REPUBLIC OF SOUTH AFRICA
Location: Southern Africa, at the southern tip of the continent.
Geographic Area: 1.2 million sq. km., slightly less than twice the size of Texas.
Climate: Mostly semiarid, subtropical along east coast, sunny days, cool nights.
Major Cities: Pretoria (Capital). Cape Town is the legislative center and Bloemfontein the judicial center. Other cities include Johannesburg, Durban and Port Elizabeth.
Population: 43 million.
Ethnic Groups: Black (75.2%), White (13.6%), Colored (8.6%), and Indian (2.6%).
Languages: The eleven official languages are Afrikaans, English, Ndebele, Sotho, Tsonga, Swati, Tswana, Venda, Pedi, Xhosa, and Zulu.
Workweek: Monday through Friday, 8:00/8:30 a.m. to 5:00 p.m.
Type of Government: South Africa is a republic, consisting of a central government and nine provincial governments.
Head of State: President Thabo Mbeki (since 16 June 1999); Executive Deputy President Jacob Zuma (since 17 June 1999).
Currency: 1 rand (R) = 100 cents.
Exchange Rate: U.S. $1 = 9.82 rand.
Current Economic and Political Conditions: Upbeat economic predictions, a stable socio-political environment, and reinforced vigor of the South African Government to address the issues of privatization and deregulation, while maintaining the long-term goal of making the country more investor friendly, bode well for U.S. businesses seeking trading, investment and joint venture opportunities in South Africa. The domestic market is characterized by increasing competition in almost all fields, margins are being reduced as a result and many local companies used to tariff and non-tariff protection are being forced to streamline their operation in order to survive.
South Africa’s domestic market of U.S. $133 billion, significant growth potential, infrastructure, and pro-business environment make it the logical choice for an increasing number of companies seeking a steppingstone to conduct business on the continent.
South Africa’s well-developed road and rail links provide the platform and infrastructure for ground transportation deep into sub-Saharan Africa. The country also boasts a sophisticated financial sector, with well-developed financial institutions and a stock exchange (Johannesburg Stock Exchange) that ranks among the top exchanges in the world.
Economic Data (1999, in $US)
Total GDP: Purchasing power parity = $296 billion.
GDP Growth: 0.6%
Per Capita GDP: Purchasing power parity = $6,900.
Inflation Rate: 5.5%
Trade Balance: $2 billion surplus.
Trade with RI: South Africa is Rhode Island’s 10th largest trading partner, with $28 million in exports in 1999.
Exports: $28 billion: Gold, diamonds, other metals and minerals, machinery and equipment. Export trading partners: UK, Italy, Japan, U.S., and Germany
Imports: $26 billion: Machinery, foodstuffs and equipment, chemicals, petroleum products, scientific instruments. Import trading partners: Germany, U.S., UK, and Japan.
Best Prospects for Exports: Telecommunications equipment, computer software and services, airports, air pollution and waste management, security and safety equipment, managed health care, Eco-tourism, cosmetics and hair care.
Tariffs, Trade, Taxes, Trademarks
South Africa is a member of the World Trade Organization (WTO) and follows the Harmonized System (HS) of import classification. Beginning in 1994, South African shipments to the U.S. have received Generalized Schedule of Preferences (GSP) treatment.
Tariffs: In keeping with its WTO commitments, the South African Government committed itself to reducing and restructuring import tariffs, removing import surcharges and phasing out the General Export Incentive Scheme (GEIS). Over the last several years, the government has been quite successful in simplifying and reducing its overall tariff code so that the average tariff rate has fallen from more than 20 percent to just over 12 percent in less than three years.
Taxes: The value-added tax (VAT) of 14 percent is payable on nearly all imports. Specific excise duties are levied on alcoholic and nonalcoholic beverages, tobacco and tobacco products, mineral waters, some petroleum products, and motor vehicles.
Foreign Investment: South Africa offers an attractive climate for foreign investors, and as a result, a large number of American firms have invested or reinvested in South Africa since the lifting of sanctions in the early 1990s, making the U.S. the largest source of new investment in South Africa. South Africa has a substantial market with significant growth potential, an economy steadily moving toward market orientation, access to other markets in Africa, well-developed financial institutions and capital markets, excellent communication and transport links, liberal repatriation of profits and other earnings, lower labor costs compared to western industrialized countries, and availability of inexpensive electrical power and raw materials.
Free Trade Zones: The Department of Trade and Industry has undertaken to implement a series of Industrial Development Zone (IDZ) Initiatives that aim to create environments conducive to export-oriented production and services for international and local investors. By locating within these zones, new investments will benefit from world-class infrastructure, local and cost advantages, in addition to having the existing fiscal incentives, linkages with local markets, expedited customs procedures, and a single stop regulatory authority. IDZs are to be geographically designated within a controlled duty free area, near a port or airport.
Trade Finance: South Africa’s well-developed banking system resembles banking in Britain rather than the United States. It is composed of three key elements: the South African Reserve Bank (the country’s central bank), private sector banks (commercial banks, merchant banks, and general banks), and mutual banks. South African banks hold the first six places among the top 100 banks on the continent of Africa. The legal distinctions between commercial, merchant, and general banks have eased in recent years, and South Africa’s major bank holding companies typically own several banks geared to various clientele. Fifty-six fully licensed institutions and 60 representative offices of foreign banks are located in South Africa.
The United States’ Export-Import Bank and the Trade and Development Agency offer their programs to support U.S. trade and investment activities in South Africa. The South African Government has a number of development agencies that provide project financing. With the lifting of international sanctions against South Africa, a number of multilateral lending agencies have made available financing for projects in South Africa.
Letters of Credit (LC) are the customary way to finance imports into South Africa. These are documents issued by a bank on behalf of an importer in favor of a beneficiary, typically the exporter. The most commonly used documentary credits are irrevocable credits and confirmed irrevocable credits. If the exporter is concerned about the reliability of the importer only, he/she should use an irrevocable LC. If the exporter is also concerned about the standing of the issuing bank and/or the standing of the importer’s country, he/she should use a confirmed irrevocable credit.
Business Customs: Business customs in South Africa are generally similar to those in the United States and Western Europe. South African business people tend to dress conservatively.
Business cards are usually simple, including only the company logo, name, business title, address, telephone number, and fax number. South Africans are very punctual, and South African business people make every effort to be on time for appointments. Appointments should be made in advance of a business call.
Marketing and Selling Factors:
General: South Africa offers foreign suppliers a wide variety of methods to distribute and sell their products. These include using an agent or distributor, selling through established wholesalers or dealers, selling directly to department stores or other retailers, or establishing a branch or subsidiary with its own sales force. When appointing a South African distributor, U.S. exporters should find out if the distributor handles a competing product.
Additional Services: In South Africa’s very competitive marketplace, it is essential that the U.S. exporter provide adequate servicing, spare parts, and components, as well as qualified personnel capable of handling service inquiries. In most cases, servicing should be available locally since potential delays often lead purchasers to seek alternative suppliers.
Advertising: South Africa has a sophisticated advertising industry. Advertising agencies provide a full range of services and the majority of the larger agencies are subsidiaries of prominent international agency groups. Major media outlets include television, radio, newspapers and magazines, outdoor advertisements, cinema and the Internet.
Direct marketing: Although South Africa’s foreign exchange controls and import documentation requirements have been relaxed, the overseas firm should contract with a South African agent or partner who would be responsible for marketing the product, holding stock, fulfilling purchasing transactions, and remitting revenue to the U.S. company. Companies interested in learning more about South Africa’s mail order sector should contact the South African Direct Marketing Association.
E-Commerce: For developing countries like South Africa, e-commerce presents important new opportunities to achieve a more level playing field compared to larger, more developed economies. It reduces existing disadvantages relating to cost, communication, and information, and has the potential to create huge new markets for U.S. products and services. One of the leading areas for continued growth is Internet security.
Patents/Trademarks/Copyrights:
General: Property rights, including intellectual property, are protected under a variety of laws and regulations. South Africa has an independent judiciary under which any threat to property rights may be enforced without political interference.
KEY CONTACTS
Bryant College, John H. Chafee Center for International Business
RI Export Assistance Center, Raymond W. Fogarty, Director
World Trade Center, Edward Barr, Manager
RI State Directorate, Maureen Mezei, International Trade Director
Contact: Mary-Ruth Foley
Telephone: (401) 232-6566
Fax: (401) 232-6416
E-mail: mrfoley@itdn.net
Web site: http://www.rieac.org
U.S. Export Assistance Center, Department of Commerce
Keith M. Yatsuhashi, International Trade Specialist
Telephone: (401) 528-5104
E-Mail: kyatsuha@mail.doc.gov
U.S. Small Business Administration
Marilyn Bogue, International Trade Officer
Telephone: (401) 528-4585
E-Mail: marilyn.bogue@sba.gov
United States Embassy in South AfricaPO Box 9536 Pretoria 0001 877 Pretorius St., Arcadia 0083
Pretoria 0001 Telephone: (27) (12) 342-1048 Fax: (27) (12) 342-2244
Consulate(s) General: Cape Town, Durban, and Johannesburg.
Embassy of South Africa
3051 Massachusetts Ave. N.W.
Washington D.C.
Telephone: (202) 232-4400
Fax: (202) 265-1607
E-mail: safrica@southafrica.net
American Chamber of Commerce in Southern Africa
PO Box 1132
Houghton 2041
Telephone: (27 11) 788-0265; Fax: (27 11) 880-1632
E-mail: amcham@yebo.co.za
English Language Publications
Business Day
PO Box 1746
Saxonwold 2132
Tel: (27 11) 280-3000 Fax: (27 11) 280-5600
Daily (Monday to Friday)
Internet: www.bday.co.za
The Star
PO Box 1014
Johannesburg 2000
Mr. Gary Pitzer (Advertising Manager)
Tel: (21 11) 633-2417
Daily (Monday to Saturday)
Internet: www.star.co.za
The Citizen
PO Box 7712, Johannesburg 2000
Tel: (27 11) 402-2900 Fax: (27 11) 402-6862
Daily (Monday to Saturday)
The Sowetan
PO Box 6663
Johannesburg 2000
Tel: (27 11) 474-3740 Fax: (27 11) 474-8834
Daily (Monday to Saturday)
