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The case for investment
in South Africa
New Dawn, New beginnings,
New growth. South Africa
Inspiring New Ways
WHY INVEST IN SOUTH AFRICA
• South Africa has the most developed and diversified
economy on the African continent.
• South Africa’s economy is the 30th largest in the world
and one of the three largest in Africa.
• The levels of technological advancement and
sophistication of the South African economy are the
highest in Africa.
• South Africa has a world-class financial sector,
comparable (if not superior) to those of many of its
global peers.
• Exports from South Africa accounted for 0.5% of global
exports in 2017, the 37th largest exporter in the world.
The country’s export base is broad, with its
manufacturing component accounting for roughly 57%
of total merchandise exports in 2017.
• The Johannesburg Securities Exchange is the 19th
Land area 1 220 813 km2
Population (mid-2017)
% under the age of 35
56.5 million
66%
Gross domestic product (GDP)
in 2017 * Average R/$ for 2017 applied
R4.65 trillion
US$349.3 billion
GDP growth:
• 2017
• 2000 to 2017 (average)
• Pre-crisis (2004-07) average
1.3%
+2.9% p.a.
+5.2% p.a.
Trade in goods & services:
• Value of exports in 2017
• Value of imports in 2017
* Average R/$ for 2017 applied
R1.38 trillion / US$104.0
billion
R1.32 trillion / US$99.3 billion
Consumer price inflation
(average for 2017)
5.3%
Exchange rate:
• 2017 average
• On 24/05/2018
US$1.00 = ZAR 13.31
US$ 1.00 = ZAR 12.43
Prime interest rate (25/05/2018) 10.00%
Unemployment rate
(First quarter of 2018)
26.7%
South African Economy at a glance
largest stock exchange in the world by market
capitalization and the largest in the African continent.
• A robust and well-entrenched democracy with an
independent judiciary underpin South African society.
• South Africa has a modern and extensive infrastructure
network which is well connected to the Southern African
region and the world at large.
Source: IDC analysis
The South African economy at a glance
• South Africa has a mature, accessible legal system providing
certainty and respect for the rule of law;
• South Africa is the multi-nationals’ investment location of choice
ranked No.1 in Ernest and Young’s Africa Attractiveness survey
2016;
• According to the World Bank 2016/17 Global Competitiveness
Report, South Africa ranks 27th for its domestic market size;
• The Continental Free Trade Area (CFTA) will bring together 54
African countries with a combined population of more than one
billion people and a GDP of more than US $ 3.4 trillion;
• South Africa has world class infrastructure with the most
advanced transport infrastructure in Africa. It has the largest air,
rail and port networks on the continent. South Africa has efficient
ports equipped with ship-to-shore cranes and other support
handling equipment;
• South Africa has eight ocean economy seaports: Richards Bay,
Durban, East London, Ngqura, Port Elizabeth, Mossel Bay,
Cape Town and Saldhanna Bay.
• South Africa is ranked No 1 in Africa, on the World Bank’s
Logistics Performance Index.(World Bank, 2017)
South Africa’s logistics performance index
Source: World Bank
South Africa’s ports
Source: Transnet
Source: World Bank, InvestSA
South Africa Economic Overview
South Africa’s diversified economy forms an important basis for
sustained growth & returns on invested capital
• The economy has diversified its mining sector
concentration risk and is now geared toward services
and manufacturing industries;
• Mining, via its vast backward sectoral linkages, remains a
key contributor to growth and export earnings. SA’s
mineral resources portfolio has also become more
diversified over time;
• With the most developed and diversified economy on the
African continent, South Africa remains competitively
positioned to leverage continental growth opportunities;
• The country’s technological base, advanced
manufacturing capabilities and economic infrastructure,
supported by sophisticated and globally integrated capital
markets, facilitated the development of domestic
industrial value chains;
• While certain constraints have weighed on SA’s
competitive positioning in global value chains, integrated
domestic value chains have not only supported economic
growth through challenging periods, but have also
opened up investment opportunities in sectors with high
growth potential, particularly those that are export-
oriented.
Sectoral composition of the South African
economy in 2017
Addressing structural impediments &
economic bottlenecks could ignite SA’s growth
engine
South Africa has produced exceptional long-term financial
returns for investors
800
700
600
500
400
300
200
100
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2000=
100
Relative equities performance since 2000
JSE Allshare
Hang Seng
MSCI Emerging Markets Index
Shanghai Composite
Ibovespa
MSCI World
South Africa has outperformed a number of its
peers…
…with several sectors outside of the minerals
value chain generating positive returns
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
JSE Sectoral Indices
Financial 15
General retailers
Industrial 25
Resources
Mining
Source: Bloomberg (data), National Treasury analysis
Enabling environment for investment in South Africa
• Supportive and progressive legal framework:
o Legislation on copyrights, patents, trademarks and disputes that
is in line with international norms and conventions;
o Strong judiciary;
o Protection of foreign investment;
o Exemplary Constitution from a global perspective.
• Sophisticated and robust banking environment, well regulated.
• Sound macroeconomic management, independent central bank.
• Strong industrial capabilities and cutting-edge technology, having
developed leading technologies particularly in the fields of energy
and fuels, deep-level mining, medicine etc.
Governance: World Bank Ease of Doing Business Index 2018
o Starting a business o Protecting investors
o Dealing with construction
permits
o Paying taxes
o Getting electricity o Trading across borders
o Registering property o Enforcing contracts
o Getting credit o Resolving insolvency
• The World Bank Ease of Doing Business Index ranks South Africa 82nd out of 190
economies (overall ranking)
• Overall ranking is calculated using 10 sub-indices, which include:
South Africa’s Strengths: Protecting investors (24/190), paying taxes (46/190), resolving
insolvency (55/190), Getting credit (68/190)
Notable Improvements: Paying Taxes (50 to 46/190)
Distribution of South African FDI Stock trends 2003 - 2018
• Europe, China and the US constitute the key sources of inward investment into the South African
economy
Investment into SA Proportion % Investment from SA Proportion %
1. United States 19.97% 1. United Kingdom 10.28%
2. United Kingdom 19.69% 2. Nigeria 5.60%
3. Germany 6.70% 3. United States 4.98%
4. China 6.14% 4. Kenya 4.82%
5. France 5.72% 5. Ghana 4.67%
6. India 4.32% 6. Zambia 4.51%
7. Italy 3.91% 7. Namibia 3.89%
8. Switzerland 3.07% 8. Mozambique 3.42%
9. Japan 2.93% 9. Germany 3.11%
10. Netherlands 2.93% 10. India 2.64%
Source: Invest SA
South Africa has several trade agreements
Agreement Name
Type of Agreement
Countries Involved
Southern African Customs
Union
Customs Union South Africa, Botswana, Lesotho
Swaziland
Southern African Development
Community (SADC) FTA Free Trade Agreement 15 SADC member states
Economic Partnership Agreements FTA SACU- EU EPA plus Mozambique and
Angola
EFTA-SACU (FTA) FTA SACU + EFTA (Iceland, Liechtenstein,
Norway and Switzerland
Africa Growth & Opportunity Act
(AGOA)
Unilateral assistance measures
(non- reciprocal) US- 39 sub-Saharan African countries
Generalised System of Preferences Unilateral
(non-reciprocal)
SA- EU, Norway, Switzerland, Russia,
Turkey, the US, Canada, Japan
SACU-Mercosur
Preferential Trade
agreement SACU and Argentina, Brazil,
Paraguay and Uruguay
Source: Invest SA
Enabling Environment
Policy Support Measures
• Attractive investment promotion and support system:
o Policies and programmes that encourage foreign direct investment:
o Economic sectors are open to foreign investors;
o Availability of attractive incentives;
o Export assistance (e.g. export credit insurance, export marketing assistance).
• Funding assistance (various instruments) from a range of state-owned development finance
institutions.
• Several economic sectors benefiting from Industrial Policy Action Plan (IPAP) strategies and support
measures, including substantial financial incentives. For example:
o Manufacturing Investment Programme;
o Automotive Production and Development Programme;
o Clothing and textiles industry production incentive;
o Critical Infrastructure Programme;
o Aquaculture Development and Enhancement Programme;
o Tax Based Incentives on Industrial Policy Projects;
o Special Economic Zones (SEZs) have been designated in areas set aside for targeted
economic activities. These are supported through special arrangements (including legislation)
and systems that are often different from those applicable in the rest of South Africa.
Economic infrastructure geared to support production activity and
investment, including export oriented development
• South Africa has a highly developed economic infrastructure;
• World class ports form part of an integrated logistics network geared to support export-oriented industrial
development and investment across a diversified suite of industrial and mineral value chains.
Mineral bulk Break-bulk Agri-bulk RoRo Containers
Economic infrastructure geared to support production activity and
investment, including export oriented development (contd.)
Port of Cape Town: Renowned for the export of deciduous fruit,
wine, perishables and frozen products. Port of Saldanha: Africa's largest iron ore exporting port
Durban Container Terminal: Africa's biggest and busiest container
terminal
East London Terminal: Motor vehicles and components, textiles,
sugar, rice, timber, scrap steel, chemicals
Policy support measures: Special Economic Zones (SEZs)
Coega IDZ
Dube Trade Port
East London IDZ
Saldanha Bay EPZ
• Incentives offered by SEZs include:
− Preferential 15% Corporate Tax rate
− Valued Added Tax and Customs Duty
suspension in customs-controlled areas
− Employment incentive
− Building allowance
− Preferential land rental and utility rates
• 7 designated zones: Saldanha Bay
(Western Cape); Dube Trade Port (KwaZulu-
Natal); Coega (Eastern Cape); East London
(Eastern Cape); Richards Bay (KwaZulu-
Natal); Maluti a Phofung (Free State);
Musina-Makhado (Limpopo)
Richards Bay IDZ
Summary of benefits in Special Economic Zones (SEZs)
Incentive Licensee Operator Investor
1. Customs Duties & VAT (in CCA) √ √ √
2. Employment Incentive √ √ √
3. Building Allowance* √ √
4. 15% Corporate Tax* √
5. 12(i) Additional Benefits (points & %) √
6. SEZ Fund for CAPEX (Infrastructure) √ √
* Provided that the Minister of Finance has agreed to allow this benefit to the SEZ, and that the company
is involved in activities that have not been excluded.
7. SEZ Management support, infrastructure, security, OSS
Economic infrastructure geared to support production activity and
investment, including export oriented development (contd.)
Quality of air transport
infrastructure
WEF ranking: 25th out of 137 countries
Quality of rail Quality of roads
infrastructure
WEF ranking: 47th out of 137 countries WEF ranking: 50th out of 137 countries
Sectoral Investment Opportunities
in South Africa
Sectoral Strength of South Africa Provinces
•
Western Cape:
•Tourism
•Agro-processing
•Biotechnology
•Petrochemicals
•Clothing and textiles
•Fishing
Northern Cape:
•Agro-industries
•Transport and storage
•Mining and beneficiation
North West:
•Agro-processing
•Bio-fuels
•Leather products
•Mining
Limpopo:
•Food processing
•Agri-business
•Mining
•Fertilisers and pesticides
•Energy
Mpumalanga:
•Tourism
•Mining (Coal)
•Forestry
•Agriculture
•Agro-processing
Gauteng:
• Financial and business
services
• ICT
• Pharmaceuticals
• Food and beverages
• Mining
Free State:
•Agriculture
•Agro-processing
•Machinery and equipment
•Mining and beneficiation
Eastern Cape:
•Agriculture and forestry
•Aquaculture
•Automotive
•Clothing and textiles
•Leather and leather products
KwaZulu-Natal:
•Aluminium
•Automotive
•Petrochemicals
•Wood and wood products
•Tourism
•Clothing and textiles
South Africa’s priority industries for FDI
Green Economy:
• Energy & Renewables;
• Waste management;
• Energy efficiency & cleaner technology;
Resource-based industries:
• Mining & beneficiation;
• Metals;
• Oil & gas;
• Aquaculture
• Agroprocessing
Services
• Business processing & outsourcing (BPO) &
call centres;
• Information Communication Technologies
(ICT) & electronics;
• Film production;
• Tourism;
• Boat building;
Manufacturing:
• Automotives & components;
• Capital equipment;
• Leather & footwear;
• Forestry products & furniture
Advanced manufacturing:
• Nanotechnology;
• Advanced manufacturing;
• Biofuels;
• Precision engineering;
• Aerospace;
• Chemicals & biochemicals;
• Plastics & composites;
• Bio-pharmaceuticals & medical devices;
Contact Details
Name: Brian Soldaat
Email: [email protected]
Website: www.investsa.gov.za
Telephone - local: 086 1222 308 / international +2712 394 3078
Re a leboga!
Thank you
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