Modes of market entry and strategies for selected South African companies doing business in the Democratic Republic of the Congo

Abstract

This research identifies modes of market entry as well as strategies embarked on by South African companies that are currently doing business in the DRC. Data collection was performed through one–on–one interviews with executives of the South African companies that are in the different sectors of business in the DRC. Research has found that the mode adopted for entry was related to the degree to which the company has committed its resources, across all sectors involved. The DRC is potentially one of the richest countries in Africa, with rich mineral resources, timber (75% of the country is forested) and extensive energy resources, however it is one of the poorest, with real GDP per capita falling from $380 in 1960 to $167 by 2010. The top–ranked countries in Africa are South Africa (29), Mauritius (32), and Namibia (42). Guinea–Bissau (173) and the Democratic Republic of Congo (175) rank lowest in the region. The Democratic Republic of Congo also ranks lowest in the world. Doing business in Africa became easier in 2005–2006 because reformers simplified business regulations, strengthened property rights, eased tax burdens, increased access to credit, and reduced the cost of exporting and importing. “Such progress is sorely needed. African countries would greatly benefit from new enterprises and jobs, which can come with more business–friendly regulations,” said Michael Klein, World Bank–IFC vice president for finance and private sector development and IFC chief economist. “Big improvements are possible. If an African country adopts the region’s best practices in the 10 areas covered by Doing Business, it would rank eleventh globally.” Operational challenges in the DRC were found to be the same as what all emerging countries are experiencing in the continent, such as: lack of skills, corruption and lack of law enforcement, poor infrastructure, exchange rate volatility, successful informal sector, and crime and anti–South Africa sentiments. These challenges lead to higher costs of doing business in the DRC for South African companies. This research further gives a proposal for a model that South African companies can Modes of market entry and strategies for selected South African Companies doing business in the DRC consider as part of their strategic planning process when internationalising their business into the DRC.