Investment Environment


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  • Investment Environment

    1. 1. SOUTH AFRICA’S INVESTMENT ENVIRONMENT TRADE AND INVESTMENT SOUTH AFRICA A division of the Department of Trade and Industry November 2005 SOUTH AFRICA’S INVESTMENT ENVIRONMENT TRADE AND INVESTMENT SOUTH AFRICA A division of the Department of Trade and Industry August 2007
    2. 2. <ul><li>Area 1,219, 090 km 2 </li></ul><ul><li>Population 44,8m </li></ul><ul><li>Currency R1 = 100 cents </li></ul><ul><li>Time GMT + 2 hrs </li></ul><ul><li>Head of the State: President Thabo M Mbeki </li></ul><ul><li>11 Official languages with English the business language </li></ul><ul><li>Total GDP: 2006 R1 726 bn (US$ 255 bn) </li></ul><ul><li>GDP 2006 per capita: R35 994 (US$ 5 324) </li></ul><ul><li>Real GDP Growth: 5,0 (2006) </li></ul><ul><li>Inflation (CPIX): 4.6% (annual 2006 average) </li></ul><ul><li>Exports: Tourism, minerals, diamonds, metals and </li></ul><ul><li>metal products, food products & automotive components. </li></ul><ul><li>Main trading partners: Germany, USA, China, Japan & </li></ul><ul><li>the UK. </li></ul>South Africa at a glance
    3. 3. SADC and South Africa ANGOLA
    4. 4. 2004 Macroeconomic interventions to accelerate growth and ensure social inclusion <ul><ul><li>Higher public sector investment </li></ul></ul><ul><ul><li>Reduce the cost of doing business </li></ul></ul><ul><ul><li>Expand public works & micro-credit programmes </li></ul></ul><ul><ul><li>Improve state capacity to provide economic services </li></ul></ul><ul><ul><li>Strengthen social cohesion </li></ul></ul><ul><ul><li>Growth in 2005 was 4,9% </li></ul></ul>ASGI-SA <ul><ul><li>Broad framework of further steps needed to raise the range of growth to higher levels </li></ul></ul><ul><ul><li>Proceeds from premise that positive factors in the economy afford society the possibility to pursue for better economic performance. </li></ul></ul>Macro-Economic Policy
    5. 5. Achieving sustained and balanced growth Further, ‘[c]onsistently prudent macroeconomic policies have succeeded in reducing the fiscal deficit, stabilising debt levels, and lowering inflation and interest rates’; and the country ‘stands out among its peers due to its democratic and transparent institutions and entrenched political stability…’ Economic advantages which create a positive environment Standard and Poor’s, August 2005 Cheap electricity Abundant mineral & natural resources A tested and reliable legal system A relatively large labour force Established industrial & financial infrastructure
    6. 6. Macro-Economic Stability Fiscal Policy Source: SARB 0 50000 100000 150000 200000 250000 300000 350000 400000 450000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Gov. Revenue Gov. Expenditure
    7. 7. South African Economy Source: SARB 12,5% 12% 15,75% Prime Rate 4,6% 4,3% 9% (CPI) Inflation (CPIX) 25,5% 26,5% 20% Unemployment 5,0% 3,7% 3,2% GDP Growth 22,4% 20,2% 21,8% Total Foreign Debt / GDP R 398,5 US$ 58,9 R 281,8 US$ 43,6 R 69, 8 Merchandise exports (billions) R 35 994 US$ 5 324 R 29 422 US$ 4 561 R 12 507 GDP per capita R 1 726 US$ 255 R 1 374 US$ 213 R 482 GDP (billions) 2006 2004 1994
    8. 8. SA’s Export Performance by Country - 2006 Source: SARS 1.4 9.3 10. Italy 1.5 10.0 8. Spain 1.5 10.2 7. Belgium 1.7 11.6 9. Switzerland 2.0 14.0 6. China 2.6 18.0 5. Netherlands 3.0 26.8 4. Germany 4.7 31.7 3. United Kingdom 6.1 41.2 2. United States 6.1 41.3 1. Japan US$b Rb  
    9. 9. Business Environment Infrastructure Source: ABSA
    10. 10. SA’s Export Performance by Country 50,000.6 320,004.0 Total exports to all countries 1,310.5 8,387.0 China Ranked 9 1,360.1 8,704.5 Spain 1,361.5 8,713.9 Belgium 1,509.9 9,663.4 Australia 2,216.8 14,187.5 Netherlands 3,234.5 20,701.0 Germany 4,747.8 30,385.9 United States 5,006.1 32,039.3 United Kingdom 5,146.2 32,935.5 Japan 2005 (US$m) 2005 (Rm) Country 59,513.2 380,884.3 Total exports to all countries 1,519.0 9,721.8 Belgium 1,558.7 9,975.5 Spain 1,596.0 10,214.5 Switzerland 2,122.6 13,584.6 China Ranked 6 2,697.1 17,261.5 Netherlands 4,117.8 26,354.1 Germany 4,889.3 31,291.6 United Kingdom 6,282.1 40,205.7 United States 6,380.2 40,833.0 Japan 2006 (US$m) 2006 (Rm) Country
    11. 11. SA-CHINA Bilateral Trade
    12. 12. SA-CHINA Bilateral Trade 7,295.8 46,693.2 Total Imports 5,254.7 33,629.9 Top 10 Products 181.6 1,162.3 H87: Vehicles other than railway, tramway 183.3 1,173.0 H73: Articles of iron or steel 217.9 1,394.3 H95: Toys, games, sports requisites 239.0 1,529.3 H94: Furniture, lighting, signs, prefab 248.7 1,591.9 H90: Optical, photo, technical, medical, etc 357.6 2,288.6 H61: Articles of apparel, accessories, knit or 444.8 2,846.9 H64: Footwear, gaiters and the like, parts 488.6 3,127.0 H62: Articles of apparel, accessories, 1,350.6 8,643.8 H85: Electrical, electronic equipment 1,542.6 9,872.8 H84: Boilers, machinery, etc US$m Rm Top 10 Products     Imports from China to SA 2006 2,122.6 13,584.6 Total Exports 1,932.7 12,369.0 Top 10 Products 29.9 191.6 H71: Pearls, precious stones, metals, coins 48.3 309.4 H51: Wool, animal hair, horsehair yarn and 49.5 316.6 H84: Nuclear reactors, boilers, machinery 50.6 323.9 H29: Organic chemicals 65.9 422.1 H75: Nickel and articles thereof 70.8 453.2 H74: Copper and articles thereof 104.0 665.8 H76: Aluminium and articles thereof 306.0 1,958.1 H27: Mineral fuels, oils, distillation product 361.3 2,312.3 H72: Iron and steel 846.3 5,416.1 H26: Ores, slag and ash US$m Rm Top 10 Products     Exports from SA to China 2006
    13. 13. Business Environment Legal and Financial Markets <ul><li>World Class Legal Framework </li></ul><ul><ul><li>Substantive legal framework particularly in commercial, labour and maritime law regimes </li></ul></ul><ul><ul><li>Advanced legislation relating to competition policy, copyrights , patents , trademarks , and disputes </li></ul></ul><ul><ul><li>Independence of judiciary is guaranteed by the Constitution </li></ul></ul><ul><li>Financial System / Markets </li></ul><ul><ul><li>Financial system is robust and well regulated </li></ul></ul><ul><ul><li>Four of South Africa’s banks are in the world top 500 </li></ul></ul><ul><ul><li>The Johannesburg Securities Exchange (JSE) is the 17 th largest in the world </li></ul></ul><ul><ul><li>South African commercial banks have wide presentation in Africa </li></ul></ul>
    14. 14. <ul><li>Further allocations are envisaged going forward </li></ul><ul><li>Such investment levels have not been seen before since 1994 </li></ul>Overall government plans for infrastructure spending totals some R416 bn/ $ 59,4bn over the next 3 years Infrastructure Development To be spent by the three spheres of govt 50% To be spent through Public Private Partnerships 5% To be spent by development finance institutions 3% To be spent by State Owned Enterprises. 40%
    15. 15. <ul><ul><li>70% - generation capacity </li></ul></ul><ul><ul><li>30% - transmission and distribution: 6 metro Regional Electricity Distributors to be set up within next six months </li></ul></ul><ul><ul><li>Rehabilitation of three power stations; plus the construction of two peaking plants ( R15 bn/ $ 2,4bn ) </li></ul></ul>Core national programmes of SOEs R40bn/ $ 6,3bn for a range of core projects – railways, ports, infrastructure & operations and petroleum pipeline <ul><li>A further R8,5bn/ $ 1,3bn to be invested in SAA and other non-core projects </li></ul><ul><li>Spoornet will spend some R8bn/ $1,3 bn on locomotives, wagons and equipment </li></ul><ul><li>Funding options : divesting from non-core businesses, PPPs, own revenue, concessioning, borrowing and strategic equity arrangements </li></ul>R 150 bn/ $ 21,4bn in the next 5 years for infrastructure investments and refurbishments, raised from cash flow and off its balance sheet: Infrastructure Development
    16. 16. <ul><li>Some R19,7bn/ $ 3,1bn of water resource projects planned </li></ul><ul><ul><li>R3bn/ $ 0,5bn to be funded from the fiscus </li></ul></ul><ul><ul><li>Rest to be funded from cost recovery and financial markets </li></ul></ul>Core national programmes of SOEs Air Transport infrastructure <ul><li>ACSA plans to spend R 19,3 bn/ $ 2,75bn by 2010 in improving existing facilities particularly in Johannesburg and Cape Town </li></ul><ul><li>In addition, the Dube Trade Port initiative includes a new airport in Durban. </li></ul>Infrastructure Development Water Infrastructure
    17. 17. An IDZ is located adjacent to a port allowing importation of raw materials, plant machinery & equipment; and the export of finished products; IDZ’s are considered part of the Customs Territory of South Africa. SARS Customs will perform specific controls within the CCA to provide for Expedited Services Coega ELN RCB JIA Customs Territory of South Africa Customs Controlled Area INDUSTRIAL DEVELOPMENT ZONES Industry & Service Area Customs Secured Area Services Enterprises One Stop Center IDZ
    18. 18. East London IDZ Multi-Level Car Terminal Containerisation Dry Dock & Ship Repair Grain Elevator
    19. 19. Johannesburg International Airport IDZ
    20. 20. RICHARDS BAY IDZ
    21. 21. NEW DEEPWATER PORT OF NGQURA <ul><li>Inner Basin 16.5 m below CD </li></ul><ul><li>Entrance Channel 18m </li></ul><ul><li>175,000 DWT Bulk Carriers </li></ul><ul><li>80,000 DWT Bulk Carriers </li></ul><ul><li>9 000 TEU Cellular Containership </li></ul>
    23. 23. Freight growth future requirements Excluding primary export haulage Million tons 2003 (Million tons 2020 MSA forecast) Source: CSIR and DOT 2003
    24. 24. Rail and port volumes and investment Port Elizabeth East London Maputo Gauteng Mega Industrial Zone Sishen Beit Bridge Richards Bay Durban Saldanha Cape Town 17.8 334 Volume (mt) 0.6 19.5 Value (Rbn) Gauteng Mega Domestic Zone Rail Road
    25. 25. Leveraging SOE capex
    26. 26. <ul><li>BBBEE is an integrated and coherent socio-economic process that directly contributes to the economic transformation of South Africa and brings about significant increases in the numbers of black people who manage, own and control the country’s economy, as well as significant decreases in income inequalities </li></ul><ul><li>BBBEE includes elements of human resource development, enterprise development, preferential procurement, as well as investment, ownership and control of enterprises and economic assets. </li></ul>WHAT IS B-BBEE? *Black people include all African, Indian and Coloured South African Citizens (Source: Broad-based Black Economic Empowerment Strategy Department of Trade and Industry, March 2003)
    27. 27. Broad-Based Beneficiary Base The Poverty Barrier The Skills Barrier The Business Barrier The Opportunity Barrier Employment Equity/Job creation Corporate Social Investment Skills Development Preferential Procurement Ownership And Management Equitable Economic Opportunities Enterprise Development <ul><li>Broad-based BEE must be inclusive </li></ul><ul><li>Result in economic growth Accounted for with substance over form </li></ul>Emerging black middle class & investors Black entrepreneurs Black workers, professionals, graduates, school-leavers Black unemployed & rural poor
    28. 28. Economic Implications of Broad-Based BEE <ul><li>Increase level of participation by black people in mainstream economy </li></ul><ul><li>Increase real market size in SA economy </li></ul><ul><li>Increase income through resulting economic growth </li></ul>More economic participants Increased economic growth Mainstream economy BEE Upliftment Second economy
    29. 29. Promulgation of BEE Framework 2001 BEE Commissions Report 2003 Publication of the BB-BEE Strategy 2004 Promulgation of BB-BEE Act 2005 Release of the Codes of Good Practice Provision of clearly defined BEE framework coincides with increase in Business Confidence Business Confidence
    30. 30. Elements of Broad-Based BEE Transforming the First Economy Addressing challenges of the First and Second Economy Addressing challenges of Second Economy Ownership Management Employment Equity Skills Development Preferential Procurement Enterprise Development Direct participation in Economic Activities (Shareholders and Management Team) Development of Human Capital (Current and prospective employees) Development and Investment in Affirmable Enterprises (Suppliers and communities)
    31. 31. Identified and approved ASGISA provincial projects National Livestock North West OTT Logistics hub and IDZ Gauteng Dilokong Platinum Limpopo Moloto Corridor (rail) Mpumalanga Cape Flats Infrastructure Western Cape Biofuels, Makhathini casava and sugar KZN Biofuels Free State Diamond and gem stone jewellery, National Livestock, biofuels, Northern Cape Mzimvubu Catchments & Biofuels Eastern Cape Project Province
    32. 32. Lead sectors for fast-tracking <ul><li>Capital/Transport equipment and Metals </li></ul><ul><li>Major opportunity to stimulate manufacturing through reducing import leakage of the public Capex programme and capitalising on the current mining and mineral-processing boom </li></ul><ul><li>Platform to position these sectors as major future exporters onto the rest of the continent and beyond </li></ul><ul><li>Automotives and Components </li></ul><ul><li>SA’s leading manufacturing sector, generating strong backward linkages from other sectors, particularly metals, leather, textiles and plastics </li></ul><ul><li>Major opportunity to double current vehicle production to 1.2 million units by 2020 with a corresponding deepening of local content </li></ul><ul><li>Chemicals, Plastic fabrication and Pharmaceuticals </li></ul><ul><li>Major opportunity to increase local beneficiation of polymers, particularly for automotive and packaging applications and leverage state procurement for local production of pharmaceuticals </li></ul><ul><li>Forestry, Pulp and paper, and Furniture </li></ul><ul><li>The sector has the potential to bring jobs and income to poor rural communities </li></ul><ul><li>Increased plantations in EC and KZN in the next 10 years will contribute to the provinces’ growth and employment and stimulate processing activities, such as sawmilling and furniture </li></ul>
    33. 33. Investment Opportunities Source: DTI/TISA Hotels and self-catering holiday resorts, Adventure-, Eco-, Sport- Conference- and cultural tourism, gaming, infrastructure development, leisure complexes and world class golf courses, h arbour & waterfront developments,transfrontier conservation areas, cruise liners & transportation. Tourism Manufacturing of: automotive electronics, microchips and telecommunication equipment. Electro Technical <ul><li>Call Centres, Back Office Processing and Shared Corporate Services. </li></ul><ul><li>Enterprise solutions viz. fleet management, knowledge management, asset management solutions. </li></ul>Business Process Outsourcing & IT Enabled Services <ul><li>Titanium Beneficiation Initiative,Fluorochemicals Expansion Initiative,Polypropylene Conversion. </li></ul><ul><li>Restructuring of State Owned Chemical Enterprises. </li></ul>Chemicals and Allied Industries Interiors, Engine Parts/Components, Electronic, Drive Train Components, Body Parts, Aluminum Components and Diesel particulate filters. Automotives Fisheries and Aquaculture, Floriculture, Fruit and Vegetable Processing Plants, Juices, Meat Processing, Wine Production, Confectionery, Indigenous teas and Natural Fibres. Agro-processing Sub-sector Sector
    34. 34. Investment Opportunities Aerospace: Rotor and fixed wing aviation equipment and services, Helicopters and aircraft components, Aviation training services for African airlines, IDZ at Johannesburg International Airport, warehousing for aircraft parts. Rail: Rolling stock and services for the domestic market, estimated R7 billion Gautrain which includes infrastructure development and rolling stock, Rail infrastructure of the African continent through NEPAD and Rehabilitation of low density rail line. Marine: Development of boat yards and wet docks/floating docks, Joint ventures with local shipyards, manufacture of boats, yachts, catamarans and fleet racing boats, custom-made vessels (tugs) and training schools. Aerospace, Rail and Marine Aluminum smelter capacity, Capital equipment: machine tool manufacturing and petrochemical equipment, downstream processing and value-adding of iron, carbon steel, aluminum, platinum group metals and gold, ferro-alloys, gold and stainless steel. Mining and metal based industries <ul><li>Manufacturing of Industrial Textiles using Polyester </li></ul><ul><li>Production of other natural fibre textiles such as flax </li></ul><ul><li>Wool and mohair production – downstream opportunities for yarns, knitwear and fabric. </li></ul><ul><li>Footwear – manufacturing of leather uppers. </li></ul>Clothing, Textiles, Leather and Footwear Sub-sector Sector
    35. 35. Investment Opportunities Source: DTI/TISA <ul><li>Film studios and post production facilities. </li></ul><ul><li>Co-production ventures. </li></ul><ul><li>Distribution infrastructure </li></ul>Film <ul><li>Re-capitalisation of: </li></ul><ul><li>Forgings & Castings </li></ul><ul><li>Boilers </li></ul><ul><li>Tool dies & moulds </li></ul><ul><li>Expansion & export development </li></ul><ul><li>Pumps, valves, material handling & straddle crane carriers </li></ul><ul><li>Mechanised mining </li></ul><ul><li>New investments in: </li></ul><ul><li>Turbine assembly </li></ul><ul><li>Production of turbine components </li></ul><ul><li>Machine tool manufacturing </li></ul>Capital Equipment Sub-sector Sector
    36. 36. Incentives Prospective IDZ operator companies must apply for permits to develop and operate an IDZ Exemption from VAT when sourcing goods and services from South African customs territory and duty-free imports of raw materials and inputs for export Industrial Development Zone   Development must be a significant technological advance and have commercial advantage over existing product 50% of the direct cost incurred in development Support Programme for Industrial Innovation   Investments of less than R100m; benefit decreases with size of investment   Cash grant of up to 10% of qualifying assets Small and Medium Enterprise Development Programme ( Temporary suspended ) Main Conditions Benefit Incentive
    37. 37. Incentives The minimum qualifying infrastructure development cost is R15m   Infrastructure projects intended to service IDZ, shall qualify for a grant of 30% of the qualifying infrastructure development cost Critical Infrastructure Fund   Only new machinery, equipment acquired from abroad and required to establish a manufacturing project in SA will be considered Foreign entities may qualify up to a maximum of R3m   Foreign Investment Grant ( Temporary Suspended ) Main Conditions Benefit Incentive
    38. 38. the dti’s Investment Services <ul><li>Sector Information </li></ul><ul><li>Finance to Explore Investment Opportunities in SA </li></ul><ul><li>Facilitating Direct Government Support in the form of </li></ul><ul><li>Information on Investing in SA and Business Environment </li></ul><ul><li>Detailed Investment Incentives </li></ul><ul><ul><li>Investment Facilitation </li></ul></ul><ul><ul><li>After care – ongoing contact </li></ul></ul>
    39. 39. <ul><li>the dti Call Centre: 0861 843 384 </li></ul><ul><li>the dti Switchboard: +27 12 394 0000 </li></ul><ul><li>Investment Promotion: +27 12 394 1333/1339 </li></ul><ul><li>Website: </li></ul><ul><li>E-mail: [email_address] </li></ul><ul><li>Postal Address: Private Bag X 84 </li></ul><ul><li>Pretoria </li></ul><ul><li>0001 </li></ul><ul><li>South Africa </li></ul>the dti’s Contact Details
    40. 40. Thank You