Trade And Investment South Africa

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

August 2007

•Area 1,219, 090 km2

•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: 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 &

the UK.

South Africa at a glanceSouth Africa at a glance

SADC and South AfricaSADC and South Africa

ANGOLA

Macroeconomic interventions to accelerate growth and ensure social inclusion

Higher public sector investment Reduce the cost of doing business Expand public works & micro-credit programmes Improve state capacity to provide economic services Strengthen social cohesion

Growth in 2005 was 4,9%

Broad framework of further steps needed to raise the range of growth to higher levels

Proceeds from premise that positive factors in the economy afford society the possibility to pursue for better economic performance.

Macro-Economic PolicyMacro-Economic Policy

Achieving sustained and balanced growthAchieving 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 country ‘stands out among its peers due to its democratic and transparent institutions and entrenched political stability…’

Economic advantages which create a positive environment Cheap

electricity

Abundant mineral & natural resources

A tested and reliable legal

system

A relatively large labour force

Established industrial &

financial infrastructure

Standard and Poor’s, August 2005

Macro-Economic StabilityMacro-Economic StabilityFiscal Policy

Source: SARBSource: 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

South African EconomySouth African Economy1994 2004 2006

GDP (billions) R 482 R 1 374

US$ 213

R 1 726

US$ 255

GDP per capita R 12 507 R 29 422

US$ 4 561

R 35 994

US$ 5 324

Merchandise exports

(billions)

R 69, 8 R 281,8

US$ 43,6

R 398,5

US$ 58,9

Total Foreign Debt / GDP 21,8% 20,2% 22,4%

GDP Growth 3,2% 3,7% 5,0%

Unemployment 20% 26,5% 25,5%

Inflation (CPIX) 9% (CPI) 4,3% 4,6%

Prime Rate 15,75% 12% 12,5%Source: SARBSource: SARB

SA’s Export Performance by SA’s Export Performance by Country - 2006Country - 2006

Source: SARSSource: SARS

Rb US$b

1. Japan 41.3 6.1

2. United States 41.2 6.1

3. United Kingdom 31.7 4.7

4. Germany 26.8 3.0

5. Netherlands 18.0 2.6

6. China 14.0 2.0

9. Switzerland 11.6 1.7

7. Belgium 10.2 1.5

8. Spain 10.0 1.5

10. Italy 9.3 1.4

Business EnvironmentInfrastructure

Source: ABSA

SA’s Export Performance by SA’s Export Performance by CountryCountry

Country 2005 (Rm) 2005 (US$m)

Japan 32,935.5 5,146.2

United Kingdom 32,039.3 5,006.1

United States 30,385.9 4,747.8

Germany 20,701.0 3,234.5

Netherlands 14,187.5 2,216.8

Australia 9,663.4 1,509.9

Belgium 8,713.9 1,361.5

Spain 8,704.5 1,360.1

China Ranked 9 8,387.0 1,310.5

Total exports to all countries 320,004.0 50,000.6

Country 2006 (Rm) 2006 (US$m)

Japan 40,833.0 6,380.2

United States 40,205.7 6,282.1

United Kingdom 31,291.6 4,889.3

Germany 26,354.1 4,117.8

Netherlands 17,261.5 2,697.1

China Ranked 6 13,584.6 2,122.6

Switzerland 10,214.5 1,596.0

Spain 9,975.5 1,558.7

Belgium 9,721.8 1,519.0

Total exports to all countries 380,884.3 59,513.2

SA-CHINA SA-CHINA Bilateral TradeBilateral Trade

-40,000.0

-20,000.0

0.0

20,000.0

40,000.0

60,000.0

2002 2003 2004 2005 2006

Rm

Total Exports Total Imports Balance

SA-CHINA SA-CHINA Bilateral TradeBilateral Trade

Imports from China to SA 2006

Top 10 Products Rm US$m

H84: Boilers, machinery, etc 9,872.8 1,542.6

H85: Electrical, electronic equipment 8,643.8 1,350.6

H62: Articles of apparel, accessories, 3,127.0 488.6

H64: Footwear, gaiters and the like, parts 2,846.9 444.8

H61: Articles of apparel, accessories, knit or 2,288.6 357.6

H90: Optical, photo, technical, medical, etc 1,591.9 248.7

H94: Furniture, lighting, signs, prefab 1,529.3 239.0

H95: Toys, games, sports requisites 1,394.3 217.9

H73: Articles of iron or steel 1,173.0 183.3

H87: Vehicles other than railway, tramway 1,162.3 181.6

Top 10 Products 33,629.9 5,254.7

Total Imports 46,693.2 7,295.8

Exports from SA to China 2006

Top 10 Products Rm US$m

H26: Ores, slag and ash 5,416.1 846.3

H72: Iron and steel 2,312.3 361.3

H27: Mineral fuels, oils, distillation product 1,958.1 306.0

H76: Aluminium and articles thereof 665.8 104.0

H74: Copper and articles thereof 453.2 70.8

H75: Nickel and articles thereof 422.1 65.9

H29: Organic chemicals 323.9 50.6

H84: Nuclear reactors, boilers, machinery 316.6 49.5

H51: Wool, animal hair, horsehair yarn and 309.4 48.3

H71: Pearls, precious stones, metals, coins 191.6 29.9

Top 10 Products 12,369.0 1,932.7

Total Exports 13,584.6 2,122.6

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 Securities Exchange (JSE) is the 17th

largest in the world– South African commercial banks have wide presentation in

Africa

Further allocations are envisaged going forward Such investment levels have not been seen before since 1994

50% To be spent by the three spheres of govt

5% To be spent through Public Private Partnerships

3% To be spent by development finance institutions

40% To be spent by State Owned Enterprises.

Overall government plans for infrastructure spending totals some R416 bn/ $ 59,4bn over the next 3 years

Infrastructure DevelopmentInfrastructure Development

Core national programmes of SOEs

70% - generation capacity 30% - transmission and distribution: 6 metro Regional 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)

R40bn/ $ 6,3bn for a range of core projects – railways, ports, infrastructure & operations and petroleum pipeline

A further R8,5bn/ $ 1,3bn to be invested in SAA and other non-core projects Spoornet will spend some R8bn/ $1,3 bn on locomotives, wagons and

equipment Funding options: divesting from non-core businesses, PPPs, own revenue,

concessioning, borrowing and strategic equity arrangements

R 150 bn/ $ 21,4bn in the next 5 years for infrastructure investments and refurbishments, raised from cash flow and off its balance sheet:


Core national programmes of SOEs

Some R19,7bn/ $ 3,1bn of water resource projects planned

R3bn/ $ 0,5bn to be funded from the fiscus Rest to be funded from cost recovery and

financial markets

Air Transport infrastructure

ACSA plans to spend R 19,3 bn/ $ 2,75bn by 2010 in improving existing facilities particularly in Johannesburg and Cape Town

In addition, the Dube Trade Port initiative includes a new airport in Durban.

Water Infrastructure


Industry &Service Area

CustomsSecured

Area

ServicesEnterprises

One Stop

Center

IDZAn IDZ is located adjacent to a port allowing importation of raw materials, plant machinery & equipment; and the export of finished products;

IDZ’s are considered part of the Customs Territory of South Africa.SARS Customs will perform specific controls within the CCA to provide for Expedited Services

Coega ELN

RCB

JIA

Customs Territoryof

South Africa

CustomsControlled

Area

INDUSTRIAL DEVELOPMENT ZONESINDUSTRIAL DEVELOPMENT ZONES

East London IDZ

Multi-Level Car Terminal Containerisation

Dry Dock & Ship Repair Grain Elevator

Johannesburg International Airport IDZ

RICHARDS BAY IDZRICHARDS BAY IDZ

NEW DEEPWATER PORT OF NGQURANEW DEEPWATER PORT OF NGQURA

• Inner Basin 16.5 m below CD

• Entrance Channel 18m

• 175,000 DWT Bulk Carriers

• 80,000 DWT Bulk Carriers • 9 000 TEU Cellular Containership

STRATEGIC GEOGRAPHIC POSITION TO STRATEGIC GEOGRAPHIC POSITION TO GLOBAL SHIPPING ROUTESGLOBAL SHIPPING ROUTES

Freight growth future requirements

Projected Growth 2003to 2020 40%

Road RailRoad Rail

73% 27%73% 27%

Dominant Commodities

•Maize•Processed foods•Coal

Includes Gauteng-Polokwane & Gauteng-Beitbridge


Road RailRoad Rail

90% 10%90% 10%

Dominant Commodities•Processed foods•Chemicals & Fertilizer minerals•Gold & Uranium

Maputo

Beitbridge

Gauteng

Lobatse

Walvis Bay

Cape Town Port Elizabeth

Durban

East London

Projected Growth 2003to 2020: 38%

Road RailRoad Rail

82% 18%82% 18%

Domestic Export/ImportDomestic Export/Import

84% 16%84% 16%


•Stone Quarrying•Limestone•Processed foods•Fuel & Petroleum products

2003 corridor stats:


Road RailRoad Rail

91% 9%91% 9%Domestic Export/ImportDomestic Export/Import

90% 10%90% 10%


•Processed foods•Maize•Chemicals•Wood and wood products

2003 corridor stats:Projected Growth 2003

to 2020 : 39%2003 corridor stats:Road Rail92% 8%92% 8%

Domestic Export/Import90% 10%90% 10%


•Processed Food•Maize•Chemicals•Iron Steel and ferro-alloys•Railway equipment•Motor Vehicles


Road RailRoad Rail

77% 23%77% 23%


•Maize•Fuel & petroleum products


Road RailRoad Rail85% 15%85% 15%

Domestic Export/ImportDomestic Export/Import

90% 10%90% 10%


•Processed foods•Coal•Chemicals•Beverages•Fruit produce

2003 corridor stats:

53

(57)

19

(15)

17

(12)

3

(6)

5

(9)

Million tons 2003(Million tons 2020 MSA forecast) Source: CSIR and DOT

2003

Exc

lud

ing

prim

ary e

xp

ort h

aula

ge

Port

Elizabeth

East London

Maputo

Gauteng Mega

Industrial Zone

Sishen

Beit Bridge

Richards

Bay

DurbanSaldanha

Rail and port volumes and investment

Gauteng-Cape Town

Volume (mt) Value (Rbn)

Road 16,6 13,3Rail 2,7 0,7Total 19,3 14,0

Investment (Rbn)

NPA

SAPO

Spoornet

Total

1.260.790.102.14

Gauteng-Durban

Volume (mt) Value (Rbn)Road 44,7 16,1Rail 9,7 1,9Total 53,4 18,0

Investment (Rbn)NPA

SAPO

Spoornet

Petronet

Total

2.51

6.201.900.40

11.01

Sishen-Saldanha

Volume (mt) Value (Rbn)Road

Rail 27,0 0,8Total 27,0 0,8

Investment (Rbn)NPA

SAPO

Spoornet

Total

0.381.101.83

0.35

Gauteng-Beit Bridge


Road 29,5 8,5Rail 3,2 0,6Total 32,7 9,1

Gauteng-Richardsbay


Rail 74,0 3,8Total 74,0 3,8

Investment (Rbn)NPA

SAPO

Spoornet

Total

1.172.704.79

0.92

Gauteng-PE/East London


Road 9,1 5,2Rail 0,7 0,3Total 9,8 5,5

Investment (Rbn)

NPA

SAPO

Spoornet

Total 3.98

2.760.201.02

Sishen-PE


Rail 2,4 0,3Total

Investment (Rbn)NPA

Total 0.250.25

Gauteng-Maputo

Volume (mt) Value (Rbn)Road 23,1 4,6Rail 4 0,4Total 27.1 5,0

Investment (Rbn)Spoornet

Petronet

Total

0.920.27

1.19

Spoornet - Other

Investment (Rbn)

Branchlines

Other

Total

0.1816.8016.98

Coega

Investment (Rbn)NPA

Spoornet

Total

2.171.023.20

Cape Town

Gauteng Mega Domestic Zone

Volume (mt)

Value (Rbn)

Road 334 19.5

Rail 17.8 0.6

Leveraging SOE capex

• BBBEE is an integrated and coherent socio-economic process 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 country’s 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 Strategy

Department of Trade and Industry, March 2003)

The Poverty Barrier

The Skills Barrier

The Business Barrier

The Opportunity Barrier

EmploymentEquity/Job creation

CorporateSocial Investment

Skills Development

PreferentialProcurement

OwnershipAnd Management

Equitable Economic Opportunities

EnterpriseDevelopment

• Broad-based BEE must be inclusive

• Result in economic growth Accounted for with substance over form

Emerging black middle

class & investors

Black entrepreneurs

Black workers, professionals,

graduates, school-leavers

Black unemployed &

rural poor

Broad-Based Beneficiary Base

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 U

pliftm

en

t

Second economy

Promulgation of BEE Framework

SACOB Business Confidence Index

80

85

90

95

100

105

110

115

120

125

130

1998 1999 2000 2001 2002 2003 2004 2005

Publication of BEE Commissions Report

Publication of Broad-based BEE Strategy

Promulgation of Broad-based BEE

Release of the draft Codes of Good Practice

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

Elements of Broad-Based BEE

Transforming the

First Economy

Addressing challenges of the First and

Second Economy

Addressing challenges of

Second Economy

Ownership

Management

EmploymentEquity

SkillsDevelopment

PreferentialProcurement

EnterpriseDevelopment

Direct participation in

EconomicActivities

(Shareholders and Management

Team)

Development of Human Capital

(Current and prospective employees)

Development and Investment in

Affirmable Enterprises

(Suppliers and communities)

Identified and approved ASGISA provincial projects

Province Project

Eastern Cape Mzimvubu Catchments & Biofuels

Northern Cape Diamond and gem stone jewellery, National Livestock, biofuels,

Free State Biofuels

KZN Biofuels, Makhathini casava and sugar

Western Cape Cape Flats Infrastructure

Mpumalanga Moloto Corridor (rail)

Limpopo Dilokong Platinum

Gauteng OTT Logistics hub and IDZ

North West National Livestock

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

• SA’s 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

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, Aluminum Components and Diesel particulate filters.

Chemicals and Allied Industries

•Titanium Beneficiation Initiative,Fluorochemicals Expansion Initiative,Polypropylene Conversion.•Restructuring of State Owned Chemical Enterprises.

Business Process Outsourcing & IT Enabled Services

Call Centres, Back Office Processing and Shared Corporate Services.Enterprise solutions viz. fleet management, knowledge management, asset management solutions.

Electro Technical Manufacturing of: automotive electronics, microchips and telecommunication

equipment.

Tourism Hotels and self-catering holiday resorts, Adventure-, Eco-, Sport- Conference- and

cultural tourism, gaming, infrastructure development, leisure complexes and world

class golf courses, harbour & waterfront developments,transfrontier conservation

areas, cruise liners & transportation.

Investment OpportunitiesInvestment Opportunities

Source: DTI/TISA Source: DTI/TISA

Sector Sub-sectorClothing, 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.

•Footwear – manufacturing of leather uppers.

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, catamarans and fleet racing boats, custom-made vessels (tugs) and training schools.



Sector Sub-sectorCapital Equipment Re-capitalisation of:

•Forgings & Castings•Boilers•Tool dies & moulds

Expansion & export development•Pumps, valves, material handling & straddle crane carriers•Mechanised mining

New investments in:•Turbine assembly•Production of turbine components•Machine tool manufacturing

Film •Film studios and post production facilities.•Co-production ventures.•Distribution infrastructure

Source: DTI/TISA Source: DTI/TISA

IncentivesIncentives

Incentive Benefit Main Conditions

Small and Medium

Enterprise

Development

Programme

(Temporary

suspended)

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 (Temporary

Suspended)

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

• Sector Information

• Finance to Explore Investment Opportunities in SA

• Facilitating Direct Government Support in the form of

• Information on Investing in SA and Business Environment

• Detailed Investment Incentives

• Investment Facilitation

• After care – ongoing contact

• the dti Call Centre: 0861 843 384the dti Call Centre: 0861 843 384

• the dti Switchboard: +27 12 394 0000the dti Switchboard: +27 12 394 0000

• Investment Promotion: +27 12 394 1333/1339Investment Promotion: +27 12 394 1333/1339

• Website: Website: www.thedti.gov.za

• E-mail: E-mail: [email protected]

• Postal Address: Private Bag X 84Postal Address: Private Bag X 84

PretoriaPretoria

00010001

South AfricaSouth Africa

the dti’s Contact Detailsthe dti’s Contact Details

http://www.thedti.gov.za/

mailto:[email protected]

Thank YouThank You