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South African Economy
South Africa at a glance
Indicator
Total Population
% of Total Population under 15 years
Adult Literacy Rate (1990)
Internet Users
Mobile Telephone Subscriptions
GDP per capita (constant 2005 prices)
FDI (net inflows % of GDP)
Gross Fixed Capital Formation (% of GDP)
1994
2009
38,283,223
49,320,150
37%
31%
76.2 %
88.8%
100,000
4,420,300
340,000
46,436,000
R 27,400.12
R 37,261.16
0%
2%
15%
23%
Source: World Bank Development Indicators 2010
South African Economy
Subject Descriptor
2005
2010
2015
GDP (constant prices)
5.277
2.784
4.5
GDP per capita (constant prices)
33,506.98 36,730.29
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
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 3.2% -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.
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South Africa houses one of the three largest telescopes in the world at
Sutherland in the Karoo.
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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
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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.
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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)
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T – FTA will create a sizeable regional market with a GDP of
$ 624 billion and a population of approximately 700 million people
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An African common market without internal borders will unleash the
economic growth and potential of Africa
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Developmental Integration leading to cross border infrastructure
development to strengthen regional supply capacity
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North – South Corridor – Cape to Cairo to facilitate trade and reduce
cost of doing business
Africa’s Main Transport Corridors
North/South
Corridor
Dares-Salam
To
Durban
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
18
14
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
Exports to Turkey
Rank
Product
Value (R) 2010
1
Mineral products
1,441,975,537
2
Base metals & articles of base metal
498,265,902
3
Machinery & mechanical appliances
384,370,996
4
Products of the chemical or allied industries
271,253,179
5
Prepared foodstuffs
74,523,274
6
Raw hides & skins, leather, fur skins
44,336,213
7
Pulp of wood or of other fibrous cellulosic material
43,526,537
8
Vehicles, aircraft, vessels & associated transport equipment
29,123,505
9
Textiles & textile articles
23,665,939
10
Articles of stone, plaster, cement, asbestos, mica or similar
materials; ceramic products; glass & glassware
15,489,074
Imports from Turkey
Rank
Product
Value (R) 2010
1
Machinery & mechanical appliances
473,987,003
2
Vehicles, aircraft, vessels & associated transport equipment
355,073,409
3
Textiles & textile articles
268,077,890
4
Products of the chemical or allied industries
146,425,899
5
Plastics & articles thereof; rubber & articles thereof
129,534,627
6
Articles of stone, plaster, cement, asbestos, mica or similar
materials; ceramic products; glass & glassware
116,452,569
7
Special classification of original equipment components/parts for
motor vehicles
94,566,031
8
Pulp of wood or of other fibrous cellulosic material
89,821,496
9
Prepared foodstuffs
86,107,258
10
Base metals & articles of base metal
67,255,919
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 Location on Shipping Routes
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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
World Class Capability
South African Construction and Steelwork on ALL
continents, including Antartica!
International icons constructed include Burj al Arab Hotel - Dubai,
Emirates Towers - Dubai, Khalifa Sports Hall Asean Games 2006 – Qatar and
many more!
World Class Capability
Examples of complete stadiums, including all civils and steelwork
built for the World Cup.
Our steelwork is to be found in and around all the stadiums!
Greenpoint Stadium, Cape Town
Moses Mabhida Stadium, Durban
Soccer City, Soweto
World Standard Comparison
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Birds Nest Beijing, China
• Steel – 110,000 tons
• Construction period - 5 years
• Cost $423m in 2008 terms
• 80,000 seating capacity
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Soccer City JHB, SA
• Steel – 110,000 tons
• Construction period – 3 years
• Cost $445m in 2010 terms
• 90,000 seating capacity
Infrastructure Development
Securing Electricity Supply
• Eskom has spent over R75.5 billion on the capital investment
programme since 2005, and has delivered some 5 031 Megawatt of
new electricity generating capacity into the system as well as
thousands of kilometres (3 051 km) of high voltage transmission
lines to transport electricity across the country.
• Eskom, through its Medium Term Power Purchase Program (MTPPP),
has signed agreements with three Independent Power Producers
(IPPs) since April 2010, totaling some 277 MW with a number of
contracts in the final stages of completion, which will bring the
contracted power purchases to around 400MW this year.
• Eskom has embarked on returning to service it’s previously
“mothballed” coal-fired power stations. . The total RTS (return to
service) portfolio will add 3 800 MW nominal capacities to the
national electricity supply system.
Infrastructure Development
Water
• The Department of Water Affairs has identified seven (7) new
augmentation water resources infrastructure projects to support
the domestic, industrial, agriculture and energy sectors
Communication infrastructure
• Broadband Infraco continues to invest in its national backbone
fibre optic network with R243 million spent in the 2009/10
financial year. Broadband Infraco’s fibre optic cable network now
covers approximately 12 250km country-wide. Enables the country
to extend connectivity to the SADC Region to countries such as
Lesotho, Namibia, Botswana, Mozambique, Zimbabwe and
Swaziland.
Infrastructure Development
Transport infrastructure
• Maintenance of secondary road infrastructure using labour intensive
methods of construction and maintenance. We have set aside R6.4 billion
in 2011/12, R7.5bn in 2012/13 and R8.2bn for 2013/14, amounting to a
total of R22.3bn in the medium term. At least 70 000 jobs will be created
in 2011.
Rail modernisation programme
•
The Gautrain forms an integral part of our rail modernisation programme.
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Starting in June 2011, the Gautrain will move at least 40 000 people
hourly on the commuter line between Johannesburg and Tshwane stressfree and in less than 40 minutes.
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The system includes 125 feeder buses operated by a consortium that
includes taxi operators.
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The recapitalization of PRASA rolling stock, Extension of the Gautrain from
Sandton to Hatfield, and the Modernisation of our long-distance passenger
and freight services.
Industrial Development Zone
IDZ’s are considered part of
the Customs Territory of
South Africa.
ORT
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
34
East London IDZ
Multi-Level Car Terminal
Dry Dock & Ship Repair
Containerisation
Grain Elevator
Richards Bay Idz
Aerospace Aviation Village
Future Aviation
Cluster
Development on
State Land
Factory Expansion
New
Aerosud
Supplier Park
37
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
the dti’s Investment Services
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Sector Information
Finance to explore investment opportunities in SA
Facilitating direct Government support in the form of:
- information on investing in SA and the Business Environment
- detailed investment Incentives
- investment facilitation
- after care – ongoing contact
Contact Details
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the dti Call Centre: 0861 843 384
the dti Switchboard: +27 12 394 0000
Investment Promotion: +27 12 394 1339/1032
Website: www.thedti.gov.za
E-mail: [email protected]
Postal Address:
Private Bag X 84, Pretoria 0001
South Africa
THANK YOU