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Investing into South Africa
TRANSPORT INVESTORS CONFERENCE 2011
South Africa at a glance
Indicator
1994
2009
38,283,223
49,320,150
37%
31%
Adult Literacy Rate (1990)
76.2 %
88.8%
Internet Users
100,000
4,420,300
Mobile Telephone Subscriptions
340,000
46,436,000
R 27,400.12
R 37,261.16
FDI (net inflows % of GDP)
0%
2%
Gross Fixed Capital Formation (% of GDP)
15%
23%
Total Population
% of Total Population under 15 years
GDP per capita (constant 2005 prices)
Source: World Bank Development Indicators 2010
South African Economy
Subject Descriptor
GDP (constant prices)
GDP per capita (constant prices)
2005
5.277
2010
2.784
33,506.98 36,730.29
2015
4.5
42,280.50
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
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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
Achieving sustained and balanced growth
Economic
advantages
which create
a positive
environment
A tested and
reliable legal
system
Increased
investment in
infrastructure
Abundant mineral
& natural
resources
Established
industrial &
financial
infrastructure
A relatively large
labour force
Further, ‘consistently 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…’
Standard and Poor’s, August 2010
Reachable economic goals
South African Economy…

Rapid recovery from recession:
• 4.8% growth in Q1
• 14% growth in manufacturing
• improving fiscal position
• Improved growth prospects in Africa and Asia
•
Platform on which
improved economic
performance can be
built
low interest rates
Economic growth
2005-2007
2011-2014
5%
4-5%
Employment elasticity
Increase to 0.8% relative to GDP growth
=
=
Employment growth of 140 000 in
past 6 months

Complemented by investment in
social, municipal and economic
infrastructure
Proviso: Gross fixed capital formation growth of 10% p.a. - investment would
thus rise to 25% by 2014.
Macro-Economic Policy
Macroeconomic interventions to accelerate growth and ensure
social inclusion

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

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 and municipal infrastructure
Growth in 2011 expected 3,8%

Broad framework of further steps needed to raise the rate
of investment, employment and economic growth

Proceeds from premise that positive developments in
Africa and BRICS will lead to economic development.
South Africa- global perspective
•
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 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 accelerate from 2.8% in 2010 to 3.7%
in 2011 and 4.8% in 2012, helped by stronger external demand and looser
fiscal policy.
Source: SouthAfrica.info; Economist Intelligence Unit
South Africa - global perspective
• 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
Source: SouthAfrica.info
South Africa - global perspective
• South Africa's total road network is about 754 000 kilometers, of which
over 70 000km are paved or surfaced roads.
• South Africa has an extensive rail network – the 10th lengthiest in the
world – connecting with networks in the sub-Saharan region.
• More than 50 airlines, making around 230 000 aircraft landing, and
carrying about 33m passengers a year, move through South Africa’s 10
principal airports.
• The Port of Ngqura is being developed off the coast of Port Elizabeth in
the Eastern Cape and is set to be the deepest container terminal in Africa.
Source: South Africa Geared for Growth, 2010
South Africa – emerging market perspective
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 market
• 2nd lowest effective business tax rate
• 4th ranked for ease of accessing capital
• 4th ranked i.t.o. the cost of capital
• 6th ranked for infrastructure
• 7th 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
Economic Achievements
• In 2011, at 5.5%, South African interest rates are at a 30-year low.
• The JSE Securities Exchange one of the world’s top 20 exchanges.
• 1st for the regulation of securities exchange, strength of
auditing & reporting standards by Global Competitiveness Report
2010.
• 1st out of 60 countries in the Economist’s House Price index for
the period 1997 – 2009.
• The South African Rand was the 2nd best performing currency
against the US Dollar between 2007 and 2011, in Bloomberg’s
Currency Scorecard.
Source: SouthAfrica.info
Economic Achievements
• The South African stock market rose 16.09% in 2010, ranking 8th
out of the G20 nations and ahead of all of the G7 countries
• 34th out of 183 countries in the World Bank Ease of Doing Business 2011
• 2nd in the ease of getting credit
• 2nd for good practice in protecting both borrowers and lenders
• 10th in investor protection
• 54th out of 139 countries in the World Economic Forum’s Global
Competitiveness Index.
• 9th in financial market development
• 27th in the protection of intellectual property
Economic Achievements
•
54th out of 173 countries in the Transparency International Corruption
Perception Index 2010
•
South Africa is a world leader in coal-based synthesis and gas-to-liquid
technologies.
•
It is among the lowest-cost producers of ethylene and propylene in the
world, thanks to abundant access to low-grade coal and leading-edge
process technology.
•
Sasol has flown the world’s first passenger aircraft using the company’s
own-developed and internationally approved 100% synthetic jet fuel. Sasol
took to the skies with the world’s first fully synthetic jet fuel flight on
Tuesday, 21st of September 2010.
Africa is becoming more attractive...
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 framework
• increased transparency and improved decision-making
• privatisation initiatives
• reduced corruption
• investment protection & promotion
• intra and inter-regional initiatives
• High returns on investment
TRIPARTITE FREE TRADE AREA (T-FTA)
SADC,COMESA AND EAC (Economic Benefits)
•
T – FTA will create a sizeable regional market with a GDP of
$ 624 billion and a population of approximately 700 million people
•
An African common market without internal borders will unleash the
economic growth and potential of Africa
•
Developmental Integration leading to cross border infrastructure
development to strengthen regional supply capacity
•
North – South Corridor – Cape to Cairo to facilitate trade and reduce
cost of doing business
Trade Agreements in Africa
Source: Ernst & Young’s 2011 Africa attractiveness survey
Trade Corridors in Africa
Source: Ernst & Young’s 2011 Africa attractiveness survey
Africa’s Main Transport Corridors
North/South
Corridor
Dares-Salam
To
Durban
Trans-African Highways
Traffic Flows in Southern Africa
BRICS (Economic Benefits)
•
Combined GDP of BRICS countries is over $ 9 trillion
•
BRICS will account for 60 % of global growth in 3 years time according to
the IMF
•
BRICS-Africa trade is expected to show dramatic gains by 2015, increasing
threefold from USD150 billion in 2010 to an incredible USD340 billion.
BRIC’s share of Africa’s total trade is expected to increase from one-fifth
in 2010 to one-third in five years
•
BRIC’s foreign direct investment (FDI)in Africa is expected to soar to more
than USD150 billion by 2015.
South African Economy: New Growth Path
Vision:
Create 5 million jobs
And reduce unemployment to 15 %
in the next 10 years
Industrial Policy Action Plan II
Key pillar of the New Growth Path
IPAP: value-added sectors with high employment and growth multipliers
5
Low employment multipliers &
strong backward linkages
High employment multipliers &
strong backward linkages
4.5
4
Motor vehicles, parts &
accessories
Total Backward linkages
3.5
Paper & paper products
3
Basic chemicals
Basic iron & steel
2.5 Basic non-ferrous metals
EGW
Business services
2
6
1
2
3
5
4
7
11
81
9
Leather & leather products
Textiles
Food
14
1
Other manufacturing
Transport & storage
Mining
Financial services
13
Wood & wood products
Excl. medical, dental & vet
Wearing apparel
Agriculture
Wholesale & retail trade
1. Other chemicals & manmade fibers
2. Furniture
3. Plastic products
4. TV, radio and comm equip
5. Electrical machinery and
apparatus
6. Paper and paper products
7. Rubber products
8. Non-metallic minerals
9. Beverages
10. Glass & glass products
11. Professional & scientific
equip
12. Metal products excl.
machinery
13. Machinery & equipment
14. Footwear
Government services
1.5
1
0.5
Low employment multipliers
& weak backward linkages
High employment multipliers
& weak backward linkages
0
0
7
Employment multipliers
24
14
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
INVESTMENT ENVIRONMENT
&
OPPORTUNITIES
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
South Africa’s leading trade partners
South African Exports 2010 – top 10
Rank
Country
2010
Name
1
China
Proportion
Growth
% Total
2009 - 2010
11.48%
20.28%
South African Imports 2010 – top 10
Rank
Country
2010
Name
1
China
Proportion
Growth
% Total
2009 - 2010
16.89%
14.22%
2
United States
10.08%
25.26%
2
Germany
5.45%
11.35%
3
Japan
9.08%
36.42%
3
United States
0.93%
7.14%
4
Germany
8.34%
31.49%
4
Japan
17.01%
5.34%
5
United Kingdom
5.13%
4.20%
5
Saudi Arabia
-11.01%
4.12%
6
India
4.36%
24.23%
6
Iran
4.04%
4.00%
7
Netherlands
3.35%
-7.15%
7
United Kingdom
2.30%
3.81%
8
Switzerland
3.28%
-21.29%
8
India
33.92%
3.58%
9
Zimbabwe
2.93%
12.53%
9
France
1.58%
2.93%
10
Mozambique
2.68%
5.53%
10
Nigeria
3.10%
2.80%
Source: Quantec, 2011
South Africa’s leading investment partners
Investment in South Africa – top 10
2003 - 2010
Rank
Country
Proportion %
Investment from South Africa – top 10
2003 - 2010
Rank
Country
Proportion %
1
United States
17.21%
1
Qatar
18.60%
2
Australia
13.60%
2
China
14.95%
3
UK
11.52%
3
Ghana
14.00%
4
Germany
7.26%
4
Nigeria
8.33%
5
India
6.03%
5
Canada
4.78%
6
Japan
5.00%
6
Mozambique
4.64%
7
Canada
4.59%
7
Indonesia
4.15%
8
Ireland
4.59%
8
United States
3.46%
9
Norway
4.06%
9
Seychelles
2.70%
10
Switzerland
3.91%
10
Iran
2.56%
Source: The Financial Times Ltd , 2011 (www.fdiintelligence.com
South Africa’s FDI Composition
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%
Source: The Financial Times Ltd , 2011 (www.fdiintelligence.com
STRATEGIC GEOGRAPHIC POSITION TO
GLOBAL SHIPPING ROUTES
32
Strategic Location on Shipping Routes
•
•
•
•
South – South Trade
Important to the BRICS countries
Important to T-FTA - SADC, COMESA and EAC
Vulnerability of the Suez Canal
• Political instability
• Somali pirates
Dubai
Burj Al Arab
34
Industrial Development Zone
IDZ’s are considered part of
the Customs Territory of
South Africa.
JIA
Customs
Controlled
Area
RCB
Customs Territory
of
South Africa
Coega
An IDZ is located adjacent to a
port allowing importation of raw
materials, plant machinery &
equipment; and the export of
finished products;
EL
Customs
Services
Secured
Enterprises
Area
Industry &
Service Area
One
Stop
Center
IDZ
New Deepwater Port Of Ngqura
• 80,000 DWT Bulk Carriers
• Inner Basin 16.5 m below CD
• Entrance Channel 18m
• 175,000 DWT Bulk Carriers
• 9 000 TEU Cellular Containership
36
East London IDZ
Multi-Level Car Terminal
Containerisation
Dry Dock & Ship Repair
Grain Elevator
Johannesburg International Airport IDZ
38
Richards Bay Idz
Aerospace Aviation Village
Future Aviation
Cluster
Development on
State Land
Factory Expansion
New
Aerosud
Supplier Park
40
Investment Opportunities
Sector
Sub-sector
Agro-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, Fluoro chemicals 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.
Source: DTI/TISA
Investment Opportunities
Sector
Sub-sector
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.
•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.
Source: DTI/TISA
Investment Opportunities
Sector
Sub-sector
Capital 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
Incentives
Incentive
Benefit
Main Conditions
The Enterprise
Investment 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 foreign
investors for the cost of moving
qualifying new machinery and
equipment 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
Section 12i Tax
Allowance
Benefit
Tax deductions of up to R 900m
depending on status viz. preferred
or qualifying projects.
Main Conditions
Valid until December 2015
Capital investment > R 200m
Training allowance/ deduction of
up to R30m or R36 000 per
employee.
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
South Africa’s investment environment
South Africa today is one of the most sophisticated and promising emerging
markets globally, mainly because of …
Abundant
natural
resources
Political & economic
stability with sound
macro-economic
management
Excellent
transport &
logistical
infrastructure
Competitive
sectors/industries
World class
financial
system
Skills
availability
Favourable cost of doing business