Cape Town — Economies can grow in countries which do not meet Western standards for democracy, says Neville Isdell, the world-wide head of The Coca-Cola Company. But once they are growing, people in those societies will demand more freedoms. And oppressive societies do not produce good growth. Isdell, the chairman and chief executive officer of Coca-Cola, spoke to AllAfrica in Cape Town, where he was attending the World Economic Forum on Africa.
What proportion of your non-U.S. sales does Africa make up?
Well, of our total sales it's seven percent. I think you want to look at it on a global basis because we are really a global company. Eighty percent of our sales are outside [the United States]. So Africa is seven percent but growing more rapidly than other parts of the world.
With Africa a relatively small proportion of your market, why are you taking this forum so seriously?
Well, you look first of all where you are today but then you've got to look at where you are going to be in the future. What you have to focus on is where are the future growth points, where's the growth going to come from? Africa will be a higher percentage of our incremental growth than our existing business. If you look at the last few years, we've been growing at around seven, eight percent…
Per annum?
Per annum in Africa. As I look at the future, I think that that is going to accelerate and that's why we have a major focus [on Africa]. We are present today in all 56 countries, and this is going to be one of the growth points for us in the future.
Can you draw a distinction between the different regions of the continent? Where's the growth biggest, where's the growth smallest?
Well, it's not actually regional. It really is related to what is happening in individual countries. So we have been having good growth in South Africa but if you take the rest of Africa, there is good growth coming out of the likes of Tanzania, out of Egypt, out of Ghana. I'll just take those three – you've got east, west and north – and in all of those countries you've got economies that are growing. And they are growing because of good economic policies and sound government. We're not growing as well… [in] areas where the structures and the governmental policies are more restrictive.
Is there a correlation in your experience between democracy and good governance? Have you had growth in oppressive societies?
Oppressive societies – that is always a problem. You don't get good growth out of those. Where you have a deficit of democracy as defined today by Western elites, you can still have very good growth because they're putting in place sound policies. Not just economic policies – educating their people, having good rule of law, building infrastructure.
I think the real qualifier for democracy to be not just a vote once, but really to take root is a functioning middle class. That is the democratic stabilizer. There's a little bit of a chicken-and-egg situation here. You do not get a functioning middle class unless you have got a growing economy, unless you've got the right economic policies, and those can be put in by governments which don't meet the current Western democratic norm.
Let me give you an example, which has been used by some of the politicians here [at the forum]. I was talking to President [John] Kufuor [of Ghana] last night. He was talking about the fact that at the time of independence the gross domestic product of Ghana and of South Korea were the same [and that South Korea's GDP was now 40 times that of Ghana].
Well, South Korea developed their economy under a military regime initially, with chaebols (giant groups of companies), with centralization, with individual families. That's all broken apart because as the economy grows, as the middle class grows, then their political voice is louder. They say, "Well actually we don't to be run by military government, we don't want to have this centralized economic power. We want dispersion of power." That brings about change, hopefully without any violence whatsoever, which was largely true in South Korea –– there was some but it was a very good evolution.
You've seen what President Kufuor has done in Ghana – I think Ghana's a very, very good example. But remember that that was built off some sound economic policies that had been put in by his predecessor, President [Jerry] Rawlings – whose history was a very interesting one. He [Rawlings] converted to putting in very sound economic policies. And then you've got someone who believes in civil society in President Kufuor, who starts bringing that together.
So I think these things are situational. We keep looking for a simple formula to what is a very complex issue. It's going to vary, society by society, because you can have clashes of elites, you can have issues such as religious divides, which you have to deal with in maybe different ways.
What are the biggest challenges you have in growing business in Africa?
Well the single biggest one is clearly infrastructure. That is I think one of the big deficits in Africa, and I deal with that in the broadest sense, not just infrastructure in terms of roads and rail but infrastructure also in terms of educational systems, solid judicial systems. They're all the things that everyone writes about.
But if you go back even to solid infrastructure, I see Africa and Africans as being entrepreneurial. I was in Liberia six weeks ago and they're trying to re-emerge from a terrible civil war. Out on the streets are the hawkers, hundreds of them. Now "hawkers" is almost a demeaning word – they're entrepreneurs. It is there, it is in the DNA. How do you facilitate it? Well, the goods are there, but the agricultural goods don't get to market. Forty, 50, 60 percent of the crops that are grown in the rural areas, where there is a surplus, don't get to market, doesn't become an economic good. That to me is the most important thing.
In the course of business, do you come across corruption? Attempts to solicit bribes?
We've got a very clear policy around that. It is also of course enshrined in the Foreign Corrupt Practices Act in U.S. law, and we monitor that. We find that in fact that is the best protection you can have from being approached. The word very soon gets out that a company is either susceptible or not susceptible to bribery, so we have very limited of experience of that because, coming in, everyone knows that the Coca-Cola Company does not operate in any way, shape or form in a corrupt manner.
Unlike any other U.S.-based company I can think of, Coca-Cola during the 1980s in South Africa managed both to sell your product, under its name, and to keep on the right side of anti-apartheid leaders. How did you do that?
Well we withdrew as a company but because of the franchise system that we have, our franchisees continued in business, continued manufacturing. So we actually withdrew all of our ownership and as a result of that, we were able to maintain those relationships. But I think it actually goes back to the Sullivan Code as well. Even before we withdrew, we were very, very active in terms of being sure that we were implementing the Sullivan Code [named for the Rev. Leon Sullivan, a General Motors director who initiated the code of conduct for American companies in apartheid South Africa].
I was here [in South Africa] at the time, running our operation and we were breaking the law. I had officials of the health department telling me under section so-and-so, so-and-so and so-and-so, I was subject to fines and jail sentences because we had integrated canteens, we had integrated the toilet facilities etc. Very small things today but they were actually big issues at the time. That obviously was a major, major piece of it.
The other factor was that we were in dialogue all the way through with all sectors of South African society, including those that were outside...
Carl Ware [a senior African-American company executive] flying to Lusaka [to see the exiled leadership of the African National Congress]?
Yeah, sure. Yeah, Carl worked for me and then took over from me in Africa. Yeah, Carl going to Lusaka, because we knew the changes that were going to take place, and when the change took place we were a very, very active participant in trying to assist the new government.
That consultation that you undertook, not only with the ANC in exile but with domestic anti-apartheid leaders – is there any other company which did that?
Of large American companies, there are none of which I am aware. But our involvement on the African continent is probably greater than just about anyone else's, and has been over a long period of time, so our sensitivity to it was probably pretty high. There may well have been others but I'm not aware of any.
Are there circumstances in Africa today in which such a policy is being pursued, or where you might consider it? Zimbabwe, for example, or Sudan, where if you're going to keep in touch with your market, you have to have an eye on the political future.
Well, I think Zimbabwe is a very difficult situation. It's a subject here [at the forum] that people are obviously talking about. I think there that there is a new election coming up and I think that's going to be an inflection point one way or the other.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
But let me take Sudan, where we actually operate under what's called OFAC [a license approved by the U.S. Government's Office of Foreign Assets Control] because we actually don't have a business in Sudan. Again, we go through a local owner, who's a franchisee. But what we do there is we help the refugees in Darfur. Through the Red Cross, through Oxfam, all of our profits are actually re-invested in helping the displaced people in Darfur.
All Coca-Cola's profits in Sudan?
In Sudan, yes. We don't have a political role to play. We shouldn't as a business be playing a political role. But what we can do is to help those in society who are displaced and suffering as a result of what is happening, and that's exactly what we are doing in Sudan. That means you are actually involved with the elites on both sides of the equation, but it's not a political role. It is one of doing the right thing by your consumers and being an integral part of the society, to the degree that you are able in those circumstances.
A last question. Reminisce a little about Zambia, when you were young and joined Coca-Cola. How old were you when you joined Coke?
Well, it was 42 years ago, so I was 23. I had been brought up in Zambia, so I was really offered a job as it were to go back home [from a job in Johannesburg]. It was a wonderful time, it was a very carefree time. I had grown up in Zambia from the age of 10 – you come back from school and you kick your shoes off and you walk around barefoot. I've hitch-hiked through Africa – the security was there, you could stand by the side of the road. I've hitch-hiked from Cape Town to Lusaka in my day. Those were great, carefree times, no question about it.
The business was different?
Yeah, the business was different, so much smaller, so much less sophisticated. We didn't have the range of products. That's been personally a major area of growth, because the world has become more complex – the way you reach consumers is much more complex.
We're dealing with consumers who are much more educated now than I was as an executive then. I'm going up to the University of Cape Town tonight, thankfully to join the alumni, so we're on the same level [Isdell graduated there]. But when you talk to young graduates today, you realize that they have been taken to a level which is higher than the level we were at when we went up and got our degrees.
