The Report: South Africa 2012
South Africa lies on the southern tip of Africa, occupying 1.22m sq km with some 2800 km of coastline along the Atlantic and Indian Oceans. The so-called “Rainbow Nation” has a population of around 50.5m and is a melting pot of ethnicities, cultures and languages that reflect its rich and tumultuous history. South Africa is considered the most advanced economy in Africa, with well-developed financial, communications, energy and transport sectors. The country has vast deposits of minerals and natural resources and is the world’s fourth-largest source of gold and diamonds. The country’s banking, insurance, industry and telecommunications sectors are all poised to see substantial future growth.
Country Profile
This section outlines South Africa’s history, culture, geography and economy.
Explore chapterPolitics
South Africa is a parliamentary representative democratic republic, wherein the elected president exercises executive power and acts as both head of state and head of government. Legislative power is wielded by both the government and two chambers of parliament, the National Assembly (the lower house) and the Council of Provinces (the upper house). The judiciary operates as an independent arm of government. South Africa is a multi-party democracy with about 80 political parties, 13 of which are currently represented in the National Assembly. The ANC has dominated the electoral landscape since the first democratic elections of 1994, while the Democratic Alliance (DA) is the country’s official opposition party, with 67 seats in the current parliament. This chapter contains interviews with President Jacob Zuma; Fernando Damata Pimentel, Brazilian Minister of Development, Industry and Foreign Trade; and Andris Piebalgs, European Commissioner for Development.
Explore chapterEconomy
South Africa’s GDP, which stood at R2.96trn ($362.3bn) in nominal terms in 2011, took a significant hit at the start of the global economic slowdown, contracting by 6.3% in the first quarter of 2009. Since then it has improved noticeably, with real growth rising to 2.9% in 2010 and to 3.1% in 2011. The country’s recovery from the recession has resulted primarily from domestic consumption, both private and public. Prices have been fairly steady, with inflation running at about 5% in 2011, thanks to an inflation-targeting policy by the South African Reserve Bank (SARB). One of the most pressing obstacles that South Africa faces is unemployment, which passed 23% in 2011. With job creation one of the main pillars of the government’s strategic plans, additional attention is being paid to labour-intensive manufacturing sectors. This chapter contains interviews with Pravin Gordhan, Minister of Finance; Rob Davies, Minister of Trade and Industry; Malusi Gigaba, Minister of Public Enterprise; Angel Gurría, Secretary-General, OECD; Chi Jianxin, CEO, China Africa Development (CAD) Fund; and Henk Bleker, Dutch Minister for Agriculture and Foreign Trade.
Explore chapterBanking
This chapter outlines how South Africa’s well-capitalised banks have weathered the global economic crisis with aplomb, largely thanks to a robust regulatory environment. Rising competition and efforts to engage the large unbanked population have also helped the sector recover from the effects of the global downturn. At the close of 2011, the sector comprised 17 registered banks, two mutual banks, 12 branches of foreign banks and 43 foreign banks operating local representative offices. However, the sector remains dominated by four major banks that together accounted for around 84% of total banking assets at the end of 2011. This chapter contains interviews with Gill Marcus, Governor, South Africa Reserve Bank (SARB); Mike Brown, CEO, Nedbank; and Sim Tshabalala, CEO, Standard Bank.
Explore chapterCapital Markets
This section includes information about the Johannesburg Stock Exchange (JSE), which occupies a prominent position in South Africa’s economic landscape. Today the JSE is recognised as one of the world’s leading exchanges connecting buyers and sellers in five different financial markets, namely, equities, equity derivatives, commodity derivatives, currency derivatives and interest rate products. It is ranked the 20th largest stock exchange in the world and has 403 listings and a market capitalisation of R7.27trn ($889.3bn) as of December 2011. Like exchanges around the world, the JSE has faced a challenging environment in the wake of the global credit crisis and is now working to make the market more attractive by incentivising larger currency deals and enhancing trading flexibility for investors. This chapter contains interviews with Nicky Newton-King, CEO, Johannesburg Stock Exchange (JSE); and Stephen van Coller, Chief Executive for Corporate, Investment Banking and Wealth Management, Absa & Barclays in Africa.
Explore chapterInsurance
The South African insurance industry is a regional giant, with nearly 80% of all direct premiums in Africa. The market is split into two regulated segments with separate legal frameworks and different representative bodies. The global financial crisis of 2008-09 had a deleterious effect on South African insurers. Both the long- and short-term segments faced internal challenges, such as lower investment yields and higher expenses, and external ones, including an increase in lapsed policies as households struggled with rising food prices and unemployment. The sector is facing new challenges, including shifting market dynamics and an evolving regulatory framework that will likely alter the day-to-day operations of licensed insurers. This chapter contains an interview with Barry Scott, CEO, South African Insurance Association.
Explore chapterMining
The mining industry has long been a driving force behind South Africa’s economic growth. In 2010 it contributed 18% of GDP, and the country’s total reserves, while diminished, remain some of the world’s most valuable, with an estimated worth of $2.5trn. South Africa is perhaps best known for its gold, diamond and platinum riches but its wealth in other metals and minerals have also helped support industry as new economic sectors have developed. However, the industry is widely perceived to have experienced an extended period of decline. Significant steps forward will be required in infrastructure provision, the development of a market-friendly mining policy, human resources improvement and the encouragement of major investment in the industry. This chapter contains interviews with Susan Shabangu, Minister of Mineral Resources; Bheki Sibiya, CEO, Chamber of Mines; Godfrey Gomwe, Executive Director, Anglo American South Africa; Nick Holland, CEO, Gold Fields; and Andile Sangqu, Executive Director, Xstrata South Africa.
Explore chapterIndustry
This section looks at South Africa’s industry sector, which has long supported the national economy. For the first 11 months of 2011 output rose 7.7% in comparison to the same period of 2010, according to Statistics South Africa. The fastest-growing manufacturing sectors included electrical machinery; radio, television and communication equipment; and automobiles and components, each of which expanded by 10% or more. Industrial Development Zones (IDZs) have become a recognisable component of South Africa’s industrial sector. The fact that the country has long positioned itself as gateway to African markets, both financially and physically, has also served its industrial sector well. This chapter contains interviews with Lionel October, Director-General, Department of Trade and Industry; Geoffrey Qhena, CEO, Industrial Development Corporation (IDC); and Peter Matlare, CEO, Tiger Brands.
Explore chapterTransport
While South Africa’s infrastructure has held a comparative advantage over its neighbours, upgrades have become necessary for most categories of public infrastructure to maintain that edge. The country’s airports are routinely praised as the best in Africa, and there is no shortage of capacity after a recent round of upgrades in advance of the 2010 World Cup. South Africa has 747,000 km of roads and a functioning railway network. The 20,500-km rail network is managed by Transnet, which is working on a plan to overhaul the rail system. The port at Durban is the country’s largest, handling around 60% of traffic, however, the country’s sea ports are challenged by high costs and congestion. This chapter contains interviews with Brian Molefe, CEO, Transnet; and Richard Branson, President, Virgin Atlantic.
Explore chapterProvinces
This chapter looks at the role of regional government across the country. While the ruling African National Congress has largely stood for a strong central government, the capacity of local and provincial government to provide services and infrastructure to millions of South Africans has remained central to the evolution of the country during the post-apartheid period. However, a number of the smaller provinces are looking to increase their investment attractiveness, growth rates and economic diversification as well, which is helping to buttress development nationwide. This chapter contains an interview with Helen Zille, Premier of the Western Cape.
Explore chapterEnergy
South Africa’s energy landscape is defined by increasing demand and limited capacity as the country’s energy needs have risen rapidly in recent years. Underinvestment in infrastructure remains a key challenge for the sector. The government has in recent years sought to develop a long-term energy strategy and has launched major efforts to diversify electricity-generating capacity, reduce dependence on coal and seek alternative sources of hydrocarbons. The country is also looking at how to ensure demand- and supply-side management, as well as incorporate improved energy efficiency into its plans and the use of renewables, which are expected to account for 42% of additional generating sources, or a total of 17.8 GW, by 2030. This chapter contains interviews with Dipuo Peters, Minister of Energy; Brian Dames, Chief Executive, Eskom; Bonang Mohale, Chairman, Shell South Africa; and David Constable, CEO, Sasol.
Explore chapterReal Estate & Construction
South Africa’s real estate sector felt the full force of the global economic crisis in 2008. The sector has been hit by a lack of demand stemming from weakened consumer confidence, rising inflation and obstacles to credit growth. However, the market is benefitting from the growth in urban middle-class consumers, a fact reflected in the emerging property supply and prices. South Africa’s young, and increasingly wealthy, population should offer many opportunities for investors and developers in all facets of the real estate sector in the next decade. The construction sector remains a critical component of the economy. The contribution of the sector to GDP was estimated at 3.2% in 2010. However, as the economy slowed and the flow of work linked to the hosting of the FIFA event dried up, growth came to an abrupt halt and contractors were left to make do with a dwindling list of projects. Developer caution persists, suggesting that this trend may remain for some time. As such, contractors are looking to the government and its ambitious infrastructure programme for future work. This chapter contains an interview with Samuel Ogbu, Chief Executive, Liberty Group Properties.
Explore chapterTelecoms & IT
The telecommunications sector in South Africa is among the continent’s most developed. It tends toward encouraging data-heavy services by shifting from voice to data services, increasing smartphone usage, expanding localised content, and adding both private and public sector capacities to lay the groundwork for fourth-generation (4G) and long-term evolution (LTE) networks. As of the third quarter of 2011, there were approximately 57m active mobile subscriptions, and with 20% of subscribers holding more than one SIM card, the mobile penetration rate stands above 100%. This compares with an overall fixed-line subscriber base of roughly 4m users, a rate that has been on a slow but steady decline in recent years. South Africa is bursting with opportunities for growth in information and communications technology (ICT). The country has about 6m internet users and studies conducted by Research ICT Africa show that 15% of South African households have a working computer and that 5% have an internet connection. Prices for broadband internet connectivity have fallen in recent years, and the landing of multiple international cables on South African shores in 2012 will likely lower prices further. Continued expansion of South African firms, such as logistics companies, retailers and distributors, could strengthen demand for inventory management software, cloud computing services and other technological solutions. This chapter contains interviews with Alan Knott-Craig, CEO, Cell C; Karel Pienaar, Managing Director, MTN South Africa; Pieter Uys, CEO, Vodacom South Africa; and Robert Venter, Chief Executive, Altron.
Explore chapterTourism
While the FIFA event was seen as an overwhelming success by organisers and the domestic tourism body, the country has, thus far, been unable to replicate or sustain the level of visitors the international football tournament brought to the country. However, figures began to head upwards in the last quarter of 2011 and certain markets, such as the African and Asian visitor segments, offer hope for an industry that remains central to the government’s development plans. The government has begun a transition in its strategy, moving away from its traditional reliance on European and Western tourists and shifting towards other markets, promoting domestic travel and looking to emerging economies. This chapter contains interviews with Robert Venter, Chief Executive, Altron; and Marcel von Aulock, CEO, Tsogo Sun Group.
Explore chapterAgriculture
Agriculture’s contribution to the South African economy has waned in recent years, however the industry is well-placed to address some of the more fundamental needs of the country’s growth trajectory and offers significant potential in a number of key cash crops and export commodities, as well as niche opportunities in segments such as organic produce and wine. While the government looks to create thousands of jobs in agriculture and reverse a trend that has seen the number of farm workers decline significantly over the past few decades, the industry continues to face problems of competitiveness and efficiency, compounded by factors such as soil productivity, input costs, infrastructural impediments and the trade environment. This chapter contains an interview with Alex Thiel, CEO, Sappi Southern Africa.
Explore chapterMedia & Advertising
South African media is a vibrant, developed and thriving industry. Radio is the country’s most accessible media, with 88.1% reach among the adult population, and television reaches some 83.9%. Print media captures a smaller portion of the population, with an estimated 64.9% of the population accessing newspapers and/or magazines. The sector shares many of the challenges currently experienced by media outlets around the world. As a result, it has been affected by the uncertainties of the global economic climate, which have manifested themselves in the fragmentation of audiences and decreasing advertiser budgets. The South African advertising and communications industry is a growing network of leading international agencies and established home-grown firms. While print advertising has suffered, radio, television and out-of- home formats remain strong. Fast technological developments and a restructuring away from traditional media offer ample opportunity for innovation and growth. Digital advertising, various online schemes and advertising delivered to mobile devices are all likely to be important growth areas. This chapter contains an interview with Nic Dawes, Editor-in-Chief, Mail & Guardian.
Explore chapterRetail
South Africa’s retail sector is marked by a mixed system featuring elements of both traditional and modern retailing. In recent years rising retail spending has been driven by a growing middle class and increased access to finance. According to data from Statistics South Africa, retail was the fastest-growing segment of GDP in the third quarter of 2011, and added 48,000 jobs in the fourth quarter of the year. The most important development in the sector in 2011 was the announcement of the Walmart-Massmart merger in February 2012. South Africa has long positioned itself as an ideal operating base for firms interested in regional expansion and South African retailers are making a mark in other countries, placing them at the vanguard of pan-African retailing. This chapter contains an interview with Ian Moir, CEO, Woolworths.
Explore chapterHealth & Education
Change is expected in South Africa’s education sector over the coming years. The sector receives a large share of the national budget, with some R189.5bn ($23.19bn), or 19% of all state expenditure, spent on education in the 2011/12 fiscal year. However, results have yet to materialise. The government has been eyeing different strategies to improve the education system and remove the regulatory and bureaucratic confusion challenging the sector. So far, the schooling system has shown signs of improvement, with the number of overcrowded public schools dropping from 50% to 24% between 2006 and 2011. South Africa currently offers universal health care via hospital access. But this standard of care is far lower than what those who can afford private care have access to. Therefore, the Department of Health is embarking on a multi-decade plan called the National Health Insurance (NHI) to provide better health care for citizens. The idea is to eventually ensure a higher standard of care for all South Africans, to eliminate the disease burdens complicating the challenge and to move from a system based on curing health problems to one in which prevention plays a larger role. This chapter contains interviews with Frank Thompson, Chief Executive, ADvTECH Group; and Adrian Gore, Chief Executive, Discovery Holdings.
Explore chapterTax
In conjunction with SizweNtsalubaGobodo, OBG explores the taxation system, examining South Africa’s investor-friendly environment.
Explore chapterLegal Framework
OBG introduces the reader to the different aspects of the legal system in South Africa, in partnership with Edward Nathan Sonnenbergs. Koos Pretorius, Director, Edward Nathan Sonnenbergs, talks to OBG.
Explore chapterThe Guide
This section includes an article about urban renewal in South Africa, as well as information on hotels, government and other listings, alongside useful tips for visitors on topics like currency, visas, language, communications, dress, business hours and electricity.
Explore chapterTable of Contents
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