South Africa: Alive with Opportunities

1
South Africa Alive with Opportunities

• U.S. Commercial Service
• South Africa

2
Regional Importance within Africa

• 6 of the population (46.9 million)
• 24 of continent-wide GDP
• 50 of electrical generation
• 45 of mineral production
• 50 of purchasing power

3
Political Importance within Africa

• South Africa sits as a non-permanent member of
  the United Nations Security Council
• Leader in the Southern African Customs Union
  (SACU)
• The Key member state of Southern African
  Development Community (SADC)
• Pre-eminence with Nigeria and Algeria in the
  African Union (AU)

4
Southern Africa Customs Union

• Botswana
• Lesotho
• Namibia
• South Africa
• Swaziland

5
Southern African Development Community

• Angola
• Botswana
• Democratic Republic of Congo
• Lesotho
• Madagascar
• Malawi
• Mauritius

• Mozambique
• Namibia
• South Africa
• Swaziland
• United Republic of Tanzania
• Zambia
• Zimbabwe

6
So Why Do Business in South Africa?

• Cost-effective gateway to SADC (160 million
  customers)
• Largest African market
• Stable political and macro economic climate
• High quality physical communications
  Infrastructure
• Highly developed financial, legal, energy
  sectors
• Value - added logistics

7
Macro Economic Growth

• Economic growth in 2006 at 5 percent, trending up
• Inflation at 4 percent, trending down
• SAG enjoys small budget surplus, however
• Savings are low, current account is in deficit
  (6 of GDP)
• FDI into South Africa 1994-2006, 30 billion
• Stock exchange ranks among worlds 20 largest,
  index expanded 47 percent in 2006

8
Drivers of Growth - Infrastructure

• Fixed Capital Investment had fallen to 15 of
  GDP
• Government is planning USD 50 billion upgrade
• Electricity generation, USD 20 billion
• Transportation upgrade, USD 6 billion
• Communications upgrade 6 billion
• Private sector plans another USD 50 billion
  capex
• Manufacturing
• Mining / Metallurgy
• Tourism

9
2010 FIFA World Cup Soccer

• The largest sporting event larger than the
  Olympics
• Building or refurbishing nine municipal stadiums
• Upgrading urban transport systems
• Upgrading airports
• Dramatically improving communications backbone
• Investing in security networks
• Upgrades of tourism facilities hotels, lodges,
  car rental, catering, retail, franchise, etc.

10
Drivers of Growth - Black Economic Empowerment

• BEE is designed to create economic opportunity
  for historically disadvantaged groups.
• It is the law government procurement,
  licensing, permitting, government ownership of
  shares
• Has lead to a surge in Black urban middle class
• Has created growth opportunities in all consumer
  goods and services sectors
• BEE is a bedrock for political stability in South
  Africa

11
BEE Scorecard

• Ownership 20 percent
• Management Control 10 percent
• Employment Equity 15 percent
• Skills Development 15 percent
• Preferential Procurement 20 percent
• Enterprise Development 15 percent
• Socio-Economic Dev. 5 percent

12
Status of BEE

• Great Progress
• Clean water 68 to 88
• Electricity 58 to 80
• Home ownership 71
• 2 million homes built since 94
• SA Institute of Race Relations

• Still a Long Way to Go
• 2.5 12 million foreigners
• 50 people murdered/day
• 8 m (26/40) unemployed
• 90 black hh expend 2,500
• 54 new jobs are informal
• HH debt 70 income
• 1,000 AIDS deaths/day
• 1/3 females between 16 and 25 have HIV/AIDS

13
Drivers of Growth Trade and Foreign Investment

• South Africas trade is equal to 68 percent of
  GDP
• Relatively low tariff rates, few NTB
• Free Trade Agreements with EU
• Growing investment from India, GCC and China
• Strong commodity prices flatter growth
• Growing regional trade
• On-going negotiations with U.S, 2nd largest
  partner

14
SA Inhibitors of GrowthWEF Global
Competitiveness Forum, 2006-2007

15
South Africa and the United States Partners in
Trade

• South Africa and the United States Partners in
  Trade
• The Numbers
• 4.5 Billion U.S. Exports to South Africa
  (2006)
• 7.5 Billion SA Exports to the United States
  (2006)
• 11.9 Billion in two-way trade (2006)
• 5.0 Billion U.S. investment into South Africa
  (2005)

16
South Africa and the United States Partners in
Trade
17
South Africa and the United States Partners in
Trade
18
South Africa and the United States Partners in
Trade

• The U.S. is the second largest foreign direct
  investor in South Africa.
• The U.S. is the largest source of new foreign
  direct investment since the 1994 transition to
  democracy.
• 600 U.S. Companies have a presence in South
  Africa.

19
South Africa and the United States Partners in
Trade -Largest US Investors

• Chevron
• Coca Cola
• Dow Chemicals
• IBM
• 3M
• Goodyear
• Ford
• McDonalds
• Eli Lilly
• General Electric
• General Motors

• Minute Maid
• Nike
• Colgate-Palmolive
• Deloitte Touche
• Levi Strauss
• Microsoft
• Dell
• Sara Lee
• Caterpillar
• HP

20
South Africa and the United States Partners in
Trade

• Best Prospects for U.S. Exporters

• Airport/Ground Support Equipment
• Automotive Parts/Service Equipment
• Electrical Power Systems
• Medical Equipment
• Mining Equipment
• Pollution Control Equipment
• Safety/Security Equipment
• Telecommunication Equipment
• Telecommunication Services

21
Barriers to Entry

• Cost of doing business, bad infrastructure, ports
• Price based purchasing, little emphasis on
  quality
• Informal, unstructured tendering procedures
• Poor standards, conformity compliance
• Skills shortage
• Corruption over or under invoicing
• Financing high risk if do not demand cash
• Parallel imports and counerfeiting

22
Business in South Africa

• Must do proper due diligence
• Companies should register IPR - territoriality
• Confidentiality agreements are binding
• LOI, MOU can be binding if not explicit
• Contract should include mediation or arbitration
• Jurisdiction can be an issue
• Do you have appropriate insurance coverage
• Draconian protections for labor

23
Our Team

• 4 American Officers
• 6 Commercial Specialists/Assistants
• Offices in Johannesburg and Cape Town

24
Commercial Specialists in South Africa

• Jaisvir Sewpaul (Automotive Transportation
  Jaisvir.Sewpaul_at_mail.doc.gov)
• Felicity Nagel (Medical Felicity.Nagel_at_mail.doc.
  gov)
• Bheki Ndimande (Energy Bheki.Ndimande_at_mail.doc.g
  ov)
• Luisa dos Santos (ICT Luisa.D.Santos_at_mail.doc.g
  ov)
• Johan van Rensburg (Aerospace Defense, Safety
  Security, Building Construction) -
  Johan.van.Rensburg_at_mail.doc.gov)
• Estelle Welgens (Environmental Technologies
  Estelle.Welgens_at_mail.doc.gov)

25
CS South Africa Contacts
Johannesburg Cape Town 15 Chaplin Road
2 Reddam Avenue, West Lake llovo
2196 Cape Town, South Africa
8001 Johannesburg Ph 27 21 702-7300
Ph 27 11 778-4800 Fax 27 21
702-7402 Fax [phone] Email
Cape.Town.Office.box_at_mail.doc.gov Email
Johannesburg.Office.Box_at_mail.doc.gov U.S.
Trade Development Agency 15 Chaplin Road Illovo
2196Johannesburg Ph 27 11 778 4804Fax 27
11 442 3770Email jbell_at_tda.gov Commercial
Service South Africa www.ussatrade.co.za