Trade & Investment South AfricaDepartment of Trade and Industry

PUMLA NCAPAYI

Deputy Director General

INVESTMENT ENVIRONMENT

&

BUSINESS OPPORTUNITIES

South Africa fast facts

• Area 1,219, 090 km2

• Head of the State: President Jacob Zuma

• 11 Official languages with English the business language

• Est. Population: 49,9 million

South Africa at a glance

Indicator 1994 2009Total Population

38,283,223 49,320,150% of Total Population under 15 years

37% 31%Adult Literacy Rate (1990)

76.2 % 88.8%Internet Users

100,000 4,420,300Mobile Telephone Subscriptions

340,000 46,436,000GDP per capita (constant 2005 prices)

R 27,400.12 R 37,261.16FDI (net inflows % of GDP)

0% 2%Gross Fixed Capital Formation (% of GDP)

15% 23%

Source: World Bank Development Indicators 2010

• South – South Trade• Important to the BRICS countries • Vulnerability of the Suez Canal

• Political instability• Somali pirates

STRATEGIC LOCATION ON SHIPPING ROUTES

Africa is becoming more attractive...

Source: Ernst & Young’s 2011 Africa attractiveness survey

Investor’s plans in Africa

1%

8%

19%

43%

29%Withdraw from Africa

Can't say

Maintain operations in Africa

Invest in Africa

Not invest in Africa

Source: Ernst & Young’s 2011 Africa attractiveness survey

INVESTING IN AFRICA: AN IMPROVING ENVIRONMENT

The operating environment is improving visibly and rapidly …

•54 countries, 35 democracies (compared to only 8 in 1991)•Many countries have improved their business environment:

restored macro-economic stability greater predictability & increased reliability of policy & regulatory frameworkincreased transparency and improved decision-makingprivatisation initiativesreduced corruptioninvestment protection & promotionintra and inter-regional initiatives

High returns on investment

Cape Town was named the top tourist destination in the world in the 2011 Traveler’s Choice Destinations awards.

South Africa is the only African country that is a member of the G20

South Africa is also a non permanent member on the UN Security Council

OR Tambo airport is the best airport in Africa, according to the World Airport Awards 2010/11. It was also in the top 3 most improved airports in the world for the same period

South Africa’s Real GDP growth will quicken from 2.8% in 2010 to 3.2% in 2011 and 4% in 2012, helped by stronger external demand and looser fiscal policy.

SOUTH AFRICA- GLOBAL PERSPECTIVE

Source: SouthAfrica.info; Economist Intelligence Unit

•Stellenbosch University was the first African university in the world to design and launch a microsatellite

The Western Deep Level mines are the world’s deepest mines at approaching 4km.

South Africa houses one of the three largest telescopes in the world at Sutherland in the Karoo.

SA has 45 million active cell phones (population 49 million) – ranking in the top 5 globally in terms of cell phone coverage.

South Africa sold $1.8 billion worth of cars to the US in 2010, putting us ahead of Sweden and Italy as suppliers to the US market. Car sales are projected to grow 10% in 2011 to 460,000

SOUTH AFRICA - GLOBAL PERSPECTIVE

Source: SouthAfrica.info

Ranked 50th out of 142 countries in the World Economic Forum’s Global Competitiveness Report.

Highest of Sub-Saharan Countries

2nd after China in BRICS group of countries

Ranked 1st in strength of auditing and reporting standardsRanked 1st in regulation of securities exchangesRanked 2nd in soundness of banksRanked 3rd in protection of minority shareholders’ interestsRanked 4th in financial market developmentRanked 8th in the legal rights indexRanked 10th in investor protection Ranked 25th in the market size pillarRanked 30th in intellectual property protection

SOUTH AFRICA’S COMPETITIVENESS

Of 14 emerging markets; Australia, Canada, Russia, Mexico,China, Poland, Spain, India, Korea, Brazil, SA, Colombia Chile &Argentina

South Africa is:2nd most sophisticated financial market2nd lowest effective business tax rate4th ranked for ease of accessing capital4th ranked i.t.o. the cost of capital6th ranked for infrastructure7th for FDI as a % of GDP (2008)8th ranked i.t.o labour productivity

Source: Brazil National Confederation of Industry. Competition Brazil 2010: A Comparison of selected countries

SOUTH AFRICA – EMERGING MARKET PERSPECTIVE

SOUTH AFRICAN ECONOMY

• South Africa positioned as a manufacturing centre of excellence• Diversified Industrial sectors• Open economy• Sound business case for investment and profit• Gateway to Africa and markets of more than 200 Million consumers • Africa is the next big story after China and India

Subject Descriptor 2005 2010 2015

GDP growth 5.277 2.784 4.5

GDP per capita (constant prices) 33,507 36,730 42,280

Investment (%GDP) 17.958 21.698 20.855

Import volume of goods and services growth (%) 10.879 4.584 6.3

Export volume of goods and services growth (%) 8.568 5.036 6.452

Population (million people) 46.888 49.912 52.979

Source: IMF: World Economic Outlook, April 2011

SOUTH AFRICAN ECONOMY: NEW GROWTH PATH

Vision:

Create jobs

And to 15 %

in the next 10 years

5 millionreduce unemployment

INDUSTRIAL POLICY ACTION PLAN II

1. Macro-economic policies which support more competitive and stable real exchange and interest rates

2. Industrial financing channelled to more labour-intensive and value-adding sectors

3. Leveraging procurement to raise domestic production and employment in a range of sectors

4. Developmental trade policies such as tariffs and standards deployed in a selective and strategic manner

5. Competition and regulation policies: competitive input costs for productive investments and affordable goods and services for poor and working-class households

6. Skills, technology and innovation policies better aligned to sectoral priorities

7. Deploying these policies in general and in relation to more ambitious sector strategies, as set out in detailed Cross-cutting and Sector KAPs

Country Overall Rank Getting credit Protecting investors

South Africa 34 2 10

China 79 65 93

Russia 123 89 93

Brazil 127 89 74

India 134 33 44

SOUTH AFRICA’S TOPS THE BRICS FOR EASE OF DOING BUSINESS

Source: World Bank Group, 2011

South African Exports 2010 – top 10

R a n k2010

CountryName

Proportion% Total

Growth2009 - 2010

1 China 11.48% 20.28%

2 United States 10.08% 25.26%

3 Japan 9.08% 36.42%

4 Germany 8.34% 31.49%

5 United Kingdom 5.13% 4.20%

6 India 4.36% 24.23%

7 Netherlands 3.35% -7.15%

8 Switzerland 3.28% -21.29%

9 Zimbabwe 2.93% 12.53%

10 Mozambique 2.68% 5.53%

South African Imports 2010 – top 10

R a n k2010

CountryName

Proportion% Total

Growth2009 - 2010

1 China 16.89% 14.22%

2 Germany 5.45% 11.35%

3 United States 0.93% 7.14%

4 Japan 17.01% 5.34%

5 Saudi Arabia -11.01% 4.12%

6 Iran 4.04% 4.00%

7 United Kingdom 2.30% 3.81%

8 India 33.92% 3.58%

9 France 1.58% 2.93%

10 Nigeria 3.10% 2.80%

SOUTH AFRICA’S LEADING TRADE PARTNERS

Source: Quantec, 2011

R a n k COUNTRY Proportion Growth

2010 Name %Total 2009-2010

1 Basic non-ferrous metals 39.40% 43.19%

2 Basic iron & steel 13.02% 23.75%

3 Motor vehicles, parts & accessories 10.27% 9.19%

4 Machinery & equipment 7.03% 9.91%

5 Basic chemicals 5.73% 11.34%

6 Food 3.67% 4.03%

7 Other industries 3.39% -2.13%

8 Coke & refined petroleum products 2.55% -8.67%

9 Paper & paper products 2.24% 8.03%

10 Other chemicals & man-made fibers 1.95% -3.70%

SOUTH AFRICA’S EXPORT COMPOSITION

Source: Quantec, 2011

Investment in South Africa – top 102003 - 2010

Rank Country Proportion %

1 United States 17.21%

2 Australia 13.60%

3 UK 11.52%

4 Germany 7.26%

5 India 6.03%

6 Japan 5.00%

7 Canada 4.59%

8 Ireland 4.59%

9 Norway 4.06%

10 Switzerland 3.91%

SOUTH AFRICA’S LEADING INVESTMENT PARTNERS

Investment from South Africa – top 102003 - 2010

Rank Country Proportion %

1 Qatar 18.60%

2 China 14.95%

3 Ghana 14.00%

4 Nigeria 8.33%

5 Canada 4.78%

6 Mozambique 4.64%

7 Indonesia 4.15%

8 United States 3.46%

9 Seychelles 2.70%

10 Iran 2.56%

Source: The Financial Times Ltd , 2011 (www.fdiintelligence.com

Rank Sector Proportion %2003 - 2010

1 Coal, Oil and Natural Gas 25.13%

2 Metals 20.75%

3 Automotive OEM 8.15%

4 Alternative/Renewable energy 7.53%

5 Communications 7.32%

6 Hotels & Tourism 5.49%

7 Real Estate 3.00%

8 Chemicals 2.89%

9 Building & Construction Materials 2.78%

10 Transportation 1.89%

SOUTH AFRICA’S FDI COMPOSITION

Source: The Financial Times Ltd , 2011 (www.fdiintelligence.com

SOUTH AFRICAN TRADE AGREEMENTS

• South Africa – European Union (EU) Trade, Development and Co-operation Agreement (TDCA)

• Southern African Development Community (SADC) FTA

• Southern African Customs Union (SACU) – India Preferential Trade Agreement (PTA)

• Southern African Customs Union (SACU) - European Free Trade Association (EFTA) FTA

• Africa Growth and Opportunity Act (AGOA)

• SACU – Southern Common Market (Mercosur) Preferential Trade Agreement

Trade Agreements in Africa

Source: Ernst & Young’s 2011 Africa attractiveness survey

Sector Sub-sector

Business Process Outsourcing & IT Enabled Services

•Call Centres•Back /office Processing•Shared Corporate Services•Enterprise solutions e.g. fleet management and asset management•Legal process outsourcing

Electro Technical

•Software & mobile applications•Smart metering•Embedded software•Radio frequency identification•Process control , measurement & instrumentation•Security & monitoring solutions•Financial software

Clothing, Textiles, Leather and Footwear

•Manufacturing of Industrial Textiles using Polyester•Production of other natural fibre textiles such as flax•Wool and mohair production – downstream opportunities for yarns, knitwear and fabric.

INVESTMENT OPPORTUNITIES

Sector Sub-sector

Agro-processing

Fisheries and aquaculture i.e. freshwater aquaculture & marinculture Food processing in the milling and baking industriesBeverages viz. fruit juices and the local beneficiation, packaging and export ofindigenous teasHigh value natural fibres viz., organic cotton & downstream mohair production High value organic food for the local and export marketBiofuels production viz. biodiesel & bioethanol

Automotives & Components

Engine parts/components, vehicle interiors, electronic drive train components, body parts, catalytic converters, aluminum forgings & castings, diesel particulate filters and leather products

Chemicals and plastic fabrication

Beneficiation of polypropylene used in automotive components & building andconstruction industries, packaging materials Medical (drips & syringes), manufacture of active pharmaceutical ingredient(APIs) for key anti-retrovirals (ARVs)Manufacture of reagents for AIDS/HIV diagnosticsProduction of vaccines and biological medicines

INVESTMENT OPPORTUNITIES

Sector Sub-sector

Metal fabrication, capital and transport equipment

•Downstream processing and value adding of iron, steel, aluminium, stainless steel ferroalloys and the platinum group of metals (PGM)• Conversion processes of metal products i.e. metal fabrication, pipe & tube, foundry products, wire and jewellery•Manufacturing and assembly of mining, agricultural and construction equipment•Utilities i.e. reticulation plants and pipe lines.•Machine tools and tooling (auto, packaging, mining and aerospace industries) •Electrical motors•Services in the engineering, construction sectors •Rolling stock i.e. locomotives, wagons and coaches•Production of permanent ways i.e. railway lines, signalling equipment, electrification, bridges and stations•Harbour construction and equipment•Ship- and oil platform building and maintenance

INVESTMENT OPPORTUNITIES

Sector Sub-sector

Tourism •Accommodation – hotels, boutique hotels, lodges & resorts•Urban integrated tourism/ entertainment precincts •Adventure, - eco-, sport-, conference - and cultural tourism.•Infrastructure development.•Leisure complexes & world class golf courses.•Harbour & waterfront developments.•Transfrontier conservation areas.•Tourism transport – aviation, rail, cruise liners etc•Green building and green technologies for tourism•Attractions and activity – based tourism•Museums and heritage•Cultural, music, arts festivals and events

Aerospace •Aviation related services, including maintenance, repair and overhaul (MRO)•Rotary and fixed wing components.•Aviation training services•Specialised manufacturing of avionics, including health usage monitoring systems•Aerostructure components, specifically composites and sheet metal (aluminium and titanium)•Small and micro-satellite capability including sensor platforms•Satellite related services (including tracking and control and applications development)•Specialised design expertise, systems level as well as first tier level.•Unmanned Arial Vehicles (UAVs)

INVESTMENT OPPORTUNITIES

Power generation and distribution

Independent power generation, energy infrastructure & alternative energy

Renewable energy and energy saving industries

Solar water heating, evacuated tube plants, concentrated solar heating, wind and biomass energy production

Advanced Manufacturing

Advanced materials manufacturing viz. Nano-materials •High performance materials based on natural resources (advanced bio- composites)•Composites (intelligent textiles used in medical, building and construction industries)•Continuous fibre reinforced thermoform compositesDigital TV and Set Top Boxes due to migration to full digital television asanalogue will be switched-off by November 2011.Nuclear Build Programme i.e. joint ventures, consortiums and theestablishment of new companies to grow South Africa’s nuclearmanufacturing capability and nuclear supply industry to supply into thenuclear build programme Electricity Demand Side Management Solutions to improve electricity efficiency usage.

INVESTMENT OPPORTUNITIES

Creative and Design Industry Film and MediaFilm studios, treaty film co-production ventures, distribution infrastructure,servicing of foreign productions.Production of film and documentaries, commercials, stills photography andmulti-mediaDesignJewellery manufacturing and designFashion design

INVESTMENT OPPORTUNITIES

INCENTIVES

Incentive Benefit Main Conditions

The EnterpriseInvestment Program(EIP)

The EIP (manufacturing) is a cash grant for locally based manufacturers who wish to establish a new production facility, expand an existing facility or upgrade an existing facility in the clothing and textiles sectors

the EIP will be used to stimulate investment within manufacturing and tourism, it will also be used to deliver on some of the IPAP's key performance areas, as well as priority sectors. 

Foreign Investment Grant

To compensate qualifying foreigninvestors for the cost of movingqualifying new machinery andequipment from abroad to SA.

Foreign investors only

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

INCENTIVES

Incentive Benefit Main Conditions

Section 12i Tax

Allowance

Tax deductions of up to R

900m depending on status viz.

preferred or qualifying

projects.

Training allowance/ deduction

of up to R30m or R36 000 per

employee.

Valid until December 2015

Capital investment > R 200m

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 Location Film & Television production Incentive

To encourage and attract large budget films and television productions that will contribute towards SA economic development and international profile and increase foreign direct investment

Foreign owned qualifying

productions

Incentive Benefit Main Conditions

BPO & O Investment Incentive

The BPO&O Investment Incentive comprises an Investment Grant and a Training Support Grant towards costs of company-specific training. The incentive is offered to local and foreign investors

Local and foreign investors establishing projects that aim primarily to serve offshore clients

Competitiveness Improvement Programme

Grants are to be used for thefollowing interventions:World-class manufacturingprinciples.TrainingLabour relations and employeewellness programmesProduct relatedSupply chain integrationIndustrial engineering Competitiveness improvementBottom line business processes

Clothing and Textile companies and clusters

INCENTIVES

Incentive Benefit Main Conditions

Production Incentive (PI)

Aims to help the industry upgrade its processes, products and people.

Clothing manufacturersTextiles manufacturersCut, Make and Trim (CMT) operatorsFootwear manufacturersLeather goods manufacturers andLeather processors (specifically forleather goods and footwearindustries).

Automotive Investment Scheme (AIS

A taxable cash grant of 20 percentof the value of qualifyinginvestment in productive assets

Motor vehicle assemblers/manufactures.

Motor component manufacturers

INCENTIVES

COEGA IDZ & PORT INFRASTRUCTURE

Sector InformationFinance to explore investment opportunities in SAFacilitating direct Government support in the form of:

- information on investing in SA and the Business Environment

- detailed investment Incentives- investment facilitation- after care – ongoing contact

Contact Details• the dti Call Centre: 0861 843 384

• the dti Switchboard: +27 12 394 0000

• Investment Promotion: +27 12 394 1339/1032

• Website: www.thedti.gov.za

• E-mail: investmentsa@thedti.gov.za

• Postal Address: Private Bag X 84, Pretoria 0001

South Africa

THE DTI’S INVESTMENT SERVICES