- 1. SOUTH AFRICAS INVESTMENT ENVIRONMENT TRADE AND INVESTMENT
SOUTH AFRICA A division of the Department of Trade and
IndustryNovember 2005 SOUTH AFRICASINVESTMENT ENVIRONMENT TRADE AND
INVESTMENT SOUTH AFRICA A division of the Department of Trade and
Industry August2007
2.
- Head of the State: President Thabo M Mbeki
- 11 Official languages with English the business language
- Total GDP: 2006 R1 726 bn(US$ 255 bn)
- GDP 2006 per capita: R35 994(US$ 5 324)
- Real GDP Growth: 5,0 (2006)
- Inflation (CPIX): 4.6% (annual 2006 average)
- Exports: Tourism, minerals, diamonds, metals and
- metal products, food products & automotive components.
- Main trading partners:Germany, USA, China, Japan &
South Africa at a glance 3. SADC and South Africa ANGOLA 4. 2004
Macroeconomic interventionsto accelerate growth and ensure social
inclusion
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- Higher public sector investment
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- Reduce the cost of doing business
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- Expand public works & micro-credit programmes
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- Improve state capacity to provide economic services
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- Strengthen social cohesion
ASGI-SA
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- Broad framework of further steps needed to raise the range of
growth to higher levels
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- Proceeds from premise that positive factors in the economy
afford society the possibility to pursue for better economic
performance.
Macro-Economic Policy 5. Achieving sustained and balanced growth
Further, [c]onsistently prudent macroeconomic policies have
succeeded in reducing the fiscal deficit, stabilising debt levels,
and lowering inflation and interest rates;and the countrystands out
among its peers due to its democratic and transparent institutions
and entrenched political stability Economic advantages which create
a positive environment Standard and Poors, August 2005 Cheap
electricity Abundant mineral & natural resources A tested and
reliable legal system A relatively large labour force Established
industrial & financial infrastructure 6. Macro-Economic
Stability Fiscal Policy Source: SARB 0 50000 100000 150000 200000
250000 300000 350000 400000 450000 1990 1991 1992 1993 1994 1995
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Gov. Revenue
Gov. Expenditure 7. South African Economy Source: SARB 12,5% 12%
15,75% Prime Rate 4,6% 4,3% 9% (CPI) Inflation (CPIX) 25,5% 26,5%
20% Unemployment 5,0% 3,7% 3,2% GDP Growth 22,4% 20,2% 21,8% Total
Foreign Debt / GDP R398,5 US$58,9 R281,8 US$43,6 R 69, 8
Merchandise exports (billions) R 35 994 US$ 5 324 R29 422 US$4 561
R 12 507 GDP per capitaR1 726 US$ 255 R1 374 US$ 213 R 482 GDP
(billions) 2006 2004 1994 8. SAs Export Performance by Country -
2006 Source: SARS 1.4 9.3 10.Italy1.5 10.0 8. Spain 1.5 10.2
7.Belgium 1.7 11.6 9. Switzerland 2.0 14.0 6. China 2.6 18.0 5.
Netherlands 3.0 26.8 4. Germany 4.7 31.7 3. United Kingdom 6.1 41.2
2. United States 6.1 41.3 1. Japan US$b Rb 9. Business Environment
Infrastructure Source:ABSA 10. SAs Export Performance by Country
50,000.6 320,004.0 Total exports to all countries 1,310.5 8,387.0
China Ranked 9 1,360.1 8,704.5 Spain 1,361.5 8,713.9 Belgium
1,509.9 9,663.4 Australia2,216.8 14,187.5 Netherlands 3,234.5
20,701.0 Germany 4,747.8 30,385.9 United States 5,006.1 32,039.3
United Kingdom 5,146.2 32,935.5 Japan 2005 (US$m) 2005 (Rm)Country
59,513.2 380,884.3 Total exports to all countries 1,519.0 9,721.8
Belgium 1,558.7 9,975.5 Spain 1,596.0 10,214.5 Switzerland 2,122.6
13,584.6 China Ranked 6 2,697.1 17,261.5 Netherlands 4,117.8
26,354.1 Germany 4,889.3 31,291.6 United Kingdom 6,282.1 40,205.7
United States 6,380.2 40,833.0 Japan 2006 (US$m) 2006 (Rm) Country
11. SA-CHINABilateral Trade 12. SA-CHINABilateral Trade 7,295.8
46,693.2 Total Imports 5,254.7 33,629.9 Top 10 Products 181.6
1,162.3 H87: Vehicles other than railway, tramway 183.3 1,173.0
H73: Articles of iron or steel 217.9 1,394.3 H95: Toys, games,
sports requisites 239.0 1,529.3 H94: Furniture, lighting, signs,
prefab 248.7 1,591.9 H90: Optical, photo, technical, medical, etc
357.6 2,288.6 H61: Articles of apparel, accessories, knit or 444.8
2,846.9 H64: Footwear, gaiters and the like, parts488.6 3,127.0
H62: Articles of apparel, accessories,1,350.6 8,643.8 H85:
Electrical, electronic equipment 1,542.6 9,872.8 H84: Boilers,
machinery, etc US$m RmTop 10 Products Imports from China to SA 2006
2,122.6 13,584.6 Total Exports 1,932.7 12,369.0 Top 10 Products
29.9 191.6 H71: Pearls, precious stones, metals, coins 48.3 309.4
H51: Wool, animal hair, horsehair yarn and 49.5 316.6 H84: Nuclear
reactors, boilers, machinery 50.6 323.9 H29: Organic chemicals 65.9
422.1 H75: Nickel and articles thereof 70.8 453.2 H74: Copper and
articles thereof 104.0 665.8 H76: Aluminium and articles thereof
306.0 1,958.1 H27: Mineral fuels, oils, distillation product 361.3
2,312.3 H72: Iron and steel 846.3 5,416.1 H26: Ores, slag and ash
US$m Rm Top 10 Products Exports from SA to China 2006 13. Business
Environment Legal and Financial Markets
- World Class Legal Framework
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- Substantivelegal frameworkparticularly in commercial, labour
and maritime law regimes
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- Advanced legislation relating to competition policy,copyrights
,patents ,trademarks , anddisputes
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- Independenceofjudiciaryis guaranteed by the Constitution
- Financial System / Markets
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- Financial system isrobustandwell regulated
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- Four of South Africas banks are in theworld top 500
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- TheJohannesburg Securities Exchange(JSE) isthe17 thlargestinthe
world
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- South African commercial banks have wide presentation in
Africa
14.
- Further allocations are envisaged going forward
- Such investment levels have not been seen before since
1994
Overall government plans for infrastructure spendingtotals some
R416 bn/$ 59,4bnover the next 3 yearsInfrastructure Development To
be spent by the three spheres of govt 50% To be spent through
Public Private Partnerships 5% To be spent by development finance
institutions 3% To be spent by State Owned Enterprises. 40% 15.
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- 30%-transmission and distribution: 6metroRegional Electricity
Distributors to be set up within next six months
-
- Rehabilitation of three power stations; plus the construction
of two peaking plants ( R15 bn/ $ 2,4bn )
Core national programmes of SOEs R40bn/ $ 6,3bn for a range of
core projects railways, ports, infrastructure & operations and
petroleum pipeline
- A furtherR8,5bn/$ 1,3bnto be invested in SAA and other non-core
projects
- Spoornet will spend someR8bn/ $1,3 bnon locomotives, wagons and
equipment
- Funding options :divesting from non-core businesses, PPPs, own
revenue, concessioning, borrowing and strategic equity
arrangements
R 150 bn/ $21,4bnin the next 5 years for infrastructure
investments and refurbishments, raised from cash flow and off its
balance sheet: Infrastructure Development 16.
- SomeR19,7bn/ $3,1bnof water resource projects planned
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- R3bn/$ 0,5bnto be funded from the fiscus
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- Rest to be funded from cost recovery and financial markets
Core national programmes of SOEs Air Transport
infrastructure
- ACSA plans to spendR 19,3 bn/$ 2,75bn by2010in improving
existing facilities particularly in Johannesburg and Cape Town
- In addition, the Dube Trade Port initiative includes a new
airport in Durban.
Infrastructure Development Water Infrastructure 17. An IDZ is
located adjacent to aport allowing importation of rawmaterials,
plant machinery &equipment; and the export offinished products;
IDZs are considered part of the Customs Territory of South Africa.
SARS Customs will performspecific controls within the CCA to
provide forExpedited Services Coega ELN RCB JIA Customs Territory
of South Africa Customs Controlled Area INDUSTRIAL DEVELOPMENT
ZONES Industry & Service Area Customs Secured Area Services
Enterprises OneStop Center IDZ 18. East London IDZ Multi-Level Car
Terminal Containerisation Dry Dock & Ship Repair Grain Elevator
19. Johannesburg International Airport IDZ 20. RICHARDSBAYIDZ 21.
NEW DEEPWATER PORT OF NGQURA
- Inner Basin 16.5 m below CD
- 9 000 TEU Cellular Containership
22. STRATEGIC GEOGRAPHIC POSITION TO GLOBAL SHIPPING ROUTES 23.
Freight growth future requirements Excluding primary export haulage
Million tons 2003 (Million tons 2020 MSA forecast) Source: CSIR and
DOT 2003 24. Rail and port volumes and investmentPort Elizabeth
East London Maputo Gauteng Mega Industrial Zone Sishen Beit Bridge
Richards Bay Durban Saldanha Cape Town 17.8 334 Volume (mt) 0.6
19.5 Value (Rbn) Gauteng Mega Domestic Zone Rail Road 25.
Leveraging SOE capex 26.
- BBBEE is an integrated and coherent socio-economicprocess that
directly contributes to the economic transformation of South Africa
and brings about significant increases in the numbers of black
people who manage, own and control the countrys economy, as well as
significant decreases in income inequalities
- BBBEE includes elements of human resource development,
enterprise development, preferential procurement, as well as
investment, ownership and control of enterprises and economic
assets.
WHAT IS B-BBEE? *Black people include all African, Indian and
Coloured South African Citizens (Source: Broad-based Black Economic
Empowerment StrategyDepartment of Trade and Industry, March 2003)
27. Broad-Based Beneficiary Base The Poverty Barrier The Skills
Barrier The Business Barrier The Opportunity Barrier Employment
Equity/Job creation Corporate Social Investment Skills Development
Preferential Procurement Ownership And Management Equitable
Economic Opportunities Enterprise Development
- Broad-basedBEE must be inclusive
- Result in economic growthAccounted for with substance over
form
Emerging black middle class &investors Black entrepreneurs
Black workers, professionals, graduates, school-leavers Black
unemployed & rural poor 28. Economic Implications of
Broad-Based BEE
- Increase level of participation by black people in mainstream
economy
- Increase real market size in SA economy
- Increase income through resulting economic growth
More economic participants Increased economic growth Mainstream
economy BEE Upliftment Second economy 29. Promulgation of BEE
Framework 2001 BEE Commissions Report 2003 Publication of the
BB-BEE Strategy 2004 Promulgation of BB-BEE Act 2005 Release of the
Codes of Good Practice Provision of clearly defined BEE framework
coincides with increase in Business Confidence Business Confidence
30. Elements of Broad-Based BEE TransformingtheFirst Economy
Addressing challengesof the First andSecond Economy Addressing
challengesofSecond Economy Ownership Management Employment Equity
Skills Development Preferential Procurement Enterprise Development
Direct participation in Economic Activities (Shareholders and
Management Team) Development of Human Capital (Current and
prospective employees) Development and Investment in Affirmable
Enterprises (Suppliers and communities) 31. Identified and approved
ASGISA provincial projects National Livestock North West OTT
Logistics hub and IDZ Gauteng Dilokong Platinum Limpopo Moloto
Corridor (rail) Mpumalanga Cape Flats Infrastructure Western Cape
Biofuels, Makhathini casava and sugarKZN Biofuels Free State
Diamond and gem stone jewellery, National Livestock,
biofuels,Northern Cape Mzimvubu Catchments & Biofuels Eastern
Cape Project Province 32. Lead sectors for fast-tracking
- Capital/Transport equipment and Metals
- Major opportunity to stimulate manufacturing through reducing
import leakage of the public Capex programme and capitalising on
the current mining and mineral-processing boom
- Platform to position these sectors as major future exporters
onto the rest of the continent and beyond
- Automotives and Components
- SAs leading manufacturing sector, generating strong backward
linkages from other sectors, particularly metals, leather, textiles
and plastics
- Major opportunity to double current vehicle production to 1.2
million units by 2020 with a corresponding deepening of local
content
- Chemicals, Plastic fabrication and Pharmaceuticals
- Major opportunity to increase local beneficiation of polymers,
particularly for automotive and packaging applications and leverage
state procurement for local production of pharmaceuticals
- Forestry, Pulp and paper, and Furniture
- The sector has the potential to bring jobs and income to poor
rural communities
- Increased plantations in EC and KZN in the next 10 years will
contribute to the provinces growth and employment and stimulate
processing activities, such as sawmilling and furniture
33. Investment Opportunities Source: DTI/TISAHotels and
self-catering holiday resorts, Adventure-, Eco-, Sport- Conference-
and cultural tourism, gaming, infrastructure development, leisure
complexes and world class golf courses, h arbour & waterfront
developments,transfrontier conservation areas, cruise liners &
transportation. Tourism Manufacturing of: automotive electronics,
microchips and telecommunication equipment.Electro Technical
- Call Centres, Back Office Processing and Shared Corporate
Services.
- Enterprise solutions viz. fleet management, knowledge
management, asset management solutions.
Business Process Outsourcing & IT Enabled Services
- Titanium Beneficiation Initiative,Fluorochemicals Expansion
Initiative,Polypropylene Conversion.
- Restructuring of State Owned Chemical Enterprises.
Chemicals and Allied Industries Interiors, Engine
Parts/Components, Electronic, Drive Train Components, Body Parts,
Aluminum Components and Diesel particulate filters. Automotives
Fisheries and Aquaculture, Floriculture, Fruit and Vegetable
Processing Plants, Juices, Meat Processing, Wine Production,
Confectionery, Indigenous teas and Natural Fibres. Agro-processing
Sub-sector Sector 34. Investment Opportunities 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 continentthrough 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, catamarans and fleet racing boats,
custom-made vessels (tugs) and training schools. Aerospace, Rail
and Marine 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. Mining and metal based industries
- 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.
- Footwear manufacturing of leather uppers.
Clothing, Textiles, Leather and Footwear Sub-sector Sector 35.
Investment Opportunities Source: DTI/TISA
- Film studios and post production facilities.
- Distribution infrastructure
Film
- Expansion & export development
- Pumps, valves, material handling & straddle crane
carriers
- Production of turbine components
- Machine tool manufacturing
Capital Equipment Sub-sector Sector 36. Incentives Prospective
IDZ operator companies must apply for permits to develop and
operate an IDZExemption from VAT when sourcing goods and services
from South African customs territory and duty-free imports of raw
materials and inputs for export Industrial Development Zone
Development must be a significant technological advance and have
commercial advantage over existing product 50% of the direct cost
incurred in development Support Programme for Industrial Innovation
Investments of less than R100m; benefit decreases with size of
investment Cash grant of up to 10% of qualifying assets Small and
Medium Enterprise Development Programme ( Temporary suspended )
Main Conditions Benefit Incentive 37. Incentives The minimum
qualifying infrastructure development cost is R15m Infrastructure
projects intended to service IDZ, shall qualify for a grant of 30%
of the qualifying infrastructure development cost Critical
Infrastructure Fund Only new machinery, equipment acquired from
abroad and required to establish a manufacturing project in SA will
be consideredForeign entities may qualify up to a maximum of R3m
Foreign Investment Grant( Temporary Suspended ) Main Conditions
Benefit Incentive 38. the dtis Investment Services
- Finance to Explore Investment Opportunities in SA
- Facilitating Direct Government Support in the form of
- Information on Investing in SA and Business Environment
- DetailedInvestment Incentives
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- After care ongoing contact
39.
- the dti Call Centre:0861 843 384
- the dti Switchboard: +27 12 394 0000
- Investment Promotion: +27 12 394 1333/1339
- Website:www.thedti.gov.za
- Postal Address:Private Bag X 84
the dtis Contact Details 40. Thank You