About South Africa

Economic Information

Business Environment
With regard both to regulatory law and to commercial practice, South Africa's economy has much in common with those of North America, Europe and Australasia.

Free enterprise is the norm, although there are a number of important economic sectors (such as transport, telecommunications, electricity and water) that have been or continue to be wholly or partly Government-owned and controlled. The Government's policy is to promote the commercialization, restructuring and privatization of certain Government-owned enterprises (see below for further details).

South African entrepreneurs and business professionals are generally highly educated, skilled and competitive.

Relationship of Government and Business
The Government is committed to providing facilities and opportunities to the communities that were disadvantaged by the pre-1994 apartheid system, and to enabling those communities to share equitably in the resources of the country and its economic activity. The Government's Macroeconomic Strategy for Growth, Employment and Redistribution (GEAR) is however based on promoting the free market and financial and fiscal discipline, and aims at economic growth, job creation and the development and distribution of basic services to all South Africans.

The Government has indicated the importance it attaches to investment by introducing measures to enhance and support trade and industrial development .

The Government has stated its intention to promote small and medium sized enterprises (SMMEs). The National Small Business Act provides a mechanism to review the impact of proposed legislation on small businesses.

The National Economic Development and Labour Council (NEDLAC) facilitates discussions to reach consensus between Government, organised business, organised labour and organised community groupings on various issues of social and economic policy.

Business organisations such as the Chamber of Mines, the South African Chamber of Business (SACOB), the Black Business Council, the National African Federated Chamber of Commerce (NAFCOC), the Afrikaanse Handelsinstituut (AHI), the Foundation for African Business and Consumer Services (FABCOS), the South African Foundation and foreign chambers of commerce in South Africa regularly liaise with Government and also comment on draft legislation.

Business organisations have traditionally been divided on race and ethnic lines. However, in 2003, the Chamber of Commerce of South Africa (CHAMSA) was formed as a voluntary association of NAFCOC, SACOB, AHI and FABCOS. In addition, Business Unity of South Africa (BUSA) was formed in 2003 by merging Business South Africa (BSA) (a predominantly white business confederation) and the Black Business Council (BBC) (which represented black business and professional bodies).

During 1999, the President formed the International Investment Council to advise the Government on its investment and economic policies. The Council consists of leading local and foreign businessmen.

Economic Structure
South Africa has the most sophisticated free-market economy on the African continent. The country represents only 3% of the continent's surface area, yet it accounts for approximately 40% of all industrial output, 25% of gross domestic product (GDP), over half of generated electricity and 45% of mineral production in Africa. Most of South Africa's economic activity occurs in the four main metropolitan areas (which together represent about 3% of the total land area) namely the Witwatersrand area surrounding Johannesburg in the Gauteng Province, the Durban/Pinetown area in KwaZulu-Natal, the Cape Peninsula, and the Port Elizabeth/Uitenhage area in the Eastern Cape.

The country's economic system however has a marked duality. A sophisticated industrial economy has developed alongside an underdeveloped "informal" economy. The industrial economy has an established infrastructure and economic base with great potential for further growth and development whereas the "informal" economy presents both untapped potential and a developmental challenge for South Africa. South Africa is also a gateway for investment into Sub-Saharan Africa and since 1994, South Africa's trade with and investment in other African States has increased significantly.

Economic Performance
The South African economy grew by 2,2% during 2001, 3% during 2002 and 1,9% in 2003. The Government expects it to grow by 2,9% during 2004, 3,6% in 2005 and 4% in 2006.

The inflation rate has generally declined over the last year and the Reserve Bank expects to meet its inflation target of consumer price inflation between three and six per cent. The CPIX inflation measure is expected to average 4,8% in 2004. The prime overdraft interest rate has declined from 17% at the beginning of 2003 to 13,5% at present.

The national debt dropped from 48% of GDP in March 1997 to 36,8% for 2003/2004. The 2002/2003 budget deficit was R31,4 billion (2,6% of GDP). However, in his budget speech in 2004, the Minister of Finance announced that the deficit will rise to 3,1% of GDP in 2004/2005.

The official unemployment rate is currently 28,2% of the country's economically active population. If one includes those who have given up looking for employment, it is 41,8%.

Imports, Exports and Free Trade Areas
Most of South Africa's exports to industrialised countries consist of primary and intermediate commodities. A large proportion of exports consists of unprocessed raw materials, with the mining industry contributing the greatest proportion to the country's total exports. More of South Africa's raw materials are however now processed in South Africa before being exported. South Africa is a major exporter of gold, diamonds, platinum, wool, sugar, manganese and chrome ores, asbestos, atomic energy materials and base minerals such as coal, antimony, copper and iron ore. The country is also an exporter of deciduous and citrus fruit as well as animal hides and skins. Exports of chemicals, metal products, machinery, transport equipment and manufactured goods have increased, particularly to Africa, in recent years.

Imports include mainly capital goods, certain raw materials, intermediate goods as well as sophisticated consumer goods.

South Africa maintains formal trade relations with most industrialised countries and trade with Africa, Latin America and Asia is growing. At a regional level, South Africa is a member of the Southern African Development Community (SADC) (along with Angola, Botswana, the Democratic Republic of Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, Swaziland, Tanzania, Zambia and Zimbabwe) which is committed to forming a free trade area. Africa's oldest trade grouping, the Southern African Customs Union, comprises South Africa, Botswana, Lesotho, Swaziland and Namibia.

South Africa is a founder member of the World Trade Organisation (WTO) and is amending its tariff structure in accordance with WTO rules and the Uruguay Round of GATT. This may introduce new trade opportunities for foreign manufacturers. South Africa is a member of the Cairns Group, an informal association of seventeen agricultural exporting members of the World Trade Organisation (including, amongst others, Argentina, Australia, Brazil, Canada, Chile, Indonesia and Malaysia) which supports free and fair trade in agricultural markets and the lowering of agricultural tariffs by developed countries. South Africa is a member of the Group of 20 which was formed by certain developing countries after the failed WTO Cancun talks in 2003 and which include Nigeria, Brazil, Argentina, Chile, China, India, Indonesia and Mexico. A trilateral trade pact between South Africa, India and Brazil has also been proposed with the intention of strengthening the position of developing countries at the WTO.

In October 1999 South Africa and the European Union concluded a trade, development and co-operation agreement, which entered into force on 1 January 2000. The formation of free trade areas with the USA, the Mercosur states (which include Argentina, Brazil, Uruguay and Paraguay), the European Free Trade Association (which include Switzerland, Norway, Liechtenstein and Iceland), India, Nigeria and China is under discussion. Trade with the United States of America has grown significantly subsequent to the passing by the USA Congress of the African Growth and Opportunities Act, in terms of which a large variety of products may be imported into the USA duty and quota free.

The European Union, the United States of America and Japan are amongst South Africa's largest trade partners. Trade with Africa has also increased significantly in recent years and over the last ten years South Africa has been the single largest foreign direct investor into Africa.

Natural Resources
South Africa holds a significant portion of the world's reserves of certain metal and mineral resources, including manganese ore, platinum and gold. (See Appendix 2 for a chart listing significant reserves). The country has a reputation as a reliable supplier of these resources.

South Africa's fish stocks are abundant and well managed. Its nature reserves and game parks are important tourist attractions

International Relations and Associations
South Africa has become a significant player on the world political stage and plays an important role in international organisations like the IMF, World Bank and UN and in international affairs generally (for example with regard to the Lockerbie dispute between the UK and Libya and peace negotiations in Central Africa).

South Africa is one of the founding members of the African Union, the organisation succeeding the former Organisation for African Unity. The President of South Africa, Mr Thabo Mbeki, has been instrumental in the preparation and promotion of NEPAD, the New Partnership for Africa's Development which seeks to promote investment, development and good governance throughout Africa. South Africa chaired the Non-Aligned Movement from 1998 to 2001.

South Africa has become an important international conference destination, and has in recent years hosted a number of large international conferences including peace talks on the Democratic Republic of Congo, the World Conference on Racism, the OAU/AU summit on Peace, Development and Prosperity and the United Nations World Summit on Sustainable Development.

The Government's foreign policy principles are to seek to prevent conflicts and promote the peaceful resolution of disputes, promote democratisation, disarmament and respect for human rights, advance environmentally sound, sustainable development and poverty alleviation.

Diplomatic relations have been established with 164 countries and South Africa participates in more than 70 international agencies. South Africa has 76 embassies or high commissions and 12 consulates or consulates general abroad.

South Africa and the SADC
South Africa is a member of the Southern African Development Community (SADC) (along with Angola, Botswana, the Democratic Republic of Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, Swaziland, Tanzania, Zambia and Zimbabwe). South Africa's foreign policy with regard to the Southern African region reflects a commitment to close diplomatic, economic and security cooperation and integration, adherence to human rights, the promotion of democracy and the preservation of regional solidarity, peace and stability.

There are however significant disparities in the levels of development and infrastructure of the SADC member countries. The SADC has a permanent secretariat and South Africa currently holds the Financial and Investment Sector as its special area of responsibility.

South Africa has signed twenty-one SADC protocols (including protocols on trade, transport, communications, meteorology and combating illicit drug trafficking) and is in the process of acceding to several others.

United Nations
South Africa is a founder member of the United Nations, and has fully participated in and contributed to UN international organisations, treaties and conventions concerned with global policies since its readmittance to the UN in 1994. It has played an active role in the United Nations Commission for Trade and Development (UNCTAD), and several General Assembly working groups tasked with the appraisal of UN reforms and the restructuring of the Security Council. Should Africa be given permanent representation on the Security Council, it is believed that South Africa (together with Nigeria) would be a strong contender for that seat. Johannesburg hosted the United Nations World Summit on Sustainable Development in 2002.

The Commonwealth
South Africa rejoined the Commonwealth in 1994 after an absence of 33 years due to the apartheid system. Immediate advantages for South Africa included the facilitation of trade with and travel to other member countries, as well as participation in the biennial Commonwealth Heads of Government Meetings (CHOGM) and other Commonwealth ministerial meetings. South Africa hosted the November 1999 CHOGM and chaired the Commonwealth from 2000 to 2001.

The European Union
The European Union is one of South Africa's main economic partners in terms of trade, investment, finance and transfer of technology. A trade, development and co-operation agreement between the EU and South Africa took effect on 1 January 2000. The first phase of the second Multi-Annual Indicative Programme (2000-2002), part of a R11 billion development programme funded by the EU, was launched on 22 June 2000. South Africa and the European Union signed a Wines and Spirits Agreement on 28 January 2002. Negotiations have also been under way in respect of a fisheries agreement envisaged by the abovementioned trade, development and co-operation agreement.

Other Organisations

South Africa participates in many other international governmental and non-governmental organisations that are active in a wide variety of fields, such as finance, shipping, atomic energy, trade, science, agriculture and the environment. This involvement includes participation in the International Monetary Fund, the World Bank, the World Trade Organisation and the Non-Aligned Movement.

Black Economic Empowerment (B.E.E) and Affirmative Action
For historical reasons, control of the economy has been concentrated primarily in the hands of white South Africans. It is Government policy to actively promote a more equitable distribution of wealth, in a free market context, by actively supporting and favouring the economic empowerment of historically disadvantaged persons (HDPs) in the grant of Government tenders and procurement contracts and licences (for example casino licences, the National Lottery licence, radio and cellular telephone licences) and by rendering financial and other assistance to HDP private business. Joint ventures with HDPs and entities controlled by HDPs have accordingly become common. The private sector has also been involved in several private sector empowerment transactions and several large HDP controlled corporations have emerged in recent years pursuant to the unbundling of private business to HDP entities. The Government has also implemented affirmative action and employment equity legislation in order to extend and promote opportunities for HDPs in the economy.

The purpose and objectives of the BEE Act are to establish a legislative framework for the promotion of BEE, to empower the Minister of Trade and Industry to issue codes of good practice (Codes), to publish transformation charters (Charters), to establish the Black Economic Empowerment Advisory Council (the Council) and to facilitate broad based BEE by:

Promoting economic transformation in order to enable meaningful participation of black people in the economy.

Achieving a substantial change in the racial composition of ownership and management structures and in the skilled occupations of existing and new enterprises.

Increasing the extent to which communities, workers, co operatives and other collective enterprises own and manage existing and new enterprises and increasing their access to economic activities, infrastructure and skills training.

Increasing the extent to which black women own and manage existing and new enterprises, and increasing their access to economic activities, infrastructure and skills training.

Promoting investment programmes that lead to broad based and meaningful participation in the economy by black people in order to achieve sustainable development and general prosperity.

Empowering rural and local communities by enabling access to economic activities, land, infrastructure, ownership and skills.

Promoting access to finance for BEE.
In terms of the BEE Act, "black people" is a generic term which means Africans, Coloureds and Indians and "broad-based BEE" means the economic empowerment of all black people including women, workers, youth, people with disabilities and people living in rural areas through diverse but integrated socio economic strategies, including:

Increasing the number of black people that manage, own and control enterprises and productive assets.

Facilitating ownership and management of enterprises and productive assets by communities, workers, co operatives and other collective enterprises.

Human resource and skills development.

Achieving equitable representation in all occupational categories and levels in the work force.
Preferential procurement.