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SOUTH AFRICA’S INVESTMENT SOUTH AFRICA’S INVESTMENT ENVIRONMENTENVIRONMENT
TRADE AND INVESTMENT
SOUTH AFRICA
A division of the Department of Trade and Industry
November 2005
SOUTH AFRICA’S SOUTH AFRICA’S INVESTMENT ENVIRONMENTINVESTMENT ENVIRONMENT
TRADE AND INVESTMENT SOUTH AFRICAA division of the Department of Trade and Industry
2006
OverviewOverview
1. South Africa at a glance
2. Africa, SADC and South Africa
3. Macro-Economic Overview
4. Investment Performance
5. SA Business Environment
6. Export Performance
7. Specific Investment Opportunities
8. Incentives
9. Services for Investors
10. How to contact us
South Africa at a glanceSouth Africa at a glance
• Area 1,219, 090 kms
• Population 44,8m
• Currency R1 = 100 cents
• Time GMT + 2 hrs
• Head of the State President Thabo M Mbeki
• 11 Official languages with English the business language
• Total GDP 2004 R1 374 bn (US$ 213 bn)
• GDP 2004 per capita R29 422 (US$ 4 568)
• Real GDP Growth 3.7% (2004)
• Inflation (CPIX) 4.3% (annual 2004 average)
• Exports Gold, minerals, diamonds, metals and metal
products, food, automotive components
• Main trading partners Germany, USA, China, Japan,
France
Africa, SADC and South AfricaAfrica, SADC and South Africa
Macro-Economic StabilityMacro-Economic StabilityFiscal Policy
Source: SARBSource: SARB
Government Expenditure, Revenue and Fiscal deficit
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
(Rm
)
-8-7-6-5-4-3-2-10
Gov. Revenue Gov. Expenditure Fiscal Deficit (% of GDP)
Macro-Economic StabilityMacro-Economic StabilityMonetary policy
Interest Rates and Inflation
0
5
10
15
20
25
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Nominal Real Inflation
Source: SARBSource: SARB
Macro-Economic PerformanceMacro-Economic Performance
Key Macro-Economic Indicators
-5 0 5 10 15 20 25
Fiscal deficit (% of GDP)
Real merchandise exports (% of GDP)
CPIX(% change)
Bond Yield (10 yrs and over)
Nominal prime rate
Real GDP growth
1990 2004
Source: SARBSource: SARB
Macro-Economic PerformanceMacro-Economic PerformanceCountry Moody's Sovereign Long- S&P's Sovereign Long-
Term Debt Rating Term Debt RatingForeign Currency Foreign Currency(2004/5) (2004/5)
Rating Rating
Poland A2 BBB+
Mexico Baa2 BBB-
South Africa Baa1 BBB+
Thailand Baa1 BBB
Philippines Ba2 BB
India Baa3 BB
Turkey B1 B+
Brazil B2 B+
Source: Moodly’s; S&PSource: Moodly’s; S&P
Macro-Economic OutlookMacro-Economic Outlook
2005 2006 2007 2008 2009 2010
Real GDP growth (%) 4.3 3.8 3.2 4.3 4.5 4.6Inflation (CPIX) ( % change) 4.6 5.5 5.7 4.9 4.6 4.4Prime overdraft rate (Nominal) 10.7 12.7 12.5 10.7 11.0 11.5R/$ Exchange rate 6.3 7.2 8.0 8.5 9.0 9.4R/Euro Exchange rate 8.5 9.4 10.10 10.5 10.8 11.1Merchandise exports, current prices (R billion) 306.5 354.7 400.0 449.0 503.8 574.5Merchandise imports, current prices (R billion) 355.8 410.9 449.4 507.1 579.4 662.4Fixed capital formation, constant 1995 prices (R billion) 193.9 209.8 223.0 245.0 270.0 293.6Source: BER
Source: BERSource: BER
Business EnvironmentBusiness EnvironmentLegal and Financial Markets
• World Class Legal Framework– Substantive legal framework particularly in commercial, labour and
maritime law regimes– Advanced legislation relating to competition policy, copyrights,
patents, trademarks, and disputes– Independence of judiciary is guaranteed by the Constitution
• Financial System / Markets– Financial system is robust and well regulated– Four of South Africa’s banks are in the world top 500– The Johannesburg Stock Exchange (JSE) is the 17th largest in
the world– South African commercial banks have wide presentation in Africa
Business EnvironmentBusiness EnvironmentLabour Market
• New Labour Legislation since 1994
– Labour Relations Act
– Skills Development Act
– Skills Development Levies Act
– Employment Equity Act
• Labour Bargaining Council
– The Council played a major role in the reduction of worker
days lost due to strikes.
– The Labour Relations Act provides for collective bargaining
Institutes, which leads to increased flexibility in the labour
market.
Business EnvironmentBusiness EnvironmentInfrastructure
Roads & Rail– Extensive road and rail network across South Africa which connects with
Sub-Saharan African region
Ports– Strategic ports are located in Durban, Cape Town, Port Elizabeth, East
London, Richards Bay, and Saldanha Bay. – Together these handle over 13,000 vessels and 188 million tons cargo a
year.
Telecommunications– SA ranks 23rd in telecommunications development, and 17th in internet use in
the world – SA has the largest and most developed telecommunications network in
Africa – There are 4.8 million installed fixed lines in 2003– Growth in SA’s mobile phone market is among the highest in the world
Investment PerformanceInvestment Performance
A large part of the inflow in 2001 was as a result of the buy-out of De Beers minority shareholders
A large part of the inflow in 2001 was as a result of the buy-out of De Beers minority shareholders
FDI into South Africa
-10000
0
10000
20000
30000
40000
50000
60000
70000
Source: SARBSource: SARB
Investment PerformanceInvestment PerformancePercentage Share of FDI by Sector
as at 31 Dec 2003
35%
25%4%
7%
29%
Mining & Quarrying Manufacturing
Trade & Accomodation Transport & Communication
Financial & Business Services
Source: SARBSource: SARB
Sector Sub-sectorAgro-processing Fisheries and Aquaculture, Floriculture, Fruit and Vegetable Processing Plants,
Juices, Meat Processing, Wine Production, Confectionery, Indigenous Teas and Natural Fibres
Automotives Interiors, Engine Parts/Components, Electronic, Drive Train Components, Body Parts
and Aluminium Components
Chemicals and Allied Industries
Fine and Specialty Chemicals, Inorganic and organic Chemicals and
Pharmaceuticals, Consumer formulated chemicals and bulk formulated chemicals
Business Process Outsourcing & IT Enabled Services
Call Centres, Back Office Processing and Shared Corporate Services
Electro Technical Automotive Electronic Manufacturing, Upgrade of Micro Chip Plant, Contract
Manufacturing
Tourism Hotels and self-catering holiday resorts, Adventure-, Eco-, Sport- Conference- and
Cultural tourism, Gaming, Infrastructure development, Leisure Complexes and World
class golf courses
Investment OpportunitiesInvestment Opportunities
Source: DTI/TISA Source: DTI/TISA
Sector Sub-sectorClothing, Textiles, Leather and Footwear
Cotton Spinning, Weaving and Knitting, Industrial Textiles, Middle- to high-end apparel wear, Production of other natural fibre textiles
Mining and metal based industries
Aluminum smelter capacity, Capital equipment: machine tool manufacturing and petrochemical equipment, Downstream processing and value-adding of iron, carbon steel, aluminum, platinum group metals and gold, Ferro-alloys, gold and stainless steel
Aerospace, Rail and Marine Aerospace: Rotor and fixed wing aviation equipment and services, Helicopters and aircraft components, Aviation training services for African airlines, IDZ at Johannesburg International Airport, Warehousing for aircraft parts
Rail: Rolling stock and services for the domestic market, Estimated R7 billion Gautrain which includes infrastructure development and rolling stock, Rail infrastructure of the African continent through NEPAD and Rehabilitation of low density rail line
Marine: Development of boat yards and wet docks/floating docks, Joint ventures with local shipyards, Manufacture of boats, yachts and catamarans, fleet racing boats, Custom-made vessels (tugs) and Training schools
Investment OpportunitiesInvestment Opportunities
Source: DTI/TISA Source: DTI/TISA
Potential Investments in Potential Investments in National Infrastructure over the next 5 yearsNational Infrastructure over the next 5 years
• Electricity: R95 billion/ €12 billion
– Rehabilitation of three power stations; plus the construction of two
peaking plants (R15 billion/ € 1,8billion)
• Transport: R40, 8 billion/ €5 billion
– In Durban Harbour, the expansion and redesign of Pier 1 and the
widening of the entrance will cost R2, 9 billion/ € 360 million
– The container terminal at Ngqura and the expansion of the Cape
Town Container Terminal will cost R2, 6(€325 million) and R1, 4(€175
million) billion respectively.
– The new Multipurpose Pipeline from Durban to Gauteng will be a R3
billion(€375 million) investment.
Potential Investments in Potential Investments in National Infrastructure over the next 5 yearsNational Infrastructure over the next 5 years
• In product terms Eskom’s demand for steel and cement per annum
in the next few years is 60 000 and 1 million tons respectively.
• The construction of the pipeline will require anywhere between 75
000 and 90 000 tons of steel.
• Spoornet will spend some R8 billion/ €1 billion on locomotives,
wagons and equipment.
IncentivesIncentives
Incentive Benefit Main Conditions
Small and Medium
Enterprise
Development
Programme
Cash grant of up to 10% of
qualifying assets
Investments of less than R100m;
benefit decreases with size of
investment
Support Programme
for Industrial
Innovation
50% of the direct cost incurred in
development
Development must be a significant
technological advance and have
commercial advantage over existing
product
Industrial
Development Zone
Exemption from VAT when
sourcing goods and services
from South African customs
territory and duty-free imports of
raw materials and inputs for
export
Prospective IDZ operator
companies must apply for permits
to develop and operate an IDZ
IncentivesIncentives
Incentive Benefit Main Conditions
Foreign Investment
Grant
Foreign entities may qualify up to
a maximum of R3m
Only new machinery, equipment
acquired from abroad and required
to establish a manufacturing project
in SA will be considered
Critical
Infrastructure Fund
Infrastructure projects intended
to service IDZ, shall qualify for a
grant of 30% of the qualifying
infrastructure development cost
The minimum qualifying
infrastructure development cost is
R15m
the dti’s Investment Servicesthe dti’s Investment Services
• Information on Investing in SA and Business Environment
• Detailed Sector Information
• Finance to Explore Investment Opportunities in SA
• Facilitating Direct Government Support in the form of
Investment Incentives
• Investment Facilitation
• After care – ongoing contact
• the dtithe dti Call Centre: 0861 843 384
• the dtithe dti Switchboard: 012 394 0000
• Website: www.thedti.gov.za
• Postal Address: Private Bag X 84
Pretoria
0001
the dti’s Contact Detailsthe dti’s Contact Details
Thank YouThank You