016). South Africa has begun the process of formalising its foreign assistance with the creation of the African Renaissance and International Co- operation Fund (ARF). The ARF was founded in 2001 after the promulgation of the African Renaissance and International Cooperation Act. The ARF introduced a mechanism to formally provide development aid within the framework of its six objectives:

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 Co-operation between South Africa and other countries, particularly African countries;  The promotion of democracy, good governance;  Conflict prevention and resolution;  Socio-economic development;  Humanitarian assistance; and  Human resource development (DIRCO 2015:16-18).

The ARF has so far funded projects such as the SADC election observer missions to Zambia and the Seychelles as well as drought relief to Namibia (DIRCO 2016:6-7). The process of formalisation has further intensified in the creation of the South African Development Partnership Agency (SADPA) (at the time of writing SADPA had not yet been operationalised).

Does South African mobile telephony project South Africa’s ideals across the continent? It can be deduced from the successful operations of both MTN and Vodacom, that the deepening integration within the African economy is being facilitated by the expansion and pervasiveness of their operations. MTN, the more successful of the two, has exported South African ideals and corporate culture and localised them depending on their host.

As illustrated in the chapter delving deeper into the MTN group, every MTN location has followed an isomorphic model with key South African ideals as supports. One of those pillars is the indigenisation of the local entity of the MNC through shareholding, and, even by putting shares out to the public on the stock exchange. A model they could have followed was by providing shares directly to target groups or alternatively, keeping the share in the local subsidiary. The success of MTN has ultimately provided, and spread, post-apartheid South African cultural ideals and values.

Notwithstanding these successes, South Africa’s position on the continent is in danger because of two things: first, increasing internal strife. The number of violent

132 protests and flare-ups of xenophobic violence do not bode well for South Africa’s standing; second, the lagging economy. The global economic meltdown of 2008 and 2015, which includes China’s economic slow-down, has negatively affected South Africa’s economy. Added to this challenge are its overall policies that keep shifting targets, and the inability to leverage its existing capacity to improve the economy. It can be argued however, that South Africa’s leadership is being propped up because of its symbolic nature. As asserted earlier on, its relative stability and its similar economic outlook to Western nations make it an attractive regional hegemon in Southern Africa and to a lesser extent sub-Saharan Africa.

4.7 CONCLUSION

South Africa has a long history of large corporations being embedded within the State policy machinery. In the post-1994 era, the State and big capital have had a complicated relationship that is coloured by ideological and racial tensions. Further complicating the relationship is the State – business - labour nexus, which appears to often be in conflict with each other. In spite of the fact that the relationship is largely dysfunctional, the role of big business, particularly those that move beyond South Africa’s borders, is significant.

The miracle of a relatively peaceful transition into democracy in 1994 bolstered South Africa’s image abroad as well as on the continent. It became a beacon of political stability and an example to the rest of the continent owing to the fact that the country had a relatively peaceful transition to democracy.

In the lead-up to 1994, there was quite a lot of discussion among African leaders and Africa focused analysts as to what role South Africa would play on the continent. In light of its previous character as a malignant hegemon, there was understandably a lot of concern that the country would continue to overpower the rest of the continent.

South Africa’s state apparatus and elites spent a considerable amount of time conceptualising what its role should be on the continent; the most well-defined of those scenarios were the options forwarded by Rob Davies (Op Cit). His scenarios 133 were: South Africa first; non-hegemonic regional cooperation and integration; and, integration under South African hegemony. The South African government and the ruling party have balked at the possibility of being identified with the coercive hegemony of the past. Nevertheless, there is recognition that South Africa’s long- term survival and success is dependent on the rest of the continent and for that reason it has stressed integration and regional cooperation. There is, however, an argument to be made that South Africa has actually followed the option of ‘integration under South African hegemony’. Although there has been a push for greater integration and cooperation, it is South Africa that is providing the framework for this integration and as such is setting the terms for integration. With institution building to deepen integration, South Africa has taken the lead. Whether South Africa actually is a hegemon with the will or even capacity is subject to debate, and will be further interrogated later on in this body of research.

It is hard to disagree with the notion that South Africa’s supposed hegemony is not a complete hegemony in the traditional sense. What cannot be denied is South Africa’s primacy in its region, owing to historical and economic reasons, and the rest of the continent. South Africa is a hegemon because: in addition to its diversified economy, it also has moral authority owing to its relatively peaceful democratic transition and ability to avoid violent coups. Also, as it is often criticised for, to a large degree it pursues a neo-liberal agenda through the policies it promotes internally and externally. For instance the NDP which, although accepted in parliament, is highly derided within the tripartite alliance as well as among more left leaning members of society because of its pro-business development stance. So also NEPAD, championed by South Africa, has been criticised.

Pretoria has, on the one hand, been reluctant to be perceived as hegemonic, but at the same time, has worked towards shaping the norms and values of the continent and sometimes working unilaterally against its pan-African agenda. As a response, particularly in Southern Africa, there have been varying reactions to its overtures at regional leadership that vacillate between bandwagoning and bonding.

Zimbabwe has been brought up, in popular discourse, as the chink in South Africa’s armour for its regional and continental ambitions because South Africa has not

134 succeeded in greatly influencing the political situation in that country. On the rest of the continent, despite driving continental bodies and being involved in peace building in places like the Sudan and South Sudan, a number of countries throughout North and East Africa have not welcomed South Africa’s attempt at leadership, but instead, have taken either neutral or resistive stances towards South Africa’s leadership and/or hegemony.

It becomes apparent therefore that South Africa’s hegemony is girdled by material support from South African MNCs on the continent. The danger of a corporation shoring up hegemony is that the company can start to act as a hegemon or extra- regional hegemon itself, both benevolently or coercively. Cox (1973) has previously argued that MNCs in general have had an effect on the global economy. At a global level, analysts such as Sklair (2000) and Upendra Acharya (2013) have argued that the MNCs control the international system and disseminate the values of globalisation. Acharya has further argued that multi-lateral institutions weaken national sovereignty and autonomy. If this line of reasoning is used to examine South Africa and relations with its own MNCs, it is easy to infer that the driver of the relationship is actually the MNCs with South Africa serving as a funnel for ideologies such as globalisation, which entrench the power of MNCs. It is indicative of the complicated nature of the role MNCs play in South Africa’s power politics beyond its borders. As South Africa’s profile on the international stage has grown, so has its strategic importance. Therefore, it would be incumbent on Pretoria to ensure that business is able to take advantage of the developing policy and regulatory framework. In the same vein, a greater level of cohesion between business and government is crucial in order to meet the social and developmental goals that the State has set for the country as well as the continent.

The next chapter will focus on the growth of the telecommunications sector, in particular, mobile telephony, in sub-Saharan Africa. As this telecommunications sector is, and will continue to be, one of the key drivers of development on the continent. While both the SOEs and the private sector have waded into the investment waters with the provision of ICT services on the continent; the levels of success have varied drastically. It will be interesting to observe the ways in which

135 corporations in the telecommunications sector have benefited – purposefully or otherwise, from Pretoria’s diplomatic efforts.

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CHAPTER FIVE: MOBILE TELEPHONY: THE INTERSECTION BETWEEN ATTEMPTED CORPORATISM AND HEGEMONIC STABILITY

As South Africa transitioned into democracy, its domestic political economy vacillated from a capitalist model, to the first iterations of a corporatist model. The concept of corporatism posits the State as directing industrial relations with business and labour, acting as collective partners. Adam, Slabbert and Moodley (1997:140), however, define corporatism as “the national institutionalisation of global imperatives, articulated by business organisations and state bureaucrats”. It is important to understand the domestic economic, political model followed by South Africa, as it gives insight into the process by which multinationals within the telephony space became so influential.

South Africa’s foreign policy trajectory is heavily influenced by the ideological leanings of the ruling party evidenced in the increased move away from Western affiliations towards closer ties to BRICS and other developing nations. Although in a discussion on the ANC’s influence on South Africa’s foreign policy, Essop Pahad, a former minister in the presidency, reminds us that the ANC’s influence on foreign policy is on “broad terms” and the details as well as the implementation are left to DIRCO (Nganje 2012:11). The language used in the 2015 ANC policy discussion document on international relations was decidedly anti-Western but continued with the ANC tradition of calling for deeper relations with countries in the global south. The state policy pronouncements have not been openly anti-Western but have leaned heavily towards south-south cooperation and alternatives to the current world order. An example is the support for a BRICS Development Bank, now called the New Development Bank. In a speech to a BRICS leaders’ plenary session in India, President Zuma states “South Africa’s participation in BRICS is interlinked with the development objectives of Africa as reflected in Agenda 2063, which is the Continent’s blueprint for economic and technological transformation” (Zuma 2016). Moreover, he points to the fact that the New Development Bank would be focused on

137 funding Africa’s industrialisation and infrastructure as well as sustainable development (ibid).

This chapter provides further context for the investigation into whether the interests of corporate actors are built into the economic dimension of South Africa’s foreign policy. The telecommunications sector is an interesting sector as it was the first economic sector to reform in the newly democratic South Africa and it became a “model” for other sectors (Horwitz 2001:18-19). Other than working towards providing services for previously underserviced black communities, the telecommunications sector saw one of the first offerings of BEE shares. The partial privatisation of the State telecoms company, Telkom, to create the Khulisa scheme sadly only saw less than 1% ownership of Telkom transferred to select black people (Rumney 2005:407).

Telecommunications in turn became a prototype for South African corporate expansion in the post-apartheid era; although it was not the first sector to embark on expansion. This model is most evident in mobile telephony.

Mobile telephony is a mode of telecommunications in which mobile devices are wirelessly linked to a cellular communications network. ICT has long been recognised as a necessary component of socio-economic development. However, fixed line penetration is in a perilous state on the continent owing to historical and economic factors. Mobile penetration, on the other hand has been rising steadily, and the increasing penetration resulted in a US$75 billion contribution to sub- Saharan Africa’s GDP, by mobile network operators, in 2013 (GSMA Intelligence 2014:40). In 2014, this figure jumped to US$102 billion, which according to the GSMA, accounts for approximately 5.7% of the region’s GDP (GSMA intelligence 2015:45).

This chapter only considers one part of the mobile phone production network; MNOs. The reason for this is that South Africa’s entry point into mobile telephony was through MNOs and not through the mining of Coltan or the manufacturing of equipment. Examining the birth of South African MNOs illustrates how they were able to reach the status of MNCs and become politically influential.

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On a developmental level, the influence of mobile telephony presents an opportunity for Africans to leapfrog the developmental curve providing an outlet for Africans to participate in the Internet age; and, creates the potential to reshape, or reinforce, the prevailing international order. Access to telephony as well as Internet access is giving Africans an opportunity to innovate and participate in the global economy; examples of African born innovation are products such as the mobile money transfer service M-Pesa (Davidson 2012:5) and the development of innovation incubators such as the iHub in Nairobi, Kenya (Puhl 2013); Technopark in Stellenbosch South Africa (Mahlaka 2015); and the Tshimologong Digital Precinct in Braamfontein South Africa (Tshimologong 2016). In 2016 there were 314 active Tech Hubs in Africa with MNOs partnering with approximately 13% of them (GSMA 2016). For instance MTN has supported the launch of the Activspace hub in Cameroon (Dahir 2016) as well as Jumia (formerly Africa Internet Group) in Nigeria (Akwaja, 2013). What all this activity in the digital space indicates is that Africans are increasingly able to produce their own information products and use that impetus for further economic activity.

Alec Ross, Advisor to Former US Secretary of State Hillary Clinton underscores the value of increased connectivity: states can engage with citizens of another state who in turn may be able to influence their own governments (Ross 2011:452). Specifically, states or non-state actors may influence public thinking and ideology, outside of their own territory, in a more pervasive way than ever before. Ross (Ibid) uses the example of former US President Obama’s Persian New Year video message early in his administration that went viral and which was viewed “by more than one-third of the citizens of Iran”. Westcott (2008:8) points to the 2006 letter published on the Iranian government website by President Ahmendinejad to President Bush which was viewed extensively across the Internet. Governments in Africa have become aware of the power of the Internet and mobile technology, with a number of governments restricting access to the Internet including all forms of social media in order to stem protests. For instance, in early 2017 the Cameroonian government cut access to the Internet in English speaking parts of the country (BBC

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News 2017). In 2016 11 African countries restricted access to the Internet including Zimbabwe that cut access to the social networks WhatsApp16 and Twitter17 during protest action against the State (Shezi 2017).

In Mozambique’s 2010 ‘Bread Riots’ protest action was successfully organised via mobile phone short message service (SMS). The text message stating “enjoy the great day of the strike…to protest the increase in energy, water, mini-bus taxi and bread prices” were widely disseminated and sparked an intense week-long protest action that saw bread prices increases being reversed (Jacobs & Duarte 2010; BBC 2010). The fact that many governments have responded to such challenges by ordering MNOs to shut down access to various mobile services as well as the Internet when there is a risk of protest action points to the power of mobile telephony; particularly on a continent where more people have access to mobile phones than they do to electricity or piped water (SAPA 2014). An Afrobarometer infrastructure report demonstrates, in the 35 countries surveyed, 93% of citizens had access to a mobile phone but only 65% have access to electricity (Wambua & Balongo 2016). This gives MNOs an incredible amount of structural power (see Culpepper’s arguments in chapter two) because their services are so widely used but also shines a spotlight on who controls the technology that is simultaneously able to facilitate development and protest. The two key inquiries addressed in this chapter are: whether or not South African mobile telephony MNCs are helping entrench South Africa’s regional hegemony; and whether the State is in fact being led by corporate interests.

The discussions are organised as follows: first, insight into South Africa’s telecommunications sector. This section delves into the manner in which South Africa’s history informs the apparent influence of mobile telephony MNCs originating on its shores. This section will include a brief discussion on the digital divide as well as how mobile telephony has opened the way for the creation of mobile broadband

16 A free encrypted messenger service that uses the Internet to transmit text messages, video, images, text documents and voice calls between users. 17 An online social network that allows users to publish, as well as read, text and hyperlinks. The text is limited to 140 characters.

140 as a mode for access to the Internet; second, an overview of the benefits of increased mobile telephony penetration will be provided. This gives a broad perspective on how usage of this technology can augment the political and economic significance of mobile MNCs; third, the question of hegemony will be considered; and fourth, the key findings of this section and concluding reflections will be noted.

5.1 THE BIRTH OF SOUTH AFRICA’S MOBILE TELEPHONY: THE INTERSECTION BETWEEN POLITICS AND COMMERCE

In 1996 the newly elected democratic government issued a White Paper that was revolutionary in three aspects: first, it committed to “the ideal of telecommunications not being simply an aspect of development, but a precondition for its success” (Parliament of the Republic of South Africa 2007:190); second, it opened the door to liberalisation; and, third, it created a mechanism for the sector to provide economic redress for the economically disempowered black community through equity ownership schemes, inclusion of black people in the employment and management, as well as entrepreneurship in the sector (The Ministry for Posts, Telecommunications and Broadcasting 1996: Chapter 4). Debatably, this served as one of the first conceptions of the eventual broad-based black empowerment programme.

Analysts such as Johann Maree identified the country’s poor economic performance as signalling the need for a corporatist state (Maree 1993). But, somewhere along the line, corporatist institutions, such as NEDLAC, became toothless tigers; NEDLAC is discussed in the preceding chapter. Kim and van der Westhuizen have predicted the eventual demise of NEDLAC and argue that the move towards corporatism in South Africa has collapsed. What this means is that South Africa has moved towards embracing a more capitalist model (Kim & van der Westhuizen 2015). However, big businesses that were created during the leaning towards corporatism had politically influential people included in their structure and the environment was created for them to thrive domestically and on the continent. In the move away from corporatism, there appears to be a dearth in policy, especially in the realm of telecommunications and mobile telephony. Horwitz and Knott-Craig’s account of the development of mobile telephony in South Africa, lends credence to the notion that

141 the model of political economy that was being embraced in the early years of South Africa’s transition, and new democracy, was leaning towards a form of social corporatism where the State was co-opting established businesses and labour into a new social arrangement. This arrangement was designed to alter the socio- economic order that was prevalent at the time.

Fast-forward to just over 20 years later, and the South African government, is about to lose all the gains that is has made, apparently unwittingly, from mobile telephony. When mobile telephony first became available, the State owned a considerable amount of both MTN and Vodacom (this is discussed in more detail in subsequent chapters). It gradually began to sell its shares in MTN and Vodacom, which reduced the State’s influence in the growth trajectory of MNOs. At the core of the problem, it may be argued, is a lack of strategic vision that guides policy decision-making. Thus a vacuum is created that can be filled by the agendas of those outside the State. In other words, without a clear plan being followed, the government has given outside parties the license to set the agenda for ICT and mobile telephony.

Owing to its technological expertise and developed mobile industry, South Africa has been a leading ICT player. Dagada notes that a number of innovations in mobile telephony were “invented or refined in South Africa”: prepaid services, mobile fax transmissions and mobile banking (Dagada 2012:53). South Africa has, however, begun to lag behind countries such as Kenya and Nigeria who are both investing a considerable amount of capital to upgrade their infrastructure. Indeed, Kenya’s success in integrating ICT into both the private and public sector is well documented (Ndung’u & Waema 2012;Ogutu 2015). There appears to be policy inertia in South Africa, and the country has failed on several occasions to take the lead in this industry - particularly in mobile telephony. Perhaps one could posit that from its genesis, the government has failed to harness this very influential, and powerful, component of the economy.

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In a different account to that provided by Horwitz and Mueller detailed in chapter three, Dagada maintains that:

“The growth of the cell phone industry happened without any plausible policy intervention. The outgoing apartheid government and the ANC didn’t take the potential of the cell phone industry seriously in terms of influencing economic growth and enabling universal access to ICT services by the people in underserviced areas. The ANC perceived cell phones as luxury devices of middle and upper class people. The ANC insisted that access to telecommunications by needy people would be achieved through the fixed line telephony” (Dagada 2012:57).

No matter which account of mobile telephony development is accepted as being correct, the fact remains that the State is no longer directing developments in this sector. One of the most illogical policy decisions that the post-apartheid government has made on mobile telephony was the initial selling of its Vodacom shares. In an answer to a parliamentary question, the then Minister of communications, Siphiwe Nyanda, responded that the sale of Vodacom was because of the shareholders’ agreement that restricted Telkom from entering mobile telephony but allowed Vodacom to enter the fixed telephony market (Nyanda, 2009). The State originally had considerable shares in Vodacom; a private company. In other words, the reasoning given was that in order to allow Telkom to compete in the mobile telephony space, they had to end the restriction caused by the Vodacom shareholders’ agreement. However, Minister Nyanda’s explanation is not satisfactory because if there was truly an intention to make Telkom a major player on the mobile telephony scene then the support needed to take on established players such as Vodacom and MTN would have been substantial. Knott-Craig contends that the government has made it difficult for additional MNOs, such as Cell C and 8*ta (Telkom Mobile), to compete with the duopoly of Vodacom and MTN (Knott-Craig 2012:33). His argument is that the regulator could have brought prices down to foster competition.

The next two chapters will demonstrate that not only was mobile telephony the prototype of post-apartheid business relations domestically, but it also became a model for African corporate expansion and value setting. South African firms favour mergers and acquisitions when expanding on the continent, this allows them to control “capital invested” and be able to establish policy direction (Luiz and Stephan 143

2012:625). In the case of mobile telephony, as we see in chapter six, the MNOs also built the supporting infrastructure and thus have control of the distribution channels. Moreover, including following local guidelines, South African companies export South African corporate governance culture as the condition for listing on the Johannesburg Stock Exchange (JSE) is following South African governance guidelines in its operations outside the country, such as the King Commission reports.

5.1.1 BRIDGING THE DIGITAL DIVIDE AND GROWTH OF TELECOMMUNICATIONS IN SUB-SAHARAN AFRICA

In discussing the importance of mobile telephony, the topic of the ‘digital divide’ cannot be ignored. The common sense understanding is: the schism between who has access to information and communication technologies and who does not. However, there is not a consensus between academics and policy-makers as to what the digital divide actually is. The definition provided by the Organisation for Economic Co-operation and Development (OECD) is: “[t]he term “digital divide” refers to the gap between individuals, households, businesses and geographic areas at different socio-economic levels with regard both to their opportunities to access information and communication technologies (ICTs) and to their use of the Internet for a wide variety of activities “ (Organisation for Economic Co-operation and Development 2001: 5). This definition basically allots the digital divide into two areas: the access to ICTs and the type of usage. There has been a lot of discourse around not only the inequality in access to ICTs but also the differences in the type of usage. For instance, it is widely understood that in developed nations, ICTs are used heavily for entertainment purposes more often than in developing countries (Pew Research Center 2015). The installation of high band-width under-sea cables across Africa’s coastline has meant that the cost of Internet access has been reduced. In addition, the cost of smartphones is rapidly decreasing which has resulted in a higher mobile phone uptake across the continent with 3G connections ‘doubling’ to 20% in 2015 (GSMA Intelligence 2015:10). A White Paper by Cisco Systems, a leading information technology and networking provider notes that in Africa and the Middle East mobile data traffic has increased by 96% in 2016 (CISCO 2017).

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These recent African mobile connectivity gains do not provide a complete picture of the inherent challenges with the provision of mobile telephony inclusive of the Internet. Academics such as Mark Warschauer have criticised the concept of ‘digital divide’ as not being particularly useful in practical terms and not being reflective of the state of affairs on the ground (Warschauer 2003: 297). One of the examples he uses is that of an NGO worker in rural Indonesia who does not necessarily have access to the Internet but has colleagues download information that she may need for her work (Ibid). He thus suggests that “while technology can shape social relations, social relations shape how technology is developed and deployed” (Ibid:301).

Proper consideration of the terminology used is important to unpack the issues surrounding mobile telephony corporate expansion in this chapter. Waverman, Meschi and Fuss (2005) contend that the impact of telecommunications penetration in developing countries is under-researched notwithstanding the influence that ICT has on the world economy. With the weakening of state telecom monopolies and the explosion in the mobile markets, the implications, and opportunities, are unparalleled. South African industry is uniquely placed to take advantage of these opportunities, given the country’s formidable technological infrastructure, access to capital, and human resources. Waverman et al, point out that mobile phones are playing the same role that fixed lines “played in the richer economies in the 1970s and 1980s... countries with under-developed fixed-line networks have achieved rapid mobile telephony growth with much less investment than fixed-line networks would have needed”(Ibid:11).

In spite of the controversial concept of digital divide, there is undoubtedly a need to bring the developing world up to speed on its ability to compete with the developed world. Conquering the digital divide in Africa has implications that go beyond developmental drivers. On a political level, the entity (state or corporation) that marshals the process of the current wave of industrialisation has the power to alter the current system. Regarding the exploration hegemony, the implication is that heading up the telecommunications groundswell that mobile telephony has brought forth, gives the country driving it an opportunity to draw other states into multilateral 145 arrangements that affirm its own leadership. Moreover, states that command the technological advancements affirm their dominance, as has been the case with historical hegemons such as the United Kingdom, the Netherlands and the US.

As will be illustrated later in the chapter, South Africa, owing to its history and developments in the international political economy, was fertile ground for South African corporations in the mobile telephony space, to not only dominate the industry, but also to rapidly expand on the continent.

By the 1960s, a number of African countries such as Sudan, Ghana and Cameroon had just begun breaking off the shackles of colonialism. The telecommunications infrastructure was minimal as it was created to serve the colonial administration.

But, by the 1970s, telecommunication density in African states was double that of South and East Asia (Foster & Briceno-Garmendia 2010:48). The reason that this situation was reversed by the 1990s, as established by Foster and Briceno- Garmendia, was that there were regional leaders that drove infrastructure expansion. China “pursued a conscious strategy of infrastructure led growth” (Ibid).

Mobile telephony provides accessibility to the Internet and additional communication channels. Research by Bankole et al found that access to the Internet assisted trade performance in developing countries (Bankole, Osei-Bryson and Brown 2015:32 - 39). In 2012, a GSM Association report, prepared by Deloitte, made the link between higher mobile penetration and economic growth (Deloitte 2012). Quantitative analysis undertaken by Michael Enowbi Batuo (2015) confirms this phenomenon. Batuo used a 44-country dataset to examine the correlation between economic growth and telecoms investment. Correlation does not equate with causation, the latter is more difficult to prove in this type of research because the area of examination is dynamic. Correlation relates to the relationship between the various variables. Batuo’s empirical study used a dynamic panel data approach model18 so

18 Dynamic Panel data describes where the dependent variable, in a research experiment, introdces a possible error term which may be due to having multiple causations. A rudimentary explanation is that

146 that he could control for a variety of factors. His research illustrated this correlation but also suggests that investment into telecommunications provides higher returns on investment.

Concomitant with economic growth another purported benefit of increased mobile telephony penetration is the diversification of the economy. Business Monitor International describes the success of telecoms operators in Saudi Arabia and the United Arab Emirates in providing other innovative systems and services for business that it says “has created new revenue streams for operators and significant investment opportunities in the telecoms ecosystem” (Business Monitor International 2014: 24).

Conversely, mobile telephony penetration can have several undesired outcomes for the economy especially in situations where the host country has to import skills, services and hardware for their telecoms sector. Becard and Viera de Macedo’s analysis of Chinese involvement in the telecommunications sector of Brazil highlights the proverbial double-edged sword of external MNC expansion within local markets. Chinese, state-supported companies Huawei and ZTE were able to ride the wave of the telephony explosion on the Brazilian market. The Brazilian market was able to meet the demand for mobile telephony services and products and conversely the Chinese imported a large amount of goods into the country. The challenge with this relationship is that it did not allow the Brazilian telecoms company to flourish. The authors highlight the fact that in 2008 Huawei was the largest provider of goods to service the need of the telecommunications sector; yet, it does not own a factory in Brazil; which is ultimately detrimental to the local manufacturers (Becard & Viera de Macedo 2014:154). A factory would result in additional jobs for the Brazilian economy and gives local manufacturers the ability to become competitive.

South Africa is willing to develop the values and systems for Africa’s development; as evidenced by the development of NEPAD and the concept of ‘African

of consumer purchasing behaviour which is not only dependent on price but other possible causes such as marketing (for more in depth explanation please see Brañas-Garza, Bucheli, & Muñoz 2011)

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Renaissance’. However, there have been critical failures at actualisation on the part of the State. The failures may be related to the prevailing ideology or unstable domestic socio-economic conditions present in South Africa. South African multinationals have clearly attempted to piggyback on South Africa’s political efforts to drive their African expansion. South Africa in the early 1990s was not the originator of mobile technology, or telecommunications, but it did have superior infrastructure to other African countries and its corporations were able to mobilise funds for expansion purposes. The challenge for South Africa is that, from a policy development perspective, it is in danger of falling so far behind that its leadership becomes hollow. In other words, South Africa’s leadership would be superficial until it is displaced by a stronger African state.

The overarching discussion within this chapter considers two issues: the potential extra-regional hegemony of mobile telephony MNCs; and the possible use of mobile telephony MNCs as a tool with which to exert South Africa’s hegemony. However, both discussions cannot be embarked on without considering the role of Internet regulation because the power of the Internet is what has given mobile telephones and MNOs their dynamism.

5.1.2 REGULATION OF THE INTERNET

In terms of participation in Internet regulation, Africans in general have been on the back foot. At the time that the Internet was developed, Africa was still focused on its anti-colonial struggles that were quickly followed by Cold War proxy battles. There was little time to access, or come to grips with the technology. Understanding the history and implications of the Internet and its regulations, would explain the current state of affairs. Van Grasdorff (2005:16) contends that the status quo with the control of knowledge production and validation makes the Internet an “instrument of domination of Africa” (Ibid). Although this thesis does not take Van Grasdorff’s hard view, it is evident that for Africa to fully engage in the world economy, global governance of the Internet needs to become more democratic.

The Internet, as it is known today, is a system of inter-linked computer networks. It traces its history back to the early 1960s when the US department of Defence’s

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Advanced Research Projects Agency (ARPA) partnered with scientists to create a method of communication outside the existing telephone system. The precursor of the Internet, ARPAnet allowed various computers to communicate with each other using “packet switching” which was a way that data was broken into blocks before being transmitted.

In the 1970s, a way for various networks to speak to each other was developed called the Transmission Control Protocol (TCP) followed by the Internet Protocol (IP); this turned the Internet into a global network. This brief history is important because it serves as a context to understanding future, and existing, battles for control of the Internet. Goldsmith and Wu in their 2006 book, Who controls the Internet? Illusions of a Borderless World, detail the history of the Internet as well as the battle for control of the Internet. They argue, and illustrate, that a self-governing Internet is a myth and also untenable. Over time borders have not become invisible but rather, nation states have found various ways to regulate the Internet; with the clear desire to increase regulation. The use of firewalls, and other technologies, gives states the ability to control content that filters into their country. Examples of this are the access restrictions to external Internet content in China and Singapore (Deyner 2016 ; Li 2013). That is not to say those that the more technologically savvy have not breached these firewalls but a number of states do work more steadily to control content.

The first battle they detail is that for root authority19 of the Internet. One of the founders of the Internet, Jon Postel, wrote an email to the human operators of eight of the 12 “name servers”20 around the world and requested that his computer be recognised as “the root” and they complied (Goldsmith & Wu 2006: 29). Prior to this

19 Root authority is important because it gives the ability to assign domain names to IP numbers. Goldsmith and Wu note that “control over membership is a powerful tool for making people follow rules” (Goldsmith and Wu, 2006: p.31) 20 Root name servers translates IP addresses to readable host names. Domain Name System (DNS) “is the system which converts Internet domain names, such as www.netnod.se, into numeric addresses such as 192.71.80.109 or 2a01:3f0:1:3::109. DNS includes a hierarchy of “authoritative name servers”, each level of which contains different pieces of information.” (Netnod, accessed 7 November 2014)

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Postel had tried to push forward Internet Policy that was independent of traditional governments, in the form of gTLD-MoU (Generic Top Level Domain Name- Memorandum of Understanding). In section two of this document, it proposed to transfer the DNS from the US government to a self-regulating institution.

Although the gTLD-MoU had a semblance of legitimacy owing to it reposing at the ITU (which is a UN body), there were serious questions that were not answered. The failure of the TLD, argues Goldsmith and Wu, led to Postel’s actions in 1998. In due course, this led to the US battening down the hatches on Internet regulation. Goldsmith and Wu illustrate, quite effectively, that rather than the world becoming increasingly borderless and stateless as argued by many Internet analysts, they show that borders and states are still important. Internet users are often filtered towards sites that share the same language, use the same currency etc. (Goldsmith and Wu 2006:40, 51). They also highlight that a key issue that makes borders important is bandwidth limitations (Ibid: 54). Most African countries have low bandwidth capacity which causes problems with reliable connectivity. Moreover, African countries are dependent on countries with stronger bandwidth capacity that affects their bargaining positions about discussions on how the Internet is administered. According to the ITU (2016 Online), Africa has “the lowest international connectivity of all regions: there is twice as much bandwidth per inhabitant available in Asia and the Pacific, four times as much in the CIS [Common Wealth of Independent States] region, eight times as much in the Americas and more than twenty times as much in Europe”.

The reason that this discussion is important is that it provides context to the current debates around Internet freedom and the political, as well as legal implications thereof. Moreover, for mobile telephony and mobile broadband there are direct consequences. In 2014, the ITU held its 19th plenipotentiary conference in which, over a space of three weeks, it was meant to choose new leadership as well as decide on whether or not to potentially change its mandate by defining the actual term ICT in its convention. No African made it to the top two leadership positions and South Africa failed to get its representative in the ITU council. It could be argued that this occurred because South Africa had been failing to leverage its existing

150 support structures. Organisations, such as the Internet Society, welcomed the fact that there was little change in the convention’s mandate (Internet Society 2014). The most important outcome, for the purposes of this research, is the unanimously adopted Connect 2020, which sets out goals and targets for governments for increased Internet connectivity. The key goals to take note of are:

Goal 1: Growth – Enable and foster access to and increased use of telecommunications/ICT Goal 2: Inclusiveness – Bridge the digital divide and provide broadband for all Goal3: Sustainability – Manage challenges resulting from telecommunication/ICT development Goal 4: Innovation and partnership – Lead, improve and adapt to the changing telecommunication/ICT environment (Resolution WG-PL/9).

Although there are an increasing number of ICT regimes in place, Africans are mere participants instead of drivers. The few regimes that relate to African ICT governance, but are more broadly focused, are currently driven by South Africa. These regimes will be detailed later in the chapter.

5.2 THE DEVELOPMENTAL AND CONSUMER APPLICATIONS OF MOBILE TELEPHONY

Mobile telephony has been widely lauded; economic growth and developmental applications have been highlighted as a boon of increased penetration. The opening up of the proverbial lines of communication presents a myriad of possibilities such as: the easy transfer of information; the strengthening of public administration and governance; and, the encouragement of economic growth. Mobile phones also have alternate applications such as being a tool for monitoring human rights abuses (Warzui 2010) and social activism (Asuncion-Reed 2010). In the sphere of international relations and politics this is important because the ease of communication and information sharing has the potential to alter grassroots support of an incumbent government.

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In 2010, the Mozambican government experienced some of the danger posed by the ease of communication. For instance, it was reported that the riots over food prices, that took place in September 2010, were organised via text message and not by a specific organisation (Fabricius & Faubet 2010). Nathan Eagle contends that the telecommunications sector “has presented an opportunity for foreign governments to increase their presence in sub-Saharan Africa” (Eagle 2010:6). One of the examples he refers to is that of Chinese ICT companies, ZTE and Huawei, and their equipment monopoly with the Ethiopian Telecommunications Corporation (Ibid).

Jenny Aker and Isaac Mbiti succinctly point out that, through various socio-economic spheres, “mobile phones connect individuals to individuals, information, markets, and services” (Aker & Mbiti June 2010:1). Authors such as Christine Zhen-Wei Qiang highlight the fact that mobile telephony has positive, but differing, growth impacts in both poor and rich countries. In the former countries it serves as a substitute for fixed telephony and in the latter it serves as a complement to fixed line infrastructure. Qiang concludes that this implies a more significant growth impact in poor countries (Qiang 2009:8). However, in considering the social, economic, as well as political impact of mobile telephony, and its related technology, there is a need to take cognisance of socio-developmental dimensions.

In the UNDP’s 2012 Mobile Technology primer, it was noted that “…mobile phones will neither pull people out of poverty, nor propel democratic governance… what they can do is help poor people leverage their resources and knowledge to enter the marketplace, demand public services and have a voice in governance processes” (UNDP 2012:14). That being said it may be argued that mobile devices are powerful tools and whoever controls that tool is capable of immense influence. The World Bank correctly highlights the fact that “[t]echnology is eminently social, bound up in the local context and culture, so broad generalizations about its global character are bound to overlook important differences in the meaning and significance of mobile telephony in the developing world” (World Bank 2013:8).

The developing world, particularly nations in sub-Saharan Africa, is beset with multiple challenges and opportunities. For instance, some of the socio-political and developmental problems that mobile telephony has provided solutions for include: 152 provision of financial services on a larger scale; facilitating job creation; and improving governance.

a) Mobile financial applications

Mobile financial applications have been lauded as a breakthrough in the crossover of mobile telephony and financial services. In Africa, there have been tremendous challenges in providing financial services to those living in rural or peri-urban areas. In its 2013 fiscal year overview, the International Finance Corporation (IFC) discovered that “Less than a quarter of adults in Sub-Saharan Africa have access to formal financial services” (IFC 2014:1). The Financial Access Initiative found that approximately 80% of the population in low-income countries do not have access to financial services. The number is only 8% in high-income OECD countries (Chai et al 2010:5).

Mobile finance applications are developed to provide a variety of services such as “…transmitting airtime, paying bills and transferring money between individuals. There are also currently a few m-money systems in developing countries that allow international money transfers” (Aker & Mbiti 2010:18). The drive to ‘bank the unbanked’ has meant that the financial services institutions have had to be innovative in creating products that are able to offer services such as long distance remittances and micro-payments. The advent of mobile transfers means that countries have to reconsider the ways that they engage with each other about international agreements.

Chohan and Dunsby point out that there are two key concepts: mobile banking and mobile payments [another term often used is mobile money]. Mobile banking relates to “traditional financial services” via mobile phone. These services run complementary to banking infrastructure already in existence; the second, is mobile payments which is an operator-led ‘non-bank model’. This system allows financial services such as micro-payments (Chohan & Dunsby 2012: 36). They illustrate that the latter is the most successful model in Africa. “The reason is straightforward. The combination of high mobile penetration with widespread availability of retail agents means operators are placed better to connect unbanked people with the basic financial services they need” (Ibid 2013:37). 153

One of the most successful M-payment platforms is Kenya’s M-PESA. M-PESA is a mobile financial service by operator Safaricom that allows users to transmit and withdraw funds using their mobile device via a network of agents/retailers. The model has been so successful that it has been replicated in Tanzania, Afghanistan, South Africa and India. Neil Davidson notes that mobile money systems gives operators the opportunity to widen the offerings to their subscribers as well as appealing to subscribers of competing networks (Davidson 2012:5).

b) m-Work

Mobile telephony is also able to expedite job and/or income creation. In its 2013 Base of the Pyramid study, the World Bank found that mobile telephony assisted in the following ways: first, it improved search capacity. Mobile platforms provide job seekers with better access to information about jobs and places to apply for jobs. Second, it offers the ability to work on ‘micro’ jobs. For instance, remuneration based on individual small projects. Third, “enterprise creation”, work is made available through “core firms” such as mobile operators as well as the entire system of industries that provide support to the core firm (World Bank 2013:13).

c) m-Governance and advocacy Mobile governance, or m-governance, forms part of a wider drive towards e- governance. Electronic governance or e-governance, refers to the delivery of government services using ICT applications. The United Nations Educational, Scientific and Cultural Organization (UNESCO) describes e-governance as ”... the public sector’s use of information and communication technologies with the aim of improving information and service delivery, encouraging citizen participation in the decision-making process and making government more accountable,[and] transparent…” (UNESCO 2011).

The employment of mobile telephony within the governance arena has provided greater opportunity for citizens to interact with public institutions. The UNDP mobile technology primer notes that m-governance is a complementary service to e- governance and promotes accountability and transparency (UNDP Ibid:19). It provides the example of the Ushahidi platform in Kenya, which gave citizens the opportunity to report post-election violence in the wake of the 2007 elections. 154

Citizens can also participate in governance and influence change by engaging in advocacy. Mobile advocacy has proven to be powerful; using social media, via the Internet, or even something as rudimentary as SMS. Certainly, African NGO, Fahamu, has embarked on successful campaign making using SMS as one of its platforms. For example the 2004 SMS campaign alongside the Solidarity with African Women’s Rights (SOAWR). This campaign was meant to promote the ratification of the Protocol on the Rights of Women in Africa, and by all accounts it achieved its goal (Ascunion- Reed 2010).

Conversely, SMS campaigns may not be as successful because they are not always the most appropriate method. Anil Naidoo, discussing the UmNyango pilot project in rural KwaZulu-Natal, illustrates that SMS technology is at times best used as complementary to social organisation (Naidoo 2010). One of the major challenges presented by m-advocacy is the ability of governments to utilise the platforms. In South Africa, in the wake of the 2015 outbreak of xenophobic violence, the department of Science and Technology launched the ‘We are Africa’ mobile app. The app allows users to not only report incidences of xenophobic violence and incitement but also allows users to pledge their support for anti-xenophobia efforts. The idea of the app is ground-breaking but whether the app works needs investigation, particularly as there has not been a sustained awareness campaign on the app’s existence. Also, it is not clear whether the information collated via the app has been appropriately channelled to the correct authorities and followed through.

In reality the telecommunications sector is still uncharted territory with potential for positive and negative by-products. The availability of telephony in Africa, particularly mobile telephony, has grown exponentially. Even more intriguing is the growth of Internet users on the continent; helped in part by mobile technology. The cost and availability of broadband Internet access is set to improve drastically with the development of underground and underwater fibre optic cables in African countries (Rao 2011:7). After the installation of cables between 2002 and 2012, costs have already begun to decrease (GSMA 2015:10).

The services and infrastructure provided by mobile telephony MNOs have the ability

155 to shift a country’s development positively or negatively. Furthermore, the security vulnerabilities created by network connectivity, puts all ICT MNCs in a unique position to possibly influence state policy and, in effect, make them largely, invulnerable to state chastisement. It is in this context, that the discussion on the influence of mobile telephony MNCs is located.

5.3 MOBILE TELEPHONY MNCS AND THE QUESTION OF SOUTH AFRICA’S HEGEMONY

The motivations for mobile telephony firms are very similar to those in other sectors that have expanded within the continent: growth, profit and sustainability of the firm. There has not been an overt political agenda for the MNCs because their bottom line is to make money; potential political involvement comes as a consequence of this expansion. Luiz and Stephen elucidate the sophistication of South Africa’s telecommunications network as being primarily digital in nature with a high mobile penetration rate. They note that as a result, the South African market is saturated and expansion within sub-Saharan Africa is necessary for growth (Luiz and Stephan 2012: 624).

One of the underlying propositions of this thesis is that MNCs provide legitimacy to South Africa’s apparent hegemony in two respects: first, they assist in projecting South Africa’s power; and, second, assist in paving the way for consent to South African leadership. Therefore, it stands to reason that MNCs, particularly in the realm of mobile telephony, assist the State with its power projection.

Krishna Kumar suggests that there are states that do not shy away from making use of the political benefits of the expansion of their MNCs. The example of Taiwan is provided: “…national authorities and entrepreneurs see their foreign direct investment as one way of strengthening their political and economic ties with other countries” (Kumar 1982:417). In the case of South Africa, corporate expansion is used as a way to strengthen ties, but South Africa has not created enough coordinating mechanisms to ensure that they extract full value from this expansion.

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As a result of deepening economic links, political partnerships become necessary and cultural integration becomes automatic. However, appearing too powerful can also create discomfort for smaller neighbours. Kumar succinctly points out that: “When a large, powerful developing country seems to dominate a region, it is quite likely that its small neighbours might prefer investments from distant industrialized countries rather than from their immediate powerful neighbour” (Kumar 1982: 408).

Undoubtedly MNCs have a lot of power; Kapfer conjectures that this is owed in a large part to states depending on MNCs “to integrate their economy into the global economy and to encourage development” (Kapfer 2006:16). Although the focus of this body of research relates to South African MNCs in Africa, it is important to briefly discuss the foreign MNCs that use South Africa as a base or ‘gateway’ into the rest of Africa. The term ‘gateway’, in the context of South Africa, is mired in controversy (Games 2012; Whittles 2015) as it creates the image of South Africa acting as a ‘conveyer belt’ of developed countries.

5.3.1 FOREIGN MNCS WITH BASE OPERATIONS IN SOUTH AFRICA

A brief discussion on foreign MNCs with base operations in South Africa is important as it provides a better understanding of the operating context for companies, local and foreign, that use South Africa as a platform from which to expand to other African countries. Peter Drucker describes the MNC as “a tool and organ of society” (Drucker, 1960: 209). This is true for both South African MNCs working abroad as well as foreign MNCs operating within South Africa (including those using South Africa as a gateway to the rest of the continent). Analysis of the participation of foreign MNCs in the South African economy, as well as their influence on the socio- political environment, has to take into account three distinct eras: the post-1976 era, the early 1990s, and post-1994.

The corporate code of conduct that promoted responsible corporate citizenship, in the post-1976 era, was the controversial Sullivan principles that were created by Reverend Leon Sullivan as a response to the growing drive for more black participation in the South African economy. These principles related to the conduct of US MNCs and the treatment of black employees in the country (Lewis 2001). Part of 157 the issues related to the implementation of the Sullivan principles was the fact that it relied on self-reporting (Paul 1986). Despite some of its challenges, the Sullivan principles did add to the growing pressure to end apartheid and ultimately served as the basis of future corporate social responsibility philosophy (Stewart 2011). In the era immediately post-apartheid, the term Black Economic Empowerment (BEE) entered the economic-political lexicon. The basis of this strategy, as well as the later version of Broad Based Black Economic Empowerment (BBBEE), is preferential access to the economy for the previously disadvantaged.

MNCs still have to act within the ambit of the law and policies of the nation in which they operate. In South Africa, a foreign company can operate in one of two ways: first, it may open up its company with South Africa being a branch of the international parent body. A “Memorandum of Incorporation” has to be registered in South Africa; second, the MNC can open a local subsidiary. This means that the company opens a private South African company in which shares are owned by the MNC.

Examples of international telephony companies that have invested in South Africa are: French Telecommunications company Alcatel-Lucent, through local partners Altech group and the black empowerment group Rethabile; American Cisco Systems, which has a history in South Africa dating back to 1989, partnered with Dimension Data; and, British Vodafone, which controls a sizeable part of Vodacom. Foreign registered companies or their local subsidiaries still have to operate according to the ambit of the BEE charter even though BEE ownership targets remain a contentious issue (Bowman Gilfillan 2004). Concerning BBBEE, this is no different. In the ICT sector, this however comes with a degree of flexibility (Sánchez 2008:111). The flexibility in the ICT sector was due to the fact that the requirements for equity partnership were not as rigorous as with other sectors. In 2016 an amended BBBEE ICT sector code was launched. The new code gives more weight on the BEE scorecard to various categories of black people such as women and the disabled. The areas given priority in the code are ownership, supplier development and skills development (Parliament of the Republic of South Africa 2016:13).

Notwithstanding the administrative burdens of operating within South Africa, it is still quite attractive to foreign MNCs and provides a milieu for discussions about South 158

African MNCs that operate outside of the State’s borders. For all MNCs, particularly in the space of mobile telephony, the setting is very attractive to be among the initial wave of investors. Research by Ravi Ramamurti (2000) illustrates the benefit of “first mover” status in the telecommunications industry. This status comes with the benefits of being an incumbent in the industry (or buying up shares of the State- owned companies), which includes access to networks and a robust customer base.

Sánchez’s study considers how South Africa’s transformation agenda has affected the way MNCs operate within the country as well as in foreign operations. The case study utilised is that of Ericsson. Although Ericsson is a Swedish telecommunications MNC, it uses South Africa as a regional hub for its expansion on the rest of the continent (Sánchez 2008:105-123). The rationale for looking at Ericsson stems from its long history in South Africa in both the pre- and post-apartheid era; it is a primary provider of infrastructure for MTN and has a rapidly expanding market share in Africa. The author argues, “[t]he story of Ericsson in post-Apartheid South Africa is illustrative of how MNCs are responding to South Africa’s Broad-Based Black Economic Empowerment (BBBEE) strategy” (Ibid:105). She illustrates that MNCs got around the BBBEE requirements by having two headquarters in South Africa: one for South Africa, and a regional office. The requirements for the South African headquarters would comply with local laws and transformation processes (Ibid:106). The question, however, is how much benefit does the rest of the continent receive from having the headquarters based in South Africa?

5.3.2 WHO SERVES WHOM?

In the discussion on state - business relations (chapter four), it was established that: the State creates the environment for business to flourish both domestically and abroad, an investment friendly environment engendered through a stable economy, lucrative trade agreements and favourable state-state relations. South Africa’s history is intrinsically linked to its relationship to capital (see chapter three); however, this is not unique to South Africa. The challenge arises when a domestic MNC’s behaviour abroad, negatively affects the perception of the country. In a study on South African perception abroad, Neuma Grobbelaar found that South African 159 companies are seen as detached; possibly exploitative; and having a prejudicial competitive advantage (Grobbelaar 2006:68-69). However, these perceptions are not based on the behaviours of individuals or small companies and possible negative effects of increased trade. Brand SA field research in Nigeria and Kenya, found that South African companies are not only employers of choice but also improve the culture of corporate governance (de Kock 2014:4). However, they also found that South African companies are aggressive and sometimes ignore the advice of local advisors (Ibid:3). Regarding corporate governance, South African legislation, particularly the South African Companies Act 71 2008 section 72 and regulation 43, compel companies of a certain size listed in South Africa to have social and ethics committees which oversee both corporate responsibility and corporate governance. The King Report III, lists corporate responsibility as one of the principles of the code of conduct. Companies listed on the JSE have to apply the code. But they are not obliged to strictly follow the code because of the ‘apply or explain’ principle that means that a company must apply the code of conduct or explain in their annual reporting why they deviated from the code. The King IV Report (2016), which will replace the previous King codes from April 2017, has done away with this principle.

Beyond what was expected of them in the mid-1990s, MTN’s case illustrates that the company was very aware of the impression the company created by the poor behaviour of expatriate staff. Dissertation research undertaken by Thomas Lutete Maketa, demonstrates the extent to which MTN was concerned about the impression it created. He provides the example of racial incidents involving white South African staff in its Nigeria operation. MTN dealt swiftly and decisively with these incidents in order to avoid headlines such as: “South Africans bringing apartheid to Nigeria” (Maketa 2009).

Jade Miller (2009) has illustrated that there is a complicated interplay of interests between the State, its domestic MNCs and the host country. Miller breaks down different interests in her analysis of the February 2006 congressional hearings into four US MNC’s actions in China. Google, Microsoft, Yahoo, and Cisco were accused of aiding the Chinese government. She notes that the US has a long history of supporting industry, particularly for expansion beyond US shores (Miller 2009:287). 160

The US is able to assist its domestic MNCs, as well as purely local private industry, through state-state trade agreements (Ibid: 288). However, it struggles to rein-in MNCs for behaviour that goes against its national value system. Miller argues that in these situations the State has to turn to ‘soft power’ approaches in order to prompt cooperation. The hearing into the big tech MNCs highlighted the State’s willingness to confront its domestic corporation but “at the same time not serve to disrupt the success of American MNCs in the world order” (Ibid:300).

Regarding mobile telephony, in South Africa in particular, the waters are murkier. On the level of policy practitioners and academics, there have been complaints about the lack of support for the business sector as a whole. Although there has been dialogue and debate on a uniform regulatory body for South African businesses operating outside its borders, no such body has yet been formed. The experience of mobile telephony MNOs is more nuanced, perhaps owing to their unique place in South Africa’s history (as detailed in chapter three as well as this chapter). The ruling ANC at its 52nd party conference also called for the creation of a code of conduct for business (ANC 2007).

South Africa has the largest telephony market on the continent, and very high penetration rates. As a result, the companies emanating from this market are advanced and furnished with the ability to wholly understand the additional challenges often seen on the continent. On the continent, South Africa cornered the market for telephony and ICT. Part of the big draw-card, besides infrastructure and human capital, was the policy environment. There appears to be an inflection point, for ICT policy machinery, that sees South Africa beginning to lag behind. There are two major factors that have contributed to this state of affairs: lack of leadership and a dearth of implemented policy.

Between 1999 and 2014 there were six changes to the leadership of the department of communication, which led to missed deadlines and not enough traction given to great ideas. In 2014, the department was split into two departments: the department of telecommunications and the department of postal services. However, the newly formed department of telecommunications has failed to adequately meet its mandate. 161

5.4 THE INSTITUTIONAL LANDSCAPE OF SOUTH AFRICA’S TELECOMS SECTOR

South African MNOs, more specifically Vodacom and MTN, in developing their entry strategy into other markets on the continent, have had to straddle South Africa’s telecommunications regulatory environment, the South African legal framework concerning multinationals, as well as the country’s nascent economic diplomacy framework.

Chapters three and four of this thesis considered the historical and contemporary use of private corporate actors, particularly MNCs, as part of the State’s method to deepen political relationships, and project its power on the continent. However, these relationships are complicated by the fact that South African corporations, in the post- 1994 environment, still have a complex relationship with the State and cannot be said to follow the mandate of the State. Private companies answer to their shareholders and do not have to align themselves to the developmental or transformational mandate of the State.

Interestingly, in spite of lack of an official state mandate, MNO multinationals appear to have aligned themselves with South Africa’s foreign policy initiatives. For instance, in a seminar presentation to Parliament’s International Relations Committee in 2007, former Group Executive of Corporate Affairs, Mthobi Tyamzashe, links one of Vodacom’s main bases of their African operations to one of the pillars of South Africa’s foreign policy - African prosperity and stability (Tyamzashe 2007). Tyamzashe’s presentation includes investment criteria that influence Vodacom’s market choice that goes beyond economic benefit for shareholders, which are notably: “Government invitation” and existing “bilateral trade agreements between South Africa and targeted countries” (Ibid). In an Interview with MTN’s Chris Maroleng, his description of MTN’s choice of market was similar to Vodacom’s investment decision that “goes beyond pure commercial benefit defined in the form of profit maximization” (Maroleng, Interview at MTN Innovation Centre Fairlands 2016).

Therefore, the obvious question is: if there was no clear government mandate on business, in this case MNO multinationals, why would they feel it important to relate 162 their African expansion to South Africa’s post-1994 foreign policy? To answer this question, one has to understand the evolution of South Africa’s telecommunications landscape domestically and also consider the key players involved in the pan-African expansion. Chapter six will investigate the MTN case in depth, however this sub- section provides a synopsis of the issues at play.

The Department of Posts and Telecommunications regulated all nationwide communication until 1990 and in 1991 the SOE, Telkom was created. This is an important historical juncture because this was how the first MNOs were created and their relationship with the regulator domestically. Their domestic business model is the basis of the model that is exported beyond South Africa’s borders. This is quite apparent in the MTN case, where the subsidiaries are similarly run with a focus on indigenous empowerment - very much in line with the spirit of the African renaissance ideology, as well as the spirit of NEPAD.

In 1991, The South African Post Office and Telecommunications, was separated into two SOEs: Telkom and the Post Office. This was a result of the socio-political environment at the time and findings of the De Villiers report. At this time, there was no independent regulator for the telecommunications sector; regulations and licensing were done through the Department of Posts and Telecommunications (DTPS). As Horwitz (1999) correctly notes, the reforms that were taking place at the time had to be viewed in light of the political context. What this meant was that at the time of South Africa’s transition, there were power plays and attempts to retain control over key sectors of the economy by the previous administration. In telecommunications, this meant that as much as the sector was privatised, the DTPS got to police the sector.

As previously discussed in chapter three, the licensing of the MNOs was a hot button issue during the democratic transition negotiations. Vodacom was formed with Telkom as the majority shareholder, whereas MTN was formed as one of the first black empowerment corporations. This was an untenable situation as the State was essentially regulating itself. By 1994, a telecommunications regulator was created; the South African Telecommunications Regulatory Authority (SATRA). SATRA was soon replaced owing to South Africa’s accession to the World Trade Organization’s Fourth Protocol on Basic Telecommunications. Article 5 of the agreement’s 163 reference paper stated that an independent regulator had to be established. It stated that:

“The regulatory body is separate from, and not accountable to, any supplier of basic telecommunications services. The decisions of and the procedures used by regulators shall be impartial with respect to all market participants” (WTO 1996). After a number of domestic processes aimed at bringing South Africa in alignment with its international obligations, such as the National Telecommunication Forum, the Independent Communications Authority of South Africa (ICASA) was created. This discussion on regulation is important because it illustrates where real power lies on a domestic level and it also gives an indication of the state of play in the South African telecommunications industry. The creation of ICASA was supposed to lessen political interference by the regulator. However, this has been circumvented through ICASA’s council appointments process.

Horwitz and Currie’s interview with the former Chief Executive Officer of ICASA, Nkateko Nyoka, highlighted that “real power… lies in the interpretation of policy, a prerogative that rests with the Minister. And the Ministry is open—if only by virtue of its shareholding in Telkom—to industry (especially Telkom) lobbying” (Horwitz & Currie 2007:454). In 2002 the Electronic Communications and Transactions Act (ECT Act) of 2000 replaced the Telecommunications Act. Subsequently, in 2005, the Electronic Communications Act (36 of 2005) replaced the ECT Act. However, chapter two of the Act still gives the Minister of Communications the power to interpret and issue policy.

Mobile telephony is arguably heavily regulated in all countries of operation. In South Africa ICASA is the regulatory authority; ICASA was one of the first regulatory authorities on the continent to allow number portability and the reduction of mobile interconnection rates. In terms of improving the quality of service, the regulator is supposed to implement the Electronic Communications Amendment Act No 37. The purpose of the Act is to foster an even better environment for investment and innovation. However, there have been serious delays in the implementation of the Act. The result is that operators are struggling to get timely approval to roll out their infrastructure owing to bureaucratic red tape.

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In addition to the apparent revolving door of the ministry’s leaders, the department itself has been bogged down with inefficiencies with no policy being made on spectrum allocation. The reason that spectrum allocation is important is that the radio frequency bands of electromagnetic spectrum are required for many applications including television and mobile phones. Mobile operators are unable to improve their service offering especially for the provision of mobile broadband but need to have sufficient spectrum available to enable high data transfers and ensure coverage in and out of buildings. The migration from terrestrial television to digital television gave hope for the liberation of additional spectrum. However, South Africa missed its June 2015 deadline for the migration set by the ITU.

The agreement for digital migration was made in 2006 with the ITU; the split of the ministry as well as a turbulent relationship with the communications industry resulted in South Africa missing the deadline. When the spilt occurred it was not immediately made clear who was in charge of the migration process (van Zyl 2015). According to the ITU, by August 2015 only three African countries had migrated (ITU 2015).

To further add to the woes facing the telecoms sector, Minister of Telecommunications and Postal Services, Siyabonga Cwele, decided to put the department’s director-general Rosey Sekese on precautionary suspension as a result of the apparent infighting in the department (McLeod 2015). These dynamics are important because in the thick of all the domestic confusion are South African MNCs, that are still deepening their penetration on the continent.

Through its foreign policy thrust, South Africa has illustrated that it fully understands that its well-being is linked to the rest of the continent. Owing to its size, and structural power, which is discussed in chapter two, South Africa has been at the forefront of advancing its norms and values throughout its immediate neighbourhood and in Africa as a whole. With telecommunications, Horwitz and Currie contend that the South African telecommunications reform model has become the dominant model pursued in Africa and Southern Africa (Horwirtz & Currie Op Cit:460). In mobile telephony specifically, the model that is implemented is one that is shaped by operations in South Africa, as well as by South African values; this is very clear in

165 the MTN case where their investment model reflects South African ownership ambitions of considerable local shareholding of multinationals.

In the year 2014 the ITU plenipotentiary conference took place and South Africa sent a delegation that lacked political and international standing to support the telecommunications and postal services minister, Siyabonga Cwele - unlike many other major players. For instance the US ambassador was accompanied by 130 people from the public and private sector as well as civil society (Kerry, 2014). South Africa’s election bid to the ITU failed and the presence of the South Africans was barely felt; South Africa had been on the council since 2006. South Africa has long been at the forefront for promotion of Africa in multilateral forums (see chapters three and four). But, by failing to remain on the council, South Africa’s voice and leadership have been muted. Currently, Minister Cwele heads up the Parliament’s Portfolio Committee for International Relations so he is familiar with South Africa’s foreign policy objectives. This failure might be attributed to the fact that his ministry was only created in May 2014 and the conference took place in November of that year.

In June 2015, South Africa appeared to be more intentional about its presence in the African Telecommunications Union (ATU). The logic of this move is not very clear because South Africa would have been able to achieve more for Africa, as its oft stated foreign policy goal, if it was in a leadership position in the ITU rather than the ATU. It can be argued that South Africa saw the error in failing to give the ITU conference enough attention and is trying to ensure that it has influence by entering through the back door. In other words, where it failed in influencing international telecommunications governance via the ITU, it is working towards influencing international policy via the ATU. This is moot if on a domestic level, the newly formed telecommunications department still appears to be in disarray.

South African MNCs, particularly mobile telephony MNCs, operate in an environment that lacks a coherent code of conduct. The problem with the lack of a coherent policy and regulatory environment is that it opens the door to corruption, other unethical business practices, and illogical business decisions. Ewan Sutherland has found that the telephony market, and the policies that advocate it, increases the risk of corruption (Sutherland 2012). Deposed Sierra Leone president, Charles Taylor, was 166 accused of using Lonestar (formerly the monopoly mobile operator in the country) as one of his sources of personal income. It is alleged that he was part owner and granted them an exclusive license (Carvajal 2010). Lonestar was eventually acquired by MTN.

As previously argued, MNCs can be a means for nation-states to exert or increase national power even if this power is symbolic. Large operations are easily viewed as proxies by their host nations so can easily be made targets. For instance, in the aftermath of the 2014 outbreak of xenophobic violence in South Africa, South African MNCs came under increasing pressure and scrutiny.

However, a number of companies have undertaken a localisation strategy that creates a sense of ownership of the local subsidiary of the South African companies. Petrus de Kock notes that Stanbic ITBC has been the most successful in these efforts (de Kock, Research & Nation Brand Performance presentation at the offices of SARCHI Chair for African diplomacy and foreign policy 2015).

5.5 CONCLUSION

The mobile economy and the information economy are inextricably linked in sub- Saharan Africa. Owing to a failure of infrastructure, among other factors, mobile telephony MNCs are well placed to take advantage of the environment. The GSMA reported that by mid-2014, there were approximately 600 million simcard connections in the region, which is equivalent to a penetration rate of 68% (GSMA 2014:8). This has profound implications for the economy of the region because the entire mobile telephony ecosystem contributes to GDP directly and indirectly.

The growth of MNCs from emerging markets has been beneficial in deepening ties between emerging market economies. The deepening ties have resulted simultaneously, perhaps not unrelated, to deepening political ties. The result is that emerging markets have been buffered from the full effects of the 2008 financial crisis that hit the global economy (Africa Progress Panel 2012). A number of successful emerging market MNCs come from South Africa.

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The overarching question in this chapter was whether or not South African MNCs in the area of mobile telephony have entrenched South Africa’s hegemony. As influential as MNCs appear to be, there is no clear evidence that MNCs directly affect the South African government’s behaviour. However, it may be argued that the deepening engagement of mobile telephony MNCs contributes to the perception of South Africa’s hegemony … or even “symbolic hegemony” as described by Alden and Schoeman.

The behaviour of South African companies abroad has profound implications on the perception of the South African government as well as on its efforts at public diplomacy. Furthermore, on a domestic level, the South African government needs its MNCs to succeed outside of the country because their profits significantly contribute to the South African GDP.

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CHAPTER SIX: MTN CASE STUDY

Mobile telephony is a relatively new sector, especially in Africa, and so the rules of engagement are still being written. The story of the MTN group (also referred to as MTN) is undoubtedly impressive; an empowerment company born out of South Africa’s democratic transition that has managed to become a pan-African mobile telephony behemoth in just over 20 years. In spite of its success, its relationship with the State and the ruling party has appeared to be patchy at times.

MTN is in a unique position because many of its current, and historical key shareholders and board members, have had direct or indirect relations with the ruling party. As illustrated in chapters four and five, the creation of MTN was born of the desire for involvement of black South Africans in the telephony space. Important ANC figures, such as Cyril Ramaphosa - who would later become the vice-president of South Africa21- and Nthato Motlana, have all been involved with the company in varying degrees. However, the close relationship with the ruling ANC has not helped the company to the extent expected, as the State has not come out aggressively to assist the company outside of South Africa’s borders. Nonetheless, its level of power projection, particularly, outside of the continent, necessitates analysis. Its proud vision is “[t]o lead the delivery of a bold, new Digital World to our customers” (MTN Op Cit 2015). It appears that it has been successful in achieving this vision. The MTN group has been one of the most prolific actors in the mobile telephony space. It is also increasingly a player in providing ICTs on a number of platforms and has proven itself adept at adapting to local conditions and challenges.

The purpose of this case study is to determine whether or not MTN has leveraged its history, and political relationships, in order to further its corporate objectives; also, whether the South African government has leveraged the success of MTN to improve its own standing or perception of power on the continent. In summary, the

21 He has divested from his stakes in MTN prior to taking up office

169 main aim of the study is to investigate South Africa’s supposed regional hegemony, as well as its provision of regional hegemonic stability, and whether companies such as MTN are acting as an extra-regional actor propping up South Africa’s hegemony. This investigation will include two key factors: first, whether the foreign policy engagements by the South African government creates a framework for the MTN group to operate successfully; and second, if the company contributes to South Africa’s image and standing abroad.

This chapter begins with a consideration of MTN’s history. Although its genesis was briefly alluded to in the previous chapter, more detail will be provided. In a number of media outlets on the continent, MTN has been accused of at times displaying a propensity towards patronage; the reasons for this impression and its validity will be analysed. Following this, MTN’s expansion is considered. The central query of this section is whether MTN is operating at the behest of the State. Moreover, the implications of Nigeria’s astronomical fine will be discussed followed by the chapter’s concluding analysis.

6.1 HISTORY OF MTN

As discussed in chapter three, towards the end of the previous regime, there was a realisation among government officials and politicians that additional telephony capacity and infrastructure was needed. The relationship between mobile telephony multinationals and politicians, as well as the State apparatus, is quite complicated. These companies provide the State with high amounts of tax remittances as well as increasing the profile of South Africa. Nevertheless, there is sometimes anger at the lack of state control of MNCs.

The license for MTN was one of the outcomes of the multi-party negotiations during

South Africa’s democratic transition (Horwitza 2001). Nicholas Sullivan, tracing the development of the MTN group, reports that within the ANC, in spite of opposition, there were some who lobbied for the granting of a second mobile license. Nthato Motlana, who was the chairman of the empowerment group New Africa Investment Limited (NAIL), spent 9 months appealing to the party (Sullivan 2007:100).

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Before the issuing of the license, plans were already in place between established white business and key players within the ANC to bid for the license. At the time this was not surprising, as key business leaders had already started engaging with the ANC on the future of a transformed South Africa. Consequently, many financial relationships were formed (Adam, Slabbert, & Moodley 1997; Handley 2008;

Horwitzb 2001; Naidu S Skype Interview 2016). The reality was that the burgeoning black business class needed the capital and expertise from established white, English and Afrikaans businesses if the ANC’s plan to get black Africans involved in the economy was to be successful.

MTN’s initial shareholding was quite complex; in 1991 a multi-layered consortium, that included M-Net 22 , Cable and Wireless 23 , Transtel 24 , and National African communications 25 (NAFTEL), created M-Cell (the holding company of MTN). Through NAFTEL and future increase in equity in M-Cell, NAIL would own 20% of the company while the South African Black Taxi Association and SA Clothing and Textile Workers Union each had a 5% holding (Sullivan Op Cit:110).

The creation of MTN and MTN group, was not only fraught with tensions from the outset, it also highlighted great incongruities of the ideology of some of its shareholders, most notably COSATU. COSATU was one of the main agitators, outside of and within the ANC tripartite alliance, against the issuing of mobile licenses. The concerns were that it would cause job losses for Telkom workers and cell phones were essentially an elitist indulgence 26 . However, financing from COSATU and its affiliates helped create MTN indirectly through the National Empowerment Consortium. Tomaselli confirms the paradox inherent in union generated black investment capital in the 1990s. A considerable part of black investment capital was generated from black unions’ pension and provident funds that amounted to “R20 billion”. The ANC government used these funds for its

22 A South African pay television company established by Naspers in 1986; Naspers was created by the National Party in the early 20th century 23 UK based company. It eventually helped build the physical infrastructure of the MTN 24 The communications arm of parastatal Transnet 25 Part of NAIL 26 These issues were referred to in the previous chapter.

171 privatisation initiatives, even though COSATU vehemently opposed privatisation (Tomaselli 2000:257). Nonetheless, it willingly allowed this money to be invested in a process that it was opposed to (Ibid). The State was able to do this as it was in control of the funds.

In 1993 the process of bidding for the MTN licence began (Ndemo & Mureithi 2015:187). Between 1994 and 1995, M-Cell held 25% of MTN holdings and 60% of M-tel (Goldstuck 2006). The latter eventually became MTN’s service provider. M- Cell began as a shelf business, Investment Facility Company Two Six Five Ltd, in November 1994. This shelf company was subsequently converted into a public company and changed its name to M-Cell Ltd. M-Cell, between 1997 and 2000, increased its stake in MTN holdings and in the year 2000 MTN Group Ltd was born.

FIGURE 2: MTN/M-CELL OWNERSHIP STRUCTURE AT 31 MARCH 200127 28(M-CELL, 2001:2)

27 Edited from original relationship structure

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The eventual creation of MTN group was rife with the struggle to maintain its character as an empowerment company as the company expanded. Furthermore, some of the empowerment investment vehicles with shares in MTN were fraught with internal strife (Sigonyela 2001). The extent it has gone to, to elevate its empowerment status signals the importance placed on it being true to its original mandate as an empowerment vehicle. MTN’s South African unit, MTN SA, created one of the most extensive BBBEE deals to date (Reuters & I-Net Bridge 2010) and thus elevated its BEE status to level two (mybroadband staff 2011). This means that according to South Africa’s BEE legislation, and consequent code of conduct, it is considered to be a fully empowered29 company (The Republic of South Africa 2003).

MTN group, expanding to become a multinational company, had its reach growing to 22 countries (see Annexure C for the 2016 structure of the company). Its reach in terms of operations covers Africa and parts of the Middle East30 . The top four shareholders at March 2016 are: the largest shareholder is the state-owned Public Investment Company (PIC) (approximately 16%); Singaporean investment holding company M1 Ltd (approximately 6.5%); US based investment company Dodge & Cox (approximately 5%); and MTN Zakhele (RF) empowerment shares (about 4%) (JSE Stock Exchange News Service (SENS) announcements from February 2016 and March 2016, Annual Report 2015 and trading information).

At the time that South African MNO multinationals were growing and expanding their operations outside of South Africa, another paradigmatic shift was happening. The pan-Africanist ideology that led to the creation of the OAU in 1963 was beginning to take a different form as Africans wanted a bigger say in their economic future and not only in their political future. There was more receptiveness for African multinationals in comparison to Western multinationals. Buoyed by the African

28 BEEG stands for Black Empowerment Group 29 An empowered company is one that has met or surpassed the requirements of the B-BEE codes. The approach of the codes is to “situate black economic empowerment within the context of a broader national empowerment strategy focused on historically disadvantaged people, and particularly black people, women, youth, the disabled, and rural communities” (BrandSA 2013). 30 Cyprus falls under the MTN Middle East and North Africa office

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Renaissance ideology and the creation of the AU, NEPAD and attempts at regionalisation, MNOs such as MTN found a more welcoming environment when they began their quest to expand. In many locations they were further helped by the fact that traditional Western companies were not interested in moving into Africa at the time because they had not yet perceived its potential.

South Africa illustrated its desire to integrate into Africa politically and ideologically, and the private sector wanted to be part of this integration. Nowhere was this more evident than in the telecommunications sector; particularly by MTN. By 1997, MTN had already made its first moves in Uganda, Rwanda and Swaziland (Cairns 2010). The MTN group report in 2009 speaks of a historical “pre-emptive-move strategy to aggressively enter markets in Africa and the Middle East” (MTN Group Limited 2009:2).

The story of MTN’s expansion is different from other South African born multinationals as it was one of the first multinationals born of South Africa’s democratic transition. Its history is reflective of the structural and political change that took place in the country and within the ruling party.

6.1.1 MTN’S AFRICAN OPERATIONS IN CONTEXT

In defining the world economy, to study the phenomena of imperialism, early 20th Century Marxist, Nikolai Bukharin describes the world economy as being singular with many parts much like a cell. As such, he views competition between ‘modern’ national economies as battles within a singular “sphere” (Bukharin 1917:17):

“Just as every individual enterprise is part of the "national" economy, so every one of these “national economies" is included in the system of world economy. This is why the struggle between modern "national economic bodies" must be regarded first of all as the struggle of various competing parts of world economy—just as we consider the struggle of individual enterprises to be one of the phenomena of socio-economic life” (Ibid).

Bukharin’s viewpoint is in line with global political economy in both the 20th and 21st century. Indeed, the economy is affected negatively or positively by large individual enterprises. Those enterprises from the key driving sectors of the economy are embedded within the State and the political elite. In the case of MTN, this chapter

174 will further illustrate that its operations are politically important to the State and the political elite.

In chapter four, the economic and developmental benefits of mobile telephony were considered broadly. The sector, in comparison to traditional sectors such as retail and mining, is relatively new and means that assessing the level of influence MNOs have on their host environment is complicated.

Neuma Grobbelaar points out that business cannot be separated from its “sensitive political and social environment” (Grobbelaar 2014:46) Grobbelaar’s conclusions are based on the findings of a four year SAIIA research study on South Africa’s corporate expansion. In analysing the impact of South African businesses on the environment, some of the points that were highlighted included: the fact that consumer culture was often changed; the corporate governance environment was changed; the work environment was often more attractive; and trade, technology transfers as well as local economic development, was impacted.

MTN’s corporate strategy for Africa underscores its exportation of a South African model of values and governance. For instance, MTN places considerable emphasis on local ownership as well as utilising local supply chains, which is very similar to its South African operations.

This analysis does not address issues such as whether MTN is an actor in conflict or peace building activities in its host economies. The emphasis of the study is on whether or not these operations contribute to South Africa’s power projection. This is important as it assists in the overall assessment of South Africa’s regional hegemonic status as well as hegemonic stability.

6.1.2 CORPORATE IDENTITY: A POLITICAL TORQUE?

Projecting an image of being a responsible corporate citizen has increasingly become the norm, and sustainable development is undoubtedly a key word when it comes to business, both big and small in the 21st century. A good corporate citizen not only means providing goods or services for those at the bottom of the pyramid but also includes corporate social responsibility and social investment. This new set 175 of norms is reflected internationally; for example through the UN Compact and the OECD business guidelines. However, there has been little consideration for the implications of business being involved in what is essentially a government domain. This consideration goes beyond the politics of liberal versus socialist ideals.

The real issue, by way of explanation, is that the private sector is tasked by the State with essentially providing goods and services to the poor while at the same time helping them move out of the cycle of poverty. Both are noble and honourable endeavours but it is rarely considered what the long-term implications of this level of responsibility means. Is it correct to make private enterprises responsible for development even though they have a large role to play in achieving development goals? At what point are private enterprises serving the needs of government and at what point is this the other way round? It must be kept in mind that most enterprises, especially those that are transnational in nature, are not designed with social welfare as their core competency.

Owing to the fact that the international system is being modified to reflect a new set of norms for business, whether mobile telephony companies are the torque or the axis must be considered. In physics and mechanics, a torque is defined, in layman’s terms, as “the amount of “turning power” you have, much in the same way you turn a wrench” (Siegal 2009). In other words, it is a measure of the force that moves an inert object from one point to another along an axis. If we were to apply this principle to our query in international relations, the torque would be a measure of the political will that enforces change within the larger political economy. This particular inquiry would be normative because the research undertaken has been qualitative. However, this concept may be modified and applied for quantitative research methods.

MTN, throughout its various host economies, is often seen as a desirable employer. As MTN expanded in Africa, its hiring practices evolved. It created an ‘Expat Pool’ that was made of up of staff, identified from all of its operations, that it deployed rapidly to set up new operations (Maketa Ibid:29). Its additional “mandate” was to transfer skills and build local talent in each operation (Ibid:30). The hiring of majority local staff, as well as local subsidiary ownership, is the hallmark of MTN’s expansion 176 strategy. For instance, in Cameroon, the company progressively reduced the amount of expatriates on its staff to five in 2007 (Chinje 2008:55). The MTN Group Sustainability report for 2015 shows that there was only a 0.8% expatriate staff base across the group (MTN Group Limited 2015).

The company has consistently aimed to create a local subsidiary ownership scheme in which the nationals own a considerable portion of the company. This plan does not always work for a variety of reasons, and the result in places such as Nigeria, is that the companies end up being majority foreign owned. The desire to increase local ownership in Nigeria is the main driver behind the new share scheme that will launch on the Nigerian Stock Exchange in 2016. What does all this mean? As much as Nigeria is a financial success for MTN, continuing to foster close relations with the country politically has been a boon for South Africa. Nigeria’s level of influence within West Africa, and on the continent gives legitimacy to South Africa’s involvement and its quest for leadership.

MTN’s drive for a large portion of local ownership flies in the face of what is the norm for traditional multinationals (for discussions on local ownership of MNCs see Encarnation & Vachani 1985; & Liu Z 2015). Interestingly, the release of shares for local ownership does resemble South Africa’s BEE share schemes. Despite the fact that the process has many critics, it has been successful in getting previously disadvantaged people involved in the corporate sector. MTN Zakehele which launched in 2010, and has been trading on its own platform, was widely successful and trading at ‘six times more’ than what it was originally paid for in 2010 (Ujuh 2015).

The year 2015 saw the rise of black shareholder activism, with shareholders of these BEE shares attending the recent MTN AGM to voice their own concerns about how things are run at MTN. In the Sunday Times Business section, Speckman (2015) reported that a number of these concerns surrounded actual implementation of the vision of BBBEE such as the request for clarity on MTN’s procurement policy of black SMEs. As surprising as this may have been for MTN senior management, this is in line with the vision that the ruling ANC and government had for South Africa- and perhaps the rest of Africa. Although much of Africa was liberated from white 177 minority rule in the 1960s, the process of company indigenisation has not been successful. In fact it may be argued that indigenisation of large corporations has failed in much of Africa. The perception that it creates is that MTN is transposing a South African model of indigenisation on its different host countries - particularly in Africa. Arguably, South Africa’s version of indigenisation is BEE, when MTN operates outside its borders not only does it work towards localising the value chain, and keeping its expatriate staff levels low, it also works towards local shareownership rather than having the local entity being primarily South African owned. The details of this are discussed further on in the chapter.

Another area where South African models seem to be transposed in the rest of Africa by MTN, is corporate governance. A clear corporate governance culture has not been the norm in a number of African countries. Regarding corporate governance and anti-corruption stances, in its 2014 Corporate Governance report, MTN lists its efforts at group-wide anti-bribery and corruption programmes, as well as its channels to facilitate whistle blowing (MTN Group 2014:16).

Throughout its African operations, MTN has sought to be the leading telecommunications service provider as well as Internet Service Provider (ISP) but there has been criticism that this will negatively affect the development, and survival, of local ISPs. In Cameroon in 2005, Global Net (a top ISP) was purchased by MTN Cameroon. This move was opposed by a group of local private operators under the banner of CONESTEL (Collectif de opérateur nationaux exploitant dans le secteur des télécommunications) as they argued that this move would be detrimental to the national telecommunications ecosystem that includes thousands of Internet cafés and local ISPs (Ohada Legis 2005).

Corporate citizenship, or CSR of which corporate governance standards is included, has become an integral part of operations of multinationals but its application is not standard and universal. The United Nations Industrial Development Organization (UNIDO) defines CSR as: “…a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders” (UNIDO online).

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Another definition by World Business Council for Sustainable Development (WBCSD): "Corporate Social Responsibility is the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large" (WBSCD, 2000:3).

The second definition illustrates that there are viewpoints that include a social investment in the community as an integral part of CSR. It must be noted, however, that this study is not on CSR and neither is it a study from the field of economics nor business studies, it is rather considering the effect of CSR and associated social investment, on actions in the international political economy. In other words, this study views CSR and CSI regarding its effects on the political and economic relations between states.

MNCs from emerging markets, such as South Africa, follow a CSR approach that includes social investment as a component and, as Kytle and Ruggie (2005) would argue, CSR is an integral part of risk management. Furthermore, South African laws and frameworks compel companies listed on the stock exchange to invest in social spending. For instance, the King Report on corporate governance in South Africa, King III, has corporate responsibility as one of the principles of the code. An expression of corporate responsibility is Corporate Social Investment (CSI). According to the code:

“it refers to donations and other kinds of financial assistance (made for an altruistic purpose), and in the broader sense, includes other kinds of contributions beyond just financial assistance. Whilst Responsible Investment is an important aspect of Corporate Responsibility, it should be an integral component of a broader economic, social and environmental (sustainability) strategy” (Institute of Directors in Southern Africa, Simplified Version:51).

This principle compels companies operating in South Africa not only to spend socially but also to include social spending in their overall strategy. MTN, throughout its operations, is known for its CSR initiatives through the MTN Foundation. CSI is not a core competency of a multinational as their competency lies in provision of their goods and services and not in activities that are outside their business mandate; neither should the MNC be responsible for the development agenda of a state. However, there has been a move towards good corporate citizenry around the 179 world and more MNCs are including CSI as a side to their business operations. Companies growing CSI involvement is a growing international trend, but the effects of CSI in developing nations can be more acute because of the stark needs across all sectors including education. In essence, companies are compelled to provide public goods to supplement what government provides.

MTN, like a number of South African MNCs, have developed robust CSI programmes. For instance, across the group, they are involved in programmes that cover a variety of areas such as education; health; enterprise development; and, location specific priority areas. In line with their company’s value position, the focus of MTN’s educational programmes is centred on ICT; in 2013 approximately ZAR122 million was spent across the group’s foundations, in each operation, on education (MTN Group Online).

The challenge with MTN’s CSI programmes is that they are providing goods that should be provided by the State itself. It is accepted that in many cases the State is unable to provide these goods but it is surely a slippery slope when a corporation, or groups of corporations, start to take over competencies that are meant for the State. This state of affairs gives the corporation more weight in the upper echelons of power because of its function in society. A good example is Enns and Bersaglio’s (2015) study, ‘crude citizenship’, where they examine the expression of citizenship in an oil enclave in Kenya. They found that the oil companies provided public goods such as healthcare and education, which they had displaced with the responsibilities of the State in the oil enclave examined. The result has been that oil companies, as well as other stakeholders, have been given free rein to influence the governance of oil in Kenya (Ibid:84). Susan Sell’s (2003) examination of the influence of the private sector in WTO, specifically in the Trade-Related Aspects of Intellectual Property Rights (TRIPS), illustrates the level of influence that the private sector now has over states in various international governance regimes. Hong and Liskovich’s (2015) insightful research was on the influence that CSR had on how regulatory bodies treated ‘socially responsible’ companies when they were found guilty of corruption. They considered, in particular, the fine imposed on socially responsible companies in the US that were found guilty of bribing foreign governments. They discovered that

180 socially responsible firms were fined less than other companies, including those with higher CSR scores before investigation. Their research considers the US, but it is instructive for South Africa and the rest of Africa.

6.1.3 PRIVATE ENTERPRISE AND THE EVER HANGING CLOUD OF POLITICAL PATRONAGE: CORRUPTION OR RELATIONSHIP BUILDING?

A complaint often levelled against multinationals operating in Africa is that they entrench patronage networks and thus encourage corruption (Tangri 1999). A counter to this argument is that a degree of political patronage is in fact a form of relationship building. If this counter argument is accepted, there is still a whisper-thin line before patronage crosses over to outright corruption. Lyle White explains that most business done in Africa is done with governments, as most projects are state driven. Foreign investment is a relationship and confidence building exercise between a company and the country it invests in (White, Op Cit 2016). Adrian Meyer, quoted by Alex Weingrod, provides a pithy description of patronage: “the transactor (patron) has the power to give some benefit which the respondent (client) desires...” (Weingrod 1968). The government being the patron and the private sector being the client, the playing field can become murky and fairness goes out the window. Transparency International defines political corruption as: “a manipulation of policies, institutions and rules of procedure in the allocation of resources and financing by political decision makers, who abuse their position to sustain their power, status and wealth” (Transparency International 2015).

MTN has not been immune to accusations of benefiting from patron-client privilege in its host economies. Moreover, the close ties between MTN and the ruling party create the impression that MTN has been given more license to engage in questionable behaviour.

The political positioning of South Africa has given South African multinationals the ability to easily set up shop on the rest of the continent. One of the most pervasive narratives in popular culture about multinationals relates to the big bad parasitic company. Analysts such as Ewan Sutherland (2015) contend that mobile telephony 181 companies are able to penetrate the market with the help of politicians and possible greasing of palms, but the true state of affairs is complex and multi-layered. Having a high level of political influence makes a difference because operating on the African continent is no mean feat. There have been reports of politicians stepping in to smooth the road for MTN. For instance, it was reported that South Africa’s President Thabo Mbeki and President Thomas Boni Yayi assisted MTN Benin in brokering a deal when the company had an issue with the Benin telecoms regulator (Muller 2007).

There have been a number of questions surrounding MTN executives and their ability to leverage their struggle relationships within the ruling ANC government. For instance it was reported in South Africa’s Times newspaper that Irene Charnley wrote to then President Mbeki about the controversial Iran license requesting "an intervention from your office". She was also reported to have written to the Former Foreign Affairs director-general, Ayanda Ntsaluba, offering to arrange a meeting between President Hassan Rouhani and then President Mbeki as a "token of our appreciation for your support as we scoured the Middle East for licensing opportunities" (Hofstatter, Rose, & Wa Afrika 2013).

A number of the MTN board members, past and current, have at some point or another had ties to the ANC - most dating back to the anti-apartheid struggle. Even its chairman between 2002 and mid-2013 Cyril Ramaphosa, has been in the upper echelons of the ANC for a long time. On the surface, it appears that MTN’s ability to penetrate the African markets relates to the fact that it has long-standing relations with South Africa’s political elite. It is uncertain whether the company would have had the same level of success without its close relationship to political power.

Having that level of apparent political backing is illustrative of MTN’s pull. Dianna Games notes that MNCs often have had to make use of their political influence. She notes that although companies may try to bypass risky political connections and take slower official bureaucratic channels, there is a realisation that “close ties with government can reduce regulatory risk. When unreasonable or ad hoc regulations are introduced, companies at least have a channel of appeal if they have the ear of top officials” (Games 2011:39).

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Telecommunications, as a whole, has grown increasingly important and the true value of the sector in forwarding South Africa’s foreign policy objectives is only recently becoming apparent. The focus of South African foreign policy has been shown to be the deepening of SADC integration and the overall renewal of Africa. These priorities are encapsulated in the South African Foreign Policy Discussion Document (1995). These foci have been repeated in several other documents including DIRCO’s Medium Strategic Framework of 2009-2014. Another key interest that has popped up in South Africa’s foreign policy documentation and posturing has been the strengthening of South-South relations. In 1995, the then Foreign Minister Alfred Nzo stated, “South Africa should deal with African partners as equals and avoid all hegemonic ambitions” (Department of Foreign Affairs 1996:16). His conceptualisation of hegemony is one that is self-interested and exploitative. Certainly, hegemony does have other motivations including the creation and maintenance of structures that actually entrench its leadership.

South Africa has sought to create, and has continued to maintain relationships and institutional regimes that entrench its leadership. When the manner in which MTN embarked on its expansion efforts on the continent in comparison to the maturation of South Africa’s diplomacy organism is considered, it is hard not to imagine that there was not some form of grand design. Though, it is more likely that MTN was just fast in its response to political developments on the continent.

In 1997, MTN expanded to Uganda, Rwanda, and Swaziland. Those territories were very curious choices for initial expansion. Although Swaziland is a very small country, surrounded by South Africa, from a market point of view the choice was curious. Swaziland has the capacity to cause serious reputational risk to the company owing to the fact that the corporate governance standards in the country are quite different to many other locations.

It was a partnership between the Swazi Government, MTN, and the Royal Family. The king holds 10% of the shares in MTN (Swazi Media Commentary 2015), which makes the likelihood of any competing network opening highly unlikely. The fact that the king’s eldest daughter was also appointed to the Board of Directors of the local

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MTN subsidiary (Lukhele 2012), illustrates that there is a high level of local political investment in the company. In his article, Telecommunications in the Kingdom of Swaziland, Ewan Sutherland (2014) bemoaned the system of governance in the country that has the interest of the sovereign as its priority.

As much as poor corporate governance practices are a reputational risk to MTN, it also is a reputational risk to South Africa. The political climate in Swaziland has been a cauldron threatening to bubble over for many years. This was made patently obvious during the intensive strikes during 1994, 1995, 1996, and 1997. Salmond observes that in addition to meetings between then South African President, Nelson Mandela and Swaziland’s King Mswati III, the business sector got involved in trying to ease the political tensions (Salmond 1997). Swaziland has always been dependent on South Africa, both politically and economically. It is well-known that South African businesses used Swaziland as a way to evade sanctions. It is no surprise then that the ANC used the same territory that caused it a lot of trouble during the fight against apartheid in the same way.

Langalanga (2014) has argued that South Africa since 1994 has influenced Swaziland’s domestic political atmosphere through institutions such as SACU and SADC, as well as non-state actors. It is argued that “[t]he presence of South African companies and State-owned enterprises could provide much-needed political and economic leverage to ensure greater tolerance of diverging views. The threat of their withdrawal would directly affect the Swazi establishment. However, South Africa either pretends to be unaware of its economic clout or decides to turn a blind eye, further eroding the moral capital built up during and after its transition to democracy” (Langalanga Ibid:4).

The impression created is that the South African State is willing to ignore, or even prop up Swaziland (through SACU and the proliferation of South African companies), to further entrench its hegemony in the region. However, it must be recognised that the failure of any of the small states in SADC, also serves as a major risk to South Africa that could be a beacon for fleeing citizens.

Relations with both Uganda and Rwanda, provide the South African government with

184 an opportunity to have influence in Central and East Africa. In the case of Rwanda, a French speaking country, as well as a former German then Belgian colony; it presents an opportunity to break the influence of France in francophone Africa. South African influence has been severely constrained in francophone countries because of language barriers and the influence France exerts in former French Africa. South Africa’s most viable entry point into francophone Africa is through Rwanda, owing to its tenuous relationship with France; France is accused of supporting the perpetrators of genocide, by the Rwandese (Rubin & de la Baume 2014). Certainly, even before the lead to the 1994 genocide, the French involvement in Rwandese political affairs was disconcerting. Their extra-regional hegemony seemed to be motivated by the desire to reduce the influence of non-francophone countries. Ironically, in the aftermath of the genocide, Western and African Anglophone countries started to make headway in Rwanda: most specifically South Africa.

Since its advancement into Rwanda, South Africa has intensified its relationship with the country. This is evident in the increasing level of foreign direct investment from South Africa in the reconstruction of Rwanda. A key area to the Rwandese has been ICT and mobile telephony in particular. They had struggled to get foreign interest in helping bring mobile telephony to the country. South Africa’s MTN, in partnership with the ruling Rwanda Patriotic Front (RPF), helped leapfrog the country’s ICT development on the continent. The RPF and its holding company Crystal Ventures Limited (previously Tri-Star) provided much of the capital to establish MTN Rwanda. It was one of the key initial stakeholders. The result of the risk that was taken by Tri- Star was that it fast-forwarded Rwanda into mobile telephony and provided “spill- over benefits” for the entire sector; one of them being the experience gained by entrepreneurs dealing with MTN “on behalf of the government” (Booth & Golooba- Mutebi 2012:398-399).

From an economic point of view Rwanda should not necessarily have been MTN’s first choice of investment destination. Its relatively small population as well as decimated infrastructure made it unattractive to other players; one has to ask why MTN felt that it was worth the risk to partner with Crystal Ventures/Tri-Star leading to the launch of MTN Rwanda in 1998. However, to assume that the corporate 185 expansion deepened relations between South Africa and Rwanda would be incorrect.

The diplomatic spat between Rwanda and South Africa, which emanated from the expulsion of Rwandese diplomats from South Africa after the assassination of Patrick Karegeya in 2014 on South African soil, is evidence of a tricky relationship. Karegeya, a former intelligence operative, was an asylum seeker in South Africa (Allison 2014). Both countries have insisted that they are intent on smoothing relations between their countries (Kotch 2014). Part of the issues between Rwanda and South Africa may have to do with leadership of the Great Lakes Region and overall primacy in Africa. For peacekeeping missions, Rwanda is one of the top contributors. Its involvement in security and economic matters in the Great Lakes region makes it a key player.

Another influential country in the Great Lakes region is Uganda. Unlike Rwanda, Uganda already had mobile phone services in the form of Celtel. When MTN entered the market it quickly dominated it. In this locale, its model includes mobile line services, public payphones as well as Internet services. Uganda has always had a very cordial relationship with South Africa. Economically, there has been a long- standing bilateral relationship: in 1997 they signed the Convention on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion; in 2000 they signed an Agreement on the Promotion and Protection of Investments; and, in 2002 launched the Joint Commission of Cooperation. Further entrenching the relationship between the two countries through South Africa’s private sector also makes sense.

The lawsuit by competing company, Turkcell, against MTN in the issuing of the Iranian GSM license fell through. MTN was found to have won the license legitimately but the process leading to their victory did have its casualties and brought a number of things to the fore (IT News Africa Staff 2014). A KPMG forensic report noted that in the run-up to the issuing of the license, both Iranian officials, as well as officials of the South African foreign services, were treated to luxurious gifts (Business Tech Staff 2013).

It was also reported that MTN sponsored Iran’s deputy trade minister’s trip to South 186

Africa, where he attended a dinner, hosted by the Defence department, with then MTN chairman Cyril Ramaphosa (Hofstatter, Rose, & Wa Afrika 2013). There is no proof that this level of lobbying was corrupt or in excess of what is normally done in practice but it does raise a lot of flags. And it also brings into question the nature of the lobbying that took place for MTN to get a license in other countries. In the aftermath of the Iran scandal, the MTN finance chief, Nazir Patel, resigned amid allegations that he committed a number of governance breaches in the Iran debacle (Rose & Marais 2013).

Other than various trade promotion strategies undertaken by government, and the various agreements and regimes that are entered into, there is no apparent instruction that South African multinational companies enter other territories to expand the influence of South Africa. In fact, South African companies expanding onto the rest of the continent, do so with very little help from the South African government. Yet, the fact that the government regularly enters into relationships with and takes a stance that is beneficial to the private sector, and at the same time, the deepening of ties beneficial to South Africa, cannot be a coincidence; there is an interesting relationship between South Africa’s corporate engagements and the State’s foreign policy decision-making.

An interesting case to consider is that of Nigeria, MTN’s largest market. It was during president Obasanjo’s administration that a decision was taken to open Nigeria’s market to mobile operators. During this period Nigeria and South Africa had very cordial relations and it coincided with the time that NEPAD was being promoted as a pan-African development agenda. It is interesting that the NEPAD document recognised the value of ICTs as well as the promotion of African business. MTN emerged in this environment, and a close examination of its expansion efforts reveal a parallel to the relationship building exercises undertaken by the State. MTN moved into the Nigerian market at the time when Nigeria and post-apartheid South Africa were beginning to officially establish ties.

Nigeria and South Africa have had the continent as one of the pillars of their respective foreign policies. Despite both countries apparently competing for continental hegemony and being apparent hegemons in their own neighbourhoods,

187 the relative strength of bilateral relations cannot be ignored. For instance, as much as South Africa has been a key driver of NEPAD, Nigeria has also supported the call for its development. Both former president Obasanjo and former president Mbeki campaigned relentlessly in the name of NEPAD and African renaissance.

There has been a myriad of affronts in this contentious relationship. Economically it is clear that there is an asymmetrical relationship. This is due mainly to two facts: South Africa’s infrastructure and technical know-how; and easy access to capital. When South Africa and Nigeria signed bilateral agreements in 1999, the door was opened for big players – such as MTN.

South African corporate engagement on the continent, as shown in chapter three, predates the development of NEPAD or even Mbeki’s African renaissance ideology. However, NEPAD was the first African-owned developmental plan. Companies such as MTN took the opportunity to interweave their corporate narrative with that of NEPAD and African renaissance. Its presentation to the 2002 Business-NEPAD conference points out MTN’s contribution to meeting NEPADs ICT priorities (these are listed in the subsequent chapters of this thesis). In a journal article born out of the MTN presentation, Yvonne Muthien and Meshack Khosa further confirm MTN’s commitment to NEPAD as well as its belief in contributing to the African renaissance (Muthien & Khosa 2002).

NEPAD was launched to the excitement of the business community; the only concerns were tax burdens (for instance double taxation) and investment controls (Esipisu 2002). Many of these concerns were addressed in Treasury’s Gateway Initiative (discussed in chapter four).

In an example from Nigeria; when MTN was awarded its license in 2001, the investment it made into the country was the largest it had ever made outside South Africa (Onuha 2008). Undoubtedly, NEPAD assisted in making this a reality (prior to this date MTN had attempted twice to penetrate the Nigerian market). In fact, thanks to NEPAD, South African SOEs such as the IDC and many other private telecommunications companies have been able to make major inroads into Nigeria. Attesting to the value of MTN Nigeria, Cyril Ramaphosa’s investment firm, Shanduka

188 group’s Mauritius unit, bought a US$335 million stake in MTN Nigeria (Nyambura- Mwaura 2012). This purchase gave MTN group an estimated 78.8% stake in MTN Nigeria and a considerable amount added to the remaining 21.2% belonging to Shanduka31. Pascal Dozie, a shareholder of MTN Nigeria and a board member of the MTN Foundation, explained that the initial reluctance of Nigerian investors explained the share structure. The original plan was for Nigerian interest in the company to be up to 40% (Nurudeen 2015).

Ultimately, this all comes down to how MTN, as well as other South African multinationals, view their role in the socio-economy of their host nations. In other words, when they develop, they develop the narrative of their corporate strategies, what values underpin their operations. In the case of MTN, the values that underpin their operations sound very similar to that of the South African government (discussed in chapter four). In a meeting with MTN’s Chris Maroleng, he notes that MTN is not “philanthropist” but does see the bigger value of socially empowering its host economies (Maroleng Op Cit 2016).

6.1.4 HEGEMONIC STABILITY VIA THE POLITICAL ECONOMY

Traditional analysis within HST will consider a specific account and analyse the relationship dynamics. For instance, an analysis of Brazil during the 2008 global economic downturn would be an example of a traditional unit level structural analysis. The approach that this study has taken has been to examine the operations of MTN group broadly. The purpose of utilising this approach is that it gives a broad picture of South Africa’s relationship with the continent as well as an indication of the effects of the influence of mobile telephony companies. A full test, however, would require exploring specific companies in various sectors that are expanding within Africa.

31 Shanduka was an investment holding company founded by Cyril Ramaphosa

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The expansion strategies of the MTN group appear to mirror the apparent vision and strategy of the government of South Africa: which is to unify the global south and ‘lead’ the development process on the continent. The South African government is present, and influential, in several fora by a mixture of design and the advantage bestowed upon it owing to its unique history. The apparent imprint of South African values on MTN’s corporate culture is not surprising considering its history (discussed earlier in this thesis). Other than having very politically connected people at the helm of the business at its genesis, the nature of the backgrounds of the people who assist in stakeholder relations is also very telling. The background of the people that are placed in positions of for instance Group Executive for Corporate Affairs, gives an indication of how important external stakeholder relations is to them. An example is Yvonne Muthien, a former Group Executive for Corporate Affairs, who had served under former president Mandela in the Public Service Commission and served under both presidents Mbeki and Mandela as the Chairperson of the President’s Advisory Council for National Order. During her tenure at MTN, it was the first telecommunications company to issue a sustainability report. They clearly state their socio-economic value proposition as: “MTN, we believe that working on the continent should be as much about the development of Africa as it is for business’ sake” (M-Cell/MTN Group Corporate Affairs 2002) Nozipho January-Bardill has also filled the role of Group Executive for Corporate Affairs and prior to taking up the role was the Deputy Director-General and Head of the Foreign Services Institute and Human Resources at the Department of Foreign Affairs. The Group Executive of Corporate Affairs, Chris Maroleng, has been in the post since 2014 and his background is as a Researcher of African issues as well as producing and hosting an African research programme.

To ensure that their relations with DIRCO do not become superficial, MTN hosts several events much like the 2011 business lunch in which it hosted all the ambassadors of its various operating companies; this lunch coincided with the annual Heads of Mission Conference (Manco Voice 2011). Maroleng confirms that MTN’s relationship with DIRCO is good and “they help to facilitate engagement, especially at initial stages” in new operations. He does concede, however, that DIRCO’s engagement is limited because the number of South African staff in their 190 various operations is limited (Maroleng Op Cit 2016).

In spite of MTN’s strategy of localisation in its various operating companies, the reality is that it is still ultimately viewed as a South African company by the South African government. This was made glaringly obvious when the attempts to tie up Indian owned Bharti Airtel (Bharti) with MTN failed dismally owing to South African authorities. Bharti had tried to partner with MTN group a number of times and in a media statement announcing the deal, Bharti stated that: “…this opportunity also represents a first of its kind in developing an Indian-African initiative that would serve as a shining example of South-South cooperation” (Bharti Airtel Ltd 2009).

The Wall Street Journal points out that if the transaction had been successful it would have created “the third-biggest wireless carrier after China Mobile Ltd. and the U.K.'s Vodafone Group PLC” (Sharma & Bellman 2009). Outwardly it would appear that South Africa would be interested in having further ties commercially with India owing to their relationship in BRICS and in the India Brazil India Dialogue Forum. However, there were serious concerns on the part of the South African government on the constitution of the deal, which would have changed the character of MTN. The official statement of South Africa’s treasury maintained that: “The South African government believes that the structuring of such partnerships is best left to the companies themselves, who must make their decisions on commercial grounds. However, when companies structure their relationships outside the current exchange control regulatory framework for such transactions, they require the approval of the Minister of Finance” (National Treasury 2009).

The Minister of Communications at the time, Siphiwe Nyanda, stated:

“It would be sad if we saw this entity move into the hands and management of foreign nationals” (Tarrant 2009). His spokesperson, Tiyani Rikhotso, even more bluntly revealed South Africa’s view of the company: “[w]e obviously value MTN as a South African company; we want it to retain that character" (Business Standard Online 2009). He maintained that the company had benefited from “trade and bilateral agreements negotiated by South Africa's government” (Ibid). What this illustrates is that there is a complex interplay of interests in the relationship between South Africa and its telecommunications companies, more specifically MTN. On the one hand, South Africa wants the

191 company to be successful and it acts as a strategic asset. On the other hand, it has to walk a fine line lest it be accused of protectionism that goes against its WTO obligations. On MTN’s part, in spite of such a deal being attractive it needed to be careful in retaining its African character. The economic dimension of South Africa’s foreign policy engagements had benefited MTN, and MTN in return ensured that South African values had been woven into its corporate strategy. This can be ascribed to two factors: first, according to Minister Nyanda, its African expansion was made possible, "through government help" (Reuters 2009); second, MTN’s licencing conditions in South Africa entail that any possible change of equity is subject to a public hearing process (Mail & Guardian Staff Reporter 2009). The fact that MTN would have been subsumed by Bharti was clearly an issue for the South African government; the former Treasury Director-general Lesetja Kganyago stated that "[t]he decision will be taken by the executive ... A transaction of this magnitude is not a decision you just take on your own" (Business Standard Op Cit). A number of merger talks between MTN and Reliance Communications, another Indian telecommunications behemoth, also failed (Anand 2008; Spillane, Alexander, & Antony 2013).

MTN is clearly not afraid of risk and has entered deals that have given it a foothold in North Africa and the Middle East, in places such as Syria and Iran. This is in line with South Africa’s attempt to deepen diplomatic ties with the Middle East and its larger strategy to align with the global south. In a lecture series for the Emirates Centre for Strategic Studies and Research, Chris Landsberg underscores South Africa’s increasing political interest in the Middle East as well as increasing economic engagement from 1999 onwards (Landsbergc 2007). At a 2011 meeting held at SAIIA then deputy Minister of International Relations and Cooperation, Ebrahim I Ebrahim stressed the continuing importance of the Middle East and North Africa (MENA) for the South African government:

“We have followed the political developments in the Middle East and North Africa with interest because there is an inextricable link between our developmental aspirations, and genuine stability in these two regions. To us, these regions remain extremely pivotal to the realisation of our trade policies and strategies” (Ebrahim E 2011).

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South Africa’s re-orientation to countries of the global south, and its interest as the African hegemon would make it very concerned with relations in the developments in the MENA region. South Africa has even increased its participation in the Middle East peace process. In 2016, Minister of International Relations and Cooperation, Maite Nkoana-Mashabane participated in the Ministerial Meeting on the Middle East peace process in Paris (DIRCO 2016). It is within this context that MTN has increased its engagements in the MENA region despite issues of security. MTN has an office in Dubai that serves as its procurement hub for the MENA region as well as for tax efficiency (Maroleng Op Cit 2016). The company operates in volatile environments such as Syria, Yemen, Afghanistan, Sudan and South Sudan; it even has operations in Iran (subscriber numbers are listed in Annexure C of this thesis). Owing to the environment, MTN has struggled to repatriate its funds in these environments but has chosen to continue its operations there. It has to be kept in mind that, even at the beginning of its expansion in the late 1990s, MTN focused on markets that were underserved, with massive populations, as well as being politically ignored (which is more the case in North Africa than the Middle East). In an interview in PriceWaterHouse Cooper’s Communication Review, MTN Côte d’Ivoire‘s CEO Wim Vanhelleputte remarked: “Another big success factor for MTN, whether in Côte d’Ivoire or the rest of Africa, has been our brand and positioning the company as being the true African success story. If we didn’t have that story as a core part of our brand, our success would be different. I’m not saying that we wouldn’t be successful but that our success would be different. If tomorrow MTN were bought by Vodafone and it rebranded MTN as Vodafone, I think we would be losing a certain value, a certain extra that we have” (Communications Review 2012:54). The telling phrase is ‘African Success Story’. This phrase is very similar to the external image linked to South Africa. Thanks in part to its relatively successful transition from apartheid, and its stability in comparison to other African territories, South Africa is considered, internally and by outsiders, as a success story. Whether this belief is correct is subject to debate. Its successful involvement in the MENA region is just a continuation of this success story which has implications for South Africa.

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6.1.5 RESPONSE TO SOUTH AFRICA’S HEGEMONY: RESISTANCE TO MTN

In 2015, the Nigerian Communications Commission (NCC) issued MTN Nigeria with a fine of US$5.2 billion for failing to disconnect unregistered sim cards by mid-2015. According to Chris Maroleng, MTN had actually reported itself to the NCC and had removed a considerable amount of these unregistered simcards off the network at the time of reporting; these unregistered cards accounted for less than 1% of MTN’s Nigerian subscription base (Maroleng Op Cit 2016). At the time the fine was issued, the recently elected Nigerian president, Muhammadu Buhari, had replaced the NCC. As a consequence, the NCC was without a board, and by NCC regulations, could not enforce the fine without the involvement of the presidency. This fine can be viewed in two parts: first, as a message to the South African government; and, second, it could be a sign both internally and externally that the new government was trying to assert its authority.

At the same time in which MTN Nigeria was dealing with the NCC fine, a number of MTN subsidiaries across Africa were also embroiled in legal tussles. For instance: MTN was ordered by Uganda’s high court to pay US$662000 in an anti-competitive behaviour suit (van Zyl 2015); and in Liberia, Lone Star Cell/MTN is appealing against a US$19.2 million award to the Liberia Revenue Authority (Sieh 2016).

These legal debacles, on the surface, appear to be simply state’s fulfilling their mandates in their territory. But, on further examination, it appears a case of MTN being used as a tool to send a message. A number of other South African MNCs operating on the continent, including Nigeria, have been hit with the unexpected challenges suffered by Stanbic (Maake 2016) and Sun International (Ngcobo 2016).

The MTN fine was one of the harshest financial sanctions suffered in Nigeria. A number of reasons were touted in Nigerian media as the reason that the MTN fine was harsh - security being one of the main ones. Before the fine was issued, an Ericsson Nigeria Engineer was found to be installing transmitters on MTN base stations. MTN owns 12 000 base stations in Nigeria. The transmitters were illegally transmitting the Radio Biafra signal on behalf of the separatist group Indigenous People of Biafra (IPOB) (Ubabukoh 2015). President Buhari, at a joint press

194 conference with South African President Jacob Zuma blamed MTN for the prolific attacks by terrorist organisation, Boko Haram. He reportedly said that: “unregistered [sim cards] are being used by terrorists and between 2009 and today, at least 10,000 Nigerians were killed by Boko Haram…Other mobile phone operators complied with a mid-2015 deadline to register all sim cards…unfortunately, MTN was very very slow and contributed to the casualties" (BBC News Staff 2016).

Buhari’s statement appears to be putting all the blame for Nigeria’s security situation on MTN. MTN maintains that it has always responded positively to Nigeria’s security services’ legal requests for mobile intercepts (Maroleng Op Cit 2016). Dianna Games provides a helpful analysis. Games contends there are several reasons behind the excessive nature of the fine: the impression that MTN is making a lot of money out of Nigeria and it should recoup some of it; the relationship between security and the unregistered mobile phone connections; MTN not meticulously observing Nigeria’s laws; as well as the desire to reduce Nigeria’s considerable budget deficit (Games 2015).

As much as MTN was in the wrong in failing to meet the deadlines given by the Nigerian authorities, the punishment has to fit the crime. Operating differently to most external multinationals, a considerable portion of MTN’s funding is derived from the Nigerian banks. This ensures that not only is the local banking industry developed but also the local ties to the company are entrenched. The fact that MTN was fined for not following the laws and regulations of Nigeria, by terminating unregistered sim cards, is not in contention, what is in contention is the size of the fine. The sheer size of the fine gives the impression that the government, through the regulator, is trying to send a message to the multinationals operating in the country rather than purely punishing MTN.

The reason, that the size of the fine can be interpreted as a message is that, as previously mentioned MTN, for the most part, has operated very differently from other MNCs. A major complaint levelled against MNCs in general is that they don’t make use of locally available channels such as banking and loan facilities. Making use of these services, especially loan facilities, of a local bank injects more cash into the local system that in turn enables the bank to provide better services. Games observes that the reason that some companies shy away from local finance is the

195 high interest rate (Games 2011:20). By gaining finance locally, MTN’s loan repayments inject money back into the local economy.

MTN Nigeria has a long history of making use of locally available financing mechanisms. For instance, in 2010, it took out additional loans with a consortium of 15 local banks that amounted to N318 billion (Ifeakandu 2010), which converts to just over US$2.10 billion. It further took a dollar loan amounting to US$450 million from two foreign banks, Germany's KfW Ipex and Industrial and Commercial Bank of China, to cover the cost of hardware. The Nigerian banks that form part of the Nigerian Consortium are: Access Bank, Afribank Nigeria, Bank PHB, Citibank Nigeria Limited, Diamond Bank, Ecobank Nigeria, First City Monument Bank, Fidelity Bank, First Bank of Nigeria, Guaranty Trust Bank (GTB), Stanbic IBTC Bank, Standard Chartered, Bank Nigeria, Union Bank of Nigeria, United Bank of Africa, and Zenith Bank (I-Net Bridge 2010). In 2013, it further borrowed the equivalent of US$3 billion through GTB as well as from foreign banks such as Citigroup, Standard Chartered, Industrial and Commercial Bank of China, China Development Bank and China Construction Bank (Meineke 2013).

This fact is important because all these Nigerian banks are the primary retail banks in Nigeria and are the lifeblood of the Nigerian economy. The failure of MTN to service these loans would be devastating to the Nigerian economy. Furthermore, the fact that MTN chose to take Naira denominated loans, and pay it back as such, takes away much of the accusation that it is taking away much needed foreign currency from the Nigerian reserves.

MTN Nigeria has further stimulated the local economy across various platforms. For example, in the music industry, MTN Nigeria’s callertunez commands a lot of revenue for both artists and the company, with reduced involvement of traditional distribution channels. The founder of Technology Times, Shina Badaru, explained that if each customer pays 50 Naira to access the callertunez and there is a customer base of over 50 million it gives a very good idea of the level of influence it has on the economy (Akinola 2014).

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This begs the question as to why the NCC would want to cripple a company that feeds a considerable amount into the Nigerian economy, outside of oil revenue.

On the surface it appears that the fine was an attack on South Africa and South African interests. It is very easy to jump to this conclusion because of the fine that was also issued to Stanbic (Maake 2015). However, it can be argued that this fine is driven by deeper considerations - money. The Nigerian government is in desperate need of foreign reserves. In fact, a number of draconian measures were instituted to preserve what is left of its foreign reserves (Editor, Financial Watch Nigeria 2016). The big players such as MTN have come into the firing line. The impression that is created is that the Buhari administration has given all government bodies the instruction to increase foreign revenue by any means.

What is clear is that as a company, MTN has to go back to the drawing board about stakeholder engagement. In the weeks prior to the announcement of the MTN fine, there was an article in one of South Africa’s leading newspapers, the Mail & Guardian, essentially accusing MTN of aggressive tax avoidance (McKune & Turner 2015). This article led to parliamentary and political inquiry. The company has denied all allegations but has started to work aggressively to improve its external stakeholder engagement. In its 2015 Integrated Annual Report, MTN notes that:

“Lack of an effective strategy to engage stakeholders on their material concerns, resulting in the gradual loss of trust and confidence in MTN. In particular, key stakeholders such as governments, investors and staff feel they are not sufficiently engaged and informed about MTN’s governance and operational challenges” (MTN Op Cit 2015:26). Its solution to these identified challenges is to increase structured engagements and the introduction of “issue management councils” across operations within the group (Ibid).

Publically, the South African government has stood back from dealing with the MTN matter. But it must be worrying, as the failure of MTN in Nigeria does not bode well for MTN’s survival. It must be clear to those in the upper echelons of power, symbolically, what the failure of MTN means for South Africa. South Africa’s pan- African vision would be blind-sided. The most important move South Africa can make is repairing, and improving its relationship with Nigeria. As was seen with the

197 progress made during the Obasanjo-Mbeki era, a lot of headway was made when both countries worked together with the adoption of NEPAD.

In December 2015 the NCC reduced the MTN Nigeria fine by 25% to US$3.9 billion. MTN in response made a forward good faith payment of US$250 million. However, Nigeria’s lower house of parliament has entered the matter and decided the original fine should be paid (Gilbert 2016). At the time of writing, this matter has not been settled.

6.2 CONCLUSION

MTN has undoubtedly been a post-apartheid South African success story. In slightly over 21 years, it has become a force to be reckoned with on the African continent, and it is fast conquering the Middle East and South East Asia. The company has gone into places that were considered risky, such as Sudan, Liberia and Afghanistan, and made a success of these forays.

The success of MTN and the foreign policy success of South Africa appear to be a bifurcated tree; both attributing their success to the dearth of infrastructure and the third world leadership vacuum caused by the end of the Cold War and the end of apartheid. It is argued that both their successes are part of the same project that may be described as hegemonic. The South African government has made it clear that it does not intend to function as a coercive hegemon.

Throughout its various foreign policy instruments and pronouncements, the government has made it clear that it looks to Africa and the rest of the global South, as its partners. The South African government helps South African companies expand outward by removing double taxation, and providing funding through the DBSA and the IDC. The drive to move outward is further bolstered by the regimes the government creates and maintains. One that is most applicable here is NEPAD. The capstone of NEPAD is African ownership and increased economic integration on the continent. Lesetja Kganyago (2008) pointed out that companies such as MTN and Vodacom, actually increased African integration through their operations. This contrasts with the perception that “business does not play a big enough role in 198 integration” (Gruzd 2016). White argues that true integration has to go beyond mere treaties and agreements towards “real” connectivity. There needs to be seamless movement of goods, services and people (White Op Cit 2016). It may be contended that mobile telephony has allowed Africans to move closer to their socio-economic integration goals.

It can be further argued that operations, and success, of companies such as MTN entrench the perception of South Africa as a leader in Africa. The reason for this line of reasoning is that MTN is a model of South African success and dominance. Simply put the presence and growth of MTN is part of a larger scheme to accept South Africa’s apparent leadership through cultural and symbolic amelioration. South African companies, of which MTN is no exception, travel to other locales and export not only their products and services, but they also export South African corporate culture, particularly corporate governance standards. The recommendations of the King Reports are self-regulatory, although many of them have been incorporated into the Companies Act, which means that the group can be punished in South Africa for serious misdeeds elsewhere. Thus South African companies are affecting the values and norms of the industries away from home. However, whether South Africa has an effective stick to punish South African companies’ misdeeds has yet to be seen.

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CHAPTER SEVEN: EVALUATION

The role that South Africa plays on the continent has always been one that elicits furious debate. This discussion has been further intensified in the face of the expansion of South African corporate actors. An industry that is often acknowledged in the predominant literature on expansion, but never adequately explored, is mobile telephony. This chapter evaluates the thesis research problem based on the normative conclusions reached in other chapters.

As discussed in chapter five, South African multinationals in the telecommunications space, particularly MNOs have been very successful in their expansion on the continent. Part of their success stems from their genesis in South Africa, which is discussed in detail in chapters four, five and six. This thesis explores whether the interests of corporate actors have been embedded in the economic dimension of South Africa’s foreign policy. The focus of this study is on mobile telephony owing to its unique history and the manner in which it has expanded on the continent. The case study used in this research is the MTN group.

7.1 RESEARCH FRAMEWORK

The research conducted was qualitative, using both primary and secondary sources. Semi-structured interviews were held with foreign policy and business policy analysts as well as MTN’s Group Executive for Corporate Affairs.

The project began with two case studies: MTN and Vodacom. These companies were both created at the time of South Africa’s democratic transition. Over the course of this research, however, South Africa's shareholding in Vodacom’s group operations decreased significantly. The majority shareholder of the group operations is now British-owned Vodafone. The Vodacom Group (also called Vodacom within this document) was the first South African mobile operator to come online in the early 1990s, and it has the biggest market share in the country. At the beginning of this research project, it was considered a South African company. 200

The company originated as a partnership between Telkom and UK- based Vodafone. In 2008, Vodafone increased its ownership stake in the group to 65% (Business Monitor International 2009:45). However, in 2009, Telkom concluded the process of divesting its interest in Vodacom to Vodafone (Jurgens 2011:24). Vodacom, via Telkom, provided the State with a significant amount of revenue. Although, as reported by Africa & Middle East Telecom-Week online, there were questions about untoward deals with ICASA and possible price fixing (Africa & Middle East Telecom- Week).

Interestingly, Vodacom’s market entry in territories North of the equator in Africa was restricted by a shareholders’ agreement between Vodacom and Vodafone (Business Monitor International 2009:45; Balancing Act issue 329). Vodacom Group is made up of Vodacom South Africa (SA) as well as its other international holdings. In 2008, Vodacom Group divested part of its 100% share in Vodacom SA in a BEE deal with subsidiaries of Royal Bafokeng Holdings (Proprietary) Limited ("Royal Bafokeng") and Thebe Investment Corporation (Proprietary) Limited ("Thebe") including share schemes aimed at increasing the amount of black ownership (Business Monitor International 2009).

Vodacom secured its leadership of market share in South Africa by not only serving the underserved communities but also by having first mover status in the country. At the end of 2014, the company had approximately 39.3% market share in the country (Bronkhorst 2015).

Upon getting the green light to purchase the second fixed-line network operator Neotel (OUT-LAW.Com 2015), Vodacom is set to become one of the most powerful telephony companies on the continent. Simply put, unless the policy about the use of spectrum changes, Vodacom would have access to Neotel’s spectrum as well as its infrastructure and customer base. That base could be used to leapfrog its expansion, as well as fund other possible mergers and acquisitions on the continent.

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The selling of the government’s remaining shareholding in Vodacom Group coupled with Vodafone no longer having restrictions on Vodacom’s African expansion means that the presence of the group on the continent is set to become pervasive. However, the government’s unbundling of more of its stake in Vodacom is puzzling on several accounts: firstly, though it is branded as a South African company, Vodacom is now really a subsidiary of a British company. The unbundling of direct government stakes in the enterprise, perceptually, gives the impression that any potential reins the government had as a significant shareholder in the business, have now diminished.

Treasury, headed by the minister of finance, sold the stake that - to all intents and purposes, was a state-owned asset to the PIC, which is also state-owned, that was chaired by the deputy finance minister. The problem with this state of affairs, notwithstanding the 10% discount the PIC got when purchasing the shares is that the PIC has in effect potentially jeopardised public service pensions. The PIC is in charge of public service retirement funds and buying a stake in a foreign company subsidiary that is struggling to expand in Africa and thus sustain its growth, has severely compromised the PIC.

Another issue, as pointed out by Zibi, with the PIC deal is the proverbial “selling the family silver to pay off gambling debts” (Zibi 2015). He argues that South Africa could end up with a situation much like the Greek sovereign debt crisis with this type of decision-making. The sale was intended to raise cash for the struggling Eskom but the money raised was nowhere close to what was needed, and as such, they had to borrow more money. PIC, as Zibi notes, is an “enthusiastic” bond buyer and continues to buy Eskom debt, Sanral e-toll bonds, and government bonds (Ibid). These types of transactions put PIC on potentially shaky ground.

This transaction changes the dynamics of the case analysis and brings up the question of whether or not South Africa is being used as a gateway for foreign interests. Furthermore, the change of affairs meant that the case was no longer suitable as a tool to test the hypothesis. The Vodacom case also does not

202 adequately explain the foreign policy queries that this thesis seeks to explore. The decision was taken to continue the research focusing only on the MTN case study.

The final analysis and conclusions drawn is based on the evidence presented. The evidence takes the form of statements of senior ranking government officials as well as the examination of MTN’s corporate strategy and the foreign policy initiatives of the State.

7.2 HEGEMONY AND HEGEMONIC STABILITY THEORY

The theoretical framework that underpins this research is HST. One of the key assumptions of hegemonic stability is that there is indeed a hegemon in the region. Chapter two interrogates the concept of regional hegemony. This thesis modifies the traditional theory in three ways: first, it regionalises the subject matter; second, it uses Miriam Prys’s framework for identifying a regional hegemon; and third, it contends that the hegemon is bolstered by the influence of external actors.

Therefore, the overall argument is that South Africa’s hegemony is a qualified one and requires its power, both structural and smart power, to be projected by the South African corporations that expand beyond its borders. Later in this chapter, a working definition for regional hegemony will be developed to simplify future analysis.

Research in chapter two further established that South Africa acts as a stabilising force for the Southern African region as well as the continent. This stability is made possible through the creation and maintenance of regimes. These areas of cooperation, not only give legitimacy to South Africa’s hegemony, but they also provide a basis for corporations to leapfrog from in their expansionary efforts.

The five pillars on which this theory rests are: one, the regional hegemon should be able to foster regional cooperation to provide regional public goods; two, it should be willing and able to set the norms and values of the region; three, it should be the key driver of regional integration; four, it does not necessarily need to have the highest GDP but it should be able to access capital and marshal additional resources, therefore, it should have economic power; and five, its external leadership legitimacy 203 is garnered from its position as a regional representative in the wider international system, while its internal leadership legitimacy is garnered from its maintenance of regimes and institutions that provide regional public goods.

A challenge with the HST is that the theory is not regionalised and the approach that the thesis took was regional. To address the lack of regionalisation for future research, this chapter develops a working definition of regional HST.

7.3 PROBLEM RELEVANCE

The complexity, as well as the size, of the South African economy in comparison to other economies on the continent, has ensured its continued relevance. Historically, it was an agricultural outpost for European colonialists. The discovery of mineral wealth meant that the country continued to remain crucial to European powers long after the end of colonialism - not only as a source of commodities but, as a permanent ‘white’ presence on the continent. As a result, the country’s economy, as well as its relevance, was coupled with the rest of the continent. Simply put, South Africa’s place in the world has been dictated by its role on the continent.

Concurrent with South Africa’s political development has been the interests of capital – from the era of the BSAC to De Beers, to a myriad of various powerful corporate actors. In the 21st century, the playing field has altered significantly, giving companies residing in the ICT field almost the same level of importance as those in commodities.

Thanks to the development of the Internet, the world has changed at a rapid pace, which has led to increased innovation and a shift in the way states interact with each other. The development of the Internet made the world closer in a way that no single state could. Mobile telephony is the medium that has converged and harnessed all the benefits, and curses, of ICT, particularly the Internet.

In Africa, where ICT infrastructure lags behind the rest of the world, mobile telephony has given the continent a fighting chance at leapfrogging development. Mobile telephony has also meant that the way political actors have to engage with their

204 citizenry has changed. The Arab Spring as well as various social media and text message organised protests can attest to this. Thus the relevance of this study is well-defined within three areas: the importance of the role of South Africa; the importance of South African MNCs; and the importance of multinationals operating in the mobile telephony space.

The study does not analyse the use of mobile telephony in social protest or even social development. Although these matters are important and have been acknowledged, they are outside the scope of the study. This study focuses on MNOs, as they are currently the most important players in a strategic sector. Telephony forms part of the ICT sector, which is not only growing exponentially but also provides an avenue for developing countries to meet their developmental objectives. The importance of the industry means that mobile telephony operators have a key bargaining chip when it comes to dealing with their host and home economies.

This research highlights the reality: Africa is still the new frontier particularly in the case of mobile telephony companies. Not enough research has been conducted that considers in depth the level of influence of mobile telephony MNCs. South African mobile telephony MNCs, in particular, have been able to take advantage of their unique position.

The presence of South African corporations, projects South Africa’s power and presence onto other countries. A more nuanced analysis reveals that the expansion takes place without formal guidance from the South African government. Contrariwise, the South African government has worked steadily to increase its influence on the continent and has increasingly engaged in foreign policy instruments that assist both corporations and the government. As illustrated in chapter six, the State has maintained a vested interest in the success of MTN. For its part, MTN has aligned itself with the regimes created by the State to capitalise on the benefits that flow from such connections.

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7.4 REGIMES AND INSTITUTIONS THAT FOSTER THE PROLIFERATION OF MOBILE TELEPHONY

On a global level, there has been a relatively long-standing multilateral framework, or regime, that governs international telecommunication. With the advent of technology, mobile telephony has grown to be absorbed within the regime. The ITU administers this regime. At the foundation of this regime was the entrenchment of national monopolies. The ITU set the standards for telecommunications (Cowhey 1990). Zacher (1998) argues that parts of the telecommunications regime has "collapsed" as a consequence of free market ideals and the prominence of private actors in crafting the accords that form the regime. The regime is “designed first and foremost to reduce obstacles to the flow of commerce” (Zacher Ibid:5). The main drivers of the regime are not those from developing countries. He notes that: "As a result of the speed of technological change, a great deal of international standard-setting in recent years has taken place through coordination among US, European and Japanese bodies and their major telecommunications firms, and the ITU tends to register accords that have been concluded elsewhere. This does not, however, detract from the point that firms and governments manage to craft standards that assure interconnectivity" (Zacher Ibid:6).

Examining the telecommunications regime illustrates the embedded nature of private sector firms. Participation in a regime already causes the participants in the regime to agree to lose some of their national sovereignty…by consent. The cost of cooperation is particularly high for developing countries that have historically not had their voices heard within existing international regimes. The fact that large telecommunication firms can influence statecraft and governance of a key economic sector has far-reaching implications.

Derrick Cogburn points out that South Africa’s ICT development has, “paralleled and at times exceeded” the developments in the rest of the developed world. He points out that South Africa had access to commercial telegraphy less than two years after the US and that the South African Department of Post and Telecommunications was one of the first in the world to convert to digital switching in 1978 (Cogburn 1998:5). Even the proliferation of mobile telephony was not too far off from developed countries. In the US, in the 1940s, mobile telephony was available to a limited extent 206 in automobiles. In the 1970s, mobile handsets came into use. Although South Africa only came onto the scene with commercial mobile telephony in the 1990s, it is fast catching up with the rest of the developed world, and it is on the cutting edge of technology and innovation.

The sub-section below considers Pretoria’s perceived desire to act as a hegemon by examining a regime that has been instrumental in creating and sustaining it. The underlying reasoning in this section is that the creation of NEPAD has made it easier for South African MNCs to expand on the rest of the continent. Stephen Krasner interprets a regime as being a “set of explicit or implicit ’principles, norms, rules, and decision-making procedures’ around which actor expectations converge in a given issue-area" (Krasner 1983:2).

7.4.1 NEW PARTNERSHIP FOR AFRICAN DEVELOPMENT (NEPAD)

Africa’s history is one that is chequered with corruption and underdevelopment. In spite of the wave of countries that declared independence from colonial oppression in the 1960s, the economic realities on the ground remained virtually unchanged. There was a realisation that the objectives that drove African leaders in the previous century, among other things, were no longer appropriate for the coming century. For instance, one of the key objectives of the OAU was to remove the vestiges of colonisation and apartheid.

To a large extent, this was achieved, but deeper examination revealed the need to develop stronger ties and move the continent towards a more equitable partnership with the developed world. The OAU issued the Sirte Declaration on 9 September 1999 that established the AU. Unlike the OAU, the purpose, inter alia, of the AU is accelerating continental integration.

After the creation of the AU, in addition to increased impetus on the concept of an ‘African Renaissance’ by South Africa’s former President Thabo Mbeki, South Africa has been moving into the driving seat. NEPAD, for instance, has been primarily South African-driven since its inception. Indeed, its secretariat is based in 207

South Africa, and its first head was a South African, Wiseman Nkhulu. The purpose of NEPAD is to revamp Africa’s socio-economic standing, develop closer relations with the principal global players; and integration in the world economy. It clearly states that:

“It is a call for a new relationship of partnership between Africa and the international community, especially the highly industrialised countries, to overcome the development chasm that has widened over centuries of unequal relations” (NEPAD 2011: Para 8). NEPAD, unlike many other plans, looks to renew Africa by creating relationships of partnership with the rest of the world rather than the status quo based on being simply a source of resource and a depository for aid. This was not the first development plan or initiative with the aim of improving Africa’s economic situation. The plans that preceded NEPAD include:

• The Lagos Plan of Action for Economic Development of Africa, 1980–2000 and the final Act of Lagos, 1980;

• Africa’s Priority Programme for Economic Recovery (APPER), 1986–1990;

• The Africa Alternative Framework to Structural Adjustment Programme for Socio- Economic Recovery and Transformation (AAF-SAP),1989;

• A Three Year Priority Programme for Survival, Rehabilitation and Reconstruction of the African Economies, 1986–1989;

• The African Charter for Popular Participation for Development, 1990;

• The Compact for African Recovery, 2000.

These initiatives were not successful but did lay the groundwork for what was to become NEPAD. Tawfik (2010) comments that previous development plans were geared towards being anti-Washington Consensus and its Structural Adjustment Programmes. As much as these development plans had the State as a key player and the importance of the role of civil society, they somewhat ignored the role the private sector had to play in African development (Ibid:62).

In 2001, at the OAU’s Lusaka summit, there was an agreement by African leaders to merge both the Millennium Partnership for African Recovery Programme (MAP) and 208 the OMEGA Plan into a single programme called the New Africa Initiative (NAI). In October of the same year, the Initiative was renamed NEPAD. Adding further context to the creation of NEPAD, the shift in consciousness that occurred on the African continent has to be explored. Unlike its predecessors, NEPAD went further by involving all sectors of society, including the private sector in its quest to achieve its developmental objectives; as NEPAD evolved, it became a full programme within the AU.

• Principles

The principles of a regime reflect the values and the beliefs of that regime. NEPAD’s stated values and objectives are the eradication of poverty; sustainable growth and development; the integration of Africa into the world economy; and the empowerment of women. The principles that underpin this regime are:

I. Democracy, peace, security and good governance

Political governance, peace and security, as well as democracy, were identified as key drivers for sustainable development. The founding document of NEPAD states that:

“It is generally acknowledged that development is impossible in the absence of true democracy, respect for human rights, peace and good governance” (para 79. NEPAD 2011: 17). II. Sound economic policy-making and execution

Another precondition for improved and sustained development on the African continent is both good economic and corporate governance. More importantly, it focuses on the State’s capacity as a precursor for economic growth. Paragraph 86 confirms this:

“State capacity-building is a critical aspect of creating conditions for development. The State has a major role to play in promoting economic growth and development, and in implementing poverty reduction programmes” (para 86, NEPAD 2011:19).

III. Partnership among African people and more equitable partnerships with the developed world

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Domestic ownership and leadership on economic and development issues were identified as being essential to the renewal of Africa’s fortunes. The importance of regional economic groupings (in line with the AU) is emphasised in paragraph 91:

“These economic conditions point to the need for African countries to pool their resources and enhance regional development and economic integration on the continent, in order to improve international competitiveness. The five subregional economic groupings of the continent must, therefore, be strengthened” (para 91 Ibid:20). • Norms

Krasner characterises norms as “standards of behaviour defined in terms of rights and obligations”. One of the key norms, among others, is that espoused in paragraph 79 of the NEPAD document which calls for leaders on the continent:

“…to respect the global standards of democracy, the core components of which include political pluralism, allowing for the existence of several political parties and workers’ unions, and fair, open and democratic elections periodically organised to enable people to choose their leaders freely ” (para 79 Ibid: 17).

• Rules and decision-making procedures

Rules and decision-making are the prescriptions for behaviour by the members of a regime. According to Krasner, decision-making measures “are prevailing practices for making and implementing collective choice” (Krasner Op Cit). The Declaration on Democracy, Political, Economic and Corporate Governance was adopted as a supplement to NEPAD in 2002. The document committed its signatories to enforce the principles that underpin NEPAD and it further created a mechanism to promote compliance with the commitments of the regime by participating states. This instrument is known as the APRM. Paragraph 28 of the Declaration states that:

“We have separately agreed to establish an African Peer Review Mechanism (APRM) on the basis of voluntary accession. The APRM seeks to promote adherence to and fulfilment of the commitments contained in this Declaration. The Mechanism spells out the institutions and processes that will guide future peer reviews, based on mutually agreed codes and standards of democracy, political, economic and corporate governance” (Para 28: NEPAD 2002:10).

This mechanism is ground-breaking because no such self-run mechanism had ever existed before. The final reports are quite frank and extensive. The challenge of the

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APRM is that no punishment is built into the mechanism.

7.4.1.1 Sub-regime within NEPAD

The second regime derived from NEPAD is the mechanism promoting both economic investment and telephony investment ipso facto providing a framework for multinationals to operate and invest. Miroux (2008:3) has highlighted the fact that overall infrastructure investment, including in telecommunications, is vast. Indeed the need versus the available funding for investment is approximately 50%.

As detailed in the previous chapters, companies operating in the telephony space have invested heavily in infrastructure on the continent. MTN is set to spend almost ZAR30 billion on infrastructure across its 23 countries of operation (Mantshanthsa 2015).

The AU and NEPAD have recognised that the world is moving to a knowledge-based economy and ICTs are an integral part of this move. An argument may be made that MTN is contributing to NEPAD’s ICT objectives as detailed in paragraph 107 of the NEPAD document. This paragraph sets teledensity goals including, but not limited to, pan–African e-readiness. On the other hand, it may be argued that the policy framework created by the AU, and NEPAD in particular, has created an enabling environment for MTN to thrive.

. Principles

The belief system of the sub-regime is enveloped in three paragraphs of the NEPAD document: first, paragraph 97 regards infrastructure as being vital to Africa’s economic growth (Ibid:22); second, paragraph 104 illustrates the belief that ICTs contribute to economic growth and development as there is a further belief that ICTs would fast-track African integration as well an intra-regional trade (Ibid:24); third, paragraph 163 advocates the promotion of the private sector (Ibid:46).

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Norms The standards of the regime are covered in paragraph 108 of the NEPAD document. It calls for work with African regional bodies to develop a policy and legislative framework as the basis of reform. Its objective is among other actions also to build regulatory capacity.

. Rules and decision-making procedures

At this stage no appropriate mechanism has been created to sanction members of the regime but it is clear that the first iterations of rules and decision-making procedures within the regime are encompassed in the APRM.

7.4.2 MOBILE TELEPHONY MNCS

Debatably, since 1994, an ideological battle has been raging between South Africa’s corporate community and the State; the crux of their issues has been where the private sector fits in the social and political imperatives of the State. Of course, therein lies the challenge; how can South Africa meet its social and regional obligations without the assistance of the private sector and at the same time how can a private entity be tasked with meeting developmental objectives that are the purview of the State? South Africa’s apparent hegemonic ambitions correspond with Bob Jessop’s idea that hegemony is a normal part of capitalism. According to Jessop, “hegemonic projects somehow manage to secure the support of all significant social forces and that the hegemonic force itself is bound in the long term to be an economically dominant class or class fraction rather than a subordinate class or non- class force” (Jessop 1983:103).

At the end of the Cold War, many African countries were left with a communications infrastructure that was destroyed or underdeveloped. Additionally, the end of the Cold War coincided with the Internet boom, the end of apartheid and the issuing of the first set of mobile telephony licenses that would allow mobile operators to operate. The African continent was not considered to be attractive, or even a viable market, by many established European and American mobile operators. This situation made room for South African mobile operators, who were in their infancy, to

212 be ‘first to market’ on the continent. As seen by the success of the MTN group, in particular, the opportunity was perfect.

As the industry matures, and other players come onto the market, the spotlight is beginning to shine on South Africa’s cellular giants in comparison to players from other markets. It is becoming clear that to meet the technology demands, in some cases, corners were cut and mobile companies entered into relationships that can cause severe reputational damage to South Africa.

On the other hand, South African mobile telephony multinationals are, at surface level, a model that South Africa has been trying to sell to the rest of Africa. South Africa has been trying to create an external perception that is in many respects the polar opposite to established powers from Europe and the US.

South African based mobile telephony companies, informed by South African law and regulations have approached their expansion efforts with encompassing matters such as localisation, local infrastructure building and technology transfers, indigenisation, sustainability and good corporate governance. In other words, South African companies have altered the corporate culture in their host economies to reflect the culture that the ruling government has attempted to inculcate in South Africa. Ironically, even though their motivations appear to be benign, the approach is similar to that of the apartheid government of corporate interest being used to promote South African ideals. However, what is becoming evident is that as with large mining corporations, the interests of the company become amalgamated with the benefit of the country.

The investigation into South African mobile telephony MNCs considers questions on the potential influence and sway, South African MNCs in general; have on South African policy-making - both domestic and foreign. Furthermore, it brings up questions of whether or not a state can legitimately use a private company as an expression of its leadership or power.

Upendra Acharya contends that a capitalist ideology has infiltrated every part of human relations, from international relations to international law, including international customary law (Acharya U 2013:958). He cautions that there is an inherent “conflict of values” in the promotion of corporate interests by state 213 governments. As a result, state dependence on “MNCs comes at the cost of the States’ sovereignty allowing corporate forces to become hegemons in their right” (Ibid: 958-959).

Acharya’s counsel against the over-reliance on MNCs applies to both host governments and home governments alike. The over-dependence on a private actor does weaken state sovereignty and autonomy. Nevertheless, it cannot be argued that an MNC can be a hegemon … yet. The emergence of a global governance infrastructure that is autonomous of the State’s social contract with its citizens, for instance, the ICSID, bears the hallmarks of the possible emergence of a future supra-state.

What can be observed is that MNCs, in a number of instances, act as extra-regional hegemons. They can influence the system on the international, regional and local levels. On an international level, they have increasingly been getting representation at the highest multilateral organisations; for instance, at the ITU there are representatives from private industry. At a regional and local level, the private sector is heavily involved, including representation at the meetings of key regional bodies. Thanks in no small part to being in control of capital; private industry has been at the forefront of the development, and effective control, of regional infrastructure.

Kornegay and Landsberg (1998), during the honeymoon phase of South Africa’s democratic transition, reflected on the role that corporate South Africa was to play. They believed that corporate South Africa had the ability to “catalyse a Marshall plan for South and Southern Africa under Thabo Mbeki’s African Renaissance”. This assumed an environment where the black business community was brought into the fold.

South African corporations have been able to use South Africa’s status on the continent and the ‘African Renaissance’ as the rallying cry for their expansionary efforts on the continent. This has resulted in markets being opened for South African corporations where doors had previously been shut because of South Africa’s former identity as a ‘pariah’ state. Darlene Miller contends that South African capital can expand into the region with the “political authority” bestowed by the democratic government. In other words, South African corporations are viewed as the

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“economic bearers of the African Renaissance” (Miller 2003:12). South Africa’s leadership regionally, as well as the moral capital it gained from the successful democratic transition, have given it de facto headship of the African Renaissance ideology (Ibid:14). This has found expression in South Africa’s driving of NEPAD to the extent that it even hosts NEPAD in its economic engine room, Gauteng.

Miller, Saunders and Oloyede (2008) observed that South African investment in African host economies has not been seamless, with many local communities contesting the presence of South African corporations.

This discomfort with South African companies may be one born of concern about the lack of technology transfers or the displacement of local industry; even possibly a negative corporate culture being expressed by South African corporations outside of their home environment.

Miller et al, illustrate that South African investment in Africa, and Southern African hosts, has been for the most part facilitated by regional governance structures as well as external players such as the Bretton Woods Institutions, donor communities, and a SADC government-fronted shift towards increased privatisation (Ibid: 2).

7.5 EXTRA-REGIONALISM: HEGEMONY OR INFLUENCE

South Africa’s role on the continent, region and globally has been explored. Its role in each layer is decidedly different. The role of mobile telephony operators has also been considered. Both have been viewed through the lens of hegemony and hegemonic stability and have come to unexpected conclusions.

When considering the role of multinationals, especially MTN, it is crucial to examine the possible implications of their operations on the political economy and South Africa’s external role perception. Conceptualising post-apartheid South Africa on the continent, as well as its place in the world, is quite difficult. There is a duopoly of dominance: regional hegemony and extra-regional players. Yet, neither concept quite fits the actual state of affairs.

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Ian Clark (2009) offers an intriguing concept that might just lead to a tool for proper analysis. He argues that it is possible to have hegemony that does not necessarily mean having a single hegemon. According to Clark there are various modes of hegemony such as collective hegemony in which the Concert of Europe can be described as an example. This collective is argued to have the characteristics of a single entity. He also describes a singular hegemony and the example provided is Britain in 1870 to 1914, but he argues that it did not have all the typical features of power that would be expected of a hegemon.

The US’s singular hegemony in the post-war era was coalitional in nature. The underlying thread in Clark’s argument converges around the issue of legitimacy and whether the hegemonic role has been accepted. Goodin, Güth & Snidal (2005) correctly argue that hegemony is multidimensional and is very different from empire: it relates very much not to complete control but rather wide-ranging substantial influence. This comes back to the issue of legitimacy. Secondary states have to agree to be led for hegemony to have a constituency.

For regional hegemony, the issue of legitimacy and a willingness to be led is even more acute. Burges (2015) refers to his 2008 work in which he proffered the concept of consensual hegemony, of which soft power is inherent, as a way to describe Brazil’s position in Latin America from the 1990s to 2000. At the time, it did not have the resources, or the willingness, to overtly claim leadership. However, his 2015 analysis illustrates that consensual hegemony has its limits and at some point there needs to be a financial and political investment into shoring up its regional position.

In the case of South Africa, there are a lot of questions as to whether or not its role both on the continent, as well as in the Southern African region, represents sub- imperialism rather than hegemony. South Africa’s post-apartheid foreign policy on the continent has been one that placed South Africa almost at the centre of political and economic flows on the continent. However, one of the reasons given against viewing South Africa as a hegemon is that it does not have willing followers. On the other hand, it can be argued that South Africa uses its position to create institutions that foster a ‘co-operative hegemony’. It may also be argued that the behaviour of ‘weaker’ states in Southern Africa is

216 simply normal resistance strategies to actual hegemony and thus, in essence, do not negate hegemony but legitimise it. Outside the region, the situation is a lot more complex. There are many other hegemonic contenders, notwithstanding the fact that South Africa does struggle to project its power further onto the continent. Arguably, however, by South Africa becoming the de facto captain of the ship of regional integration, and pursuing the agenda of “African renaissance”, it has positioned itself into leadership or is at least becoming an extra-regional influence in a number of areas on the continent.

What has been clear from all the preceding analysis is that, in terms of its relations with the rest of the continent; the embedded nature of multinationals, or capital, in policy development cannot be ignored. The central idea of sub-imperialism is that the sub-imperial power is beholden, and operates on behalf of the super-imperial power. This argument seems fair considering the way that the South African economy is structured, and some of the decisions that have been made so far. However, the problem with this argument is: if there was indeed a sub-imperial agenda, then one would expect to see the system perpetuate itself in seeing the development of colonies across the continent.

7.6 NEW DEFINITION FOR REGIONAL HEGEMONY

In chapter two, the traditional theory of hegemony was adapted, as current theories do not accommodate the possibility of a regional hegemon. This thesis argues that regional hegemony does exist and develops a working definition based on the dimensions of hegemony proposed by Miriam Prys (2008; 2010). Her model posits that a regional hegemon has three attributes: Perception- Is its position accepted? Projection- Is it the one setting the norms and values for the region? Does it establish institutions; lastly Provision- does it provide some form of public goods?

Working definition of a regional hegemon:

An economically and politically dominant state in a shared geographical territory with some historical commonalities that has the ability to instigate and/or maintain regimes as well as to project its influence in order to entrench its leadership. 217

This definition still requires refinement, but it does take into account the influence of extra-regional hegemons or influencers. The contention is that, in light of the regionalised nature of the international system, it is necessary to create a definition of a regional hegemon.

Therefore, it is concurred that indeed South Africa is a regional hegemon, at least in Southern Africa, because it has been willing to set up and maintain the norms and values for the region as expressed in the regimes and institutions that it creates and maintains. On the rest of the continent, South Africa has been attempting to put itself in a position of hegemony or leadership but has not been completely successful. It has been able to provide a degree of public goods and has been driving the development of common regimes and institutions; however, it has not succeeded in entrenching its power.

In either event, South Africa’s regional hegemony and attempts at leadership are in decline. The country’s domestic political situation has become so fraught with tension that any concrete steps at maintaining or pursuing hegemony is at risk. Moreover, South Africa’s moral capital, that it gained from its peaceful transition is quickly depleting, as its value-based foreign policy becomes more outrightly interest- based.

Mobile telephony MNCs have enabled South Africa to project an image of leadership and have been an expression of its soft power (discussion on power can be found in chapter two). The image of MTN on the continent, for instance, has been a powerful one. It is a South African empowerment company that is highly successful and for the most part reflects the values that South Africa tries to espouse domestically, such as indigenous ownership and local representation in upper management (chapter six details these efforts). Rwanda for example, was one of the first countries MTN expanded to and by 2003, the Rwanda operation had a Rwandan national staff complement of 98.5% and a strong ‘localisation policy’ in place (MTN 2003:70).

The MTN story is part of the wider story of South Africa’s rebirth, as discussed in chapters three and six, as well as Africa’s attempts at renewal under the NEPAD framework. The company’s 2003 sustainability report confirms that the reason that it 218 changed its holding company’s name from M-Cell Limited to MTN Group Limited in 2002 was:

“…to leverage the strong MTN brand across Africa; create a uniform brand identity; and provide a platform to develop a more cohesive future strategy for the company” (MTN Group 2003:1).

Arguably, the decision to strengthen its brand across the continent was not a decision that was made for purely commercial reasons. The then MTN Group chairman, Cyril Ramaphosa, boldly proclaims in MTN’s 2003 sustainability report that:

“ The MTN Group is strongly committed to NEPAD’s vision of an African Renaissance and I believe that we are making an important contribution towards the achievement of this vision by providing accessible communication services. But our responsibilities extend beyond simply providing this service. If we are to be true to our commitment to Africa, then we need to invest in a manner that takes into account the expectations of our stakeholders and contributes appropriately to the social, economic and environmental sustainability of the communities we serve” (Ibid:2).

Certainly, this statement mirrors the African focused foreign policy initiatives that were made by the State. South African foreign policy and economic diplomacy is discussed in chapter four.

Chapter two considers South Africa’s regional hegemony and regional hegemonic stability. The use of economic and commercial diplomacy as a tool of South African foreign policy is considered. Vickers and Ajulu’s (2008) definition of economic diplomacy was particularly instructive to the understanding of the concept in the South African context. The authors illustrate that economic diplomacy encompasses a range of activities across ministries that encourage trade and investment, as well as positively affect the perception of the country externally. Miller’s (2009) study sounds a warning that the operation of an MNC does reflect on its home country with consequences for the relationships between states. The results from this thesis’ research, and analysis, suggests that for the most part, MTN’s expansion has improved relationships between South Africa and its African counterparts. Moreover, the expansion of MTN to include the Middle East and North Africa, in spite of the financial risks involved, serves as a tool to further strengthen South Africa’s image 219 abroad. In other words, the expansive presence of South African companies, particularly in key sectors such as mobile telephony, strengthens its position as regional hegemon. Also, the South African value system has been exported across its borders. Of course, there is inherent danger in such an approach as can be seen with the Nigerian MTN fine discussed in chapter six.

President Thabo Mbeki’s speech, at the re-launch of the PIC in 2005, alludes to the responsibility of the PIC to transform the South African economy to ensure meaningful participation by black people, as well as African economic renewal (Mbeki 2005). Mbeki bemoans the fact that much of Africa’s wealth is invested outside the continent. He points to a study of nine African civil services funds, and that they were worth, jointly, more than US$120 billion (Ibid). To this end, he declares that:

“If we were to agree among ourselves to set up an African infrastructure fund, a possibility exists for us to start taking our fate, as Africans, into our own hands….We have agreed that the Public Investment Corporation and the Government Employees Pension Fund should investigate this matter further so that it can be pursued at the level of NEPAD”(Ibid).

Mbeki’s speech illustrates that the State, or at least its political leadership, had already started working towards drawing in African resources to meet African developmental challenges, in partnership with the private sector. This is an important point to make at such an event because the PIC was on the road to become Africa’s largest asset manager as well as MTN Group’s largest investor. Unlike other investment companies, the PIC’s mandate always had a developmental agenda inclusive of South African, as well as continental, interests. In the same speech he reacts to an article lamenting the lack of shareholder activism in stock exchange listed companies by Ann Crotty for the Business Report. Mbeki affirms that:

“…institutional investors are positioned better than anyone of us to protect the value of the JSE investments of ordinary people as well as to promote the corporate transformation that will allow for meaningful participation by black people in the South African economy” (Ibid). It is against this backdrop that that the active role the PIC has taken in the MTN Group can be understood. In 2004, the PIC, when it was still the Public Investment

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Commissioners, was a majority shareholder with a 10.3% shareholding in MTN Group (MTN Group 2004). One of the major investments that it made just prior to its relaunch was increasing its shareholding in MTN. In April 2005, the PIC bought up a considerable number of MTN shares that had been held in the shelf company, Newshelf 664 (SENS announcement, Imara 2005). This move by the PIC can be understood as the State using its investment arm for ensuring that it not only has involvement in major South African companies; particularly those that operate on the continent. But, also as a way to keep MTN in line with the State’s vision. By 2016, PIC shareholding in MTN had increased to over 16%. Moreover, the PIC has not shied away from being an active shareholder in its dealings with the MTN board (Mochiko 2015; Prinsloo & Bonorchis 2016).

Hegemonic stability, as discussed in chapter two, encompasses the different dimensions of power and influence. For South Africa, its use of economic diplomacy under the ambit of NEPAD assists in it garnering enough influence for regional hegemony. The evidence in the MTN case suggests that through private sector investment, South Africa is capable of projecting its soft power to the rest of the region. The most striking result from this research is that even though companies such as MTN benefit from being aligned closely to government policy, the State’s own economic diplomacy machinery is not sufficient. The evidence finds salience in Soko and Belchin’s (2009) argument that South Africa does not have the “commercial diplomacy apparatus” that it requires to successfully engage in “high level economic diplomacy” (Soko and Belchin 2009:42). Where this research differs from Soko and Belchin is in their argument that; “South African corporate expansion is as a result, of its own efforts” (Ibid:43). The evidence suggests that in certain sectors, more specifically the MTN case, there is considerable assistance from the State and corporate expansion cannot be divorced from the State’s own efforts. However, the challenge is that South Africa’s commercial and economic diplomacy has not reached the level of sophistication needed to engage all players in the economy to meet the country’s agenda.

Part of the challenge, as previously underscored in chapters one and two, is that traditional hegemony studies do not accommodate the existence of regional hegemony. Ian Clark (2009) posits, however, that hegemony may exist as a concert

221 of powers. This thesis takes the contrary view, and accepts that regional hegemony does exist even though it does not replace the existence of international hegemony. Hegemony may be entrenched for reasons such as symbolism (Schoeman and Alden 2015). It becomes clear that the HST has to be revised to accommodate regional hegemony. Established theories of hegemony and hegemonic stability do not adequately address the antecedent issues of regions and power. This necessitates the use of an atypical version of HST.

7.7 A NEW FRAMEWORK: REGIONAL HEGEMONIC STABILITY THEORY

Petropoulos Sotiris (2008) attempted to develop the first iterations of regional HST. Sotiris correctly ascertained that it would more appropriately account for the regional cooperation initiatives that were taking place in the developing world. This model is made up of three conditions: influence, internationalisation and institutionalisation.

In essence, Sotiris was arguing that the hegemonic state has to be able to influence its neighbours, intentionally or unintentionally. The neighbouring states should have a lower international profile than the regional hegemon. In other words neighbouring states, and the region as a whole, should not be the centre of international focus. Lastly, there should be a low level of institutionalisation in the region. Regional bodies formed, according to this theory, would have to be based on a “loose organizational structure” (Sotrisis 2008:7).

The challenge with Sotiris’s conceputalisation of regional hegemonic stability is that - although it may be applicable to the regions that were examined in this study, Asia and Latin America; the conditions are not appropriate for Africa. One of the main reasons that it would not work as a tool to interpret African cooperation is that Africa, unlike the other two regions, is not fiscally harmonised. Moreover, Sotiris does not address the issue of regions that lack a set definition, or countries that view themselves as belonging to more than one region.

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This thesis proposes a framework for regional hegemonic stability, which advances a regional hegemon as a system stabiliser. The pillars upon which this theoretical framework rests are: . The hegemon should be able to foster regional cooperation in order to provide regional public goods; . It should be willing and able to set the norms and values of the region; . It should be the key driver of regional integration; . It does not necessarily have the highest GDP but it should be able to access capital and marshal additional resources. Therefore has economic power; . Its leadership legitimacy externally is garnered from its position as a regional representative in the wider international system, and its internal leadership legitimacy is garnered from its maintenance of regimes and institutions that provide regional public goods.

This theoretical framework is born out of theories of hegemony in international relations. Hegemony implies that a state is in primacy and thus in power and authority over other states. The results of the present study suggests South Africa, in spite of its domestic challenges, is still in a position of primacy over other states, particularly in its immediate neighbourhood. Through its private sector investments in conjunction with its foreign policy engagements, it has sought to ensure that it continues to be in a position of leadership.

7.8 CONCLUSION

South Africa is closer to what this thesis defines as a regional hegemon. South Africa is indeed setting the agenda, and taking on the cost of sustaining the system that it is developing. Furthermore, the foreign policy posture that it has progressively moved towards is bolder and more in tune with the developing world. It appears to be positioning itself as more than just an outpost of Western ideals and machinations.

The recurring argument is that South Africa does not have the capacity to reward or punish and therefore does not have hegemonic authority. This thesis maintains that

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South Africa’s capacity, including its legitimacy, is partly derived from the multinationals that are born in South Africa.

With legitimacy, the sheer volume of South African MNCs that have proliferated on the continent gives the impression of South Africa’s primacy. Although the major challenge with this statement is that this corporate expansion has occurred without, in some instances, apparent physical assistance from government.

At the same time, the State has pioneered visions and strategies that many of these MNCs, particularly, the mobile telephony MNCs, have used as a jump pad. This begs the question why these policies and strategies were created in the first place. The conclusions drawn from the present study are that certain MNCs are embedded in political and policy statecraft. At this stage there is no evidence that South Africa’s MNCs act as extra-regional hegemons.

In spite of possible issues with patronage, the presence of MTN has changed the economic landscape of the countries in which it operates both directly and indirectly. Various revenue sources add to MTN’s financial success on the continent; but, the level of investment that is made in improving communication infrastructure and the amount of tax revenue that mobile telephony, MTN in particular, adds to the local economy cannot be ignored.

MTN is a South African multinational which appears to enjoy a muted level of political support. One would imagine that there would be overt government support for a company that appears to support government ideals and harnesses South African prowess. But, at the same time it can be understood why the State would shy away from overt support because it would not want to be viewed as continuing to use its immediate neighbourhood as well as the continent as its market place, as it did during the time of apartheid.

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CHAPTER EIGHT: CONCLUSION

This thesis demonstrated how the interests of South African multinationals, particularly in mobile telephony, were embedded in the economic dimension of South Africa’s foreign policy. It did this by using the hegemonic stability theory as a framework to explain the interaction between the State and South African MNCs in conceptualising South Africa’s regional hegemonic status. The instruments that serve as mechanisms for facilitating multilateral cooperation were considered; for the purposes of this study, NEPAD was utilised.

As is shown in the thesis, NEPAD is an imperfect mechanism for cooperation, but it does fill the conditions of a regime by delineating “the sets of implicit or explicit principles, norms, rules, and decision-making procedures around which actor’s expectations converge” (Krasner 1983:2). Regimes and HST are interlinked concepts, as explained in chapter two of the thesis, the ability to create or maintain governance regimes is a vital role of the provider of hegemonic stability. The natural question that flows from this is whether South Africa has been a provider of stability to Southern Africa, its immediate region, and to the rest of sub-Saharan Africa. The answer to that question is yes because as is shown throughout the thesis, not only has South Africa provided ideational leadership regarding Africa’s economic revival, vis-à-vis Mbeki’s African Renaissance ideology but also it has created governance mechanisms that are broadly adopted. South Africa further illustrates a willingness to assume hegemony, and maintain stability, by driving efforts at regionalism and regionalisation, as well as setting the norms and values of its immediate and wider region.

The thesis took a unique approach to hegemonic stability by looking at the role of MTN. The reason for this was that MNCs have structural power owing to their material resources and influence the governance in which they operate (Sell 2003). MTN was shown to embrace, in their company reporting, the principles espoused in African Renaissance and NEPAD. The information contained in company reports including the annual report is crucial as it details not only compliance with various

225 applicable regulations, such as accounting regulations, but it also reveals the company culture. Moreover, companies listed on the JSE have to submit integrated annual reports. MTN is a fascinating study, as it was one of the first BEE companies created in South Africa’s democratic dispensation and its purpose was to be a vehicle to include black South African investors in the mobile telephony sector. In order words, the new dispensation used mobile telephony companies to help meet their national goal of including blacks in the economy as well as providing telecommunications service to them more broadly. This thesis takes the view that this co-opting of the private sector continued when MTN expanded beyond South Africa’s borders and created additional avenues for South Africa to diplomatically engage with other countries in Africa (and now the Middle East).

8.1 WHAT IS THE RELEVANCE OF THIS RESEARCH TO THE ALREADY ESTABLISHED LITERATURE AND THEORETICAL DISCIPLINES?

This thesis adds to the existing body of knowledge with theory and research on South Africa’s corporate expansion. Existing research on South Africa’s corporate expansion has not fully considered the development of mobile telephony companies. This thesis contributes to this area of the investigation. What this research illustrates is: that as much as there are commonalities between the expansion efforts of South African corporations in other sectors and those in mobile telephony, there are several differences as well. MNOs that operate on the African continent illustrate that the profit-making potential is high in spite of the fact that it is a risk-laden industry. Other than physical risks to infrastructure, there are legislative and regulatory hurdles that mobile telephony MNCs must navigate if they want to make their mark.

African expansion in this area is notoriously difficult because companies often have to build their infrastructure from the ground up and commit extra resources to provide the basics such as electricity to power up their operations. Moreover, there is a danger of further entrenching patronage in their host countries.

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8.2 WHAT ARE THE IMPLICATIONS OF THIS STUDY AND WHAT CONTRIBUTION DOES IT MAKE TO KNOWLEDGE?

This study has implications for those involved in policy research and, academia. Regarding policy research, this study illustrates that there are linkages between South Africa’s corporate expansion and South Africa’s foreign policy objectives. It appears that South Africa views its corporate actors as agents of its African Renaissance vision. The problem with this perception is that there is no set mechanism in place to harness and coordinate the efforts of South African corporate investment. These challenges are acute in mobile telephony where there is further room for corporate misbehaviour, which reflects badly on South Africa. This research has highlighted the need for analysts and practitioners in the policy space, to create frameworks to govern the triangular relationship between host economies, home economies, and the MNCs.

A number of South African corporates have gladly embraced the ideology of African renaissance as political justification for their push onto the rest of the continent. Regional and international policy instruments that South Africa engaged in, have given impetus to the move by South African corporations, such as those in mobile telephony. However, as much as mobile telephony MNCs are giving ‘hands and feet’ to the vision of the South African government, there is little evidence of South Africa being able to control these companies.

In fact, the picture that has emerged is that South Africa’s policy dalliances and internal challenges have hampered the ability of mobile telephony MNCs to expand their domestic technological capabilities, which has implications for their operations outside the country. Reflective of the relationship that South Africa currently has with its corporate sector, there have been serious tensions between corporations in the telecommunications sector as a whole and the State. Part of the problem may be attributed to the fact that there have been internal frictions not only within the ruling ANC but also in the DTPS. This has led to some form of strategic and policy inertia, as well as a failure of implementation.

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For academics, this research highlights the need for further refinement of traditional theories. Many of the theories that are in existence do not address the current configuration of the international system nor do they address realities present on the African continent. Part of the reason that these theories have been deficient is that schools of thought that are divorced from the realities present on the continent create them. This does not suggest that traditional theories do not have value, but they require modifications to make them useful analytic tools.

This study has also illustrated that theories that are no longer popular in academic discourse, such as hegemonic stability, can be revitalised by updating their pillars to reflect modern realities. Furthermore, the theory has been expanded, in this thesis, to not only consider regional hegemony but it is also not confined to only examining the international financial governance system as was the rationale when HST was first theorised.

8.3 ADDITIONAL CONSIDERATIONS

In spite of the localisation strategy undertaken by South African companies in the mobile telephony space, there are not sufficient methods to sanction an MNC on a macro level. What this means is that corporate misbehaviour, real or perceived, might be punished more harshly by the host country as a way to send a message to South Africa; as merely shutting down operations would affect the host nation more than it would South Africa. The development of some code of conduct for business, along with built-in reward mechanisms, would be a good avenue to reduce threats to both South Africa and its MNCs.

Another issue that was not considered but is important is the role of hardware companies such as Chinese Huawei and Swedish Ericsson. The latter company has been providing telecommunications infrastructure on the continent for a long time. The entire telecommunications ecosystem is opaque and needs probing if an accurate analysis is to be possible.

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The launch of the Telkom mobile network, 8.ta, that eventually became Telkom Mobile, altered some of the initial assumptions in this research. Initial indications were that Telkom Mobile would serve the functions of MTN concerning the promotion of the State’s agenda. However, thus far, this has not been the case. Telkom Mobile appears not to have a discernible expansion strategy and, added to this: there has not been enough money allocated to Telkom Mobile for them to be a true competitor to MTN.

8.4 CONCLUSION

If the internationalisation method of MTN is considered, it may be argued that its host countries have positively benefited from MTN's operations. Moreover, JSE listing mandates means that they have had to use local suppliers where possible and build up local talent. From this, it may be observed that South African corporations build up, as well as augment, an entire ecosystem that is meant to support their operations; from the grassroots levels, with street recharge voucher vendors, to higher levels, with local engineers and other professionals whose services these MNOs directly or indirectly utilise. A good illustration is MTN Rwanda, where the economic and IT ecosystem was enriched when the GSM license negotiations commenced for MTN to begin operating. Previously new IT businesses learned very quickly how to negotiate with large multinationals. Also, technology transfers have enabled other companies to emerge and bolster the telecommunications infrastructure in the country.

The picture is not rosy for all parties. With the advent of mobile telephony operators offering Internet services to individuals and business in many host economies, local Internet service providers have struggled to compete, and small time Internet cafés have also struggled to remain economically viable. Chinje (2008) found that, in Cameroon, as much as MTN purchased from supposed local companies, many of the companies are not local but in fact international companies that have a local presence.

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The history of South Africa and its ability to project its power is linked to the embedded nature of significant capital particularly from the extractive industries. Telecommunications is a burgeoning industry and one with severe developmental implications. At the very outset, mobile telephony companies were to operate for the purpose of meeting the State’s internal developmental agenda.

South Africa places itself at the forefront of Southern Africa and Africa’s renewal via the incomplete ideology of African renaissance, and programmes such as NEPAD. It can therefore be inferred that South Africa is placing itself in a leadership position and consequently, its companies are the harbingers of economic integration and developments.

Definitively, this thesis argues that hegemonic authority is partly derived from the ability to provide public goods, lead with technological innovation, and be a willing problem solver. South Africa has undoubtedly proved its willingness to be a problem solver in some areas, as well as galvanising its private sector to provide public goods such as infrastructure.

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ANNEXURE A: SECTION 2 OF GTLD-MOU (GENERIC TOP LEVEL DOMAIN NAME-MEMORANDUM OF UNDERSTANDING)

The following principles are adopted: the Internet Top Level Domain (TLD) name space is a public resource and is subject to the public trust; any administration, use and/or evolution of the Internet TLD space is a public policy issue and should be carried out in the interests and service of the public; related public policy needs to balance and represent the interests of the current and future stakeholders in the Internet name space; the current and future Internet name space stakeholders can benefit most from a self-regulatory and market-oriented approach to Internet domain name registration services; registration services for the gTLD name space should provide for global distribution of registrars; a policy shall be implemented that a second-level domain name in any of the CORE- gTLDs which is identical or closely similar to an alphanumeric string that, for the purposes of this policy, is deemed to be internationally known, and for which demonstrable intellectual property rights exist, may be held or used only by, or with the authorization of, the owner of such demonstrable intellectual property rights. Appropriate consideration shall be given to possible use of such a second-level domain name by a third party that, for the purposes of this policy, is deemed to have sufficient rights. (gTLD-MoU - February 28, 1997)

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ANNEXURE B: MTN HISTORY TIME LINE

• Awarded GSM 900 Licence in South 1993 Africa

• MTN Group launched in South Africa 1994 • MTN SA commercial launch • M-Cell becomes public company 1995 • MTN Holdings acquire service provider M-Tel • MTN SA launches Prepaid platform 1996

• Move in to Africa: Acquires Licence in Swaziland, Rwanda, 1997-1998 Uganda

• M-Cell buys 100 percent of Orbicom & 72 percent of MTN Holdings 1999

• Licence in Cameroon • M-Cell buys remaining shareholding 2000 from Transtel

• License in Nigeria • Launch of MTN Foundation 2001

• M-Tel becomes MTN Service Provider 2002 • M-Cell becomes MTN Group

FIGURE 3: MTN GROUP FOUNDING TIME LINE. (ADAPTED FROM GOLDSTUCK, 2006: 33-35)

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ANNEXURE C: MTN Group Structure

FIGURE 4: MTN GROUP STRUCTURE AS OF 1 JANUARY 2016 (AUTHOR'S ADAPTATION) (MTN, OP CIT, 2015:10)

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