South Africa South Africa has the largest economy in Africa and is the most developed in sub-Saharan Africa. As a member Best performer of the BRICS countries, an association of five major in Africa for trade emerging market economies, South Africa is recognised facilitation logistics as a key emerging market along with other members of the group Brazil, Russia, India and China.i Key factors supporting South Africa’s position are its well-developed financial, legal, communications and transport sectors, as well as an open trade policy and a comparatively strong domestic market. South abwe Zimb Africa is the best performer in Africa Botswana when it comes to trade facilitation Mozambique Tripoli-Windhoek-Cape Town logistics and among the best in Cape Town-Cairo Highway terms of transport infrastructure. However, there are some obstacles, O.R. Tambo Int. Pretoria Airport including rigid labour policies that Namibia diminish growth prospects to a Gautrain eMalahleni Johannesburg mediocre level. Furthermore, South Gauteng Freeway Ermelo Improvement Project Swaziland Africa faces the triple challenge of Walvis poverty, unemployment and income Bay N3 Sishen inequality. King Shaka Richards Bay Int. Airport Port of Richards Durban To address these weaknesses Lesotho Bay cabinet has officially endorsed a N1 Port of programme of action, the National Durban Development Plan (NDP). This plan represents the most comprehensive N2 and constructive attempt at Saldanha providing recommendations for Port of redressing structural imbalances Saldanha Cape Town Int. Airport Port of Ngqura in the economy. However, there Cape Town Port Elizabeth has been a loss of momentum with Mossel Port of Port Elizabeth Bay the implementation of the NDP Port of Cape Town due to political developments and industrial unrest. These bubbles represent the cities of South Africa and the size of the bubbles indicates the population size of the city Airport Port Future Airport Future Port Future Railway Future Road Railway Road PwC 67 Relatively low More than Average GDP tariff rates are growth lagging supportive of of peers and projected trade activity 75% manufacturing at 3% annually firms export to until 2017 African countries Provided it can get to grips with African Customs Union (SACU). This The country is acknowledged for its fundamental issues undermining provides significant regional trade resilient and stable banking sector. business confidence, notably policy opportunities. The private business regulatory uncertainty, South Africa has the climate is also regarded as one of the The rest of Africa is a prime South Africa potential to establish itself as a most conducive in Africa. top investment destination. As an export destination for South important gateway to the African African manufacturers, according While the general governance continent, it stands to benefit vastly to the latest survey by the environment is robust, corruption from the extraordinary economic Manufacturing Circle, which is an issue, though not endemic. growth in neighbouring countries. showed that more than 75% There are a number of initiatives and of manufacturing firms were structures in place to fight it. This Economic exporting to Africa.iii means that the situation is better than in most other African countries. performance South Africa is endowed with abundant natural resources. It is The tax and financial regulatory the world’s largest producer and climate is robust, while the tax South Africa’s economic exporter of gold, chromium and regime is progressive and includes a growth correlates with the platinum – 90% of the world’s global number of incentives for non-South global economy. platinum mineral resources are Africans. estimated to be in South Africa’s South Africa has an open economy, Bushveld Complex.iv South Africa has long been with trade activity making up a struggling with very high crime significant component of domestic Structural constraints have rates, which not only pose a threat economic activity. Exports and weighed on South Africa’s growth to individuals, but also impose imports accounting for 29% and momentum. Average GDP growth considerable costs on business 30% of domestic GDP respectively. between 2010 and 2012 registered operations in the country. The a tepid 3.0%, which compares impact of high levels of crime on Exports are dominated by minerals, unfavourably with that of its sub- business is clear, with ‘crime and but there has also been an increase Saharan African peers. The economy theft’ frequently cited as one of in manufacturing exports in recent appears incapable of extricating the most problematic issues facing years.ii There has been much itself from a rut of suboptimal business in South Africa. debate focused on recent losses in growth which is projected to be exports as a result of more intense around 3% annually between 2012 Labour competition from the east and the and 2017. impact of high labour costs in South Africa. South African imports, on the Business environment An inadequate education other hand, consist mainly of capital system, skills shortages and and intermediate goods. Tariff high unemployment are liberalisation undertaken since A fairly favourable business significant challenges. the early 1990s has been a major environment supports South contributor to South Africa’s strong Africa’s status as a regional The literacy rate in South Africa economic growth. Today relatively economic powerhouse. low tariff rates are supportive of is fairly high at 89%, and the trade activity. percentage of the population with at South Africa has one of the most least a secondary education is also Trade policy is underpinned by sophisticated business environments very robust at 70.4%. Yet, the quality deepening functional integration in sub-Saharan Africa and strong of South Africa’s education system in the region, on the continent, state institutions, which are key to rates poorly by global standards and and with emerging economies, its status as a regional economic remains a considerable obstacle particularly the BRIC nations. powerhouse. Importantly, the low to the country’s attractiveness as South Africa is a member of the cost of starting a business, estimated an investment destination. South Southern African Development at 0.3% of per capita income, means Africa’s labour force is fairly well- Community (SADC) and Southern that entrepreneurs can respond educated and skilled in comparison quickly to developing opportunities. to many other sub-Saharan countries. 68 Africa gearing up The ratio of State-owned power Services and minimum wage to utility is expanding manufacturing value added is capacity that will have overtaken add 17GW by 2019 agriculture the average 3x and mining in for other BRICS contribution to GDP countries Energy One of the biggest obstacles to Energy and utilities infrastructure growth in the country is putting its Energy capacity has become has historically accounted for a human capital to work. The labour a government priority small portion of total infrastructure market is relatively inflexible and following the power crisis industry value. However, this has lacks a robust labour relations that began in late 2007. changed since the power crisis, framework. According to the World with energy and utilities having Economic Forum, although South After years of underfunding, South accounted for the largest portion Africa has very low non-wage labour Africa’s power sector reached a crisis since 2008. costs (such as social insurance point at the beginning of 2008. The state-owned power utility, expenditure), the country has some Power shortages and steep tariff Eskom, is busy with a capacity of the most excessively rigid hiring increases have seriously damaged expansion programme that will and firing practices, as well as South Africa’s economy, as well as its cost 337 billion Rand (about very low flexibility with regard to appeal to foreign investors.vi wage determination. The ratio of US$33 billion) and add 17GW of minimum wage to value added is Despite there being two large-scale new generating capacity to the almost three times the average for 4 800MW coal-fired power stations national grid by 2019. v other BRICS countries. currently under construction as well as a number of renewable energy Consumer market projects, energy supply remains a major risk factor in South Africa. Growth in purchasing power opens new opportunities in the consumer market. Key indicators South Africa’s economy was originally based on agriculture and mining. But this has Population size (million, 2012) 51.2 changed over the years with Population growth (2012-2020, avg p.a.) 0.3% services and manufacturing now contributing the greatest share GDP (US$ billion, 2012) 384.3 to GDP. The country’s economy GDP growth forecast 2012-2017 (avg, y/y rate) 3.0% is reasonably diversified with key economic sectors including mining, GDP per capita (US$, 2012) 7 525 agriculture and fishery, vehicle Global competitiveness index 2012 (global rank/144 52 (4.37) manufacturing and assembly, food (score 1-7)) processing, clothing and textiles, Corp. Income Tax (CIT) rate 28.0% telecommunication, energy, financial and business services, real Top exports Platinum unwrought estate, tourism, transportation, and or in powder form wholesale and retail trade. (7.6%); Gold (incl. gold plated with platinum), in unwrought forms (excl. South Africa’s per capita GDP is high powder) (6.9%); Iron ores due to the sizeable and developed & concentrates, non- nature of its economy. Per