Investing into South Africa Presentation by Ms Tshepo Makhene Counsellor Economic Embassy of the Republic of South Africa Tokyo, Japan
INVESTMENT ENVIRONMENT & OPPORTUNITIES
South Africa fast facts Area 1,219, 090 km 2 Head of the State: President Jacob Zuma 11 Official languages with English the business language
South Africa at a glance Indicator 1994 2009 Total Population 38,283,223 49,320,150 Adult Literacy Rate (1990) 76.2 % 88.8% Internet Users Mobile Telephone Subscriptions 100,000 4,420,300 340,000 46,436,000 FDI (net inflows % of GDP) Gross Fixed Capital Formation (% of GDP) 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 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 (SADC) Africa is the next big story after China and India
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 quicken from 2.8% in 2010 to 3.2% in 2011 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. South Africa houses one of the three largest telescopes in the world at Sutherland in the Karoo. 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 10 th 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 off the coast of Port Elizabeth in the Eastern Cape is the deepest container terminal port 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: 2 nd most sophisticated financial market 2 nd lowest effective business tax rate 4 th ranked for ease of accessing capital 4 th ranked i.t.o. the cost of capital 6 th ranked for infrastructure 7 th for FDI as a % of GDP (2008) 8 th 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 were at a 30-year low. The JSE Securities Exchange one of the world s top 20 exchanges. 1 st for the regulation of securities exchange, strength of auditing & reporting standards by Global Competitiveness Report 2010. 1 st out of 60 countries in the Economist s House Price index for the period 1997 2009. The South African Rand was the 2 nd 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 34 th out of 183 countries in the World Bank Ease of Doing Business 2011 2 nd in the ease of getting credit 2 nd for good practice in protecting both borrowers and lenders 10 th in investor protection 50 th out of 142 countries in the World Economic Forum s Global Competitiveness Index. 9 th in financial market development 30 th in the protection of intellectual property
Economic Achievements 54 th 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. 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.
South Africa s Tops the BRICS for Ease of Doing Business Country Overall Rank Getting credit Protecting investors South Africa 34 2 10 China 79 65 93 Russia 123 89 93 Brazil 127 89 74 India 134 33 44 Source: World Bank Group, 2011
Industrial Policy Action Plan II Key pillar of the New Growth Path South Africa is a promising emerging market in the world and presenting a basket of investment opportunities not limited to priority sectors as identified in IPAP II. South Africa is fast becoming a centre of manufacturing excellence offering promising opportunities in both trade and investments. Since the launch of IPAP II, which guides the implementation of the industrial policy, the economic arena has improved with the introduction of government interventions and sector strategies. IPAP represents a significant step forward in strengthening our efforts to promote long term industrial development and industrial capacity beyond our traditional strengths in commodities and non-tradable services
Total Backward linkages Industrial Policy Action Plan II Key pillar of the New Growth Path IPAP: value-added sectors with high employment and growth multipliers 5 4.5 4 3.5 3 2.5 2 1.5 Low employment multipliers & strong backward linkages Paper & paper products Basic chemicals Basic iron & steel Basic non-ferrous metals EGW Business services 6 1 5 2 3 7 4 8 9 1 11 Other manufacturing Transport & storage Mining Financial services Motor vehicles, parts & accessories 1 13 14 Leather & leather products Textiles Food Wood & wood products Excl. medical, dental & vet Wholesale & retail trade Wearing apparel Agriculture High employment multipliers & strong backward linkages 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 0.5 0 Low employment multipliers & weak backward linkages 0 7 14 Employment multipliers High employment multipliers & weak backward linkages
South Africa s leading trade partners R a n k 2010 South African Exports 2010 top 10 Country Name Proportion % Total Growth 2009-2010 1 China 11.48% 20.28% 2 United States 10.08% 25.26% 3 Japan 9.08% 36.42% 4 Germany 8.34% 31.49% 5 United Kingdom 5.13% 4.20% 6 India 4.36% 24.23% 7 Netherlands 3.35% -7.15% 8 Switzerland 3.28% -21.29% 9 Zimbabwe 2.93% 12.53% 10 Mozambique 2.68% 5.53% South African Imports 2010 top 10 R a n k Country Proportion Growth 2010 Name % Total 2009-2010 1 China 16.89% 14.22% 2 Germany 5.45% 11.35% 3 United States 0.93% 7.14% 4 Japan 17.01% 5.34% 5 Saudi Arabia -11.01% 4.12% 6 Iran 4.04% 4.00% 7 United Kingdom 2.30% 3.81% 8 India 33.92% 3.58% 9 France 1.58% 2.93% 10 Nigeria 3.10% 2.80% Source: Quantec, 2011
USD Billion South Africa Japan Bilateral Trade USD 9.00 USD 7.16 USD 8.01 USD 8.00 USD 6.09 USD 6.40 USD 7.00 USD 6.00 USD 4.11 USD 5.00 USD 4.00 USD 5.26 USD 4.98 USD 4.47 USD 4.25 USD 3.00 USD 3.15 USD 2.00 USD 1.00 USD 0.00 2006 2007 2008 2009 2010 EXPORT to Japan IMPORT from Japan Year (Jan-Dec) Source: Japan Customs
South Africa Japan Bilateral Trade Export 1. Precious stones, metal 2. Ores, slag, ash 3. Iron & steel 4. Aluminium 5. Vehicles (not railways) 6. Wood 7. Nickel 8. Machinery 9. Preserved Food 10. Inorganic Chemicals; Rare Earth Import 1. Vehicles (not railways) 2. Country specific products for motor vehicle 3. Machinery 4. Electrical machinery 5. Rubber 6. Optical and Medical Instruments 7. Ceramic Products 8. Iron and Steel 9. Plastic 10. Miscellaneous Chemical Products Source: Japan Customs
South Africa Japan Bilateral Trade South Africa is one of World s Economic Powerhouses. Number of Japanese companies, operating in South Africa: More than 120. Examples of Japanese investors: Toyota, Nissan-Renault alliance, Suzuki, NGK, Cataler, Sumitomo, Mitsubishi, Sojitz,Itochu, Mitsui and more. Latest Investments: NTT Acquisition of Dimension Data in October 2010. Kansai Paint Acquisition of Freeworld Coatings in April 2011. Itochu Agreement with Ivanhoe Nickel & Platinum Ltd. (Canada) to acquire a direct interest of 10% (including previously acquired 2% in Sep 2010) to participate in the exploration & development project of PGMs and Nickel in June 2011.
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
Trade Agreements in Africa Source: Ernst & Young s 2011 Africa attractiveness survey
TRIPARTITE FREE TRADE AREA (T-FTA) SADC, COMESA AND EAC T FTA will create a sizeable regional market with a GDP of $ 624 billion and a population of approximately 700 million people An African common market without internal borders will unleash the economic growth and potential of Africa Developmental Integration leading to cross border infrastructure development to strengthen regional supply capacity North South Corridor Cape to Cairo to facilitate trade and reduce cost of doing business
Trans-African Highways
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
Aerospace Aviation Village 29 Nov 2011 Inaugural Event Future Aviation Cluster Development on State Land Factory Expansion New Aerosud Supplier Park 26
Infrastructure Development Infrastructure Development More than R800 Billion (About JPY 8 trillion) will be spent on new power stations, road networks, dams, water supply pipelines, rail and port facilities, schools and hospitals over the next three years. (Ref: 2011/12 National Budget Revenue ZAR 825 Billion / Expenditure ZAR 980 Billion) For instance, in Energy sector. Independent Power Producer (IPP) Procurement Programme 3725 MW generated from IPP renewable energy sources is to be allocated in the first round, whose bidding was just closed on 4 November 2011, and the second round will take place on 4 March 2012. Several Japanese companies are expected to participate in the bidding.
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. SA has 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. Rail modernisation programme The Gautrain forms an integral part of our rail modernisation programme. In August 2011, the Gautrain started to move at least 40 000 people hourly on the commuter line between Johannesburg and Tshwane stress-free and in less than 40 minutes. The system includes 125 feeder buses operated by a consortium that includes taxi operators. 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.
Incentives Incentive Benefit Main Conditions The Enterprise Investment Program (EIP) Foreign Investment Grant Industrial Development Zone 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 To compensate qualifying foreign investors for the cost of moving qualifying new machinery and equipment from abroad to SA. Exemption from VAT when sourcing goods and services from South African customs territory and duty-free imports of raw materials and inputs for export 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 investors only Prospective IDZ operator companies must apply for permits to develop and operate an IDZ
Incentives Incentive Benefit Main Conditions Section 12i Tax Allowance Critical Infrastructure Fund Tax deductions of up to R 900m depending on status viz. preferred or qualifying projects. Training allowance/ deduction of up to R30m or R36 000 per employee. Infrastructure projects intended to service IDZ, shall qualify for a grant of 30% of the qualifying infrastructure development cost Valid until December 2015 Capital investment > R 200m 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 Excellent transport & logistical infrastructure Political & economic stability with sound macro-economic management Competitive sectors/industries World class financial system Skills availability Favourable cost of doing business
IDZ s are considered part of the Customs Territory of South Africa. Industrial Development Zone Customs Controlled Area ORT An IDZ is located adjacent to a port allowing importation of raw materials, plant machinery & equipment; and the export of finished products; Customs Territory of South Africa Coega EL RCB Customs Secured Area Industry & Service Area Services Enterprises One Stop Center IDZ
Coega IDZ & Port Infrastructure
New Deepwater Port Of Ngqura 80,000 DWT Bulk Carriers 9 000 TEU Cellular Containership Inner Basin 16.5 m below CD Entrance Channel 18m 175,000 DWT Bulk Carriers 35
East London IDZ Multi-Level Car Terminal Containerisation Dry Dock & Ship Repair Grain Elevator
Richards Bay IDZ
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