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FDI Agencies Q&A
Beyond Mining in South Africa
Author: 123jump.com Staff
FDIhub.com
Last Update: Aug 21, 9:18 AM ET
FDIhub.com
Last Update: Aug 21, 9:18 AM ET
 Yunush Hoosen |
Even though South Africa is still a resource-based economy, the flourishing services sector now accounts for nearly two-thirds of the contry’s GDP, largely due to the thriving tourism and financial segments.
DTI – South Africa |
“South Africa is regarded as one of the most sophisticated and promising emerging markets, offering a unique combination of highly developed social infrastructure and market economy, and access to markets in the EU through bilateral treaties.”
Q: What are the highlights of the South African economic developments in the last five years?
A: The South African economy has been stable and enjoying a robust growth over the past three years. In 1994, the country adopted a macroeconomic framework and an industrial policy that set the friendly environment for investors. The stable political system and investor-friendly government stimulated the economic growth from less than 3% in the late 1990s to more than 5% between 2004 and 2007.
Q: What sectors are driving the South African economy?
A: South Africa is largely a resource-based economy and the commodity boom in the past two years just lifted the economic growth to a new high. We still have very large reserves of base metals and precious metals like platinum, vanadium, gold and other rare earth minerals. Although mining has dipped in the last year as global economies have slowed, we still hold a major market share in many of these commodities.
In the last 15 years the country has focused on diversifying its mining base and also enhanced manufacturing capabilities. Today, 25% to 30% of the country’s exports are manufactured exports that have higher composition of technology.
The services sector in the economy is 65% of the GDP with the financial and tourism segments dominating. This has increased disposable income as well as retail consumption. In the last 25 years the economy has expanded four times and international trade has increased by the same amount.
The GDP per capita in 2008 was $5,500 and $10,000 on a purchasing power parity basis. Of the population of 49 million, 18 million are in labor force.
Q: What sectors are popular with foreign investors?
A: In South Africa we have 9 provinces, which are varied in their strengths. Economies in coastal provinces are dominated by tourism, in the north and in the east with mining and manufacturing of auto components and chemicals. Volkswagen and Daimler Benz are located in Eastern Cape and Toyota in Durban. Manufacturing and services sectors are now vibrant in many provinces.
The government is focused on social development and improving education, as the population is quite young. There are incentives available to train labor and to stimulate the transfer of technology.
South Africa is becoming one of the top BPO destinations in the world. The call centers are located in all parts of the country because it doesn’t matter where they are. There is more economic development today than in the major metropolitan areas like Johannesburg, Durban and Cape Town and in industrial development zones that are located in provinces such as Eastern Cape and Natal.
Labor force is diversified across various segments in the economy. The services sector employs 65% of the country’s total labor force, industry 26% and the remaining 9% is in agriculture. Mining and automotive manufacturing are very large employers in South Africa.
Q: How important is automobile manufacturing to South Africa?
A: The South African automotive sector amounts to 7.5% of the GDP, 10% of manufacturing exports and it employs 36,000 people. The auto sales in the country are about 600,000 and exports are about 200,000 vehicles to more than 70 countries.
South Africa introduced an export incentive program for local auto manufacturers, which allows companies to import duty free goods equivalent of their local and export sales. The program also grants import tax credits for capital expansion in the country. The government is expected to release a new program in 2012 that will focus on creating more jobs and increasing local value addition.
Of the top ten auto makers, eight are in South Africa, including all top three tire makers. Ford manufactures its mini pick-up truck and diesel engine in Pretoria and in Port Elizabeth. General Motors invested $100 million in the Port Elizabeth-based facility to assemble and export Hummer H3 under a six-year contract from the parent company in 2005. Toyota Motor near Durban just completed its five-year R2.4 billion ($290 million) expansion and modernization program and now has the capacity to manufacture 220,000 units a year. Volkswagen has been in South Africa for more than 55 years and in the last six years invested R6 billion ($722 million).
Auto components manufacturing is also thriving in the country. There are more than 200 manufacturers and the industry is rapidly growing. Of all the components, catalytic converters dominate the export and exhaust systems, engine subsystems and leather seat covers are other exported components. The new production and development initiative is expected to increase auto production to 1.2 million by 2020.
Q: Are there any investment opportunities in the tourism sector?
A: South Africa is one of the important tourist destinations on a global scale. The national parks and convention centers are popular with tourists from Europe and Asia. We host 500,000 tourists every year and there is a scope in building a chain of hotels for the mid-price segment too.
South Africa is also known for its excellence in hosting major sporting events. Between April and July of this year the nation is hosting the popular Indian Premier League cricket tournament, the Confederation Cup in soccer, rugby tours of British and Irish Lions and the Super 14 rugby final.
A: The South African economy has been stable and enjoying a robust growth over the past three years. In 1994, the country adopted a macroeconomic framework and an industrial policy that set the friendly environment for investors. The stable political system and investor-friendly government stimulated the economic growth from less than 3% in the late 1990s to more than 5% between 2004 and 2007.
Q: What sectors are driving the South African economy?
A: South Africa is largely a resource-based economy and the commodity boom in the past two years just lifted the economic growth to a new high. We still have very large reserves of base metals and precious metals like platinum, vanadium, gold and other rare earth minerals. Although mining has dipped in the last year as global economies have slowed, we still hold a major market share in many of these commodities.
In the last 15 years the country has focused on diversifying its mining base and also enhanced manufacturing capabilities. Today, 25% to 30% of the country’s exports are manufactured exports that have higher composition of technology.
The services sector in the economy is 65% of the GDP with the financial and tourism segments dominating. This has increased disposable income as well as retail consumption. In the last 25 years the economy has expanded four times and international trade has increased by the same amount.
The GDP per capita in 2008 was $5,500 and $10,000 on a purchasing power parity basis. Of the population of 49 million, 18 million are in labor force.
Q: What sectors are popular with foreign investors?
A: In South Africa we have 9 provinces, which are varied in their strengths. Economies in coastal provinces are dominated by tourism, in the north and in the east with mining and manufacturing of auto components and chemicals. Volkswagen and Daimler Benz are located in Eastern Cape and Toyota in Durban. Manufacturing and services sectors are now vibrant in many provinces.
The government is focused on social development and improving education, as the population is quite young. There are incentives available to train labor and to stimulate the transfer of technology.
South Africa is becoming one of the top BPO destinations in the world. The call centers are located in all parts of the country because it doesn’t matter where they are. There is more economic development today than in the major metropolitan areas like Johannesburg, Durban and Cape Town and in industrial development zones that are located in provinces such as Eastern Cape and Natal.
Labor force is diversified across various segments in the economy. The services sector employs 65% of the country’s total labor force, industry 26% and the remaining 9% is in agriculture. Mining and automotive manufacturing are very large employers in South Africa.
Q: How important is automobile manufacturing to South Africa?
A: The South African automotive sector amounts to 7.5% of the GDP, 10% of manufacturing exports and it employs 36,000 people. The auto sales in the country are about 600,000 and exports are about 200,000 vehicles to more than 70 countries.
South Africa introduced an export incentive program for local auto manufacturers, which allows companies to import duty free goods equivalent of their local and export sales. The program also grants import tax credits for capital expansion in the country. The government is expected to release a new program in 2012 that will focus on creating more jobs and increasing local value addition.
Of the top ten auto makers, eight are in South Africa, including all top three tire makers. Ford manufactures its mini pick-up truck and diesel engine in Pretoria and in Port Elizabeth. General Motors invested $100 million in the Port Elizabeth-based facility to assemble and export Hummer H3 under a six-year contract from the parent company in 2005. Toyota Motor near Durban just completed its five-year R2.4 billion ($290 million) expansion and modernization program and now has the capacity to manufacture 220,000 units a year. Volkswagen has been in South Africa for more than 55 years and in the last six years invested R6 billion ($722 million).
Auto components manufacturing is also thriving in the country. There are more than 200 manufacturers and the industry is rapidly growing. Of all the components, catalytic converters dominate the export and exhaust systems, engine subsystems and leather seat covers are other exported components. The new production and development initiative is expected to increase auto production to 1.2 million by 2020.
Q: Are there any investment opportunities in the tourism sector?
A: South Africa is one of the important tourist destinations on a global scale. The national parks and convention centers are popular with tourists from Europe and Asia. We host 500,000 tourists every year and there is a scope in building a chain of hotels for the mid-price segment too.
South Africa is also known for its excellence in hosting major sporting events. Between April and July of this year the nation is hosting the popular Indian Premier League cricket tournament, the Confederation Cup in soccer, rugby tours of British and Irish Lions and the Super 14 rugby final.
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