Assignment on International Management

International Management – Republic of South Africa (Business & Management)
1. Culture, management, business practices & challenges
Multiculturality
 Buzzword since mid-90s: South Africa is the new «rainbow nation»  The new rainbow-nation as a
society-building ideology, as it has been publicly especially publicly espoused by Desmond Tutu
 End of apartheid state – need for a society-building ideology – «unity in diversity»
 Ubuntu and Afrian Reanaissance to create a new national identity  Ethnic diversity not only brings with it
many philosophical-spiritual sides, it also carries liberal democratic basic principles of individual autonomy,
equality, freedom and fundamental rights
 Downside: latent and open conflicts exist between different social classes and ethnic groups  In this
reconciliation process, new ways are being sought to overcome ethnic and population group-specific
affiliations and traditions to be preserved and accepted without associating them with particular rankings,
exploitation, or individual discrimination of the past. Latent and manifest conflicts can be found between
different social classes and ethnic groups, especially between members of Sud African groups, as well as
political and economic refugees from other African countries.
 Downside: new perspective on multiculturalism does not bring only joy and acceptance about diversity 
intra-ethnic conflicts with historical roots  The Shaka Zulu war of 1818 still has an impact on the
coexistence of the ethnic groups affected at that time. However, social disparities have also always been
reasons for conflicts.
 modern day phenomena – gangsterism  part of everyday life in large cities and often makes unity in
diversity seem unreal.
Multiculturality – Some consequences
 Non-white population groups fear (cultural) absorption by foreign influence, economic exploitation and
social degradation. Westernization  «chameleon strategy» (black hearts but white skins); manoeuvre
betw. cultural adaptation and cultural autonomy  On the one hand, they would show "Western
behaviour" to the outside world, closing themselves off to "Western concepts and motivations," while on
the other hand they were able to preserve their own attitudes and perceptions on the inside.
 White population groups: preservation of their own identity & fighting for their position as a political
minority. Fear for their personal security, job security and the economic future of companies
Indaba (Consensus decision-making process)
• Criteria governing the processes: Age (increasing age, experience and wisdom grow and with it
recognition in the community.); Time; Consultation; Consensus
• Black Africans prefer  Decisions should be determined by consultation and consensus and outside a
specific time limit
• Obligations to ancestors and families, when deciding alone = degrading the collective knowledge and
wisdom of the community  deliberating together = honouring the community
• Decision-making process rules and phases - repeated at different stages
• Whether men or women take responsibility in the final instance depends on the one hand on the political-
ethnic structure of the kinship system, and on the other hand on the areas in which decision-making
processes are virulent.
Indaba - Phases
• Social & economic introduction – new people are introduced by older members (= sign they can be trusted
and are credible). Newcomer brings gifts and provides a specific speech
• Presentations of proposals on the topic or problem  that special attention is paid to people who are
foreign to the culture or who do not belong to the family will scrutinize the proposals presented in order to
get to know and assess the business concept and the person; duration: hours to days or weeks – with
many mutual and repeated visits
• Elders in company or family informally talk to relevant leaders of different departments in company and
sometimes even distance relatives/outsiders from same age group (aim of consulting together). Even
township inhabitants are consulted throughout the process
• Only when specific possibilites of the decision become apparent does the real decision-making process
begins.

Indaba – Decision Variables
• Important – decisions are finalized only for the moment and continues to be changeable!! No garantee
obligation in the Western legal sense.
• Decisons are based on 4 defined variables which form the basis of Bantu societies:
o Consensus through discussion as an exchange of ideas – spoken words have inherent mystical
powers  When people talk to each other, they allow the collective wisdom to appear in their midst –
nothing needs to be written down
o Decisions must «feel good» to those involved
o Agreements and understandings must be collectively accepted  No single decision-maker: no
single person has enough wisdom to lead an entire group of wise, old decision makers. Only when all
people are able to contribute can there be proper harmony.
o All decisions are made «empathetically» and details are often determined later; Indaba results =
initiation of change that must go with the times, ergo a decision is never final
Spirituality
In traditional African beliefs, myths about the origin of the world, natural phenomena and social customs play a
major role. Rituals are practiced, especially the association of ritual actions with certain word sequences and
verses. Prayers and rituals are often associated with ancestral worship, as ancestors have a prominent role in
people's lives. Even though faith is often practiced at home - because faith is strongly tied to family and clan. A
special position is held by the clan elders and people who have reached the position of spiritual leader by birth.
They know the sacred places where prayers and sacrifices are made. There is a "moral code" associated with
African belief systems that includes respect for life and for "being human” In contrast, it has often been
observed that there are spiritual forces that aim to violate "being human" through magical activities. The
spiritual belief philosophy forms the background and root for any interpersonal interaction situations. Thus, the
cultural standard of "spirituality" in its significance for everyday life in South Africa is a fundamental orientation
pattern with which foreign specialists and executives also have to deal.
Example: Health problems & accidents
Example: Break-downs & theft
Order of rules and hierarchies
Even though globalization processes are slowly changing kinship and family structures, the African family still
has more influence on social life than is the case in large parts of Europe. This applies not only to everyday
situations, but also to economic relationships and internal structures. African business methods are oriented
around people. When new business or action opportunities are explored, key people are first sought out and
then the local rules are learned. This applies in particular to organizations and companies that are "non-
Western" in their management. Most large companies in South Africa, of course, tend to be run according to
Western standards and are therefore at least not obviously oriented to the order of rules and hierarchies
described above.
In South Africa, alliances include all those people with
whom one has a family connection or is a long-term
friend. In fact, they are "extended families" made up of
real and fictional relatives. All other people who are are
not included in this imaginary circle of allies are
assessed as potential competitors or rivals. African
business structures thus resemble old-African family
structures of the "extended family" to this day. The
founder of the company, a senior, is at the centre of the imagined circles, which in turn are composed of close
and distant relatives: The inner circle consists of people of the same age who belong to the same generation
as the Grunder himself. They share the knowledge of decades of experience and collectively drive the
company. They make up the "board of directors". Often these highest company positions are filled by family
members. The inner circle contains mostly middle-aged persons and consists of sons and sons-in-law of the
founding generation. Through their education, persons of this circle strive for special fields and corresponding
positions, for example in the field of marketing or controlling (of the younger generation). However, they will
always be subordinate to their elders throughout their lives. Over time, further circles and circles are formed by

grandchildren, distant relatives or friends. The further away people and circles are from the inner circle, the
less these people have to say and the more virtual their relationship with the close family will be.
The system does not allow for fundamental distinctions between family and business interests. Supervisors
and employees are not connected by contracts, but by family structures. Therefore, family relationships cannot
be separated from business. In addition, certain positions in the company are not necessarily tied to task
completion according to responsibilities. Tasks are often assigned informally and are based on the current
situation. This fact, that the company in principle mirrors the decision-making structures of the family, leads to
informal contacts on the level of action, which, to an outsider from the Western world, not infrequently appear
as opaque or even "corrupt" actions.
UBUNTU
• Ubuntu is an African lifestyle practiced in everyday life from African traditions.
• The word and concept "Ubuntu" has no direct translation into Western languages. All value concepts
bound in it have a quite certain ideological binding: Ubuntu carries the "world spirit" in itself, which can
remind the cultures of the human becoming and show them the entrance to the harmonious and peaceful
living together
• The concept of Ubuntu has been discussed by many different scholars of different disciplines in Sud
Africa: It is described as an African way of
looking at life, the world, people and things.
Ubuntu is a kind of collective consciousness, a
religion of its own, an ethical view of things, and
its own politics with political Ideologies.
• Ubuntu manifests itself in everyday life, in
people's behaviours, creative expression and
spiritual self-fulfilment. It manifests in the
universal sense of brotherhood, sharing, giving and
receiving. In other words, Ubuntu manifests itself
in how one gets along with others, how one
treats them, or how a person integrates into the
community as a social being. The "African Humanism", the "true humanity", is inherent in every person
and shows itself in open communication, in common spiritual-religious experiences, in empathy and
mutual understanding. Open communication here means conducting communication according to the
existing norms of the social network, filled with the value of "honesty" in the culturally specific sense.
Interpersonal interactions are characterized by the pursuit of harmony, participation, reciprocity, and
cooperation when group-specific reciprocity is involved. In ingroup-outgroup relationships, the produce
expectations of general reciprocity, other cultural frames of reference are included in the expectations of
action
• Another issue with Ubuntu is morality, which is expressed in the obligations a person has to others. Thus,
it is a kind of "social morality" that is equally expressed in communication, in the social environment, in the
law, and in the preservation of nature. Humanity and nature form a unity in Ubuntu concepts.
• Ubuntu further refers to joie de vivre, happiness and fulfilment in the context of the African extended family
concept, which is the source of certain values, such as politeness, sympathy and respect: respect for older
people who carry high levels of experience and great influence. Ubuntu is always about values that have
their root in humanity, as well as other facets of African traditions of deliberation and consultation, of
decision-making, of individual creativity at work, which plays together with cooperation and shared
ownership. Personal growth and community are thus interrelated - "I am, because you are."
• The concept of Ubuntu, like "spirituality" as a philosophical concept, runs through all areas of people's
lives. This cultural standard is an attitude towards life on the basis of which people can meet because it
reflects a fundamentally positive and affirming view of humanity. For people in intercultural situations, this
means encountering a counterpart who recognizes humanity as a universal.
Mediation
• Mediation has aroused new interest in Germany since the 1980s. Conflicts at work, in families, at school
and in the neighbourhood are resolved through mediation. The win-win principle applies: each side
receives appreciation from the mediators and can enjoy success and solve the problem themselves with

the support of the mediators.
• In South Africa, mediation is a generally accepted African procedure for the harmonious settlement of
conflicts. However, trained mediators do not have to be available to resolve a conflict. Rather, older
persons or persons with a certain status take on the role of the "third side" (Ury 2000: 18ft). They mediate
in the case of conflict as well as in decision-making and resolution processes. For the choice of a
mediator, therefore, only personalities who enjoy universal esteem in the communal group structure come
into question.
• The "third person" can also be decisive in intercultural encounter situations. This is not least because most
people in Sud Africa are familiar with the concept of mediation as an everyday conflict resolution strategy,
and triangulated communication about problematic issues becomes possible.
Time
Western concept of time and notions of time is characterized by fixed, linear timelines, punctuality, deadlines,
and chronological precision
In numerous African cultures:
• The present time is where the life-shaping events take place, which are either happening now, have
recently passed, or are imminent.
• A comprehensible time dimension of the "future" does not exist, since events lying in the future have not
taken place.
• Time is closely linked to a person's status. The means that the more important a person may be at a
meeting, the later he or she is expected to arrive. Those with high status, prominent positions and roles
may not show up at all.
Peculiarities of «Time» in S. African context
Many black Africans often associate strict Western-style time management with unpleasant experiences from
the apartheid era  when they were forced to work in precisely defined time cycles and sections; in case of
non-compliance, they were usually punished.
Black Africans’ attitude toward time with regard to deadlines and problem solving:
• The bigger a problem, the more time it takes!
• The more time a decision maker spends on solving a problem, the greater his social prestige, because he
has solved an important problem with a lot of time.
• A demand for minimum of time = minimization of the social prestige of the decision maker.
• a deadline implies a loss of trust and thus a loss of honour and human dignity.
BUT
• In S. Africa, Western & African concepts of time coexist in economic & business life,  subgroups were
either socialized with a Western background, studied abroad in the West or worked with Westerners.
• However, decision-making processes, when scheduled by black Africans, will take more time than would
be the case in a Western context.
Reciprocity and patronage
• Reciprocal requests and favours are part of everyday life in South Africa
• There is no question of what a person will receive in return for a fulfilled request, such as personal or
business services.
• If a colleague makes a request, it is common for the colleague to respond to a reciprocal request.
• Often, requests are then fulfilled without even being verbally expressed.
• Mutual requests and corresponding services are not offset against each other and do not break off after
one round of mutual exchange.
• Requests can be made and fulfilled endlessly if you are in a personal or professional "alliance". This can
happen at irregular intervals and can drag on for years until a favour is fulfilled retroactively.
• Favours can be evidenced between individuals of equal, as well as different status
• Lack of reciprocal behaviour in terms of requests and favours can cause shame, social depravation, and
fear of negative ancestral reactions among black Africans
Reciprocity and patronage - Elder Brother/Younger Brother Strategy
• Elder Brother strategy: Exercised by rather rich managers or supervisors (Big Brother) with bantu
backgrounds in order to consolidate communally and commercially recognized status through their
generosity to subordinates or employees (Little Brothers).

• Result: Subordinates or employees have a permanent obligation as recipients.
• If younger brothers cannot fulfil the requests of their big brother financially or according to their status,
bring correspondingly different reciprocations: symbolic acts, hospitality, invitations, small gifts, or by giving
their time, labour, and energy = the Younger Brother Strategy.
• For Bantu-speaking individuals, both roles have their own dignity and honour - interdependence is
desirable and enhances the dignity of both persons: Sons honour their fathers, schoolchildren honour their
teachers, entrepreneurs honour their sponsors, and employees honour their superiors.
Competition in SA markets
• Colonial economies were built around European trading firms, with licensing rules that hindered the
emergence of black African capitalists.
• That logic was taken to extremes in South Africa, where just six conglomerates controlled 87% of the
stockmarket at the end of apartheid i.e. designed to keep assets in a few hands.
• An IMF working paper argues that South Africa could boost annual GDP growth by 2.5 percentage points
by encouraging competition.  Change has been slow
• Debate about what a competition law should do  African countries have borrowed from European and
American models, which prioritise market efficiency but should also try to promote development & "make
markets more inclusive“
• South African authorities weigh public-interest criteria highly  like how a merger will affect jobs/growth of
black-owned enterprises. Example case: Walmart’s takeover of S. African retailer Massmart in 2012 -
approved with conditions, including the reinstatement of retrenched workers and the creation of a fund to
support small businesses.
2. Business Environment
S. African Labour Unions
• Trade unions are recognised in the Constitution, which provides for the right to join trade unions, and for
unions to collectively bargain and strike.
• Have a lot of influence and power – e.g. Congress of South African Trade Unions (Cosatu) is in the
tripartite alliance with the ANC
• BUT unions fight for their members i.e. those in employment and a maintaining of the status quo and not
for those who are unemployed
• Biggest change through ‘affirmative action’ to introduce a new cadre of black professionals in most
companies -> goal is the development of a more representative and racially diverse management
team
Broad Based Black Economic Empowerment (BBBEE) Act of 2003.
• 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“
• encouraging black ownership and management of companies (min 51% black ownership)
• Achieving a substantial change in the racial composition of ownership and management structures and in
the skilled occupations
• ensuring that black-owned enterprises benefit from the government’s preferential procurement policies
BBBEE and management statistics
• Black economic empowerment (BEE) was one of the measures intended to address the racialised
inequality in South Africa. But numbers collated by the Broad-Based Black Economic Empowerment
Commission are not encouraging.
• commission only came into existence less than five years ago  Companies were interpreting the codes
as they pleased and there was no monitoring or regulating them
Forms of crime and corruption thriving today

The Global Economic Crime and Fraud Survey, released by PwC on Feb. 27 2018, found that South Africa’s
rate of 77% was much higher than the global rate of 49%—consistently so
• Construction Mafia: community groups who demand a cut in building projects around the country,
sometimes even resorting to violence and intimidation to get their way. From some form of employment,
sub-contracting to their small businesses or in some cases straight up cash
• Cigarette Smuggling trade: The illegal trade in cigarettes in South Africa has been booming for decades
but when lockdown regulations banned the sale of smokes, it increased demand in the black market like
never before.
• Fuel theft: from siphoning of diesel from company truck to fuel theft incidents along the Transnet inland
fuel pipelines.
• Infrastructure vandalism for profit: in telecommunications, electricity and transport sectors.
3. Political Environment
2019 Elections
• Drop in turnout (1994 = 86% of adults go to the polls, 2019 = 46% only);
• Overwhelming emotion: despondency; Reasons:
o 2009 to 2018, under Zuma, corruption became endemic and the economy stagnated
o Average income is lower than in 2013
o Levels of unemployment and inequality are among the highest in the world
o disillusioned with the post-apartheid settlement – blacks feel they got a bad deal and whites did not
have to give up much
• ANC first time achieved result below 60%; could have had higher loses without Ramaphosa who is more
popular than his party, the ANC
• Result of 2 trends:
o Drop in turnout in townships (black populations)
o Losing voters to EFF
• ANC kept control of 8 of SA’s 9 provinces in regional ballots
2019 Elections – extreme parties gain ground
• EFF (Economic Freedom Fighters) 2nd most popular party in 3 provinces; benefited from ANC loses in the
black population
• Freedom Front Plus (FF+/VF+) won 2.4%, narrowly surpassing its previous high of 2.2% in 1994
o 2019 slogan was slaan terug, or “hit back”,
o appealed to those who are
 mostly white, conservative voters in the South African hinterland.
 angry at policies such as affirmative action and land expropriation.
 anxious about what they see as the victimisation of Afrikaners
 accuse the main opposition party, the Democratic Alliance (DA), of not standing up for them.
(FF+/VF+ siphoned off ca. 250,000 votes from the DA
ANC/Zuma/Guptas - State Capture
Präsidenten Jacob Zuma im Januar 2018 eingeleitet wurde  "Vorwürfe der staatlichen Gefangennahme,
Korruption, Betrug und anderer Vorwürfe im öffentlichen Sektor einschließlich Staatsorganen"  Die
staatliche Gefangenahme der Guptas kostete die Wirtschaft rund R100bn
Revelations out of the Zondo inquiry  Jacob Zuma gave the orders and The Guptas …
• 'dealt with' ministers who did not listen to them
• could get you fired from your government job
• took charge soon after Zuma became president
• admitted they collected intelligence on political figures they wished to influence
• bragged that they controlled the investigative and prosecutorial parts of the criminal justice system
• bragged that they earned R6bn from the government
• bragged that they had made Duduzane Zuma a billionaire
• threatened to kill
• The ANC knew about the Gupta state capture plan as early as 2010

• SAP confirmed that payments were made to Gupta  but all contact was made through an intermediary
Lack of resources at HAWKS
Lebeya estimates that for the Hawks (which targets organized crime, economic crime, corruption, and other
serious crime referred to it by the President or the South African Police Service (SAPS)) to effectively
investigate organised crime and corruption, especially within municipalities, they need at least another 2 500
investigators with the required resources and support structures:
• The Hawks’ 1 700 investigators are currently working on almost 19 000 cases
• Sustained investment in both the Hawks and the NPA is needed to turn the tide of corruption
Residents Fight Back
It was a landmark ruling – the Makhanda High Court ordering the Makana Municipality to be dissolved and
placed under administration for violating its constitutional mandate by failing to provide basic services to the
community. Now as mismanagement and corruption continue to plague most municipalities around the
country, this new court judgment is helping fed-up residents finally fight back.
Still have some guarantees of democracy
• Free and independent Judiciary  The South African constitution is the supreme law of the country,
binding all levels of all arms of government. The South African judiciary is independent and only subject to
the constitution. This means that it has the power to review laws, legislation and policies, but is precluded
from making policy itself. In practice, however, its rulings, measured against the yardstick of the
constitution, may force government to adjust or abandon existing policies.
• A Public Protector: Busisiwe Mkhwebane (but a controversial figure)
• Free press
4. Social Environment
Economic development after 1994 proceeded through different phases. After a period of
relatively modest growth, the years up to 2008 saw a flourishing economy with the highest
growth rates in South Africa in the last two decades. The country was hard hit by the global
financial crisis, and since 2010 growth has been sluggish, with growth rates not exceeding 2%.
Official estimates are that in 2016 the economy expanded by only 0.5%
Population
Reasons: differences in birthrates (Black
Population) & white emigration: “…most cited
reason for making the move in the early 90s
used to be safety concerns – worries over
crime and violence in the country. While that is
still one of the reasons, the expert said that the
primary reason has now shifted to economic
uncertainty and future stability.”
Inequality
• South Africa is a capitalist country and one of the most unequal in the world. This is not only inequality of
income.
• As the World Bank says in a recent report: “Inequality of opportunity, measured by the influence of race,
parents’ education, parents’ occupation, place of birth, and gender influence opportunities, is high.”
Inequality – Southern Africa Labour & Development Research
Unit findings from National Income Dynamics Study (NIDS)
• 50% of South Africans are chronically poor.
• Only 20% of South Africans belong to the stable middle
class.
• Only 4% belong to the elite.
• 11% of the population belong to the transient poor.

• The vulnerable middle class make up 15% of the population.
Inequality – Fighting poverty – social wage
• South Africa’s social welfare system attempts to reduce
the worst deprivations of poverty. This “social wage” is
paid to the poor in a number of ways: free primary
healthcare, no-fee schools, RDP housing and housing
subsidies, free basic water, electricity and sanitation for
the poorest households, social grants.
• South Africa spent R164.9 billion on social
protection (mainly providing social grants) in the 2016/17
financial year, with an increase to R209.1 billion planned for
2019/20.
• Social protection is 3rd fastest-growing spending category for
the government after post-school education and health. The
broad social wage is said to account for almost 60% of
government spending.
• When South Africa became a democracy in 1994, social
protection was introduced as a short-term measure to ease
the dire poverty created by apartheid. But social grants are
now the only livelihood of many South Africans, and remain
essential to reducing poverty.
• Black South Africans are still under-represented in the skilled
jobs market.
• Even though little more than 10% of the working population
comes from the white community, they are more likely to be
more skilled, wealthier, and reach higher levels of education,
which means black South Africans are still most affected by
high unemployment.
Ongoing debate about the privileged and paying taxes
• According to National Treasury 2015 Budget projections:
o 13% of the population pay taxes (anyone earning less than 70K Rand is exempted from income tax)
• If 20% of tax money is received back as benefits (e.g. safety, a police force, infrastructure, etc), then the
other 80% is essentially punitive e.g. a fine that one pays for being privileged.
Other challenges (the aging and ill)

Debate among young South African professionals
• In South Africa they call it "black tax”, where young black professionals are often expected to support their
families financially - even if sometimes they can't afford it  pay back to your family
• Not exclusive to black people  aber sie machen davon mehr Gebrauch
• Even when they have to pay fees or the costs for living (rent, etc), they still need to give the family money
and even more if they think it’s a little short  not because they want to, because they have to
• “Positive” meaning of the tax  its for the family  helping yor family
• Negative aspect  young person who's finally getting that opportunity getting your first paycheck are not
allowed to contribute fully to your own development
• Government hasn’t done anything to ease this burden for the young professionals  his post 1994
Democratic generation to say we know you're already suffering but you must suffer even more because
we haven't figured out how to boost this economy
COVID-19: The Hunger Challenge
As South Africans have experienced significant shocks to their livelihoods, the threat of hunger
presents a major concern for health, political and social stability. The nation cannot rebuild and
recover economically when large groups of people are hungry. Some of our findings were that:
• the increases in social grants for six months by the government have played a vital role in providing relief
to households and are generally well targeted. But they are insufficient to address food poverty associated
with a loss of income during the lockdown. Food poverty in households that receive a child support grant,
which benefits 12.5 million children, is exacerbated through income loss. The situation would have been
much worse without the top-up grants, however.
• there have been significant delays in Unemployment Insurance Fund (UIF) payouts. This needs to be
addressed urgently to support households where formal sector jobs have been lost. These payouts are
much larger than grant top-ups, and cover gaps in lost household income from earnings more effectively.
• while the country’s social assistance system is expansive in reach, it has not been able to address the
needs of large sectors of the population who are unemployed or in informal employment, and who do not
qualify for social insurance.
Challenges
• Huge alcohol consumption in South Africa  even highest than the world and Africa  Reason why sale
of alcohol has been banned in two of S. Africa’s C-19 lockdowns
• In the last five years there has been an increase after more than a decade of decline. However, the murder
rate was twice as high in 1993, the year before apartheid ended.
• Around 79% of South Africans still felt safe walking alone in their neighbourhoods during the day, but this
is down 6.7% on the previous year. While at night, about 32% of South Africans felt safe walking alone in -
up 8% on the previous year.
Crime Situation in 2020
• The dramatic drop in crime is welcome news, but the trend is unlikely to continue after lockdown ends
• According to various reports, there was an initial decrease in crime, but insurers and tracking companies
reported that vehicle theft and hijacking numbers were back to pre-lockdown levels. According
to DialDirect, car theft and hijackings are occurring at the same pace as they were pre-lockdown and
home robberies are also starting to rise, despite the curfew imposed.
• A new trend that is emerging in and around South Africa - courier vehicles have become the new target of
armed robbers.
5. The Informal (Shadow) Economy
Shadow Economy in South Africa
• ACCA (Association of Chartered Certified Accountants) expect South Africa’s shadow economy to rise
from 23.39% in 2016 to 24.19% of GDP by 2020 (their definition of shadow economy: the production of
and trade in legal goods and services that are deliberately hidden from the authorities)
• Key stressors contributing to growth of shadow economy in RSA
o Persistent unemployment,
o low bureaucratic quality
o inefficient provision of law and order

Kasinomics | GG Alcock
• Kasinomic revolution starts in the minds of those who see in selling homemade sweets or traditional
dishes in the streets not just a way of making ends meet, but the possibility to improve individuals and
communities at the same time.
• everyone involved in the informal sector is responsible, in the etymological sense of the word, as
he/she responds to hostile conditions of poverty and unemployment by starting an economic activity that
allows families to live, send their children to university and even expand their business to involve other
people.
• such activities are not recognized as ‘jobs’ or, at least ‘proper jobs’: no pay slip at the end of the month, no
fixed income, no social recognition, even when the amount gained is far from being irrelevant.
• To consider township economy means to acknowledge the resilient entrepreneurship of individuals with a
strong sense of community and the will to improve and contribute to other people’s lives, offering a variety
of products in an exchange of Rands, trust and respect.
• human value behind any sale  honesty, companionship and network
• limitations of such revolutionary plan, namely the socio-cultural context of the township, which is peculiarly
local as shows the failed attempt by a multinational group to take on the market of a local product.
• On the other hand, success can depend on smart strategies employed by multinational companies which
invest in the informal sector: their support is important, but it is not clear to what extent it can really
improve people’s lives without perpetrating the rich-poor opposition upon which capitalism is founded.
Opportunities for formal sector players
• Mastercard is collaborating with Durban-based tech company Spazapp, to bring secure, seamless and
convenient mobile payments to thousands of informal traders and convenience stores, better known as
spaza shops, in South Africa. By combining their expertise and reach, the companies intend to unlock
economic growth by helping informal micro-businesses connect to formal markets and digital payment
systems
• The Problem: There are in a Township and then there's order of domestic crime that is happening  It
gives the customers an opportunity to ensure that they are safe
The Informal Economy
• the informal sector represents all businesses or business activity that doesn't fall within the formal
frameworks of the government or any sort of other organization  most of these businesses are not
registered for tax purposes
• these businesses are owner operated and the income that they generate is lower than the tax bracket
• informal businesses within south africa are quite willing to formalize but they are often not able to or they
don't have necessarily the knowledge or the resources in order to do so
• aren't aware of them because they don't form part of a formal record-keeping process
• it's five percent of gdp it could probably be higher and only three million people employed in it
• these businesses are extremely vulnerable to any changes in activity  cash businesses
• that means they require daily trade in order to earn money  not trading they immediately become
unemployed and that means that they won't necessarily be able to access formal finance (loans and bank
accounts to build up savings)
• formal businesses who through informal trade has accessed quite a lucrative market for themselves
• informal economy performs a very crucial function within south Africa
o it employs people
o overcome a very big obstacle for customers  easier to access for people
o they are catering to the needs  packaged instead of single
• Informal business are customers to formal business  ould buy a bulk item from a formal business and
then repackage it
• Hard to formalize, because:
o not necessarily having the legal support in order to formalize
o no accounting knowledge
• Formal businesses have to help informal businesses:
o Informal customers have access to funding during this time to assist them to survive
o removal of red tape to make it easier to formalize

o need for training and development in terms of business practices, cash flow, forecasting, accounting
o building of basic infrastructure
o Supplier development  program use this program to identify informal businesses who may form part
of this program and assist them
o Set- up bank accounts
o make your legal services available to assist them to draw up employment contracts
o making available the accounting function to assist these businesses to set up accounts so that
o they can register register themselves as businesses
6. Case Study
What does the German employee Mr. Lewin think about the South African employees?
• The staff is not participating as I would expect from people who are in a democratically run meeting.
• Mr. Nyonga is ignorant: he just puts my speech on hold.
• The staff is not very decisive, otherwise we would at least have a decision at the end of the day.
• The participants seem to have a lot of time to solve these actually so urgent problems.
• But the employees are not critical! They always agree in the end.
What does the German employee think about his own role?
• It's clear that I'm making a speaking contribution to drive the decision-making process forward.
• As a freelancer, I have the full right to speak and make decisions at this meeting.
• As a German expert, I have the task of contributing my culture-specific perspective.
• I should help to better structure the session so that we at least have a solution at the end of the day.
• As an expert, I should help to get to the heart of the problems.
What do the South Africans think about the role of the German employee?
• We haven't even incorporated him into our "internal family structure" yet. (Order of rules and hierarchy)
• Now the German also makes a suggestion, although we have not yet arrived at the solution and the
decisions in the process. How hasty! (lndaba)
• The German simply says something, although he has neither been asked nor does he hold a position that
gives him the necessary status to do so. (lndaba)
• I'm sure the German is grateful that we did him the favour of inviting him to our meeting. (favour &
reciprocity)
What do the South Africans think about their own role?
• Only those who have the appropriate position and status are invited to this meeting. (lndaba).
• We are the decision makers and bear the responsibility for future coexistence. (multiculturalism)
• Everyone should be heard - but only selected people at specific times. (Rule and hierarchy order/time)
• It is important that we make decisions together. (Ubuntu/lndaba)
• We have plenty of time to make important decisions. (Time/lndaba)
• Every decision requires us to be collectively spiritually strong. (Spirituality)
• How good that we have our executive director as mediator. (Mediation)