why invest in south africa? - itd · south africa - global perspective q cape town was named the...

WHY INVEST IN SOUTH AFRICA?

SOUTH AFRICA FAST FACTS

• Area 1,219, 090 km2

• Head of the State: President Jacob Zuma

• 

• 11 Official languages with

English the business language

• Est. Population: 55.6 million

(36% Youth -15 to 34)

• Currency: One rand (ZAR) = 100 cents

SOUTH AFRICA ECONOMY

q Currency: Rand (R) q Real GDP growth rate (1st Quarter 2016): decreased by 1.2% annualised q/q

q Ranking in terms of GDP size (PPP): 30th largest in the world

q Consumer inflation for 2016 (at July 2016): 6.4%

q Producer inflation rate (May 2016): 6.5% q Reserve Bank Prime lending rate (August 2016): 10.5%

q Labour force (July 2015): 15.7 million people employed q Unemployment (July 2015): 5.2 million unemployed and 15.1 million not economically active Read more: http://www.southafrica.info/about/facts.htm#economy#ixzz3oT6fs9ir https://www.investec.co.za/research-and-insights/economy/economic-research/price-inflation/cpi-and-ppi-updates.html

GDPComposi+onbySector

2%

22%

17%

15%

13%

10%

8%

6%

4% 4%

GDP Composition by Sector

Agriculture

Finance

Government

Trade

Manufacturing

Transport and Communication

Mining

SOUTH AFRICA: KEY INDUSTRIES Mining: World’s Largest Producer

of Platinum and Chromium

Gold and Gems: No 6 in gold and diamonds worldwide

Automobile Assembly

Metalworking and Machinery Iron and

Steel Chemicals

and Fertiliser

Agriculture and Foodstuffs

Commercial Ship Repair

Tourism

Financial Services

SOUTH AFRICA EXPORTS

http://atlas.media.mit.edu/en/profile/country/zaf/

SOUTH AFRICA EXPORT DESTINATIONS


SOUTH AFRICA EXPORTS TO THAILAND


SOUTH AFRICA IMPORTS


SOUTH AFRICA IMPORT ORIGINS


SOUTH AFRICA IMPORTS FROM THAILAND


SOUTH AFRICA - GLOBAL PERSPECTIVE q Cape Town was named the 10TH in ranking in top 10 tourist

destination in the world in the 2015 Traveler’s Choice Destinations awards.

q South Africa is the only African country that is a member of the G20

q South Africa is also a non permanent member on the UN Security Council

q O R Tambo airport is the best airport in Africa, according to the World Airport Awards 2014. It was also in the top 3 most improved airports in the world for the same period

Source: SouthAfrica.info

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 59.5 million active cell phones (population 55.6 million) – ranking in the top 5 globally in terms of cell phone coverage.

Source: SouthAfrica.info 2013 GSM African Mobile Observatory report

•  GDP: USD349.8 billion

•  GDP Growth: -1.3% 2015 q/q

•  GNP: ZAR2,932,656 Million in 2nd q 2015

•  Gross National Income: USD367,019 million (2014)

•  GDP per capita PPP*: USD12,446 (2014)

•  GNI per capita: USD7,190 (2014)

* Purchasing Power Parity

http://www.tradingeconomics.com/south-africa/gross-national-product

http://data.worldbank.org

MACRO-ECONOMIC INDICATORS

KEY FINDINGS FOR Q1 2016 Foreign Direct Investment in South Africa increased to an all time high of ZAR 2089 Billion in the first quarter of 2016. South Africa attracted ZAR64.3 billion in foreign direct investment between April and December 2015, surpassing its target of ZAR45 billion by almost ZAR20 billion. Foreign Direct Investment in South Africa is reported by the South African Reserve Bank.

STRUCTURE OF THE ECONOMY

The largest industries, as measured by their nominal value added in the third quarter of 2015, were as follows:

ü  Finance, real estate and business services – 20.5% ü  General government services – 16.9% ü  Wholesale, retail and motor trade, catering and accommodation – 14.4% ü  Manufacturing – 12.5%

http://www.statssa.gov.za

FISCAL POLICY �BREAKDOWN OF REVENUE AND EXPENDITURE 2016

BREAKING NEWS The RSA Government has recently announced there will be:

•  Revitalisation of agriculture and agro-processing value chain

•  New funding for skills development and higher education

•  Unlocking the potential of small, medium and micro enterprises (SMMEs), co-operatives, and township and rural enterprises

•  Growing the oceans economy and tourism

•  Further reform to boost and diversify the economy via The Nine-Point Plan which consists of five cross-cutting areas that are aimed at expand the economy. These cross-cutters include broadband roll-out, water and sanitation, transport infrastructure and science, technology and innovation.

•  Scaling up private sector participation and making it easier for investors to enter the country through the One-Stop Shop.

MORE BREAKING NEWS •  South Africa's minister of finance, Pravin Gordhan, and representatives of

the Reserve Bank, business and labour recently embarked on an international roadshow to pass on a single message to investors: the country is stable and has a healthy economy, able to overcome challenges.

•  The South African Rand (ZAR) v Thai Baht (THB) rate is very competitive at ZAR1.00 : THB2.23 (17th March 2016) – thus representing a fantastic investment opportunity).

MORE GOOD NEWS

•  South Africa’s exchange rate makes it one of the least expensive countries for foreigners to live in and a great place for overseas companies to invest in •  Energy costs are still among the lowest in the world •  South Africa’s unit labour costs are lower than those

of many other emerging markets •  South Africa’s first-world infrastructure and high

living standards ensures good value for money

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) - European Free Trade Association (EFTA) FTA • USA Africa Growth and Opportunity Act (AGOA) •  SADC-EAC- COMESA T-FTA

Agreements in the making: •  TA with India •  TA with Mercosur

Sector Sub-sector

Business Process Outsourcing & IT Enabled Services

• Call Centres • Back /office Processing • Shared Corporate Services • Enterprise solutions e.g. fleet management and asset management • Legal process outsourcing

Electro Technical • Software & mobile applications • Smart metering • Embedded software • Radio frequency identification • Process control , measurement & instrumentation • Security & monitoring solutions • Financial software

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.

INVESTMENT OPPORTUNITIES

Sector Sub-sector

Agro-processing Fisheries and aquaculture i.e. freshwater aquaculture & marinculture Food processing in the milling and baking industries Beverages viz. fruit juices and the local beneficiation, packaging and export of indigenous teas High value natural fibres viz., organic cotton & downstream mohair production High value organic food for the local and export market Biofuels production viz. biodiesel & bioethanol

Automotives & Components

Engine parts/components, vehicle interiors, electronic drive train components, body parts, catalytic converters, aluminum forgings & castings, diesel particulate filters and leather products

Chemicals and plastic fabrication

Beneficiation of polypropylene used in automotive components & building and construction industries, packaging materials Medical (drips & syringes), manufacture of active pharmaceutical ingredient (APIs) for key anti-retrovirals (ARVs) Manufacture of reagents for AIDS/HIV diagnostics Production of vaccines and biological medicines


Sector Sub-sector

Tourism • Accommodation – hotels, boutique hotels, lodges & resorts, guest houses • Urban integrated tourism/ entertainment precincts. • Adventure, - games parks, eco-, sport-, conference - and cultural tourism. • Infrastructure development. • Leisure complexes & world class golf courses. • Harbour & waterfront developments. • Trans-frontier conservation areas. • Tourism transport – aviation, rail, cruise liners etc • Green building and green technologies for tourism • Attractions and activity – based tourism, museums and heritage • Cultural, music, arts festivals and events

Aerospace

• Aviation related services, including maintenance, repair and overhaul (MRO) • Rotary and fixed wing components. • Aviation training services • Specialised manufacturing of avionics, including health usage monitoring systems • Aerostructure components, specifically composites and sheet metal (aluminium and titanium) • Small and micro-satellite capability including sensor platforms • Satellite related services (including tracking and control and applications development) • Specialised design expertise, systems level as well as first tier level. • Unmanned Arial Vehicles (UAVs)


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:

Ø restored macro-economic stability Ø greater predictability & increased reliability of policy &

regulatory framework Ø  increased transparency and improved decision-making Ø privatisation initiatives Ø reduced corruption Ø  investment protection & promotion Ø  intra and inter-regional initiatives

�  High returns on investment

INVESTING IN AFRICA: AN IMPROVING OPPORTUNITY

q A billion dollars to invest in Africa ü That's the message from TPG Growth and Satya Capital, which announced a billion dollar investment partnership in Africa on 18 June. ü The money will be provided by TPG Growth, which will look for companies and entrepreneurs in all sectors that are in need of capital to help them grow, including in health care, technology, media and telecommunications, consumer and financial services. ü While Satya normally targeted investments of between $20-million and $150- million, this partnership would allow it to broaden the scope to between $1-million and $200-million.

q ZAR10bn boost for SA's Saldanha Bay ü A ZAR9.65-billion investment in infrastructure projects at Saldanha Bay, on South Africa's West Coast, was announced by the Transnet National Ports Authority ü These are aimed at enhancing the deep-water port's ability to service the offshore oil and gas industry. ü The project falls under the government's "blue economy" plans of its Operation Phakisa initiative, announced by President Jacob Zuma in 2014. The aim of the project is to clear infrastructure bottlenecks that may be constraining economic growth.

GROWTH AND OPPORTUNITIES

q South Africa's hospitality sector 'poised for growth'

ü South Africa's hospitality sector is poised for further growth in the next five years on the back of rising room rates and growing tourism numbers, according to a report released by PricewaterhouseCoopers (PwC)

ü PwC's "South African Hospitality Outlook: 2014-2018" projects that the overall occupancy rate across all sectors in South Africa will rise to an estimated 58.4% by 2018, with total room revenue expected to reach R28.7-billion, a 10.7% compound annual increase over 2013.

ü Despite the recent economic uncertainty, the total number of foreign overnight visitors to South Africa rose by 3.9% in 2013, down from the 10.2% increase in 2012, but still reflecting continued growth in foreign travel to South Africa.

ü "Tourism is considered to be a key element in South Africa's economy, and is recognised in the National Development Plan as an important driver of economic and employment growth,"


q Africa's mobile boom: 'huge opportunities'

ü Sub-Saharan Africa's mobile industry has been the fastest growing region in the world for mobile users in the past five years, according to a report published by the GSMA, the body representing mobile operators worldwide

ü The region's mobile subscriber base has grown by 18% a year over the past five years to 253-million unique users and 502-million connections. GSMA forecasts in their report, "Sub-Saharan Africa Mobile Economy 2013", that mobile users in the region will be closer to 346-million within the next five years.

ü The mobile industry currently contributes more than 6% of Sub-Saharan Africa's gross domestic product (GDP) - higher than any other comparable region globally, according to the report. This contribution is expected to rise from $60-billion in 2012 to $119-billion, or more than 8% of GDP, by 2020.

ü Mobile solutions are used to address a range of socio-economic challenges in Sub-Saharan Africa. According to the GSMA, there are almost 250 mobile health services in operation across the region. These support patients who may not have access to local healthcare services.


FINANCIAL SERVICES •  ZAR is one of the world’s most competitive currencies

•  The JSE Securities Exchange is Africa’s largest and most developed Securities Exchange and one of the world’s top 20 exchanges

•  World famous insurance companies can cater for all needs

•  2015-2016 WEF report places RSA finances as 2nd for regulation of security exchanges and 1st in the world for financing through the local equity market

•  South Africa was also in the top ten for availability of financial services and the soundness of its banks. It is a world expert at centralised clearing

•  RSA has a superb integrated ATM system – SASWITCH

•  For the sixth year in a row, South Africa has been ranked number one, out of 140 countries, for the strength of its auditing and reporting standards, according to the World Economic Forum (WEF) Global Competitiveness Index for 2015-2016

•  The WEF also highly praised South Africa for the accountability of its private institutions

MOBILE BANKING • In Africa mobile based applications are a need and not just convenience and that is the driving factor behind the large scale adoption. • Besides a number of banking and financial services on mobile phones there are a lot of transactional offerings that generally deal with movement of funds as a service. • While mobile ownership is expanding in South Africa, Internet-capable mobiles have provided an alternative banking method for on line users. • Mobile banking has started to lead Africa in the adoption of mobile-banking solutions that aim to reach the unbanked. • Provides rural and urban dwellers easier banking options for both business and personal uses. • In 2004 and 2005, WIZZIT and MTN Banking each developed mobile-banking applications to address the financial service needs of low-income customers. Bank account applications provided an alternative source through which mobile customers can access on line payment instruments

SUMMARY

THANK YOU

Contact details

•  Ragil Ratnam– Vice Chairman SATCC

•  Tel – 086 5755 211 •  Email – [email protected]

why invest in south africa? - itd · south africa - global perspective q cape town was named the...

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