CONTENTSContextualizing the South African economySouth Africas trade with the US (AGOA)ImportsExportsIndustrial policy frameworkInvestment opportunitiesInvestment incentives

CONTEXTUALISING SOUTH AFRICA5x size of UK, 2x size of TexasPopulation: 48.5 million27th largest economy in the world (GDP)Largest economy in Africa Total GDP US$283bn (2007)GDP 2007 per capita: (US$ 5 815)1st world infrastructure + financial services18th largest securities exchange globallyBBB+ (Fitch + S&P)SA holds 80% of global manganese reserves, 72% of chrome, 90% of platinum-group metals,40% of gold and 27% of vanadium.2008/9 WEF Global Competitiveness Index (134 countries ranked):Overall competitiveness, ranked 45thMacro- economic stability, ranked 50th

SADC and South Africa

STRATEGIC GEOGRAPHIC POSITION TO GLOBAL SHIPPING ROUTES

SOUTH AFRICAS ECONOMIC GROWTH HIGHLIGHTSSouth African economy growing.Current upswing currently in 8th year.Real GDP growth averaging around 4.5% projected to be at 3.5% in 2009 (decline in global demand for exports).Strong growth of middle class driving consumer demand Management of the economy remains in line with best international practice.

SOUTH AFRICAS MACRO-ECONOMIC MANAGEMENT HIGHLIGHTS

SOUTH AFRICAS MACRO-ECONOMIC MANAGEMENT HIGHLIGHTS

INVESTMENT CLIMATE

FAVOURABLE TAX REGIME

Corporate Income TaxIndividual Income TaxVATBrazil34%15-27.5%17-25%Russia24%13%18%India30-40%10-30%12.5%China33%5-45%17%South Africa28%18-40%14%

DOING BUSINESS (178 COUNTRIES RANKED)

SOUTH AFRICAS ECONOMIC GROWTH HIGHLIGHTS

Macro-Economic Stability:

Budget deficit < 2% Inflation within target band 3-6%Interest rates relatively low (prime lending rate is 10.5%)Accelerated inflow of foreign capital (over US$15,5 bn in 2007)

US$5.5bn by Industrial & Commercial Bank of Chinas 20% stake in Standard BankUS$4.5bn by UK Barclays Banks 56% stake in ABSA BankUS$1.5bn by US Ford Motor Company to expand next generation pick-up truck + diesel engine production

SOUTH AFRICAS ECONOMIC GROWTH HIGHLIGHTSMain growth drivers:Commodities boomDomestic consumption growth (partially linked to growth of the black middle class): 55000 dollar millionaires by 2007.Increased investments (public & private)

Positive net job creation:1mn jobs created last 3 years strong employment growth construction and financial services unemployment rate down from high of 32% to around 26%

MAIN CONTRIBUTORS TO GDP

SOUTH AFRICA US TRADE

AGOA currently the most important legislation for US trade and investment with SSA.

South Africa AGOA eligibility: 02 October 2000

SA exports to US under GSP and AGOA

AGOA has contributed to SAs export growth into the US market

Top 5 AGOA exporter (with Chad, Angola, Gabon, Nigeria)

Top destination for US exports in Africa: 24% growth in 2007

SA currently exports the widest range of products in SSA: automotive products winecitrus fruit, processed foods (juices, jams), fish (lobster)Cut flowersFootwear, leather, textile and apparel goods

US TRADE WITH AGOA ELIGIBLE COUNTRIES

US TRADE WITH AGOA ELIGIBLE COUNTRIES

TOTAL SOUTH AFRICA US TRADESource: US Department of Commerce

SOUTH AFRICA US TRADETop 10 SA exports to US (4-digit HS Code)PlatinumMotor vehiclesFerro-alloysCentrifuges + centrifugal dryersTitanium ores and concentratesDiamonds (rough, polished or set)Acyclic hydrocarbons Aluminum, plates, sheets and strip Parts and accessories of the motor vehicles Hydrogen, rare gases and other non-metals Source: Department of Trade and Industry, south Africa

SOUTH AFRICA US TRADETop 10 SA imports from US (by sections)Turbo-jets, turbo-propellers, gas turbines Telephone sets, incl. for cellular networkSelf-propelled bulldozers, angle dozers, graders, levellers Motor vehicles for the transport of goods.Passenger motor vehiclesMedical + surgical appliancesAutomated data processing machineryPetroleum cokeMotor vehicle parts & accessoriesPetroleum oils

SOUTH AFRICA US TRADETREND: Value added imports from US vs mainly commodities exports to the US by South Africa

The dti challenge: ensuring product diversification and increased value added + beneficiated exports to the US and globally.

How?

Industrialisation to encourage value-added exports.Sustainable investments by SA and foreign companies/entities.Infrastructure development to reduce cost of doing business + facilitate trade (US$78bn committed by government for infrastructure development). Reforming trade policy to complement industrial policyIncreasing overall competitiveness: aim to increase share of global trade, create a skilled workforce and attract job-creating investments

SA National Industrial Policy Framework (2007)Aim: increase SAs competitiveness, build manufacturing capacity, ensure industrialisation, diversification and value-added output.

Key sectors/industries:Agro-processingAutomotives and componentsChemicals and allied industriesClothing, textiles and footwearElectro-technical industriesBPO and IT-enabled servicesMining and metal-based industriesCapital equipment and allied servicesTransport equipmentAerospaceTourismEnergy (renewable)Film + creative industries

INVESTMENT OPPORTUNITIES IN SOUTH AFRICA

AGRO-PROCESSING

Wine production, confectionary (sweets, choco + baking products) indigenous meat processing (ostrich, venison, crocodile), indigenous teas (rooibos, honeybush), fruit + vegetable processing plants, floriculture, freshwater fisheries + aquaculture (tilapia, African catfish, oysters, abalone).

AUTOMOTIVE INDUSTRY

Engine parts/components, vehicle interiors (natural fibre trim), electronic drive chain components, body parts (lights, painted plastic components, glass, airbags), aluminum forgings + castings.

CHEMICALS + ALLIED INDUSTRIES

Pharmaceuticals: R&D, active pharmaceutical ingredients.Beneficiation of polypropylene, used in auto + construction industries.Production of titanium dioxide pigment, beneficiation of fluorspa

ELECTRO-TECHNICAL INDUSTRIES

Software + mobile applications, pre-paid smart metering solutions, upgrading of microchip manufacturing, radio frequency identification, security and monitoring solutions, financial software, defense-related electronics.

MINING + METAL-BASED INDUSTRIES

Downstream processing + value addition of iron, steel, aluminum, ferro-alloys, platinum group of metals, diamonds.Conversion of metal products: metal fabrication, pipe & tube, foundry products, wire, jewellery.

CAPITAL EQUIPMENT + ALLIED SERVICES

Manufacturing + assembly of mining, agricultural and construction equipment.Recapitalisation of equipment (boilers, tool dies + moulds, petrochemical equipment).New investments in turbine assembly + components, machine tool manufacturing.

TRANSPORT EQUIPMENT

Rolling stock: locomotives, wagons, coaches.Permanent infrastructure + equipment: railways, bridges, harbours.Ship and oil-platform building and maintenance.

CLOTHING AND TEXTILES

Large-scale manufacturing of industrial textiles using polyester.Manufacturing of synthetic + natural fibre textiles.Wool + mohair production + knitwear.Cotton spinning, weaving, knitting

BPO + IT-ENABLED SERVICES

Call centres, Back Office Processing, Shared Corporate Services (legal, accounting etc.)Enterprise solutions: fleet management, knowledge + asset management.

AEROSPACE

Aviation related services, including maintenance, repair and overhaul + trainingSpecialised manufacturing of aviation components + systems.Unmanned arial vehicles, satellite related services, design expertise.

TOURISM

Adventure, eco-, sport-, business- and cultural tourism.Leisure complexes + world class golf courses.Harbours + waterfront developments, cruise liners.Transfrontier conservation areas.

ENERGY

Power generation (solar, hydro, nuclear, wind etc.)Energy infrastructure.Alternative energy / green energy.

FILM + MEDIA

Establishment of film studios.Production + co-production ventures: film, still photography, documentaries, commercials, multimedia.Distribution infrastructure.Services for foreign productions

DESIGN

Jewellery manufacturing and design.Fashion design + production.

INVESTMENT INCENTIVESThe Enterprise Investment Programme: ManufacturingAn investment incentive cash grant for locally-based manufacturers who wish to establish a new production facility, expand and existing facility or upgrade and existing facility in manufacturing industries.

The Enterprise Investment Programme: Tourism SupportInvestment incentive cash grant, payable over a period of 2-3yrs, to support development of tourism enterprises so as to stimulate job-creation and encourage geographical spread of tourism investment country-wide.

Accommodation services, passenger transport services, tour operators, cultural services, recreational and entertainment services.

INVESTMENT INCENTIVESForeign Investment GrantTo compensate qualifying foreign investors for the cost of moving new machinery and equipment from abroad to South Africa.

Critical Infrastructure ProgrammeA cash grant for projects designed to improve critical infrastructure in South Africa, including:Rail and road transport systemsElectricity transmission and distribution systemsTelecommunications networks cabling and signal transmission systemsSewage systems network and purificationWaste storage, disposal and treatment systemsFuel supply systems piping for liquid, gas and fuel conveyer transportation.

INVESTMENT INCENTIVESIndustrial Development ZonesPurpose-built industrial estates linked to international ports that leverage fixed direct investments in value-added and export-oriented manufacturing industries. Benefits include:Quality infrastructureExpedited customs proceduresDuty-free operating environments

Business Process Outsourcing and Offshoring Investment IncentiveComprises an Investment Grant and Training Support Grant towards costs of company-specific training. Incentives offered to both domestic and foreign investors establishing projects that aim primarily to serve offshore clients.

INVESTMENT INCENTIVESLocation Film and Television Production IncentiveIncentive programme consisting of a Large Budget Film and Television Production Rebate Scheme.Foreign owned qualifying producers are rebated a maximum of R10million for the production of large budget films and television productions.

Automotive Production and Development ProgrammeKey elements:Local assembly allowanceProduction incentivesAutomotive investment allowance

Contact DetailsLerato D. MatabogeTrade and Industry OfficeEmbassy of the Republic of South AfricaWashington, DC

Tel: +1 202 274 7973 / 5 / 7Email: Ldmataboge@saembassy.orgwww.thedti.gov.zawww.saembassy.org

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