The case for investment

in South Africa

New Dawn, New beginnings,

New growth. South Africa

Inspiring New Ways

WHY INVEST IN SOUTH AFRICA

• South Africa has the most developed and diversified

economy on the African continent.

• South Africa’s economy is the 30th largest in the world

and one of the three largest in Africa.

• The levels of technological advancement and

sophistication of the South African economy are the

highest in Africa.

• South Africa has a world-class financial sector,

comparable (if not superior) to those of many of its

global peers.

• Exports from South Africa accounted for 0.5% of global

exports in 2017, the 37th largest exporter in the world.

The country’s export base is broad, with its

manufacturing component accounting for roughly 57%

of total merchandise exports in 2017.

• The Johannesburg Securities Exchange is the 19th

Land area 1 220 813 km2

Population (mid-2017)

% under the age of 35

56.5 million

66%

Gross domestic product (GDP)

in 2017 * Average R/$ for 2017 applied

R4.65 trillion

US$349.3 billion

GDP growth:

• 2017

• 2000 to 2017 (average)

• Pre-crisis (2004-07) average

1.3%

+2.9% p.a.

+5.2% p.a.

Trade in goods & services:

• Value of exports in 2017

• Value of imports in 2017

* Average R/$ for 2017 applied

R1.38 trillion / US$104.0

billion

R1.32 trillion / US$99.3 billion

Consumer price inflation

(average for 2017)

5.3%

Exchange rate:

• 2017 average

• On 24/05/2018

US$1.00 = ZAR 13.31

US$ 1.00 = ZAR 12.43

Prime interest rate (25/05/2018) 10.00%

Unemployment rate

(First quarter of 2018)

26.7%

South African Economy at a glance

largest stock exchange in the world by market

capitalization and the largest in the African continent.

• A robust and well-entrenched democracy with an

independent judiciary underpin South African society.

• South Africa has a modern and extensive infrastructure

network which is well connected to the Southern African

region and the world at large.

Source: IDC analysis

The South African economy at a glance

• South Africa has a mature, accessible legal system providing

certainty and respect for the rule of law;

• South Africa is the multi-nationals’ investment location of choice

ranked No.1 in Ernest and Young’s Africa Attractiveness survey

2016;

• According to the World Bank 2016/17 Global Competitiveness

Report, South Africa ranks 27th for its domestic market size;

• The Continental Free Trade Area (CFTA) will bring together 54

African countries with a combined population of more than one

billion people and a GDP of more than US $ 3.4 trillion;

• South Africa has world class infrastructure with the most

advanced transport infrastructure in Africa. It has the largest air,

rail and port networks on the continent. South Africa has efficient

ports equipped with ship-to-shore cranes and other support

handling equipment;

• South Africa has eight ocean economy seaports: Richards Bay,

Durban, East London, Ngqura, Port Elizabeth, Mossel Bay,

Cape Town and Saldhanna Bay.

• South Africa is ranked No 1 in Africa, on the World Bank’s

Logistics Performance Index.(World Bank, 2017)

South Africa’s logistics performance index

Source: World Bank

South Africa’s ports

Source: Transnet

Source: World Bank, InvestSA

South Africa Economic Overview

South Africa’s diversified economy forms an important basis for

sustained growth & returns on invested capital

• The economy has diversified its mining sector

concentration risk and is now geared toward services

and manufacturing industries;

• Mining, via its vast backward sectoral linkages, remains a

key contributor to growth and export earnings. SA’s

mineral resources portfolio has also become more

diversified over time;

• With the most developed and diversified economy on the

African continent, South Africa remains competitively

positioned to leverage continental growth opportunities;

• The country’s technological base, advanced

manufacturing capabilities and economic infrastructure,

supported by sophisticated and globally integrated capital

markets, facilitated the development of domestic

industrial value chains;

• While certain constraints have weighed on SA’s

competitive positioning in global value chains, integrated

domestic value chains have not only supported economic

growth through challenging periods, but have also

opened up investment opportunities in sectors with high

growth potential, particularly those that are export-

oriented.

Sectoral composition of the South African

economy in 2017

Addressing structural impediments &

economic bottlenecks could ignite SA’s growth

engine

South Africa has produced exceptional long-term financial

returns for investors

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2000=

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Relative equities performance since 2000

JSE Allshare

Hang Seng

MSCI Emerging Markets Index

Shanghai Composite

Ibovespa

MSCI World

South Africa has outperformed a number of its

peers…

…with several sectors outside of the minerals

value chain generating positive returns

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10000

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JSE Sectoral Indices

Financial 15

General retailers

Industrial 25

Resources

Mining

Source: Bloomberg (data), National Treasury analysis

Enabling environment for investment in South Africa

• Supportive and progressive legal framework:

o Legislation on copyrights, patents, trademarks and disputes that

is in line with international norms and conventions;

o Strong judiciary;

o Protection of foreign investment;

o Exemplary Constitution from a global perspective.

• Sophisticated and robust banking environment, well regulated.

• Sound macroeconomic management, independent central bank.

• Strong industrial capabilities and cutting-edge technology, having

developed leading technologies particularly in the fields of energy

and fuels, deep-level mining, medicine etc.

Governance: World Bank Ease of Doing Business Index 2018

o Starting a business o Protecting investors

o Dealing with construction

permits

o Paying taxes

o Getting electricity o Trading across borders

o Registering property o Enforcing contracts

o Getting credit o Resolving insolvency

• The World Bank Ease of Doing Business Index ranks South Africa 82nd out of 190

economies (overall ranking)

• Overall ranking is calculated using 10 sub-indices, which include:

South Africa’s Strengths: Protecting investors (24/190), paying taxes (46/190), resolving

insolvency (55/190), Getting credit (68/190)

Notable Improvements: Paying Taxes (50 to 46/190)

Distribution of South African FDI Stock trends 2003 - 2018

• Europe, China and the US constitute the key sources of inward investment into the South African

economy

Investment into SA Proportion % Investment from SA Proportion %

1. United States 19.97% 1. United Kingdom 10.28%

2. United Kingdom 19.69% 2. Nigeria 5.60%

3. Germany 6.70% 3. United States 4.98%

4. China 6.14% 4. Kenya 4.82%

5. France 5.72% 5. Ghana 4.67%

6. India 4.32% 6. Zambia 4.51%

7. Italy 3.91% 7. Namibia 3.89%

8. Switzerland 3.07% 8. Mozambique 3.42%

9. Japan 2.93% 9. Germany 3.11%

10. Netherlands 2.93% 10. India 2.64%

Source: Invest SA

South Africa has several trade agreements

Agreement Name

Type of Agreement

Countries Involved

Southern African Customs

Union

Customs Union South Africa, Botswana, Lesotho

Swaziland

Southern African Development

Community (SADC) FTA Free Trade Agreement 15 SADC member states

Economic Partnership Agreements FTA SACU- EU EPA plus Mozambique and

Angola

EFTA-SACU (FTA) FTA SACU + EFTA (Iceland, Liechtenstein,

Norway and Switzerland

Africa Growth & Opportunity Act

(AGOA)

Unilateral assistance measures

(non- reciprocal) US- 39 sub-Saharan African countries

Generalised System of Preferences Unilateral

(non-reciprocal)

SA- EU, Norway, Switzerland, Russia,

Turkey, the US, Canada, Japan

SACU-Mercosur

Preferential Trade

agreement SACU and Argentina, Brazil,

Paraguay and Uruguay

Source: Invest SA

Enabling Environment

Policy Support Measures

• Attractive investment promotion and support system:

o Policies and programmes that encourage foreign direct investment:

o Economic sectors are open to foreign investors;

o Availability of attractive incentives;

o Export assistance (e.g. export credit insurance, export marketing assistance).

• Funding assistance (various instruments) from a range of state-owned development finance

institutions.

• Several economic sectors benefiting from Industrial Policy Action Plan (IPAP) strategies and support

measures, including substantial financial incentives. For example:

o Manufacturing Investment Programme;

o Automotive Production and Development Programme;

o Clothing and textiles industry production incentive;

o Critical Infrastructure Programme;

o Aquaculture Development and Enhancement Programme;

o Tax Based Incentives on Industrial Policy Projects;

o Special Economic Zones (SEZs) have been designated in areas set aside for targeted

economic activities. These are supported through special arrangements (including legislation)

and systems that are often different from those applicable in the rest of South Africa.

Economic infrastructure geared to support production activity and

investment, including export oriented development

• South Africa has a highly developed economic infrastructure;

• World class ports form part of an integrated logistics network geared to support export-oriented industrial

development and investment across a diversified suite of industrial and mineral value chains.

Mineral bulk Break-bulk Agri-bulk RoRo Containers

Economic infrastructure geared to support production activity and

investment, including export oriented development (contd.)

Port of Cape Town: Renowned for the export of deciduous fruit,

wine, perishables and frozen products. Port of Saldanha: Africa's largest iron ore exporting port

Durban Container Terminal: Africa's biggest and busiest container

terminal

East London Terminal: Motor vehicles and components, textiles,

sugar, rice, timber, scrap steel, chemicals

Policy support measures: Special Economic Zones (SEZs)

Coega IDZ

Dube Trade Port

East London IDZ

Saldanha Bay EPZ

• Incentives offered by SEZs include:

− Preferential 15% Corporate Tax rate

− Valued Added Tax and Customs Duty

suspension in customs-controlled areas

− Employment incentive

− Building allowance

− Preferential land rental and utility rates

• 7 designated zones: Saldanha Bay

(Western Cape); Dube Trade Port (KwaZulu-

Natal); Coega (Eastern Cape); East London

(Eastern Cape); Richards Bay (KwaZulu-

Natal); Maluti a Phofung (Free State);

Musina-Makhado (Limpopo)

Richards Bay IDZ

Summary of benefits in Special Economic Zones (SEZs)

Incentive Licensee Operator Investor

1. Customs Duties & VAT (in CCA) √ √ √

2. Employment Incentive √ √ √

3. Building Allowance* √ √

4. 15% Corporate Tax* √

5. 12(i) Additional Benefits (points & %) √

6. SEZ Fund for CAPEX (Infrastructure) √ √

* Provided that the Minister of Finance has agreed to allow this benefit to the SEZ, and that the company

is involved in activities that have not been excluded.

7. SEZ Management support, infrastructure, security, OSS

Economic infrastructure geared to support production activity and

investment, including export oriented development (contd.)

Quality of air transport

infrastructure

WEF ranking: 25th out of 137 countries

Quality of rail Quality of roads

infrastructure

WEF ranking: 47th out of 137 countries WEF ranking: 50th out of 137 countries

Sectoral Investment Opportunities

in South Africa

Sectoral Strength of South Africa Provinces

•

Western Cape:

•Tourism

•Agro-processing

•Biotechnology

•Petrochemicals

•Clothing and textiles

•Fishing

Northern Cape:

•Agro-industries

•Transport and storage

•Mining and beneficiation

North West:

•Agro-processing

•Bio-fuels

•Leather products

•Mining

Limpopo:

•Food processing

•Agri-business

•Mining

•Fertilisers and pesticides

•Energy

Mpumalanga:

•Tourism

•Mining (Coal)

•Forestry

•Agriculture

•Agro-processing

Gauteng:

• Financial and business

services

• ICT

• Pharmaceuticals

• Food and beverages

• Mining

Free State:

•Agriculture

•Agro-processing

•Machinery and equipment

•Mining and beneficiation

Eastern Cape:

•Agriculture and forestry

•Aquaculture

•Automotive

•Clothing and textiles

•Leather and leather products

KwaZulu-Natal:

•Aluminium

•Automotive

•Petrochemicals

•Wood and wood products

•Tourism

•Clothing and textiles

South Africa’s priority industries for FDI

Green Economy:

• Energy & Renewables;

• Waste management;

• Energy efficiency & cleaner technology;

Resource-based industries:

• Mining & beneficiation;

• Metals;

• Oil & gas;

• Aquaculture

• Agroprocessing

Services

• Business processing & outsourcing (BPO) &

call centres;

• Information Communication Technologies

(ICT) & electronics;

• Film production;

• Tourism;

• Boat building;

Manufacturing:

• Automotives & components;

• Capital equipment;

• Leather & footwear;

• Forestry products & furniture

Advanced manufacturing:

• Nanotechnology;

• Advanced manufacturing;

• Biofuels;

• Precision engineering;

• Aerospace;

• Chemicals & biochemicals;

• Plastics & composites;

• Bio-pharmaceuticals & medical devices;

Contact Details

Name: Brian Soldaat

Email: brians@thedti.gov.za

Website: www.investsa.gov.za

Telephone - local: 086 1222 308 / international +2712 394 3078

Re a leboga!

Thank you

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