South Africa

2 Chapter Investment Environment

    • Present state of business environment 2019

      South Africa has an emerging market with an abundant supply of natural resources, with a large market potential, well developed infrastructure and a competitive domestic economy thanks to economic reforms that have led to macro-economic stability, there have been tax and customs reductions as well. The economic growth has decelerated in recent years, unemployment, poverty, and inequality levels are among the highest in the world. But still, private consumption should pick up by 2020.

      GDP and growth rate.

      South Africa's GDP represents 0.59 % of the world economy and in 2018 the Gross Domestic Product (GDP) was worth 366.30 billion US dollars. About Growth, economy expanded 0.9 % year-on-year in the second quarter of 2019, GDP Growth Rate averaged 2.71% from 1993 until 2019. By 2017 the GDP between sectors was as follows: 

      •  

        Agriculture: 2.8%

      • Industry: 29.7％

      • Services: 67.5％

      Finance and external debt.
      External debt increased to 180,568 USD Million in the second quarter of 2019 from 176,004 USD Million in the first quarter of 2019.

       

    • Market

       Market Overview.
      South Africa’s economic freedom score is 58.3, making its economy the 102nd freest in the 2019 Index. South Africa´s score has decreased due to judicial effectiveness and declines in fiscal health, property rights, government integrity, and investment freedom. According to the freedom score South African government has restored macroeconomic stability but still faces rising public debt, inefficient state-owned enterprises, and spending pressures that have reduced the country’s global competitiveness.

      Stock Market Exchange.
      South Africa's FTSE/JSE Africa All Shares Index is a market capitalization weighted index. Companies included in this index make up the top 99% of the market capitalization of all listed companies on the Johannesburg Stock Exchange. The JALSH-All Share increased 4273 points or 8.34% since the beginning of 2019, according to Trading Economics from information on trading on a contract for difference (CFD) that tracks this benchmark index from South Africa.

      Stock level relative to the United States.
      The Dow Jones Industrial Average is one of the most closely watched U.S. benchmark indices, it is a price-weighted index which tracks the performance of 30 large and well-known U.S. companies that are listed mostly on the New York Stock Exchange. By October 12 of 2019 the Dow Jones was 26800.19 points, this changes every day. The highest it has been is 27398.68 points and the lowest 28.48 points from 1896 to 2019. South Africa by October the 12th of 2019 is 55537.02, the highest it has been is 61776.68 points and the lowest 4395.41 points from 1995 to 2019.



    • Trade

      Trade.
      Total value of goods traded during August 2019 was as follows:

      Trade balance for August 2019:  6,842,934,989 R
      Exports: 122,020,497,474  R
      ​Imports: 115,177,562,485  R
       
      In August of 2019 South Africa recorded a trade surplus of 6.84 billion ZAR, beating market expectations since the prior month there was a deficit.
       
      Exports.
      The most common commodities for exports are gold, diamonds, platinum, other metals and minerals, machinery and equipment. The main export partners by August of 2019 were the following. 
       
       
      Imports.
      The main commodities for imports are machinery and equipment, chemicals, petroleum products, scientific instruments, foodstuffs. And the main import partners by August 2019 were the following.
       

       

       
       

    • Industry trends

      Industry trends.
      The annual percentage increase in industrial production (includes manufacturing, mining, and construction) by 2017 was 1.2%, South Africa is largest producer of platinum, gold, chromium and has the following main industries such as an industry for automobile assembly, metalworking, machinery, textiles, iron and steel, chemicals, fertilizer, foodstuffs, commercial ship repair.

      Mining.
      The mining sector is a very important part of the economy, since South Africa  is the world's largest producer of chrome, manganese, platinum, vanadium and vermiculite, and is the second largest producer of ilmenite, palladium, rutile and zirconium, and is the third largest coal exporter. South Africa is also a huge exporter of diamonds and iron ore.

      Agriculture.
      The major crops and products in South Africa are corn, wheat, sugarcane, fruits, vegetables; beef, poultry, mutton, wool, dairy products.

      Foreign Direct Investment.
      Foreign Direct Investment in South Africa increased in the second quarter of 2019 by 26301 ZAR Billion, compared to other countries in the African continent, South Africa's potential attractiveness is high, the country leads in terms of FDI inflows in Africa, mostly thanks to Special Economic Zones (SEZ´s) programs aimed at attracting foreign direct investment.
      Special Economic Zones (SEZ´s) are geographically designated areas set aside for specifically targeted economic activities, supported through special arrangements and systems that are often different from those that apply in the rest of the country. Special Economic Zones have different categories such as the following:

      Industrial Development Zone: means an industrial estate that leverages domestic and foreign fixed direct investment in value-added and export-oriented manufacturing industries and services.
      Free Port: means a duty-free area adjacent to a port of entry where imported goods may be unloaded for value-adding activities within the Special Economic Zone for storage, repackaging or processing, subject to customs import procedures.
      Free Trade Zone: means a duty-free area offering storage and distribution facilities for value-adding activities within the Special Economic Zone for subsequent export;
      Sector Development Zone: means a zone focused on the development of a specific sector or industry through the facilitation of general or specific industrial infrastructure, incentives, technical and business services primarily for the export market.
       
       
      By industry.

      By country.




       



       

       
       

       

    • Infrastructure

      Infrastructure.
      The World Economic Forum´s report "The global competitiveness report 2017-2018" puts South Africa into the following rankings in their comprehensive evaluation of infrastructure. 
       
      Roads.
      The total length of the road network by 2016 was 750,000 km, of paved pave ways was 158,124 km and unpaved 591,876 km.
       

      Railways.

      The railway serves all the major cities, most smaller towns, and many rural areas, is almost entirely owned and operated through the Transnet public corporation. The total route length of the railway network by 2014 was 20,986 km including its component parts by gauge, the four typical types of gauges are: broad, standard, narrow, and dual. The standard gauge was 80 km 1.435-m gauge (80 km electrified), of Narrow gauge was 19,756 km 1.065-m gauge (8,271 km electrified) and other was 1,150 km (passenger rail, gauge unspecified, 1,115.5 km electrified).
       
       

      Airports.

      National air transport system in South Africa, in terms of both structure and performance, includes the following, the total number of registered air carriers registered with the country’s national aviation authority and issued an air operator certificate as required by the Convention on International Civil Aviation. By 2015 the number was 23, the inventory of registered aircraft operated by air carriers was 216. The number of Airports by 2013 was 566, with paved runways 144 and with unpaved runways 422.
       
      Ports.
      South Africa has no navigable rivers the major seaports are Cape Town, Durban, Port Elizabeth, Richards Bay and Saldanha Bay. Container ports (TEUs) in Durban was 2,699,978 by 2017, LNG terminals for import is in Mossel Bay.

      Merchant Marine.
      The total and the number of each type of privately or publicly owned commercial ship; military ships are not included, by 2018 was 88, by type 2 bulk carriers,1 general cargo, 6 oil tankers 6,
       
      and other types were 79.
       
      Communications.
      The telephone system is the best-developed and most modern in Africa; mobile Internet accounts for about 95% of Internet connections; by 2018 94% with access to WiMAX/LTE services; 5G trials; LTE-A services launched for commercial use. The telephone total subscriptions of fixed lines by 2017 was 3,629,141, seven subscription per hundred inhabitants.

      Transportation.
      The Department of Transport is responsible for regulation of all transportation in South Africa, including public transport, rail transportation, civil aviation, shipping, freight, and motor vehicles. Most towns are connected by two-lane highways; multilane freeway systems extend around the four major urban areas, but, over long distances, only Johannesburg and Durban are connected by that type of highway.  Local public transportation in South Africa is very limited, it can be thought taxis some have to be pre-ordered, and some have no meters, minibus taxis named ‘black taxis’ and buses called Metrobus.
      Distribution costs.According to the Road Market Report 2019 the South Africa Freight Transport status is that the major logistics companies are having problems with a slowdown in manufacturing and mining production, the sector is affected by numerous cost increases including fuel prices. The Statistics SA Land Transport Survey showed that the seasonally adjusted volume of freight transported by road increased by 9.5% in 2018 but decreased by 4.3% in the first quarter of 2019.
       




       


       

       
       
       
       

    • References

      South Africa GDP, Annual growth rate, Trading Economics, 2019.
      https://tradingeconomics.com/south-africa/gdp
       

      External Debt, South Africa, Trading Economics,2019.

       

      2019 Index of Economic Freedom, Heritage.org

      https://www.heritage.org/index/country/southafrica
       

      Trade Statistics, South Africa, SARS, 2019.

      https://www.sars.gov.za/ClientSegments/Customs-Excise/Trade-Statistics/Pages/default.aspx
       

      South Africa: Foreign Investment, Santander Trade 2019.

      https://en.portal.santandertrade.com/establish-overseas/south-africa/foreign-investment
       

      Special Economic Zone (SEZ), Department of Trade and Industry of the Republic of South Africa, 2019.

      http://www.thedti.gov.za/industrial_development/sez.jsp
       

      The World Factbook, South Africa, Central Intelligence Agency

       

      The World Economic Forum´s report "The global competitiveness report 2017-2018" 

       

      Transportation and Telecommunications, South Africa Encyclopedia Britannica, 2019.

      https://www.britannica.com/place/South-Africa/Transportation-and-telecommunications
       

      South Africa Freight Transport by Road Market Report 2019 Featuring Barloworld Logistics Africa, Bidvest Freight and Imperial Logistics, PR Newswire, 2019.

      https://www.prnewswire.com/news-releases/south-africa-freight-transport-by-road-market-report-2019-featuring-barloworld-logistics-africa-bidvest-freight-and-imperial-logistics-300884224.html