Doing Business in South Africa - IAR Multicultural Summit


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Donnadelliah Maluleke, Counsel Economic for South Africa's Midwest consulate in Chicago, talks about the nation's economy and growth. (April 26, 2013)

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  • 50 plus sovereign countries Brutal past and an uncertain future Deep pockets poverty amongst the abundance of wealth An abundance of untapped resources Not one country
  • South Africa is the economic powerhouse of Africa, producing more than 40% of the continent’s industrial output and accounting for 50% of the continent’s spending power. South Africa’s GDP comprises 25% of the entire continent’s GDP. With excellent transport infrastructure and boasting two world-class ports in Durban & Richards Bay, South Africa is the gateway to sub-Saharan Africa. The port of Durban is the busiest in Africa and the largest container port in the southern hemisphere, handling nearly 2,3 million container moves per annum.
  • Doing Business in South Africa - IAR Multicultural Summit

    1. 1. DOING BUSINESS IN SOUTH AFRICADOING BUSINESS IN SOUTH AFRICAWith members ofWith members ofPresenter: Donnadelliah MalulekePresenter: Donnadelliah MalulekeConsul EconomicConsul EconomicDate:Date: April 26April 26thth, 2013, 2013
    3. 3. The Economistlabelled Africa“the hopelesscontinent” in20002000
    4. 4. “Africa’s hopefuleconomies:The sun shines brightThe continent’simpressive growthlooks likely tocontinue”Economist, Dec 2011Economist, Dec 2011
    5. 5. Africa today**See “Lions on the Move: The Progress and Potential of African Economies”**According to a report by South Africa’s Standard Bank
    6. 6. Africa tomorrow**See “Lions on the Move: The Progress and Potential of African Economies”**According to a report by South Africa’s Standard Bank
    7. 7. SADC and SouthSADC and South AfricaAfrica• SADC FTA signed in August 2008 –market of 200 million consumers• Future FTA with SADC,COMESA &EAC with a market of 700 millionconsumers
    8. 8. Gateway into AfricaGateway into Africa•Area 1.219.090 km2•Population 49,1m (estimate)•Currency R1 = 100 cents•Time GMT + 2 hrs•Head of the State: President Jacob Zuma•11 Official languages with English the business language•Total GDP: 2010 R2,460bn (US$ 364bn)•GDP 2010 per capita: R50,107 (US$ 7,410)•Real GDP Growth: 2.8% (2010)•Inflation: 4.1% (annual 2010 average)•Main Exports: minerals & mineral products, preciousmetals & metal products, chemical & food products,automotives components.•Main trading partners: USA, Germany, China, Japan &the UK.
    9. 9. Proximity to markets by seaProximity to markets by sea• New York – 20 days• Liverpool – 25 days• Buenos Aires – 11 days• Jeddah – 20 days• India – 10 days• Singapore – 12 days• Hong Kong – 25 days
    10. 10. 40% of Africa’s Industrial output50% of Africa’s Spending power25% of Africa’s GDP
    11. 11. South African economyYEAR 1994THEN2004 IN 2011GDP (billions) R 482US$ 60R 1 374US$ 171R 2 964US$ 408,8Merchandise exports(billions)R 69, 8US$ 8.7R 281,8US$ 35.2R671US$ 92,5GDP Growth 3,2% 4,6% 3,1 %•Open economy•Diversified Industrial sectors•South Africa positioned as a manufacturing centre of excellence•Sound business case for investment and profit•Gateway to Africa and markets of more than 200 Million consumers•Africa is the next big story after China and India
    12. 12. South Africa’s leading trade partners (2011)Export CountryRand(millions)1. China 85,2972. United States 59,6293. Japan 55,2954. Germany 43,1685. United Kingdom 28,6816. India 24,3337. Netherlands 21,5048. Switzerland 21,373Import CountryRand(millions)1. China 103,1302. Germany 77,2633. United States 58,3954. Japan 34,5275. Saudi Arabia 32,3006. India 29,1957. United Kingdom 29,1448. Iran 26,697
    13. 13. Major sources of foreign direct investmentinto South AfricaSource Country Projects Capex Avg Capex * Jobs Created Avg Jobs CompaniesUnited States 118 57,267.5 485.0 15,150 128 102UK 90 55,385.5 615.6 16,786 186 71Germany 43 17,646.0 410.7 6,382 148 38India 34 22,101.5 650.0 6,074 178 26France 24 10,326.8 430.2 1,960 81 21China 23 13,397.8 582.8 8,595 373 20Switzerland 21 12,168.9 579.6 7,960 379 16Australia 21 57,292.6 2728.4 6,887 327 15Japan 20 18,847.5 942.6 3,097 154 16Netherlands 19 4,842.7 255.0 1,508 79 15Notes:1) © fDi Intelligence, from the Financial Times Ltd 2012. Data subject to terms and conditions of use2003 – Feb.2012* Rand millions (I EURO = approx R10)
    14. 14. Companies entering the region:• Walmart has recently acquired Massmart, a South Africanretailer for $2.4 bn• Massmart has operations in 14 African countries with atarget of opening 150 new stores across Africa over the nextthree years• The acquisition positions Walmart to expand into fastgrowing African markets• Rockwell Automation has recentlypurchased Hiprom, an automation systemsintegrator based in South Africa• The acquisition is set to accelerate thegrowth of Rockwell Automation’s business inthe Sub-Saharan region• Aon South Africa, a subsidiary of Aon Corporation, has acquiredGlenrand MIB• The acquisition will add approximately 15,000 corporate,public sector, specialty and commercial clients to Aon’s clientbase•Glenrand MIB’s existing operations in Sub-Saharan Africa willstrengthen Aon’s network, which together span owned offices in14 countries across the region
    15. 15. South African trade agreements• USA Africa Growth and Opportunity Act (AGOA)•South Africa – European Union (EU) Trade, Development andCo-operation Agreement (TDCA•Southern African Development Community (SADC) FTA•Southern African Customs Union (SACU) - European FreeTrade Association (EFTA) FTAAgreements in the making:• PTA with India• PTA with Mercosur• SADC-EAC- COMESA T-FTA
    16. 16. South Africa
    17. 17. South Africa’s investment environmentSouth Africa today is one of the most sophisticated and striving emergingSouth Africa today is one of the most sophisticated and striving emergingmarkets globally, mainly because of …markets globally, mainly because of …Political & economicstability with soundmacro-economicmanagementCompetitivesectors/industriesFavourable cost of doing businessSkillsavailabilityWorld classfinancialsystemExcellenttransport &logisticalinfrastructureAbundantnaturalresources
    18. 18. Defining categories in SA’s property marketNON-URBANTOWNSHIP RURALURBANMETROPOLITANSOWETOTembisa,MamelodiKhayelishaUmlaziGraaff-ReinettMabiligweUmthathaThohoyandouKroonstaadDurbanJohannesburgCape TownPretoriaPort Elizaberth
    19. 19. Why invest in the South African property market?• SA is a country of sunshine & beautiful beaches• SA political has left a shortage of property and this factorcreated long term growth potential• Less restrictions to ownership• A growing economy focused on developing a strong middleclass provides an increased demand for homes• Substantial taxation breaks of up to 20% are on offer• A tax break on rental for five years is available forrenovation projects
    20. 20. Why invest in the South African property market?• The housing property market shows steady growth ofabout 13% in the Western Cape and 15.6% in metro areas• Favourable exchange rate for the American market as$1 = R8.6• A strong regulated property purchase system createsInvestor confidence in the market• All documentation and transactions are written inEnglish with a transparent transfer system• No stamp duty free is an added benefit for propertypurchase• No VAT is incurred for property purchase, althoughsellers will pay agents’ fees that are subject to VAT
    21. 21. Trends and outlook of SA’s property market• SA trends have their own identity & deviation frominternational trends sales have improved since the globaleconomic crisis• Change of faces of homeowners – (in the last 5 yrs from40%- 56% non-white)• Great benefits from the NCA, hence low impact fromcrisis• Strong legal support such as the Consumer ProtectionAct (CPA)• Requirement for PoE submission for NQF 4 & 5respectively for practitioners
    22. 22. SA’s position in the property market•Ranked 6thin the world by Knight Frank GlobalHousing Index, when Dubai -38th, UK-11th, and USA22nd, led by China•Full-titles sales remain the backbone of SA’s realestate sales•In the residential category R300k –R5m full-title salesin 5 yrs rose from•R75bn – R111bn before plumbing to R52bn•According to StatSA there has been a decline of 11.2%of plans passed y/y & 33.5% construction in buildingscompleted outside of expenditureby government onRDP housing and social housing projects
    23. 23. SA growth prospectsSource: House Price South Africa, 2011At this point House Price South Africa has forecast a blanket of 5% houseprice growth in South Africa over the next 5 years subject to annualfluctuations. The forecast for the next 5 years after that to 2020 is 3%- 5%,subject to annual fluctuations. Adjustments to this prediction will be madeas significant economic and social data comes to light.
    24. 24. SA’s property returns by sector
    25. 25. Opportunities in the SA’s property market• Real Estate including the leisure market• Commercial Space• Sectional titles• Public Private Partnership with governmental initiatives
    26. 26. Examples of industry players in the SA’s propertymarket
    27. 27. South Africa is open for businessSouth Africa is open for businessSOUTH AFRICA CONSULATE GENERALSOUTH AFRICA CONSULATE GENERALCHICAGOCHICAGO312 939 7929312 939