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Although the economy is in many areas highly developed, there are some weaknesses, partly because ofremaining inequalities between the country's black and white residents, and partly due to the country'sinternational isolation until the 1990s. The country could, then, be said to be in a state of transition, as thegovernment seeks to address the inequities of previous regimes and foster good international traderelationships with other countries. South African business has become increasingly integrated into theinternational community; foreign investment into the area has grown substantially over the past few yearsas a result. With its advantageous location and a government receptive to foreign direct investment,South Africa certainly looks as though it is becoming an international force to be reckoned with.

The South African business infrastructure is generally well developed, and could be seen as a model forother African countries to follow. It includes an efficient physical infrastructure of roads, rail and airtransport, a well developed communications network supported by reliable electricity supplies, and asubstantial financial support structure for companies established in the country, including a network ofmerchant banks, brokers, and financial services specialists. Although the business infrastructure is notyet able to compete with those of the most developed western powers, it is certainly forging a path forother emerging markets countries to follow; increasing investment in telecommunications and technologyshould see it able to compete on an international level in the near future.

Virtually all business activities are open to international investors, although in a few sectors, ceilings have

been placed on the permitted extent of foreign involvement, for example in the banking industry in whichforeign equity investment is limited. At present, foreign investments are treated in essentially the sameway as domestic investments, and receive national treatment for various investment incentives such asexport initiative programmes, tax allowances, and trade regulations.

The main difference in treatment between domestic and foreign investment is in terms of the localborrowing restrictions imposed by the Exchange Controls authorities. For business and investingpurposes, a non-resident is known as an 'affected person', and where 25% or more of the firm's capitalassets are paid to a non-resident, or the firm is 75% owned by a non-resident, it is deemed to be similarly'affected'. At the time of writing, the maximum an 'affected' company can borrow locally is 50% of thecompany's effective capital (basically its net worth), plus an additional figure based on the followingformula:

100 + SA Participation / Non-resident Participation x 100% of total effective capital

The rate of normal tax for companies in South Africa is 28% (lowered from 29% in 2008), with anadditional 10% 'STC' (Secondary Tax on Companies, (lowered from 12.5% in 2007)) tax payable on netdividends (dividends paid less dividends received). Prior to the tax rate changes, the maximum effectiverate of company tax and STC was 37.8%. This rate applies to companies that distribute all of their after-tax profits as dividends. Double taxation is avoided by the granting of a credit to companies for dividendsreceived from South African companies that have already been subject to STC. Consequently, STC iseffectively imposed on the distribution of operating profits.

However, from 2010, Secondary Tax on Companies (STC) will be replaced with a 10% dividend tax atcompany level.

Branch profits tax (for companies which are not resident in South Africa, but do business there via aresident branch or subsidiary) is 33% (reduced from 34% in 2007); they are exempt from STC.

Despite a considerable increase in recent years in domestic savings available for investment,foreign capital investment plays a significant role in South African economic development, and anumber of manufacturing and industrial concerns have been established by the United Kingdom,the United States, and continental European companies since World War II. UK capital has beeninvested primarily in manufacturing, heavy engineering, and in the development of new gold

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fields in Transvaal and the Orange Free State. US investments are mainly in mining andmanufacturing, and in wholesale and retail trade. Some 250 American companies accounted forabout one-fifth of total foreign investment in South Africa as of 1982. However, between 1984and 1987, the number of US companies with direct investments in South Africa dropped from325 to 259. In 1986, the United States and the EEC banned new investment in South Africa.

The establishment of a multiracial government in 1994 and the lifting of sanctions led to anincrease in foreign investment in South Africa. The number of multinationals with directinvestments or employees in South Africa increased by over 20%. By 1997, total foreign directinvestment (FDI) exceeded $18 billion. The inflow of FDI in 1997 was over $3.8 billion, but fellto $561 million in 1998. Inward FDI flows increased to $1.5 billion in 1999 and to $888 millionin 2000. Contrary to worldwide trends in the economic slowdown of 2001, FDI inflow in SouthAfrica reached a record $6.65 billion.

foreign investor wants to see property as a long term investment market.SA needs to be

especially aware of headline and their power to influence perception. A headline likechinaintroduces curbs on foreign investment results in investor confidence going down in china.

Investor then turn to india because as one door closes another opens its arms.

Take another headline like foreign ownership of property in SA under review, which creates a

negative perception in international markets, as does FIFA said to have concerns over SAs ability todeliver on time. 2010 must happen well. If it does not , SA loses the power of the draw and creates a

perception that in no way serves it.

Corporate and social responsibility and constructive criticism abound in SouthAfrica. No one likes to be criticised, but in a business environment one cannot

afford to avoid constructive criticism. The facts have to be agreed upon and abrutal relationship has to be developed.