Petrenco I.

EMREI 114

Country report: South Africa

I. General overview of the economy The economy of South Africa is the largest in Africa and is ranked as an upper middle income economy !y the "orld #ank$ %hich makes the country one of only four countries in Africa represented in this category. South Africa$ unlike other emerging markets$ has struggled through the late &'''s recession$ and the reco(ery has !een largely led !y pri(ate and pu!lic consumption gro%th$ %hile e)port (olumes and pri(ate in(estment ha(e yet to fully reco(er. The long term potential gro%th rate of South Africa under the current policy en(ironment has !een estimated at *.+,. -.P gro%th has pro(ed mediocre$ though impro(ing$ gro%ing !y 1./, a year from 1004 to &''0$ and !y &.&, o(er the &''' '0 decade$ and !y *.4, in &'11. In &'11 -.P per capita %as 111$'''$ -.P (alue of the country for &'11 is 1++4./ !illion. The -2I in South Africa %as last reported at 1134& !illion in &'1'$ according to a "orld #ank report released in &'11. -2I per capita 5 *4'''1 Inflation +, 6&'11 est.7 8ountry9s currency Rand 6:AR7$ 1 :AR ; '.1&0 <S. Pu!lic de!t 111/ !illlion$ *&.*, of -.P Ease of .oing #usiness Rank *+th 6!y "orld #ank7 Participation in Trade organi=ations "T>$ - &'$ SA8< and others

South Africa has a comparati(e ad(antage in the production of agriculture$ mining 6%orld?s largest producer of platinum$ gold$ chromium7 and manufacturing products relating to these sectors$ also among key economic sectors@ fishery$ (ehicle manufacturing and assem!ly$ food processing$ clothing and te)tiles$ telecommunication$ energy$ financial and !usiness ser(ices$ real estate$ tourism$ transportation$ and %holesale and retail trade. South Africa has shifted from a primary and secondary economy in the mid t%entieth century to an economy dri(en primarily !y the tertiary sector in the present day %hich accounts for an estimated /+, of -.P or 1&*' !illion in nominal -.P terms and agriculture &.+, of -.P$ industry *1./, of -.P. Agriculture continues to face pro!lems$ %ith increased foreign competition and crime !eing t%o of the maAor challenges for the industry.The competiti(e pressures from a!road$ particularly from 8hina and India$ played a role in the decline of e)ports for the food$ te)tiles and paper su! sectors$ as firms in these sectors increasingly compete %ith lo%er cost producers. Increased e)ports from the !e(erages$ to!acco$ %ood and leather su! sectors o(er the period are pro!a!ly due to the presence of large dominant firms %ithin these sectors in South Africa$ that ha(e managed to remain competiti(e. Talking a!out competiti(eness in ser(ice sector$ fi(e cellular companies pro(ide ser(ice to o(er &' million su!scri!ers$ %ith South Africa considered to ha(e the 4th most ad(anced mo!ile telecommunications net%ork %orld%ide. There are + maAor !anks in financial sector$ it has !ecome highly competiti(e in the past &' years$ %ith the re entry of many e)perienced foreign !anks$ since they left South Africa in 3'9s or 0'9s. South Africa is a popular tourist destination$ %ith around 3/'$''' arri(als per month 6March &''37 of %hich around &1'$''' is from outside the African continent. A re(enue eBualling !et%een 1, and *, of -.P is generated !y the tourism industry. Among the main attractions are the di(erse and picturesBue culture$ the game reser(es and the highly regarded local %ines. Talking a!out endo%mentC Mining has !een the main dri(ing force !ehind the history and de(elopment of Africa?s most ad(anced and richest economy. Darge scale and profita!le mining started %ith the disco(ery of a diamond on the !anks of the >range Ri(er in 13/4 !y Erasmus Eaco!s and the su!seBuent disco(ery and e)ploitation of the Fim!erley pipes a fe% years later. -old rushes to Pilgrim?s Rest and #ar!erton %ere precursors to the !iggest disco(ery of all$ the Main ReefGMain Reef Deader on -erhardus >osthui=en?s farm Danglaagte$ Portion 8$ in 133/$ the "it%atersrand -old Rush and the su!seBuent rapid de(elopment of the gold field there$ the !iggest of them all. South Africa is one of the %orld9s leading mining and mineral processing countries. Though mining?s contri!ution to the national -.P has fallen from &1, in 104' to /, in &'11$ it still represents almost /', of e)ports. In &''3$ South Africa9s estimated share of %orld platinum production amounted to 44,H kyanite and other materials$ ++,H chromium$ 4+,H palladium$ *0,H (ermiculite$ *0,H (anadium$ *3,H =irconium$ *',H manganese$ &1,H rutile$ &',H ilmenite$ 10,H gold$ 11,H fluorspar$ /,H aluminum$ &,H antimony$ &,H iron ore$ &,H nickel$ &,H and phosphate rock$ 1,. South Africa also accounted for nearly +, of the %orld9s polished diamond production !y (alue. The country9s estimated share of %orld reser(es of platinum group metals amounted to 30,H hafnium$ 4/,H =irconium$ &4,H (anadium$ &*,H manganese$ 10,H rutile$ 13,H fluorspar$ 13,H gold$ 1*,H phosphate rock$ 1',H ilmenite$ 0,H and

nickel$ +,. It is also the %orld?s third largest coal e)porter. Africa has Aust + percent of the %orld9s coal resources$ and o(er 04 percent of this is found in South Africa$ Mo=am!iBue$ :im!a!%e and #ots%ana. Technically Reco(era!le Shale -as Resources reser(es of South Africa are 43+ trillions of cu!ic feet. South Africa suffers from relati(ely hea(y o(erall regulation !urden compared to de(eloped countries. State o%nership and interference impose high !arriers to entry in many areas. A!out a Buarter of the population is unemployed and a!out the same proportion li(es on less than <S 11.&+ a day. Poors ha(e limited access to economic opportunities and !asic ser(ices. South African go(ernment spends 1&1 !illion on RI. programms. an indication that the country is progressing to%ards !eing a kno%ledge !ased economy. ost South African RI. %ork %ere performed in the research field of the engineering sciences 6&'.0, of total RI.7$ follo%ed !y the natural sciences 6&'.*,7 and the medical and health sciences 61+.1,7. -o(ernment is implementing Ten year inno(ation plan in the country$ for e)ample South Africa has esta!lished itself as the European <nion9s fifth most important colla!orator in the European 8ommission9s se(enth research Jrame%ork Programme 6JP47$ %hich started in &''4 and %ill run until &'1*. >nly the <S$ Russia$ 8hina and India rank higher than South Africa.

II.

Description of the population and country participation in international migration

The demographics of South Africa encompasses a!out +' million people of di(erse origins$ cultures$ languages$ and religions. The last census %as held in &'11.

E(en though the population of South Africa has increased in the past decade 6primarily due to immigration7$ the country had an annual population gro%th rate of K'.'+1, in &'1' 68IA est.7$ %here the !irth rate is higher than the death rate !ut there is a net emigration rate. South Africa is home to an estimated + million illegal immigrants$ including some * million :im!a!%eans. The maAority of the population$ /+.3, are among 1+ /3 years old. Dife e)pectancy in the country is 40 years 6male@ +' years$ female@ 43 years7. Diteracy rate in South Africa$ according to <2ES8>$ is 33,. A(erage %age per month is 13*31. Luman .e(elopment Inde) './10 for &'11. Statistics SA assumes in some of their calculations that there are less than & million immigrants in South Africa. >ther institutions$ like the police and MMdecins Sans JrontiNres place estimate the figure at 4 million. .espite high emigration le(els$ a high le(el of non South African %hite immigrants ha(e settled in the country$ in particular from countries such as #ritain and :im!a!%e. Jor e)ample$ !y &''+$ an estimated &1&$''' #ritish citi=ens %ere residing in South Africa. Since &''*$ the num!ers of #ritish migrants coming to South Africa has risen !y +',. An estimated &'$''' #ritish migrants mo(ed to South Africa in &''4. There ha(e also !een a significant num!er of %hite :im!a!%ean arri(als$ fleeing their home country in light of the economic and political pro!lems currently facing the country. As %ell as recent arri(als$ a significant num!er of %hite :im!a!%eans emigrated to South Africa in the %ake of independence in :im!a!%e in 103'. 2et migration rate is /.&& migrant6s7G1$''' population 6est. &'1&7. South Africa?s immigration policy is em!odied in the Immigration Act 62o 1* of &''&7$ %hich prescri!es the reBuirements %hich are to !e met !y an applicant %ho %ishes to immigrate permanently to South Africa. "hile the profile of remittances is largely under researched in South Africa$ a national income and e)penditure sur(ey in South Africa re(ealed that roughly 1.4+ !illion households remit money.

III.

Country participation in international trade

Principal international trading partners of South AfricaO!esides other African countriesO include 8hina 1*.4,$ <S 1'.1,$ Eapan 3.4,$ -ermany 4.*,$ <F 4.1,$ India 4.*, 6&'1'7.8hief e)ports include corn$ diamonds$ fruits$ gold$ metals and minerals$ sugar$ and %ool. Machinery and transportation eBuipment make up more than one third of the (alue of the country9s imports. >ther imports include chemicals$ manufactured goods$ and petroleum. E)ports 104.&1 !illion 6&'11 est.7 Imports 10&.3/ !illion 6&'11 est.7 South Africa imports %ere %orth /*.4 #illion :AR 613.&1 !illion7 past year. South Africa imports mainly machinery$ foodstuffs$ eBuipment$ chemicals$ petroleum products and scientific instruments. Main import partners@ 8hina 1*.4,$ -ermany 11.&,$ <S 4,$ Saudi Ara!ia +.*,$ Eapan 4.4,$ Iran 4.*,$ <F 4.*, 6&'1'7. The gro%th rate of imports is around *.&,$ e)ports 5 4,. South Africa hi tech e)ports$ in total amount of e)ports$ is 1'.&3, according to "orld Trade >rganisaton. SA is among top ten countries %ith highest hi tech e)ports in the %orld. Speaking of >peness degree$ South Africa is promoting a culture of 8onstitutionalism and .emocracy$ high le(el of openess for !usiness$ though some sectors of economy remain strictly controled !y the go(ernment$ South Africa has a high >peness degree for ne% international trade organisations. The South African go(ernment and the .epartment of Trade and Industry in particular ha(e em!arked on a policy frame%ork to ensure that the SA economy !ecomes competiti(e. In an increasingly traded glo!al economy$ it is recognised that national economic %elfare %ill !e enhanced !y !oth greater efficiency$ !rought a!out !y li!eralisation$ and SA?s e)ports in the

%orld economy. The State of Trade Policy &''* in South Africa aims to de(elop a rigorous approach to the analysis of trade reform and the impact it has had on aspects of SA?s economy the o(erall macro economy$ e)port !eha(iour$ la!our markets$ resource allocation and gro%th. The report consists of a synthesis of e)isting research in SA$ as %ell as specifically commissioned research$ and is intended to !e a reference point for go(ernment$ academia$ the pri(ate sector and others. It9s re(aluated from year to year.

Export/Import Fluctuations and Trade balance

IV. Country participation in international capital flows The high le(els of unemployment and ineBuality are considered !y the go(ernment and most South Africans to !e the most salient economic pro!lems facing the country. These issues$ and others linked to them such as crime$ ha(e in turn hurt in(estment and gro%th$ conseBuently ha(ing a negati(e feed!ack effect on employment. 8rime is considered a maAor or (ery se(ere constraint on in(estment !y *', of enterprises in South Africa$ putting crime among the four most freBuently mentioned constraints. At the start of &'''$ then President Tha!o M!eki (o%ed to promote economic gro%th and foreign in(estment !y rela)ing restricti(e la!our la%s$ stepping up the pace of pri(atisation$ and cutting unneeded go(ernmental spending. Lis policies face strong opposition from organised la!our. Jrom &''4 on%ard economic gro%th picked up significantlyH !oth employment and capital formation increased. .espite the numerous positi(e economic achie(ements$ South Africa has struggled to attract significant foreign direct in(estment. The situation may ha(e started to change ho%e(er$ %ith &''+ seeing the largest single J.I into South Africa %hen #arclays !ought a maAority share in local !ank A!sa -roup Dimited. .eals !et%een the #ritish !ased Podafone and South Africa?s Podacom ha(e taken place in &''/. In &'1'$ t%o multi !illion dollar deals$ one !y LS#8 to acBuire 2ed!ank and one !y "almart to acBuire Massmart Loldings$ fell through. 6"almart did e(entually !uy Massmart in &'117. J.I stock ; 14*./ !illion 6*1 .ecem!er &'11 est.7

South Africa?s foreign direct in(estment 6J.I7 inflo%s has dropped !y 4', in &'1' %hen compared %ith &''0$ from 1+$4 !illion in &''0$ to 11$* !illion in &'1'. Joreign direct in(estment 6J.I7 inflo%s to South Africa rose to 1&.4 !illion in the first si) months of &'11$ !asically due to acBuisition of +1, of Massmart !y "al Mart. The Joreign direct in(estmentH net outflo%s 6, of -.P7 in South Africa %as last reported at '.1' in &'1'$ according to a "orld #ank report released in &'11. <28TA. measured South Africa J.I performance and according to them it9s Do% J.I Performance$ !ut Ligh J.I Potential..ifferent places in the country present differential potential in ur!ani=ation and locali=ation economies and market si=e. The high potential locations are typically found in or around the maAor agglomerations$ !ut there are a fe% smaller places on the periphery that offer J.I potential. The places %ith high J.I potential are not randomly scattered across South Africa$ !ut tend to cluster together. 8ities and to%ns can impro(e their attracti(eness to foreign in(estors through the e)ploitation of natural resources$ population gro%th$ economic gro%th and strengthening links to metropolitan areas. -o(ernment pro(ides sector support programmes in order to get high J.I9s and !e more attracti(e for in(estors. Some e)amples@ Q The creation of 1 1'' ne% Ao!s in the clothing sector through the 8lothing Te)tile 8ompetiti(eness Programme$ %hich also helped firms retain 4' ''' other Ao!s. Q The sei=ure of R*4 million %orth of clothing merchandise suspected of !eing counterfeit or non ta) compliant$ follo%ing raids on +/ premises !y the SA Re(enue Ser(ice. Q The creation of 0+' Ao!s and R4' million in in(estments in the call centre sector and the training of * 4'' young trainees under the Monyetla II Programme. The IPAP %ould also included programmes for !oat !uilding sector$ and had ele(ated a "estern 8ape initiati(e in the oil and gas ser(icing industry to !ecome a national programme. Turning to implementation of the IPAP$ .a(ies %as adamant that his department %ould take a sterner approach to meeting targets than %as taken for the first industrial policy action plan of &''4. The department held internal monthly progress meetings around IPAP$ calling in officials from other departments %hen necessary. -lo!al companies %ith a presence in South Africa all cite numerous ad(antages for setting up shop in the country$ from lo% la!our costs to e)cellent infrastructure and a !ase to e)port products internationally. The sophisticated !usiness en(ironment of South Africa pro(ides a po%erful strategic e)port and manufacturing platform for achie(ing glo!al competiti(e ad(antage$ cost reductions and ne% market access for !usinessmen. V. Curiosities about the country South Africa has 11 official languages and %as the recent host of the &'1' JIJA "orld 8up. South Africa is no% the only country in the %orld to ha(e hosted the Soccer$ 8ricket and Rug!y "orld 8upR

 South Africa9s drinking %ater is rated *rd !est in the %orld for !eing Ssafe and ready to drinkT. South Africa9s 8ape "inelands ha(e around +/' %ineries and 4 4'' primary producers. Included in the 8ape "inelands region is Route /&$ considered the longest %ine route in the %orld. South African !re%ery SA#Miller ranks 5 !y (olume 5 as the largest !re%ing company in the %orld. SA#Miller also supplies up to +', of 8hina9s !eer. South Africa is the only country in the entire %orld that has (oluntarily a!andoned its nuclear %eapons programme. The South African Ro(os Rail is considered the most lu)urious train in the %orld. -eneral Motors South Africa is the only place outside of the <SA to !uild the Lummer L*R The oldest remains of modern humans %ere found in South Africa and are %ell o(er 1/'$''' years old. SA has three capital cities@ Pretoria is the E)ecuti(e 8apital$ 8ape To%n the Degislati(e 8apital and #loemfontein the Audicial 8apital.